What is a market disruptor?
You may have heard the term “disruptors” used before. We explain this and how it’s affecting the world we live in and what opportunities can be gained in the process.
The theory explains that an innovation, whether it is a service, a strategy, new technology or a product, transforms an existing market by introducing simplicity, convenience, accessibility and affordability.
Uber, Airbnb and Amazon are the most often quoted examples of disruption. All three have essentially displaced an existing market by providing a service which is more efficient and more cost-effective than traditional alternatives.
Below the effect seen between Amazon, an online retailer, and Walmart, a traditional retailer.
Disruption is also not competition. Traditional competitors fight each other, offering the same product to the same target market. Disruptors do not compete against other suppliers. They compete against “non-consumption” by creating new consumers and new demand.
How does this affect us?
This is an important topic because companies like this will change the way in which we live and interact going forward.
From an investment perspective, these innovative companies can be very attractive. Often the trick for the fund manager is anticipating the future winners to unlock the value for the investor. Which of these disruptors could do well, and which of the traditional companies may be affected, are questions fund managers are constantly asking. Certain things in the world are changing quickly and it would be wise to challenge ourselves to know what those changes are and to understand how they impact us.