CHAPTER-5 Technological Disruption and Business Environment

Chapter 5
Technological Disruption and Business Environment
Disruptive Technology
Disruptive technology relates to instances where technology is used to fundamentally change and
‘disrupt’ the existing business model in an industry.

An example of a disruptor is the passenger service Uber which created a business model using
technology which avoided the need for licensed drivers, a vehicle fleet, local booking services etc.
Instead, customers use their internet connected device to hail a ride and all payments are handled by a
smartphone app.

The key reason for the growth of new disruptive businesses is from technology. Not only from the
technology that they employ in order to cut costs and improve efficiency, but also in the access that
consumers now have to technology in the modern on-demand economy. For example, many disruptive
businesses rely on smartphone applications or have internet-only based transactions.

The two largest growth sectors for disruptive technology are in health services and financial services.
Financial technology (commonly known as Fintech) is, for example, completely disrupting the traditional
banking sector – long seen as a highly technical, highly regulated industry dominated by giant banks.

Fintech businesses exist which can provide investment advice, offer banking services, transfer money
internationally, provide mortgages and loans, exchange currency etc.

Disruptive technology is an innovation that significantly alters the way consumers, industries, or
businesses operate.

Blockchain as an Example of Disruptive Technology

 Blockchain (technology behind Bitcoin) is a decentralized distributed ledger
 It records transactions between two parties and moves transactions from a centralized server-based
system to a transparent cryptographic network.
 It uses peer-to-peer agreement to record and verify transactions removing the need for manual
verification.
 Uses are many like for financial institutions such as banks and stock brokerages.

Disruptive Technologies of the digital age

 Disruptions are always first resisted by humans, but then they adopt it when see that useful..
 IT is combining with improvements in specific industry technology in almost every sector
 These days IT is moving faster than ever, driven by developments in 3 basic areas;

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• Processing power,
• Communication speed
• Storage capacity.

The Internet
 One of the most visible and widely used technological innovations over the past decade has been
the Internet.
 The Internet is a global network of interconnected computers, enabling users to share information
along multiple channels linking individuals and organizations.
 Internet has revolutionized how business are conducted, education is imparted and households
operate.
 In today’s, nearly every manager has a desktop or laptop, fax, voice mail, mobile phone etc.
 New ways of going online are contributing to the growing use of the Internet.

E-Business
 E-business has been defined as the transformation of key business process through the use of
internet technologies.
 E-business has grown dramatically and become a way of life for all type of businesses
 With the affordability and ease of technology, small and medium businesses have invested in e-
business and technology systems
 It gave the businesses a competitive edge over rivals by enabling them to add new services
 All businesses are more open to modify their business models with use of technology

M-Commerce
 Cell phone users all over the world have embraced mobile phone as a way of conducting
commerce.
 M-commerce, commerce conducted via mobile or cell phones, provides consumers with an
electronic wallet when using their mobile phones.
 People can trade stocks or make consumer purchases of everything from hot dogs to washing
machines and countless other products.
 Today, so many companies provide the option to customers to turn their smartphones into devices
for making purchases.

Social networking
 A system using technology to connect, explore interests and share activities around world
 Many businesses use social media tools to reach out to their customers.
 It has now become a major marketing channel.
 Major online advertising tools include:
• Search Engine Optimization (SEO)

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• Facebook Ads
• Google Ads and clicks
• Website banners

Blogs and Vlogs.

 A blog is a web-based journal or log maintained by an individual with regular entries of commentary,
descriptions, or accounts of events or other graphics or video etc.
 a lot of businesses (apparel, cosmetics, electronics and hospitality) use the medium of bloggers to
push their products in the market and compete with other brands.
 This is done through free products, invitations to brand launch events.
 A new generation of blogs appeared in the first decade of the 21st century, called vlogs, or video
web logs.
 All that was needed was access to a digital camera that could capture moving images and high-
speed Internet access.

EFFECTS OF DISRUPTION IN MAJOR INDUSTRIES

Technology and internet-based companies are accelerating pace of disruption at alarming rate.
 Google has completely disrupted the Yellow Pages business which was once valued at $60 billion
and is now below one billion dollars.
 Bookings.com/ Hotels.com / Airbnb, worth over $25 billion has disrupted the hotel industry by
accumulating the largest inventory of rooms without owning a single property.
 Uber, worth over $50 billion, has completely disrupted the local travel and taxi business without
owning a single car.

Textile Industry
 The technology such as CAD, CAM, manufacturing management and IT systems facilitate many
changes in the fashion and textile industry.
 Market drivers of clothing industry technology include the greater importance on the design,
innovative fabrics, quick response, quality and flexibility.
 Retailing is more concentrated in the global fashion market.
 Mass merchandisers extend their involvement and relationships with supplier’s right back to fabric,
fibers and yarns.
 The technology have made the machines to be ease, speedy and process technology to new modes
of clothing production based on the systems cost and productivity.
 In sewing machine industry, technology provides a flexible method of adapting to changing styles,
fabrics and sizes.
 Design, cutting and marker making can be handled with use of most modern equipment.
 Example of Sportswear and the Dri-FIT revolution of Nike.

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Solar and renewable energy

 Investments in solar and renewable technologies coupled with the global focus on improving
battery life and user-friendliness.
 we will see the need for grid-connected power reduce substantially.
 households that have a solar system installed at rooftops, the reliance on the grid is probably less
than 50% of the energy demand.
 The next 50% will come much faster thanks to the expected technology improvements.
 This will require a major change in business models of large scale power producers and utilities.

The Internet of Things (IoT) and operations of Power generation

 IOThas the potential to significantly transform the power sector by optimising operations, managing
asset performance, and engaging customers to lower energy cost.
 Already operating through smart meters and smart thermostats in power sector
 IoT and robotics have already found widespread applications in utilities, especially in demand-side
management (DSM).
 Smart meters and IoT connected power appliances has enabled consumers to track and monitor
their energy consumption and save money in energy bills.
 Similar technology is expected to make aggressive headway in the power generation and
transmission segments.
 IoT will be increasingly important in resource allocation and process optimisation in distributed
power generation.
 IoT, the system can perform effective load balancing, load flow analysis, identify faulty transformers,
and alert the nearby maintenance team for quick response.

Education
 IT has enabled students of some of the poorest and most remote communities to access the world’s
best libraries, instructors, and courses available through the Internet.
 Online education has not only replaced the physical classroom in some cases, but it is also
challenging the entire education system as it exists today.
 In many schools, lectures are available for download anytime from anywhere.
 This should enable schools to rethink and prepare themselves for sort of learning required and how
will they change their business model and secure employment of teachers & staff.

Retail and ecommerce

 Shifting to online shopping in a big way with large malls and stores being consistently forced to
reduce the number of locations.
 In Pakistan, trend of online shopping is visible with trips to malls for entertainment purpose.
 Many stores are now also protesting successfully against high rents.

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 This trend will hurt the retail business model of malls and retail stores making it difficult to
operate.

Electronic media
 A few years back, the government tried to introduce digital transmission in Pakistan and the cable
TV operators.
 The entry of mediums such as Netflix has created a disruption which can potentially eliminate cable
TV altogether and cannot be ignored any longer.
 In addition to the cable channel business, this change will disrupt the advertising industry as they
will have to switch to other medium, with social media potentially replacing mainstream advertising.

Banking
 Financial technology (Fintech) and virtual banking are the future with physical banks playing a much-
reduced role in our daily lives.
 Fintech facilitates in money transfers, investment management, finance, and banking.
 With Fintech, one can send and receive money via mobiles.
 Jazzcash and Easypaisa are some of the popular examples of fintech in Pakistan.
 In last 5 years, Pakistan has witnessed a drastic increase in e-payments especially during Covid
period.

Automobile and transport Sector

 There is already huge disruptions are electric vehicles, ride addressing and self-driving cars.
 Corporate sector now moving to more simplified electric cars, as well as having to programmed
systems to drive the car and designing apps to guide a ride.
 Technology of Tesla is so innovative their car functionality is changing through software updates.
 Tesla is also facilitating in make to order car through its website.
 The world’s first commercial robo-taxi platform is expected to be launched soon by Alphabet’s
autonomous driving division in the US, Waymo.
 Technology is also helping the car trading sector through use of mobile apps like Pakwheels, Olx.

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