International Business Techniques

Disruptive technologies:
impact on businesses and policy
makers
C O U RS E 3
Which
technologies
could have
massive,
economically
disruptive
impact
between now
and 2025?
 Features of disruptive technologies
Joseph Schumpeter: the most significant advances in economies are often
accompanied by a process of “creative destruction,” which shifts profit pools,
rearranges industry structures, and replaces incumbent businesses.
Such important technologies share four characteristics:
◦ high rate of technology change,
◦ broad potential scope of impact,
◦ large economic value that could be affected,
◦ substantial potential for disruptive economic impact.

Source: McKinsey&Company, 2013. Disruptive technologies: Advances that will transform life, business, and the global economy
Who must prepare for future technology?
Business leaders:
◦ To understand how the competitive advantages on which they have based strategy might
erode or be enhanced by emerging technologies
◦ To know how technologies might bring them new customers or force them to defend their
existing bases or inspire them to invent new strategies.

Policy makers and societies:

◦ How technology might shape the global economy and society over the coming decade.
◦ How to invest in new forms of education and infrastructure, and figure out how disruptive
economic change will affect comparative advantages.
◦ Create an environment in which citizens can continue to prosper.
◦ Learn how to manage new biological capabilities and protect the rights and privacy of
citizens.
Potential effects of disruptive technologies
Information technology (IT) is pervasive
◦ Most disruptive technologies are enabled, or enhanced, by IT.
◦ IT tends to advance very rapidly, following exponential trajectories of improvement in
cost/performance.
◦ IT is often characterized by strong network effects, meaning that the value to any user
increases as the number of users multiplies.

Combinations of technologies could multiply impact.

◦ emerging technologies could be used in combination, reinforcing each other and potentially
driving far greater impact.

Consumers could win big, particularly in the long run

◦ Health benefits, but also advantages due to the fact that competition tends to shift value to
consumers.
Potential effects of disruptive technologies
People will require new skills
◦ Increased automation.
◦ High need of training and education to refresh and upgrade worker skills
◦ Could increase the urgency of addressing questions on how best to deal with rising income
inequality.

Benefits of technologies may not be evenly distributed

◦ disproportionate opportunities for some highly skilled workers and owners of capital while
replacing the labor of some less skilled workers with machines.

Technology impact differs between advanced and developing economies

Potential effects of disruptive technologies
Innovation and entrepreneurship will increase:
◦ Many of the technologies will be readily available and may require little or no capital investment
(3D printing, Cloud-based services and mobile Internet devices.
◦ New sources of employment.

Scientific discovery and innovation will surprise us

◦ it is impossible to predict how new technologies will emerge and play out, as they will, at some
point, be revolutionized by advancements in science.

Troubling challenges ahead

◦ Improve the lives of billions of people (afor example, cloud computing, mobile Internet),
BUT ALSO
◦ Could drive unwanted side effects: rising risks of security and privacy breaches, production and
release of dangerous organisms etc.
Implications
Plans for the responses to disruptive technologies should start now, otherwise it will be too late.
Many of these technologies pose new regulatory and legal challenges.
The need to turn the disruptions into positive change.

Invest in their own

Business leaders technology knowledge

Implications for:
Encourage the
development of the
Policy makers technologies that are most
relevant to their
economies
 Implications
Companies will have new ways of developing and producing products, organizing
their businesses, and reaching consumers and business-to-business customers.
Companies could have unique opportunities to realize rapid improvements in
productivity.
Companies that use technology to make knowledge employees more productive will
Business gain large business model advantages and attract the best talent
leaders Business leaders will need to:
◦ Determine how specific technologies could drive economic impact and disruption in ways
that could affect their businesses.
◦ Determine when, how, and whether to take advantage of new technologies—and be
prepared to move quickly when others use emerging technologies to mount challenges
◦ Invest in their own technology knowledge.
◦ Develop new sources of value or competitive advantage.
 Implications
Warnings:
◦ Focusing too much on the largest, most established markets and related
value propositions, could lead companies to miss the ways in which
disruptive technologies can jump industry or market boundaries and change
the rules of the game.
Business Problems:
leaders • Early investment will probably dilute the profitability of a company’s portfolio
in the near term. However, it insures the sources of growth that ensure the
enterprise’s future.
• Companies that reallocate resources early to capture trends often have
higher returns and are more likely to survive long term. Failing to reinvent
and focusing only on existing markets open the door for disruptors,
particularly at the bottom end of the market.
 Implications
Risks:
• Internally: organizational effectiveness and cohesion could suffer as
some jobs are transformed—or eliminated—by technology. By
Business working with employees and redesigning jobs to focus on higher-value
skills—and by investing in workforce development—companies can
leaders minimize these risks.
• Externally: reputational risk and consumer resistance, as well as safety
and regulatory issues.
Implications
Each of these technologies has significant potential to drive economic growth
and even change the sources of comparative advantages among nations; could
help nations develop and exploit their unique resources and capabilities in new
ways, potentially shifting the global center of gravity across sectors and regions.
The role of the Governments:
Policy ◦ Increasingly role in bringing disruptive technologies to life, by providing initial
makers funding and incentives for technology development and even act as early buyers to
speed progress and adoption.
◦ Facilitating the creation of networks that can speed up innovation by sponsoring
collaborative efforts at a national or international level.
◦ Setting standards and facilitate the emergence of new markets.
◦ Could limit the adoption or progress of technology.
◦ Involvement for avoiding the use of technologies in bad ways (terrorist attacks etc.)
Implications
The biggest challenge: the effects of technologies have potentially
large effects on employment.
◦ The existing problem of creating a labor force that fits the demands of a
high-tech economy will only grow with time.
Policy ◦ Address the problems in education and upgrade skills and competencies.

makers
Given the scale of impact of the technologies, the job of reconciling
these conflicts and balancing the needs of today’s citizens with
those of future generations will place unprecedented demands on
policy makers.