Disruptive innovation has the power to radically shift markets and business models, permanently alter industries, sway brand loyalties and forever change customer expectations. In our current era of the startup, responding to disruptive innovation has become a new and often harsh reality.
When disruptive innovations and emerging trends radically shift your market and throw you off your game, how do you respond?
The music industry didn’t foresee the iPod, airlines didn’t conjure up “GoToMeeting” and Lyft wasn’t the brain-child of the taxi industry. The disruptive technologies that radically alter markets are often the genius of outsiders with the freedom to identify what others entrenched in the industry are unable to imagine.
While most organizations are busy conducting business as usual, defending their market share and innovating within the neatly defined parameters of their business plans and marketing strategy, any number of brilliant, creative entrepreneurs are thinking up ways to solve your customers’ unmet needs. A good business model seeks to lead disruption, not respond to it. To do so, you will need to:
Understand Your Customers. Before you do anything, you need to know who you’re doing it for. It’s vital to understand your customers’ wants, needs, decision-making process and how and why they use your product or service
A while back I interviewed Sacramentans about the sharing economy. What I discovered is that, regardless of whether they use ridesharing apps like Lyft and Uber, Sacramentans consistently report disliking the exact same things about taxis: lack of cleanliness, the awkwardness and unpleasantness of the ride, and lack of technology.
Lyft and Uber were able to disrupt the taxi industry because the taxi industry wasn’t meeting its customers’ wants and needs. The taxi industry had grown collectively complacent. The old adage about an ounce of prevention being worth a pound of cure applies here, but that doesn’t mean it’s too late to change.
Call up a few of your customers and ask why and how they use your product or service. Find out what you’re getting right and what you could be doing better. What irks them about your industry as a whole? Don’t bother with surveys and focus groups; have real, personal conversations and hear them out. Bring a human approach to the table, and nine times out of 10, they’ll reciprocate by with an honest perspective.
Assess the Competition. You need to be able to distinguish the iPod (disruptive innovation) from the New Coke (passing fad). Does it meet real needs for your customers? If this new competitor has staying power and the potential to shift brand loyalties, they are a legitimate threat.
See what their customers are saying about them on social media. What is it that their clients love so much? Combine that with feedback from your own customers to inform an updated strategy.
Next, identify for yourself how it is this competitor got a leg up. What gaps existed that they were able to fill? Rather than copying their method for solving unmet needs, spend some time thinking about how it is you might evolve your products or services to close other gaps and better meet the needs of your customers — because meeting real and relevant market needs creates tangible competitive advantages for your business.
Pursue Opportunities. Business guru Peter Drucker said, “Don’t solve problems. Pursue opportunities.” You can choose to view a radical innovation as a problem or as an opportunity. You can fight it, or you can drive it.
When Lyft and Uber arrived on the scene, insurance companies didn’t want to touch ridesharing with a ten-foot stick shift. They actively fought against this new classification of driver that blurred the lines between personal and commercial insurance. Instead of accepting and responding to the market, they dug their heels in and dropped drivers when they discovered they were moonlighting behind the wheel. That gave taxi companies incentive to start reporting the names and license plate numbers of Lyft and Uber drivers to insurance companies rather than stepping up their game. This aversion to change eventually opened the door for a divergent new insurance company, MetroMile, which offers car insurance at per-mile rates. MetroMile saves low mileage drivers from overpaying for car insurance and offers full coverage to high-mileage drivers like those who drive for ridesharing services. When no one else in the industry wanted to meet the real and pressing insurance needs for Lyft and Uber drives, MetroMile capitalized on the market need. Now, it’s taking the market by storm and giving its competitors a run for their money.
How to you become the MetroMile of your industry? Grab a pen, some blank paper and start jotting down all the possible ways you might be able to meet your customers needs and drive these new disruptive trends for profit and for good.
Your market is going to continue evolving. Whether or not your products, services or approach to doing business also evolve determines your risk of antiquation. If you’re not keeping up with the times, then you’re creating the gaps in the market that a startup will be incentivized to fill — stripping you of customers in the process.