In his 1997 book, “The Innovator’s Dilemma,” Clayton Christensen defines a “disruptive innovation” as an innovation that creates a new value network and by doing so, disrupts an existing market value network. For investors, disruptive innovations make for appealing opportunities. Whether it be a small startup hitting a giant at the knees, or a giant undercutting another giant, disruptive innovations create opportunities for significant increases in market share. In this article, I will present five companies that are developing disruptive innovations.
We’ve had electric cars before, so what’s the big deal with Tesla Motors Inc (NASDAQ:TSLA)?
Electric Network: Tesla Motors Inc (NASDAQ:TSLA) is addressing the lack of electric infrastructure by teaming up with SolarCity Corp (NASDAQ:SCTY) to build a network of Supercharger stations. These stations charge at 120kW, providing 200 miles of range in just thirty minutes. The Supercharger network is projected to reach 98% of the U.S. population and some parts of Canada by 2015.
Performance: The Model S is no Honda Insight. With 443 lb-ft of torque available at 0 RPM, the Model S outruns a BMW M5, making the Tesla Motors Inc (NASDAQ:TSLA) desirable not just to environmentalists, but to enthusiasts as well.
Production: The Model S Q1 production total exceeded that of the Chevy Volt and Nissan Leaf. General Motors CEO, Dan Akerson, recently put together a special team to keep an eye on Tesla.
Future Plans: With plans for a more affordable Model X available in 2014, Tesla will expand down market into lower income homes.
2. 3D Systems
Current Accolades: Regardless of the technology’s ability to overcome the previously mentioned challenges, the ability to move from brainstorming to prototype within a day allows for quick iterations in the product design cycle – which is very valuable to engineering companies.
Expansion: 3D printing is also slowly penetrating the public market through sales of small 3D printers such as the 3D Systems Corporation (NYSE:DDD) Cube, the Makerbot Replicator, or the Formlabs Form1. While prices for these machines are still out of the reach of the general public, adoption within the hobbyist market will help drive prices down.
100 Million: Zillow Inc (NASDAQ:Z) currently hosts photos, aerial views, information on local real estate markets, and historical home values for over 100 million homes in the U.S.
Expanding Services: Zillow Inc (NASDAQ:Z) also provides advice and support on mortgage rates, neighborhood information (schools, demographics, etc.), and Zestimates (home market value estimates).