Chief Economist, John Norris, answers the most commonly asked questions.
It seems like all the companies you read about being so-called disruptors are just tech stocks. So, why do we even worry with calling them disrupters and just call them what they are?
This is a great question, and the easy answer is: it just seems like they are all tech companies, but they aren’t necessarily. After all, Tesla makes cars. For its part, Amazon makes most of its revenue selling stuff, just like any other retailer. As such, Tesla is correctly classified as a car company, and Amazon a consumer discretionary retailer.
It is those companies use of technology which makes them industry disrupters, even if they aren’t technically tech companies themselves. The same could be said for a lot of other companies who use ‘outside the box’ methods to engineer and/or distribute their goods and services. That phrase ‘outside the box’ is key here, not necessarily the technology.
By definition, disrupters will be different than their competition. Long years ago, Piggly Wiggly was the first self-service grocery store. It was the first to have checkout stands and pricing on each item, and the company grew like crazy. Further, we all know about Henry Ford and the assembly line. The list of disruptive companies is almost endless, and many are lost to time or are now another face in the crowd: Howard Johnson’s, Blockbuster, Woolworth’s, and even Kodak.
When you take a look back on economic history, disruptive companies seem to have one thing in common: they developed non-traditional business techniques which fundamentally changed business and ultimately became the industry standard.
Today, as I have hopefully pointed out, disruptors aren’t necessarily technology companies; many of them simply use a lot of technology to help them operate ‘outside the box.’ There is difference, and differences are what make companies unique.
…and investors love uniqueness.