The concept of disruptive innovation has hit hard in recent years in the world of business management. These types of competitive shocks are a double-edged sword for investors, as they can be both a threat and an opportunity. In this article I will explain what disruptive innovations are with some examples and their application to the world of stock investment.
What are disruptive innovations?
Disruptive innovations are a type of innovation that affects a certain industry in such a way that they make it change drastically and may even make the products and services that were part of it before the emergence of this innovation disappear from the market.
My first contact with the concept of disruptive innovation was through the book “Everything is going to changeThe Warren Buffett, prefer to stay away from sectors that may be influenced by disruptive innovations. For example, this was his explanation after the purchase of the largest gum company in the world:
“I am looking for businesses whose trajectory after 10 or 15 years I think I can predict. We think of a gum brand like Wrigley. I don't think the Internet is going to change the way people chew gum "
Sectors more and less exposed to disruptive innovations
The sectors most exposed to disruptive innovations are those related to technology. Technology companies are the ones that spend the most effort on innovation. Right now, millions of people, including many of the world's brightest minds, are spending their time searching for the next innovation that will make them the leaders of the next General Electric, Microsoft or Google.
Among the sectors less exposed to disruptive innovations, we can highlight some such as food, agriculture, construction or raw materials. These sectors have been characterized by evolving relatively little or have done so gradually throughout history.
Can you think of any sector especially exposed or protected before disruptive innovations? I encourage you to share it in the comments!