Being Disruptive

Taking replacement of non-consumption to the extreme, an approach that benefits all parties in emerging markets is so-called innovation at the base of the pyramid (Prahalad & Hart, 2002). Here, companies deliberately provide products and services which are accessible to billions of people who would not otherwise have been able to afford them. This is effectively an extreme form of disruption. Examples abound where companies have established themselves with low-specification and low-cost offerings in these markets, learned how to operate with extreme efficiency, and then disrupted large, existing mainstream companies. A number of these have been fintechs, and one example is Mambu. Mambu was set up as a cloud-based bank to provide affordable services, but it has leveraged its learnings from operating at the base of the pyramid to provide cost effective cloud based banking globally. From such apparently humble beginnings, Mambu’s customer list now includes names like ABN AMRO and Santander (Cooper, 2014).

Despite his loophole, is Christensen’s definition still too narrow? Could you exclude Uber from being a disruptor simply because their offering was not inferior to existing competitors? In his book Digital Darwinism, Tom Goodwin argues that you can’t (Goodwin, 2018). He argues that “it is much better to focus on doing extra and more, than to be paranoid about companies undercutting you and being cheaper. We need the spirit of disruption to be about optimism and creation, not paranoia and defence”. He goes on to suggest that disruption involves a “paradigm leap” to a completely new solution. This is more like the top right of Pisano’s matrix, but is it wrong to call it disruption? I don’t think it matters, as long as you understand what you mean, as long as you understand when it’s a business model that is disruptive and when it’s a technology. I think both Christensen’s and Goodwin’s definitions have a lot to offer us. I like Goodwin’s thinking because it means that disruptors can be bolder and more creative than Christensen’s more narrow definition while still benefiting all parties. But I don’t want to abandon Christensen’s definition either. It makes us think, and in particular, Christensen makes us think about the awesome superpower of simplicity which should never be far from our thoughts and should usually be our primary option.

Something else Goodwin proposes, which I also really like, is the idea of “self-disruption”. Put simply, this is disrupting (and replacing) your own business before somebody else does. Goodwin gives us a couple of examples of this, one good and one not so good. In his distinction, he notes that one of the goals of self-disruption should be to replace the existing business model. Goodwin’s best example of self-disruption is Netflix, and none of us should really be surprised by that. They systematically and completely replaced their original business model with a new and very different one. And a rather poor and half-hearted example quoted by Goodwin is the creation of Go by British Airways. Unlike their low-cost competitors, British Airways didn’t really want to be a low-cost airline – as acknowledged by Alex Cruz in the Morris reference. They had no desire to replace their existing business model and set up a Go as a low-cost arm because they felt they had to somehow compete with the new entrants. They misunderstood what the market disruption was all about. Try looking at your own business through the lens of a potential disruptive competitor, try to think what they would do to replace you. Is it better to let them do it or to try to do it yourself?

I’ll return to Goodwin’s book for one last thought. He talks about how the success of the iPod was not dependent on the device as much as it was on the ecosystem that enabled it. That same dependence on the ecosystem could be levelled at Uber, Airbnb or Blockbuster – just to pick a handful of the companies I’ve talked about above. The ecosystem includes technological platforms and systems that are evolving around us, but it can also reflect our prejudices, feelings and values. I’ll illustrate this by talking briefly about Apple Pay, something I personally resisted using for some time. I preferred to insert myself into the transaction by entering a pin at the point of sale, right up to March 2020. Now, I routinely use Apple Pay. Why? Because the shop, and in particular the credit card terminal, suddenly appeared a lot more hazardous as a result of COVID-19. Touching the keys on the terminal became at worst a potential source of infection, and at best an inconvenience involving hand sanitiser. Concerns about health replaced concerns about security. I didn’t start to use Apple Pay because of its technology, I started to use it because of a significant change in the environment. I’ll talk a lot more about the impact of environment and ecosystems in a future post.

Think of a new company that has appeared in the last decade, disrupted the market and wiped out or significantly displaced competition. What did they do that was different? Did they develop new technology, or just combine stuff that was already around? Are they dependent on other technologies, or on ecosystems, to act as a platform for them? Can they control these platforms or ecosystems, and does it matter? Did they reinvent business models? Was their offering superior, or inferior, to their competitors, or did it create an entirely new market? Were they disruptive, and if so how?

I’m keen to see your examples and hear your thoughts, feel free to add them into the comments box below. Thanks!