How is this Disruptive
With disruptiveness we are trying to find out how this new technology/approach is different from the incumbent way of doing things. We will be using the word “disruptive” loosely as to mean both “creatively destruct” and/or “create blue oceans”. The folks at blue ocean strategy differentiate the two by saying that the “essential point here is that blue ocean strategy is not about finding a better or lower-cost solution to the existing problem of an industry, both of which trigger disruption and displacement of existing products and services. Instead, blue ocean strategy is about redefining the problem itself, which tends to create new demand or an offering that often complements rather than displaces existing products and services.”
Uber
Uber uses market dynamics to systematically bring down the price of transportation. As Gurley writes in his post, “As Uber becomes more and more liquid, its drivers enjoy higher and higher utilization. Utilization is a measure of the percentage of time drivers are working versus waiting. Think about rides per hour as a similar measurement. As utilization rises, Uber can lower price, and the drivers still make the same amount. Uber does in fact choose to do this, and has done it many times.”
Classpass
Classpass gets rid of the traditional model of the gym by doing away with long time commitments and enrollment fees. In addition, now you can take classes with your friends without having to travel to their gyms. With the dozens of locations available in a city, a user’s workout can be as flexible as their schedule.
Square
Square is trying to replace credit cards with software. If a customer has a Square account and a business accepts Square, then there is no need to use a card to complete the transaction.
Plated
Services like Plated eliminate the need to go grocery shopping. In fact, the groceries come to you and you don’t feel the guilt of eating out or eating greasy delivery food. It also eliminates the need for order in food. They are competing with supermarkets such as Whole Foods and Trader Joes.
Airbnb
Airbnb’s business is intrinsically disruptive. They are turning people’s homes into businesses without classifying them, and treating them (tax-wise) as businesses. They are giving people options that they have never had before. On the guest side, they have a choice on where to stay and are not limited by hotels in that area. For hosts, they can make incremental revenue by renting out a room in their home or they entire place.
Rent the Runway
Women having access to fashion that they see in magazines in groundbreaking. Not needing to spend hundreds of dollars on a dress that could be only worn once is a solution to a problem. In addition, it is educating young women on the quality of these high-end designers. As they get older and more affluent, they will have a higher propensity to own these designers dresses.
Takeaway
Disruptiveness, as we are seeing it, is enabling groups of people access to goods or services that they could not have had otherwise. Either it is by amending legislation, how Airbnb and Uber do it, or tweaking business models, how Rent the Runway and Classpass are doing it. All in all, it’s forward thinking visionaries asking themselves “Why is the X industry the way it is?” and “how can I make a dent in it?”
Exercise
- In the industry that you are in, has it been appealing to the same target demographic for the last 10–20 years? If so, can you widen that demographic to serve an underserved market?
- If that new demographic is introduced to these goods and services, what will occur? Will it cheapen or strengthen those brands associated?
- In your industry, does it make sense for a more premium good/service create a less expensive offering or a more discounted good/service to create a more expensive offering? For example, Whole Foods creating lower prices supermarkets under a different map or Kia cars getting into a more luxury brand of cars?
Experience with past Citadines Group clients
We had a client that was a community and marketplace for handmade jewelry. The process was simple. A maker would create a piece of jewelry and post it on the site. The community would vote on that piece. If it got enough support, then that piece would go into mass production and the maker would get a royalty from every single piece sold.
This was disruptive for several reasons. First, if a maker wanted to get their jewelry out to the public they would have to get a job at a large jewelry company and hope their piece was approved by their boss. Second, the jewelry is essentially pre-sold before it is made. The platform would not have to take any risks because anything they would mass produce already had preorders. So they would not have any inventory risk. Lastly, the seller does not have to worry about marketing their jewelry because the marketplace brings the buyers with the makers.
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