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THE NE W BEGINNINGS EDITION

INSIGHT

Market disruption is not a new development but the rapid pace of technological advancement means that it is becoming an ever-more prevalent possibility. Large corporations such as Apple and Netflix, which are considered market innovators, are also the vanguard for creating technology that is disrupting not only competitors’ pre-existing markets, but also their own considerable profit kingdom. In a sense, market disruption has become a nearly essential way of continuing to adapt and build a society that is growing more and more technologically connected by the day.

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spread throughout the United States, there will only be one in 2019, which will close very soon. Streaming services such as Netflix, Amazon, and Hulu took what was already a practice — the method of watching videos or DVDs in your own home — and removed the hassle of going out, driving to a location with a select amount of purchase items available, renting the item, and then having to remember to return it before the rental charges start increasing. By removing the middle-man, streaming services undercut the Blockbuster stores. Market disruption as progress

What is market disruption? In plain terms, market disruption (as its name implies) is the creation of an innovative experience or product that changes an existing market, or leads to its destruction. Partially, this is due to changing societal factors: as society connects itself to technological advancement, companies need to innovate in order to keep up. Companies that fail to do so will no longer be capable of matching the march of progress. The term was first used by Professor Clay Christensen, from Harvard Business School, and changed the way that people thought about innovation-driven growth. Usually, disruptive players enter the market in small numbers, and build a sort of ‘cult following’ that only gets more popular gradually. While initially the innovation is considered lacking by the larger market players, it serves the customers whose needs are basic and lowend, and builds a greater following gradually. Momentarily, however, when the innovation appears in the market it is not considered a threat by other market leaders: the new technology or service being promised is too immature to pose a threat and market leaders will remain confident that what they offer their clients is superior to the infant innovation. Gradually, this innovation grows to such a stage that it can offer the same level of service as up-market leaders, and then begins the process of disassembling the existing market leader. An easy example is the disappearance of bigchain DVD rental stores such as Blockbuster. Where there were once over 9,000 stores

Apple launched its Apple Pay service in 2014 to act as a faster and more secure way of paying online, purportedly to replace the chip-and-pin or credit card methods. Furthermore, it didn’t need a dedicated point-of-sale terminal, but would work with any contactless point-of-sale device and any merchant that accepted contactless point-ofsale transactions. In 2014, the contactless credit card hadn’t quite caught on, and the convenience offered by Apple Pay caught on quickly. Countries got Apple Pay at different points in time, but the fact that it was a safe and quick way of paying for goods and services online without triggering hidden charges proved popular with consumers. Additionally, Apple Pay also offered their service with the same level of security as their two-factor identification, which meant that it was difficult to hack or defraud; considering that 2014 was the year when three major companies were hacked, the appeal of an ‘un-hackable’ method of online purchasing was undeniable. The ease of applying for an Apple Pay account was also a considerable incentive: some banks have strict guidelines on who can apply and be a holder of a credit card, which can put off consumers who don’t want to be tied to the bank’s structure. However, Apple Pay’s progression as an innovator is limited: its profit is directly tied into the functionality, and while it was an innovative process in 2014, the ensuing five years have led multiple companies to bring out their own form of secure contactless payment. →

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MONEY MAY 2019 ISSUE 54