The concept of disruptive innovation has affected the world of business management in recent years. 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 Jeremy Abelson, portfolio manager and investor in disruptive innovation, will explain what disruptive innovations are and their application in the world of stock market investment.
What are disruptive innovations?
According to Abelson, disruptive innovations are a type of innovations that affect 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, disappear from the market before the irruption of this innovation.
Abelson indicates that it is important to keep in mind that a disruptive innovation does not necessarily have to be technological, although this is the most common. It can also be a change in a product or in the business model.
Disruptive innovations and investment in the stock market
As Abelson has already stated, disruptive innovations are a double-edged sword:
• On the one hand, they pose a threat to companies based in a certain sector that are not capable of adapting to the new situation.
• On the other hand, they are an opportunity for companies that know how to take advantage of them, since they completely change the rules of the game.
What should we do as investors?
“First, we must stay away from companies that may be victims of, or unable to adapt to, disruptive innovations,” says Jeremy Abelson. “On the other hand, we can take the opportunity to invest in companies that can benefit from this type of innovations”.
According to Jeremy Abelson, who invests in disruption, the problem is that these types of companies are difficult to detect and do not usually quote at attractive prices.
