In the article of Christensen et al. (2015), disruptive innovation originate in low-end or new-market footholds. Also, these innovations underperform in the mainstream markets until the quality of the products reaches the same level as incumbents.
Since the enormous increase in e-commerce sales, the demand towards traditional financial institutions to intermediate your transactions increases. The role of the incumbents in the mainstream market is huge, but some concerns are detected. Because of the risk as an intermediary, the incumbents are reluctant to deal with anyone who isn’t well-off or familiar.
This is not the case with Bitcoin and the underlying Blockchain technology. In the example of e-commerce sales, merchants don’t need anyone’s permission or dependence to go into business.
Yet, Bitcoin doesn’t seem like a disruptive innovation when applying it to the theory of Christensen et al. (2015). It is true that it underperforms in mainstream markets and bring about new features valued by new markets. So, it is in fact not yet a threat for the mainstream market. But, when looking at the criterion of originating in low-end or new-market footholds, Bitcoin does not meet this requirement. First of all, Bitcoin as a payment-method definitely didn’t enter new-market footholds. It is a substitute for the conventional banking system and doesn’t create a market for non-consumers. Secondly, Bitcoin is not a technology that focusses on satisfying the low-end customers. Therefore, Bitcoin doesn’t meet the requirements of being a disruptive innovation.
Despite the loss of hype and huge decrease in price, the fundaments of the technology stayed the same. Mainstream adoption is still far way, but in my opinion Bitcoin will disrupt the incumbents because of transparency and independency. Although Bitcoin doesn’t typically focus on the low-end customers, it could become popular when people realize what kind of transaction fees traditional financial institutes claim.
The lower transaction fees are an advantage for individuals with a low income. The increase in popularity of Bitcoin could make a shift to a practical use by the low-end market and eventually towards the mainstream market.
https://hbr.org/2015/12/what-is-disruptive-innovation
https://www.forbes.com/sites/timothylee/2013/04/09/bitcoin-is-a-disruptive-technology/#4265ceb02956
-https://www.norupp.com/bitcoin-and-patterns-of-disruptive-technology
Reading your opinion on Bitcoin and why it is not a disruptive innovation made me think about the term “low-end customer”. By definition of Christensen et al. (2015) the low end of the market represents the customers which are least profitable or yet reluctant to engage with a product or service. Having this definition in mind I am truly convinced that Bitcoins or at least its underlying Blockchain technology as a method of payment target the low-end of the market since its current target group are people who are reluctant or not satisfied with the current financial institutions.
Furthermore the Blockchain technology has some inherent features which undeniably outperform current best practices of the financial industry. Firstly, Blockchain technology allows transactions to occur without the need of a third party, therefore the risk of fraud is greatly reduced. Secondly, the fees associated with money transfers are significantly lower and international transaction take significantly less time. Thirdly, the technology allows for micropayments.
Those are only a few of its advantages. However, I know the technology yet shows a lot of drawbacks. Overall I do agree with you that Bitcoin is not a disruptive innovation yet, but in my opinion its underlying Blockchain technology definitely has the ability to become one. As we learned in the lecture, disruptive innovation is a process. Hence, with time the technology will improve and I am convinced that it will disrupt and alter a lot of industries.
Very interesting read! You agrued that Bitcoin is not meeting the second criteria of Christensen’s disruptive innovation model. I think that the financial institutes are in fact focussing on the high end of the market and that their services are too expensive for the poor. For example, when someone wants to transfer money from one country to their family in another country a relative high transaction cost needs to be paid.
Although it seems normal for us to have a bank account, 2 billion people do not have access to a financial institution via mobile phone or do not have a bank account. In Niger, Turkmenistan, Central African Republic, Guinea and Madagascar less than 10% of the population has an bank account. In case people have access to a mobile device they can transfer money via blockchain and are not limited by the unavailabiliy of a bank.
My doubt is in the quality of the technology. The processing time of transactions is slow and when the platform will be used extensively it might result in high costs due to the fact that miners can choose which transactions to process, driving prices upwards. What is your opinion?
Reading your opinion on Bitcoin and why it is not a disruptive innovation made me think about the term “low-end customer”. By definition of Christensen et al. (2015) the low end of the market represents the customers which are least profitable or yet reluctant to engage with a product or service. Having this definition in mind I am truly convinced that Bitcoins or at least its underlying Blockchain technology as a method of payment target the low-end of the market since its current target group are people who are reluctant or not satisfied with the current financial institutions.
Furthermore the Blockchain technology has some inherent features which undeniably outperform current best practices of the financial industry. Firstly, Blockchain technology allows transactions to occur without the need of a third party, therefore the risk of fraud is greatly reduced. Secondly, the fees associated with money transfers are significantly lower and international transaction take significantly less time. Thirdly, the technology allows for micropayments.
Those are only a few of its advantages. However, I know the technology yet shows a lot of drawbacks. Overall I do agree with you that Bitcoin is not a disruptive innovation yet, but in my opinion its underlying Blockchain technology definitely has the ability to become one. As we learned in the lecture, disruptive innovation is a process. Hence, with time the technology will improve and I am convinced that it will disrupt and alter a lot of industries.