Disruption and Disruptive Business Models

Harvard started lecturing on the concept of ‘disruptive innovation’ in 1995 – so this whole subject is not a new thing.

In researching this article, I’ve read articles, books, papers and blogs, I’ve watched webinars and tuition videos and I’ve listened to podcasts and speakers at events.  There’s only one real conclusion I’ve drawn … no one knows how to make the next disruptive business but they all like talking about it!

Disruption isn’t necessarily about technology but it’s often hand in hand and an integral part of the model.  Uber isn’t based on any technology that a decent app or website designer couldn’t deliver!

Disruption is ABSOLUTELY about a mindset – here’s a quote that epitomises disruption:

“You have to be BURNING with an idea, or a problem, or a wrong that you want to right. If you’re not passionate enough from the start, you’ll never stick it out.” – Steve Jobs, Apple Inc

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It’s also risky to be disruptive … we all know the famous names of successful disruptive businesses (AirBnB, Uber, Amazon, etc) but there are thousands who tried and failed – remember some of these: TiVo, Napster, AOL, Netscape, QR codes, Betamax.

Things to look for to BUILD a disruptive business:

Old fashioned industries or established businesses where their current growth models are mainly through acquisition and ‘slow and steady’ sales growth.  In truth, they’re probably struggling for cash flow, slow to pay their suppliers and constantly looking for the next finance deal. Ideally, they’re a business not currently using technology when patently they should!

In part, established businesses will always struggle to become disruptors because they’re too busy in their own day-to-day chaos, too busy dealing with challenges, too busy to try another way.

So … if you want to set up, launch and own a disruptive business then here are some starting points for you to consider:

Disruptive Business Principles

Understand and stick to your core ‘hedgehog principles’ (see the amazing business book by Jim Collins called From Good to Great) – but in short, your hedgehog principle is fundamentally where the following three basics interlap:

  • Something you’re good at
  • Something you can earn profit doing
  • Something you’re passionate about

… once you’re clear on your core strategy, find a brand new market for it because building a new market is easier than fighting for market share.

Think about your customer and not you!

Customers tell you what to do – if only you listen!  However, if you only do what’s being asked for you’re probably missing a bigger opportunity!

  • What frustrates them / what’s hard for them to do
  • What causes them to leave their current provider
  • How can you improve their lives – it genuinely has to be this level of goal and ambition to be effective
  • Have you aligned your ‘value proposition’ with your customers needs – what else can you bundle or include to add more value with low cost to you – could your competitors offer a better deal in any way?
  • How can you ‘lock in’ loyalty – what techniques can you use to keep reminding your customer how amazing you are – communication is often king.
  • NEVER enter a market with the intention of ‘changing’ a customer!
  • Make sure you can grow your market, not your business

What is currently out of reach that you can grasp?

  • Is it a pure luxury item that you can now make affordable to the masses?
  • Is it a service where, if you need to ask the cost, you can’t afford it?

Act fast, with purpose and precise strategy

  • Too many businesses do not plan or strategize and even the ones that do, tend to then not stick to it!
  • Ignore all the business language – robust, sustainable, paradigm shift, etc.  Use simple language, plain English, short and sweet – a one page business plan is best but a full business plan will be needed if you need to raise finance!

Use technology cleverly

  • Technology in itself is not disruptive … It has to benefit the customer so it’s how you use the tech that makes the difference.
  • It has to be adaptable – to change and develop as you realise new ways to change things
  • Consider partnering with a University – but demand copyright ownership (or at least a share of) and demand the use of open source code wherever possible

Focus

  • Allow growth to ‘happen’ but be consumed by profitability and scalability – if it’s truly disruptive it will grow organically without further effort – when did you last see an advert for Uber!

To conclude, our time is short so let’s do something amazing, that is fueled by our own passions and which truly benefits our customers to make us the next disruptor, and not the next ‘also-ran’!

Straight talking advice from Yorkshire Powerhouse

Now you’ve read our thoughts on disruptive business models, have you any more questions?

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