The legalization of cannabis has been like an avalanche in the past few years. As always in a new industry, innovations are brought up by entrepreneurs who are not afraid to take opportunities. This makes the whole industry grow at an exponential rate. The numbers only confirm this; in 2015 the cannabis industry in the US was worth 5 million USD, and now financial analytics predict it will grow up to 50 billion USD in 2026.
Disruption Innovation Theory explained
Disruptive innovation is a process when new companies are able to successfully challenge established incumbent businesses. They target overlooked segments and gain a foothold by delivering more suitable functionality, frequently and at a lower price. Thanks to this, they disrupt the existing leaders, products, and partnerships on the market. In usual cases, the process starts with “low-end disruption”. It means, that the product or service has a lower performance on the market in comparison to established players. But because they provide something new, they prosper eventually. The true disruptor changes the way the market functions with their new product, or creates a brand-new market from scratch.
To give a better understanding of what disruption is, let’s take smartphones as an example: Smartphones disrupted the PC/laptop industry thanks to their portability, cheaper prices and functionality. Phones today are practically hand-held computers, which is why they have taken over the PC industry in terms of sales and use.
Although the cannabis industry is still in its infancy, it has already disrupted other industries within it’s orbit. Pharmaceutical companies are fighting against legalization of one of the oldest medicines known to man. The agricultural industries are threatened as well, since hemp canvas is sustainable and known for better quality and strength compared to cotton. According to the investment bank, “Cowen and Company”, alcohol producers are threatened by the growth in the cannabis industry as well, since cannabis is often perceived as a substitute for alcohol, especially in the US.
The cannabis industry is prepared to be the next big disruptive innovator, which creates a whole new industry with global impact.