Business disruption refers to a situation in which a market entrant with fewer resources completely changes the way an entire industry works through innovation of new business models. Such innovations usually attract most customers, causing other existing businesses to lose relevance in the market. According to the Small Business Administration (SBA) 1 in 12 businesses collapse every year in the US due to factors such as stiff competition and no market need. Although such businesses usually start and stay operational for some time, business disruption creates more competition as well as decreased demand for their products, eventually driving them out of market. Here’s a look at the pros and cons of disruptive innovation.
Pros
The consumer is the greatest beneficiary of business disruption such that, high quality products and services become accessible in the market. Other pros include, among others:
• Brings changes that make the market better — In any industry, change is a vital factor that brings about improvements in the quality of outputs, lowers costs, and promotes modernization through innovation. This way, evolution in business becomes possible when new players come up with improved versions of existing products and invent more effective solutions to existing problems.
• Increases competition that encourages more quality production — While unhealthy competition is bad for the market, a healthy one can cause massive improvement in the quality of products and services. This is because in a competitive market, every business strives to attract customers by offering their best services.
• Promotes environmental conservation — In the modern world, most businesses are going green to save costs while protecting the environment. With most customers in support of environmental protection, businesses that use unsustainable forms of energy may most likely lose customers.
Cons
With a new business that offers better services in the market, the existing ones either have to improve on theirs or lose customers. This means that existing businesses have everything to lose after business disruption. The cons include, among others:
• Collapse of businesses that are unable to adapt to the changes in the market
• Fights in the market — When you enter the market and threaten the existing businesses, you’re likely to get pushback from businesses that would prefer to maintain the existing state of affairs. Consequently, you may face obstacles, such as lawsuits, that may discourage you.
Conclusion
Disruptive innovation is necessary in every industry for improvements to happen and make lives better. Even so, being the innovator can make you a target of lawsuits and slander.
