When you’re driving a car, a blind spot can mean bad news. It’s a scenario that can potentially end with twisted metal, crunching, and possibly screaming. In business, a blind spot can be almost as bad (there will almost certainly be screaming). One of the best examples of big business getting sideswiped because of a blind spot is disruptive innovation.
In the game of disruptive innovation, you want to be the disrupter rather than the disruptee.
Once upon a time, Netflix was small (much smaller than the $5.5 billion a year company it is today); and they were a disrupter. When the company began in 1997, it offered movie rentals by mail order. Netflix was not seen as competition to the likes of video store giant, Blockbuster. Despite being a cheaper service, Netflix only appealed to those happy to wait for mail deliveries and those few early adopters of online shopping. Blockbuster felt safe in the knowledge that consumers would never change their movie-watching behaviour and switch to this perceived inferior service.
Blockbuster had a blind spot.
Quietly and slowly, Netflix grew. The company had created an innovative new service for a new market, as well as starting to encroach on the needs of Blockbuster’s existing customers. As Netflix grew, so too did online shopping and the brave new world of on-demand movies and TV. Over the course of 16 years, Netflix became the instigators of a complete shift in consumer behaviour. Eventually, Netflix’s service became the mainstream offering.
In 2013, Blockbuster in the US went into administration. Cue screaming.
Why was Netflix a disrupter?
If Netflix had gone straight for Blockbuster’s core market at the start, they would not have been a true disrupter. Blockbuster would have viewed Netflix as competition and tackled them accordingly.
Netflix began with a service that was seen by most as inferior. It was cheaper and offered some benefits (no late fees) but didn’t match the service that Blockbuster offered and charged top dollar for.
It was slow moving. It took many years for Netflix to grow; on demand services didn’t begin until 2007.
Netflix changed mainstream behaviour. The company offered an innovative new solution to consumers’ desire to watch movies without fuss.
These days, Netflix are no longer a disrupter, as they are serving a mainstream market with a mainstream product. But at the time, the new service represented classic disruptive innovation.
Clayton M. Christensen originally defined the theory of disruptive innovation over 20 years ago. The theory explores what happens when new innovation creates a new market that displaces an existing market and established market leader.
Complacent, large companies define their identity by their products andservices and create strategies and pursue opportunities based on the same fundamental ideas. Growth is achieved by upgrading customers and charging more. Customers who want the basic offering are overlooked.
Disruptive innovators create new solutions based on what job the customer needs to do, rather than to leverage off existing products. Disrupters deliver a solution with improved functionality and lower price. A disrupter then moves upstream, delivering the product or service that the incumbent had originally promised but with the loyalty and improved performance that first drove their success. Disrupters disappear once mainstream customers start using the new product in volume.
Wikipedia disrupted expensive hard copy Encyclopaedia Britannica with its free, basic, online knowledge base. Google Apps disrupted PC’s word processing and calendar services. Crest disrupted expensive dental procedures with its affordable whitening strips.
Disrupters avoid going head to head with existing organisations by creating new markets. Their path to the mainstream begins on the fringe.
Why entrepreneurs are great drivers of disruption
In the world of disruptive innovation, innovation is the easy part. It’s selling the innovation that is the challenge. The trick is not selling against the competition but rather selling against the way things have always been done. Something that requires the gritty determination of a true entrepreneurial spirit. At the start, mainstream markets will be unsure (at best); and downright distrustful (at worst). Keeping a disruptive innovator going:
- Disruptive businesses have no competitors at the start, make the most of flying under the radar.
- Disrupters need to overcome existing behaviour and loyalty. Despite failings, customers often choose to hold on to their existing company because “that’s the way we’ve always done things”.
- Sell an innovation based on customer need, rather than features and benefits (the way big companies do things).
- Disrupters often succeed because they offer significant cost reductions to the mainstream offering. Showcase all the advantages to build loyalty.
- Make it easy for customers to change. It may mean offering guarantees.
- Anticipate fears. Customers will have concerns until the new way of doing things is accepted as a mainstream solution. Have a response to those fears.
Disruptive businesses shake up the big, slow-moving, keep-things-as-they-are behemoths. In the stagnant waters of giant organisations, there is opportunity for disruption.