Business Disruption:
Everything You Need To Know

Business Disruption: Everything You Need To Know

Business Disruption: Everything You Need To Know

Disruption has become the key imperative in business. With new technologies, changing customer preferences, and unpredictable events like pandemics, companies face constant challenges that require them to adapt quickly to stay ahead of the curve.  

Given that we are currently immersed in what has been called ‘The Fourth Industrial Revolution and that previous industrial revolutions have all resulted in significant change, it is reasonable to expect many more revolutionary changes, including business models. This article explores the concept of business disruption in-depth, covering everything you need to know, including: 

  1. The origins of disruption 
  2. Examples of business disruption 
  3. What is new-market disruption? 
  4. How to leverage business disruption 
  5. What are the effects of disruption on the business? 
  6. What are the advantages and disadvantages of business disruption? 
  7. How to prepare for disruption and create new markets 

The Origins of Disruption 

Since its introduction in The Innovator's Dilemma by Clayton Christensen in 1997, disruptive innovation has been the subject of much analysis and debate among researchers, leaders, and businesspeople. 

Clayton Christensen created the term "disruptive innovation" to describe a trend in which a previously underrated product or service gains enough traction to displace an established market leader. A "true" disruptive innovation establishes itself at the bottom of a market, often gaining a negative implication. However, the product eventually becomes more appealing than its competitors within the industry due to low prices, greater accessibility, or other advantages. 

The problem with using this term to describe any new business that disrupts an industry is that it alters the true meaning of disruption. It attracts more attention to startups already getting attention while true disruptors slowly climb the ladder elsewhere, unnoticed by the industry giants they are meant to replace.

Examples of business disruption 

Looking at examples of disruption in the real world can help us understand what it means.

Video streaming services  

Popular video streaming services like Netflix and Amazon Prime have disrupted traditional TV entertainment. More people are choosing to watch shows and movies online, causing a decline in TV ratings and advertising revenue for TV networks and slowly allowing more and more customers to cut their cable subscriptions. It has shifted how content is produced and distributed, with streaming services becoming more dominant in the entertainment industry.

Camera industry  

Almost everything associated with customer-oriented cameras, such as film types and overnight delivery booths, is essentially gone. With the rapid development of mobile phone technology, so did the quality of the camera on them. It was most evident when the release of the Samsung Galaxy S23 Ultra hit stores worldwide, with its 200MP main sensor and 30x optical zoom. And the trend of better cameras continued as they released newer versions, allowing for a plethora of photo opportunities.

Music streaming services  

The rise of Spotify has significantly impacted several companies in the music streaming services industry. Apple Music, YouTube Music, and Amazon Music are just a few of the other major streaming music platforms that have emerged in response to Spotify's popularity. However, Spotify has maintained its position as the leading music streaming service and has kept subscription prices stable despite fierce competition and unstable stock market performance. Spotify's success can be attributed to its unique combination of a user-friendly interface, extensive music library, and personalised recommendations. With a vast collection of songs, and podcasts, users can access their favourite content anytime, anywhere.

What Is New-Market Disruption? 

New-market disruption happens when a company establishes a new segment within an existing market to cater to customers who have been overlooked or underserved. This could involve creating an inexpensive alternative to a costly product, explicitly targeting less affluent customers.  

Since the incumbent company tends to focus on wealthier customers, it is less likely to compete with your company for the new market segment. Over time, the company with the cheaper version of the product may improve in quality and begin to appeal to other market segments, thereby driving the more expensive version toward obsolescence.

3 Characteristics of New-Market Disruption 

There are three main characteristics of new-market disruption that separate it from other types of innovation: 

  1. Non-consumption is the target.The innovative product is designed for an audience that previously did not have access to or could not afford this type of product. 
  2. Profit is generated at lower unit prices than established businesses. This is crucial because if profit margins are higher than those of incumbents, they will be motivated to resist new entrants for market share. 
  3. Existing customers receive lower performance, while non-customers receive higher performance. This makes the new entrant appear less threatening to established businesses. Existing customers are unlikely to switch to the new product because its quality is lower, but for the market segment that previously did not have access to the product, lower quality is acceptable. 

How to leverage business disruption  

Developing a disruptive strategy requires a roadmap from the current state to the desire of the business to succeed. Preparing and planning for potential disruptions in your industry is critical to a successful business strategy.

1. Determine your X factor  

Your X factor is the unique value proposition that sets your business apart from your other business. To determine your X factor, you must identify what you do better than anyone else in your industry. Once you have identified your X factor, strengthen and leverage it.  

Disruptive businesses often succeed by putting customers at the centre of everything they do. By understanding your customers' needs, preferences, and pain points, you can create products and services that meet their unique demands. It can help your business build a loyal customer base and differentiate yourself.

2. Practice CANI  

Constant and Never-ending Improvement" (CANI) is a powerful concept that can help businesses leverage disruption. When a business faces disruption, it is often a sign that they need to evolve and improve to remain competitive. 

It could involve reviewing their existing processes, technologies, products or services. Once these weak points have been identified, you should focus on implementing small, incremental changes that can be easily tested and refined. This approach will allow you to continually improve offerings without taking on too much risk or investing in large, expensive projects.

3. Learn how to spot business disruption 

Large, inflexible corporations are typical characteristics of markets that are ripe for disruption. These businesses have been around for a while and assume they have a secure foothold in the market. It is a wrong move that will leave the open to competition from newer companies offering better customer value. 

That's why it's crucial to monitor developments within your industry and adapt accordingly in the face of disruption. This could include technological advancements, market changes, or shifts in customer preferences as your audience grows older. You want to disrupt rather than be disrupted, so keep an eye on your competition while remaining agile and open to new opportunities.

4. Practice self-disruption  

"Disruptive innovation is a high-stakes game, with high risk and potentially high rewards," Alison Coleman states in Forbes. "It's also difficult to identify winning disruptive opportunities, especially when disruptive ideas require other ecosystem players acknowledging and embracing the change." 

Apple uses disruption as a long-term growth strategy. The company's iPod revenue fell by $345 million due to Apple's business disruption: the iPhone, which generated $18 billion in revenue. By being proactive and prepared to deal with disruption, you can thrive rather than survive and be the one to outperform the competition. 

5. Optimise from within 

Appreciating the value of disruption for businesses of any size is crucial, even if you are not as large as Netflix. gigCMO emphasises the need for companies to optimise from within when seeking growth. 

Instead of solely focusing on external factors, companies should carefully analyse their existing structures and processes to identify areas for improvement. It will enable them to embrace disruption more thoughtfully and strategically rather than blindly chasing innovation.

6. Scale mindfully  

Before scaling, make sure you have a clear understanding of your company's purpose and values. This will help you make decisions that align with your mission and avoid compromising your values in pursuing growth. 

Remember that one of the defining characteristics of disruptive innovation is being able to play the long game and hold on to your initial advantages while expanding your market share. You'll need a detailed company plan and strategy, a compelling business proposition, and the ability to set and achieve ambitious goals.

7. Don't force disruption  

Virtual reality is a prime example of how innovations can create a new market, transforming our experiences from sports to education. Brad Allen, the chairman of NextVR, envisions a future where customers can immerse themselves in events like never before. Such innovations demonstrate technology's potential to revolutionise how we live and work. 

So, rather than solely focusing on business disruption, take the time to understand your business's identity and values. It will enable you to make strategic decisions that drive growth and establish a unique and authentic brand identity that sets you apart from the competition. 

What are the effects of disruption on the business? 

Business disruption can shift a market and redefine what it means to be relevant in an industry. Among the effects of business disruption are the following:

1. Transforms a business model  

Business disruption can completely revolutionise a company's business model by capitalising on emerging innovations. With the advancement of technology, there are more opportunities to transform a business model from one purchasing method to another. Companies' strategies can be modified as a result of: 

  • Innovative production methods  
  • Introduction of new products  
  • Changes in the workforce 

2. Shifts the focus to convenience  

The idea of convenience has become a central focus for many modern businesses. It is because many innovative business concepts have flourished by improving customers' experience. For example, the shift from physical store shopping to online shopping has allowed customers to enjoy many benefits, including: 

  • The convenience of shopping from anywhere, at any time 
  • No need to physically travel to a store 
  • Access to a range of products and services 
  • Easy comparison of prices and features 
  • The quick and hassle-free checkout process 

3. Improves efficiency  

When a company introduces a superior method of doing things, it will likely displace the old ways. For example, email communication has reduced the demand for traditional postal services and has swamped people with messages. Disruptive innovations that raise the benchmark for industry practices will typically result in enhanced efficiency.

What are the advantages of business disruption?  

In some cases, disruption has led to the downfall of established companies, while in others has created new opportunities for growth and innovation. Understanding how to navigate disruption has become a critical skill for many business leaders. If business owners recognise a disruption opportunity and respond quickly to another disruptive business, their company will be rewarded.

1. Improved business flexibility  

Companies at the forefront of the disruption trend are commonly cited as models of flexibility, responsiveness, and innovation. These companies are more future-proof because of their improved organisational structures with less hierarchy. Similarly, businesses that adopt a disruptive mindset are going to succeed.

2. New opportunities for growth  

If you keep an eye out for changes that could cause disruption, you might also notice opportunities for expansion. These non-disruptive innovations can help you expand your business by opening up new revenue streams, such as sales channels or target markets.

3. Increased customer satisfaction  

Every company should strive to have a loyal customer. Listening to what your customers want has two advantages: it will reveal opportunities for disruption and result in happier customers. 

What are the disadvantages of business disruption?  

While business disruption can be beneficial in the long run, it also comes with certain drawbacks, including the following:

1. The process is risky  

Disrupting business operations can be risky, mainly if a business adopts a new technology or business model. Some inventions must go through several stages of development before they reach their final, most effective form. That means several losses of inventions were lost in the shuffle before reaching that final point, as well as losses due to unsustainable practices, market shifts, or stagnation. 

2. It's unpredictable  

While companies can try to plan for and mitigate risks associated with disruption, there is always a degree of uncertainty involved. For example, an unexpected economic downturn, regulatory changes, or a disruptive new competitor could all significantly impact a company's operations, even if it had no way of predicting these events in advance. This unpredictability can make it difficult for companies to plan for the future and may create instability among employees.

3. Results take time

It's essential to recognise that the results of business disruption are not always immediate. Tesla is a company that has disrupted the automotive industry by introducing electric vehicles that are not only environmentally friendly but also high-performing. When Tesla first entered the market, many people were sceptical about the viability of electric vehicles and questioned whether they would ever become mainstream.  

However, over time, Tesla has proven that electric vehicles are not only viable but also highly desirable. In 2020, Tesla became the world's most valuable car company, surpassing Mercedes-Benz And Toyota. And today, electric car manufacturers in China are rapidly changing the future of the car industry in the world’s largest car. 

But this success didn't happen overnight. Tesla had to overcome numerous challenges and obstacles before it could establish itself as a major player in the automotive industry. It took years of research and development, as well as significant investments in infrastructure and manufacturing, to bring Tesla's vision to life. 

How does gigCMO help your business to be a disruptor and create new markets?  

While your company may not have the next big thing like Netflix that will take the marketplace by storm, you can still be a disruptor by improving on what you already have. You shouldn't be contented with simply keeping up with the competition; instead, consider what would truly allow your company to be a disruptor. 

So how do you introduce new products or services to your customer who has grown and is used to doing things the old way? gigCMO can not only put your company in a unique position, but we can also reshape your business. With our extensive knowledge and experience, we can help translate your business goals into tangible success. 

So, how can you be a disruptor most effectively? 

You need to prove to your customer and other stakeholders that the product that you are pitching is a sound investment. New companies that fail to communicate their unique offerings will be quickly overtaken by other disruptors. Nokia and Blackberry failed because they were slow to respond to market changes and underestimated the threat posed by Samsung and Apple. 

Communication and clear messaging are critical to convincing your customer to put their trust in you. gigCMO can help you develop a unique value proposition that resonates with your target audience and provides you with a competitive advantage. Disruptors are intellectually curious and keen to understand changes in the minds of the customer. The better you tell your story to your customer, the more likely you will engage and convince them. To be a disruptor, you must be willing to take risks. All of the world's disruptors have that passion and vision. 

Being a leader of transformation requires a significant amount of energy, ideas and investment. gigCMO bring a diverse range of experience from various industries, allowing for a fresh perspective and innovative marketing strategies in your existing and new markets.  

Contact gigCMO today to help you communicate your value proposition in a way that generates revenue and growth.