With cannabis legalization on the rise, it’s no wonder the industry is growing at such an exponential rate. In fact, legal cannabis sales in the United States, despite only having a market for just over two years, jumped above $5 million in 2015 and are projected to grow well beyond that in 2016.
In this time, the cannabis industry has seen various new technologies and tools that cater to the specific needs of this growing space. However, the unique nature of the legal cannabis market has everyone wondering if traditional business models and theories will apply.
What is the Disruptive Innovation Theory?
Disruptive innovation is the process of a new product or service entering an existing market and “disrupting” the established leaders, products, and partnerships. This usually starts as a “low-end disruption,” which means the product/service offers lower performance in comparison to the mainstream industry market, but it provides something new and eventually prospers. A true disruptive innovation essentially changes the way a market functions, creating a new product or new market altogether.
The concept of disruptive technologies was introduced in Clayton Christensen’s The Innovator’s Dilemma, which is considered one of the most important business books to date. Later, in The Innovator’s Solution, Christensen changed the overarching term from disruptive technologies to disruptive innovation, as the latter is the process in which the technology is used to disrupt the market.
There’s plenty of examples of disruptive innovation and technologies throughout history:
- Pocket calculators didn’t match the performance of traditional desktop calculators at first, but their portable nature was appealing to certain audiences. Improvements to the technology and more widespread availability eventually caused them to surpass traditional calculators all together.
- Initially a disruptor, Netflix’s success put the original market leader Blockbuster out of business. The convenience of ordering rental videos from home and eventually just streaming without the delivery wait was just too much for brick and mortar Blockbuster to compete with. It’s a shame too, because Blockbuster passed on a chance to purchase Netflix for $50 million back when they were just a low-end disruption.
- Smartphones disrupted the PC/laptop industry because they’re more portable than traditional devices, and their use/sales have long surpassed their predecessors. Mobile phones also disrupted landline phone technology.
- Digital photography didn’t initially match the quality of traditional photography; however, vastly improved space for storing pictures and the time saved on developing photos made it more convenient. Improvements to digital camera technology have mostly solved the quality issues, eventually propelling it to becoming the market leader.
- MP3s and other downloadable digital media disrupted the CD/DVD industry. It started with illegal file sharing networks, but slowly brands such as Apple and Amazon legitimized it, ultimately surpassing sales of physical records.
Cannabis: The Next Disruption?
Despite its infancy, the legal cannabis industry is already disrupting other industries. The pharmaceutical industry is actively trying to prevent legalization because emerging data shows that the plant can more effectively and safely treat various conditions than certain prescription drugs (such as cannabis instead of opioids for chronic pain). Legalization also poses a disruptive threat to the agriculture industry. This is because hemp is proven to be of higher quality than cotton and more sustainable to grow, but cannabis prohibition also makes industrial hemp illegal.
The cannabis industry is primed to be the next big disruptive innovation, creating an entirely new industry altogether that can have massive global impact. You can learn more about this topic from Leafly’s president, Paul Campbell, at the 2016 Seattle Interactive Conference. He’ll go more in-depth on some of the surprising industries being disrupted by the growing cannabis legalization movement.