The Art of Technology: Disruptive Innovation

Disruptive innovation. A term everyone has probably heard about is apparently widely misunderstood. Take Uber, for instance. Many believed it to be a perfect example of disruption when, in reality, Uber’s concept doesn’t really align with the core principles of the theory. As confusing as it may sound, not every business that somehow transforms the market can qualify as a disruption.

Before we get to the main idea of how disruptive innovation transformed the art market in particular, let’s start with the basics by figuring out the true meaning of the term in question.

History of Disruptive Innovation

The concept of disruptive innovation has been widely applied to various industries, including technology, art, healthcare, education, manufacturing, etc. It has become an important framework for understanding how new technologies and business models can disrupt established industries and create new market opportunities.

Disruptive Innovation in Tech

Several businesses have been mislabeled as disruptive innovations, often due to their rapid growth or innovative products. One of such businesses is Uber. The definition we added above contains one of the reasons why Uber is not a disruptive innovation. As we mentioned, in order to be considered disruptive, new products or services should originate from a low-end or new market. Uber doesn’t originate from either. Uber was founded in 2009 in San Francisco. At that time, people were already used to calling cabs. Therefore, the market wasn’t new. On the other hand, it wasn’t a low-end opportunity since the cab service has not yet been as advanced.

Another reason is Uber’s targeting a mainstream audience from the very beginning. One of the core principles of the theory is that disruptive innovations initially appeal to niche markets and only gain widespread adoption once they reach mainstream quality standards. So, was Uber a major breakthrough? Definitely. But is it really a disruptive innovation? Not really.

Here are the core principles of the disruptive innovation theory:

1. Focus on underserved segments;
2. Simplicity and affordability;
3. Incremental improvement;
4. Coherent value network.

All the information above naturally raises a question: What can actually be considered disruptive innovation, and why does compliance with the theory actually matter? Well, some examples of the theory have affected our lives profoundly, like the Internet. This one must be obvious. Yet this disruption has led to creating even more disruptions.

One of the classic examples is Amazon. You may be surprised, but the industry that’s been disrupted by the creation of the platform is bookselling. The reason for that is simple: Amazon doesn’t require physical stores to showcase and sell its products.

Born from a humble garage business catering to online book enthusiasts, Amazon has turned into a digital titan, immeasurably impacting the physical retail landscape and securing an unrivaled market share. Its meteoric rise has cast a shadow over traditional bookstores, leading many to shut down. Today, Amazon's online shopping platform is well-known for a wide variety of products, from groceries to gadgets, all effortlessly accessible from one's doorstep.

Another example of disruptive innovation is Netflix. This company hasn’t always been the way we know it. Netflix originally started as an online DVD and VHS rental with mail delivery. The company captured an opportunity to utilize the Internet and thus disrupted traditional DVD rentals, such as Blockbuster.

As Netflix was expanding its service, having added streaming capabilities in 2007, the company gradually solidified its disruptive position. When the new service improved, and its content library grew, the company attracted more mainstream customers, leaving companies like Blockbuster behind.

Disruptive Innovation in Art

Perhaps the most revolutionizing disruptive innovations from the art world are art tokenization and RWAs (Real World Assets). Let’s take a closer look at them and find out their working principles.

Real-world assets (RWAs) are a broad category of assets that exist outside of the blockchain but are represented by digital tokens on a blockchain. These assets can be anything from physical goods like real estate or commodities to intangible assets like intellectual property or financial instruments.

The process of RWA tokenization involves creating a digital representation of the asset on a blockchain and issuing tokens that represent ownership of the asset. The tokens can then be traded on decentralized exchanges (DEXs) or used to access financial services.

Art can also be tokenized, and 10101.art is actually a top-tier project in this sphere. Just as Netflix disrupted the traditional media landscape by making content accessible for many, 10101.art is democratizing art ownership by giving an opportunity for anyone to own a part of a physical masterpiece.

Art tokenization is the process of representing artwork as digital tokens on a blockchain. For instance, on 10101.art, we tokenize famous paintings by internationally renowned artists and ensure transparency of ownership and accessibility of masterpieces. The process of art tokenization can be broken down into the following steps:

1. Selecting an artwork. This could be a physical artwork such as a painting or sculpture or a digital one such as a photograph or piece of graphic design. Tokenization of physical artworks can cause certain problems with authentication and insurance. Authentication requires having experienced dealers and curators on the team. Insurance, in turn, can be problematic because of the numerous anonymous owners.
2. Creating a smart contract. A smart contract is a self-executing contract that is stored on a blockchain. It will define the terms of ownership of the artwork, such as the number of tokens that will be issued and the initial price.
3. Uploading the artwork. The artwork will be uploaded to a decentralized file storage system. This ensures that the artwork is stored securely and can be easily accessed by anyone who owns a token.
4. Minting the tokens. The tokens will be minted on the blockchain using the smart contract. This minting process will create a unique identifier for each token and associate it with the artwork.
5. Listing the tokens for sale. The tokens will be listed for sale on an NFT marketplace – an online platform where people can buy and sell NFTs.
6. Transferring ownership. When a buyer purchases a token, they will be transferred ownership of the artwork. This ownership is recorded on the blockchain and is tamper-proof.

We have already tokenized Banksy’s “Turf War” and Warhol’s “Campbell's Soup Cans“ is next in line, and we are also preparing our Dali and Picasso artworks for this process. And if you want to see the artwork live, we'll be waiting for you at our partner gallery opening at “The Ritz-Carlton” (DIFC) on April 15. Follow our social media to learn more about the upcoming event.