All companies are thirsty to rise above their competitors and win consumers’ attention and business. This is tremendously easier said than done. The current economic landscape is highly competitive which makes reaching and captivating audiences difficult.
More specifically, technologies have created new communication channels which require marketers to constantly monitor and build their understanding of where they can reach their customers. One way companies stay relevant is adopting a disruptive business model.
What’s a Disruptive Business Model?
A disruptive business model is a strategy for reshaping an existing business model or entirely creating a new business market. A common value disruptive businesses share is innovation. Disruption addresses a market’s unmet need and commonly takes a nontraditional approach to satisfy any unmet needs. In doing so, this path of disruption often steals a competitor’s audience because they elevated and innovated a similar product or service. This approach can let even the smaller companies compete with the titans like Amazon.
Disruptive business behavior tends to be more apparent in small businesses and startups. Startups usually don’t have a lot to risk and are flexible in their early stages. This makes testing new, innovative ideas inexpensive and easy. Some even argue disruption is made for startups because disruption behaviors typically target niche markets.
Furthermore, established businesses have large budgets and audiences that could easily be lost for a disruption mistake. This explains why most established companies engage in sustaining innovation, a concept we will discuss later.
Famous Disruptive Businesses
When it comes to disruptive businesses, there are a plethora of businesses that adopted a disruptive business model and found major success.
Ask yourself “How do I stream movies?” and “How do I text friends?” If your answers to either of these questions includes Netflix or Apple, you just named a company that used a disruptive business model to change their industries. Some other famous disruptive businesses include Amazon, Airbnb, and Skype. Let’s take a closer look.
- Netflix is known for causing the demise of Blockbuster. Netflix offered no late fees, personalized viewing suggestions and mail delivery which were all pain points of Blockbuster customers. This is an extremely successful example of a company that implemented a disruptive business model.
- Amazon is commonly referred to as a retail industry disruptor. Amazon combined a variety of models including hypermarket and subscriptions to offer a convenient online shopping experience. Amazon’s success continues to grow today.
- Apple is recognized for disrupting the technology industry. Apple integrates all of its products (e.g. technology and software) in an ecosystem business model. This made them extremely popular in the technology industry because they make a user’s life more convenient and simple.
- Airbnb is known as the hospitality industry disruptor. More specifically, AirBnB directly competes with big-name hotels by offering lower costs and a wider variety of lodgings. Understanding this pain point and discovering there is a market for a sharing economy led to AirBnB’s great success.
- Skype is acknowledged as a telecommunication industry disruptor. Essentially, Skype offered a freemium business model which included voice and text message communications similar to what telephone companies provide.
Disruptive Businesses and the Innovator’s Dilemma
As we stated earlier, established companies have a difficult time implementing disruptive behaviors. Clayton Christensen, a Harvard Business School professor, termed the concept “Innovator’s Dilemma” to describe this challenge:
A root of this problem is established businesses tend to value sustaining innovation instead of disruptive innovations.
Sustaining innovation is improving upon your company’s existing products based on customer feedback to increased product performance improvements. This can lead stable businesses to fail because this type of innovation only works in the short run. Some may argue this type of innovation is important; however, this behavior is conventional. It’s classic business textbook.
Companies that create value rather than improvements to existing products and services create disruptive innovations. This type of innovation can establish an entirely new, niche market or way of doing things. Consumers don’t commonly see this from established businesses because disruptive innovations are risky which can be worrisome for these powerhouses. Additionally, a few characteristics of disruptive innovations are convenience, personalization, and customization.
Unfortunately, it is common to see companies attempt disruptive innovation when it’s already too late. For example, Blockbuster copying Netflix’s business model as a last resort. Fear of failure limits established companies’ disruptive innovations, yet these disruptive companies often hurt the established companies in the long run. Why? Disruptive innovations allow you to stay ahead of trends and identify consumer’s future needs while doing nothing means you fall behind.
It’s the difference between reactive and proactive. Fundera’s infographic on disruptive business models further details strategies for proactively identifying future consumer needs through disruptive innovations.
Identify a couple of strategies that make sense for your company and start brainstorming. Through some analysis and careful evaluation of your competitors, you can find your own company disrupting and making waves in no time.
Infographic: Why Your Company Needs a Disruptive Business Model
