The market is constantly changing. The businesses that actually thrive (rather than merely survive) are the ones who can adopt an offensive strategy. They look to provide new value for customers rather than improving existing (“old”) value. These businesses are the ones who are disruptive - they challenge the market and its existing players before they’re challenged themselves.
But what exactly does that mean? What are well-known disruptors (Apple, Google, Amazon etc) doing to adjust their value propositions and successfully reshape the market?
In episode 18 of ColumbusCast, I sit down with Toby Mankertz and Ian Kingstone (Principal Consultant and Business Transformation Specialist respectively) to unpick the term ‘disruption’, from what it means to the differences between offensive and defensive strategies.
What is business disruption?
Disruption is a method or theory where a company, typically one with fewer resources, can challenge others on the market, typically larger, more established ones with more resources. What happens is these businesses focus on market segments that their competitors ignore, which helps them gain a foothold in the market.
The established companies tend to be slow to respond to this - they don’t see the smaller businesses as a threat because they’re targeting customers they’re not interested in. Plus, it’s a larger company - there’s an inherent lethargy in adopting change and innovation.
Once the smaller company has developed a customer base of overlooked customers, they can start to chase the more profitable market segment. Traditionally, they try to maintain their original USP e.g. seamless UX or flawless CX.
And once the more profitable customer base begins to trade with the smaller company in volume, disruption has occurred.
Disruption can also be driven from the consumer side
It’s not just businesses who can drive disruption. Consumers can also play a key role. For example, a global pandemic might change the way people buy things. Supply chains might be disrupted which impacts consumers. These events change the market dynamic and force organisations to re-evaluate their value propositions.
The role of technology in disruption
The business landscape is constantly changing, as is the market, thanks to what Ian calls ‘megatrends’. Technology can enable businesses to adapt to these conditions. But the use of technology isn’t always disruptive - disruption is actually underpinned by whether a company can create a new market, not merely change an existing one.
For example, Uber used technology to make it easier, safer and more convenient for people to book taxis. This actually helped increase the number of taxi bookings. Despite this, Uber isn’t seen as a disruptor because they didn’t create a new market. There was already a taxi service market in Seattle (the city where Uber originated from).
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What is an example of disruption though is the French Yellow Pages. In our discussion, Toby told the story of how the French Yellow Pages began losing 10% of its revenue year on year. Though once a leader in local advertising, times were changing. Rather than flicking through big books to find businesses, people were using the internet.
And rather than advertising in big books, businesses were moving online instead.
The Yellow Pages saw that as an opportunity. The aim of the business wasn’t to produce big yellow books. It was to connect people with local businesses. Once, it was possible to do so via books. Now, it’s digital platforms. So, the Yellow Pages revisited their value proposition, redefining the reason why the business existed in the process.
By doing so, it turned their business around and made it profitable again.
Size doesn’t matter
This is a great example of someone rethinking what their business stands for. It doesn’t matter the size of the business - even the likes of giant corporations like Google, Amazon, Facebook and Apple are considered disruptors because they’re reimagining how their customers wants to engage with their businesses.
There’s a lot of research that goes on to continuously better understand the customer base so they can provide better services and experience.
The importance of properly managing the change
Disruption doesn’t just externally impact a business. It will also cause disruption within the organisation itself. Using the Yellow Pages as an example, there would be roles in the business that are centred around producing the books. Following digitalisation, these people would need new skills - new digital skills.
At the end of the day, it’s a change. The company might still serve its overarching purpose (in this case, it’s to connect people with local businesses) but how they do so has changed. Which means processes will change. And when you’re changing the organisation, you need to answer the question employees will ask - what’s in it for me?
So, the most successful disruptors don’t only change the market. They also know how to manage the disruption and minimise the impact of change to personnel.
It’s all about strategy
The advantage we have in this day and age is that there’s so much new technology available. And it’s so accessible to both businesses and consumers. So, now you have more options to improve and maximise the value to customers.
But the secret is to look strategically at the technology and evaluate how you can use it to better deliver services. Ask yourself how your organisation can use technology - existing and new - to deliver value to customers?
To learn more about disruption, scroll up to the top of this post or search for ‘ColumbusCast’ in your podcast app. Listen to the full episode and you’ll hear us discuss all of the above, plus:
- Examples of offensive and defensive strategies businesses take to combat disruption
- Why business plans should be agile, rather than static
- The differences between innovation and disruption
- And more!
Review your customer needs and discover where you can offer new value
It’s important for businesses to constantly review their vision of where they’re going with their products and services. Get closer to customers and examine their needs. Then use that knowledge to innovate. That may involve using technology but it’s not just about that - it’s about transforming in a way that helps you deliver on your vision and add new value.
Is your business placing value first when it comes to change and transformation initiatives? Download our guide which covers exactly what you should prioritise when it comes to value management.