Within business advice and techie circles, there’s a lot of talk about disruptive businesses at the moment. ‘Disruptive’ is the hip word, and we should all be either creating disruptive businesses or creating disruptive technologies. As a contrarian I often get suspicious of the “latest” thing.
So what exactly is a disruptive business or technology product?
A disruptive business sells to customers at a lower price than competitors, or sells to customers who couldn’t previously afford to buy that product.
Walmart was disruptive because the company stole all the customers from the little shops, offered lower prices because of its bulk buying and much lower levels of staffing and customer service. For buying simple things such as groceries or consumer goods, people weren’t bothered about having a nice shopkeeper to give them advice, or fancy shops – they just wanted it cheap and convenient.
‘Disruptive’ is often summed up as “FASTER, CHEAPER, BETTER”.
If you can come up with a way to make something with a lower unit cost (selling MP3s online rather than selling CDs or vinyl which cost money to make and ship), get it to the customer faster, or make it work faster (fast dispatch from Amazon) or just better (broadband vs dial up) you might have the makings of a disruptive business. You can attract customers who were previously buying expensive things. BT doesn’t sell a lot of leased lines to businesses nowadays, because you can get just as good an internet connection from a standard broadband connection for about 5% of the price.
Although this isn’t necessarily the latest rocket science is it?
How is it the latest thing to suggest that you might try to think of a business which can have lower cost of sales and/or lower overheads, and therefore attract a new market of people who couldn’t afford the expensive version. I think the Victorians probably thought of that one.
The other sort of innovation
I suspect that some of the people who are talking about ‘disruptive’ actually mean ‘innovative’. It quite often happens that there’s a new piece of business jargon in town, and people start using it willy-nilly to mean the thing that everyone understands already.
Do I sound cynical and bitter? I just mean to sound cynical, not the bitter part. As a cynical pedant, I have to point out that, technically, disruption is different to sustaining innovation. That’s when you make better products and sell them to people who have enough money to pay for them.
For the businesses I generally work with (people with less than 30 employees and without a huge war chest of people and money to invest) innovation is often (but not always) the best model. You want to concentrate on making something remarkable, and sell it to the people who will pay lots of lovely money for it because they value it.
What we normally mean by innovation
What we normally think about when we use the word ‘innovation’, is doing something new. We think about things that have never been done before, like mobile phones, digital watches or Spotify. Now, having something new can definitely give you a competitive advantage in business, but don’t get too caught up with the ‘innovative’ new thing.
For a start off, there’s rarely anything actually new.
Spotify wasn’t new. There had been streaming music services for years and years, ever since broadband in fact. I was using Classical.com in 2001. Spotify’s innovation was brilliant marketing, bringing together a whole load of material, and a very nice user interface. Plus the freemium / premium model to get people to use it in the first place.
Mobile phones were new, sort of, once upon a time. But they were really just a better version of satellite phones, which were better versions of the field telephones used by the military.
It’s rare that there’s actually anything new. Usually, business success is founded on a little twist in the tail (the iPod which was sexier than Real’s MP3 player) or an improvement in a process which makes it possible to sell something more cheaply.
It’s these twists which we need to look for to give you the success you’re looking for – not trying to be disruptive, or innovative or invent something new. Next time, I’m going to look at how boring businesses are great. If you’d like to keep in touch for the next business rant (plus some hot tips and juicy gossip) then do sign up to my email newsletter or follow me on Twitter.
Made you think about business models?
If this post has made you think about the model and strategy behind your business, whether it’s the right one, or if you have one at all, and you’d like some help in getting this right, then do get in touch for a chat about how we might work together to get your company on the right track.