Everyone wants to be disruptive; to transform a market, sweeping away the big players and bringing exciting new ideas. It is the big win that everyone looks for.

There are millions of articles about business disruption on Google with titles like:

  • How to tell if an industry is ripe for disruption?
  • 9 ways to disrupt an industry
  • Want to disrupt an industry? Three tips from the future

Shouted slogans encourage an aggressive approach:

  • Ignore all the rules!
  • Move fast and break things!
  • Take no prisoners!
  • Forget the experts; they are dinosaurs!

Ambition is good. We would all like to come up with the next Amazon or Netflix or to have been Isaac Singer and revolutionised the clothing industry.

Disruption is rare and difficult

But, disrupting an industry is rare, hard to do and impossible to predict.  Entrepreneurs routinely announce that they will transform this or that industry, and it seems to be part of the sales pitch of many new companies. I have even heard founders claim they have already disrupted their market when they have no measurable market penetration at all. Investors are looking for companies that can change an industry, but they are also adept at spotting bullshit.

Let’s assume that despite the difficulties you want to disrupt an industry or a market, what could trip you up? Well, there is always the risk you don’t create a customer benefit they care about, or that the product doesn’t work, but the biggest risk I have seen over the years is a failure to understand how the market works now.

Occasionally, you can create a brand new market by meeting a customer need they did not know they had, but this is rare. Usually, your target customers have already some way of meeting their needs, and what you will do is offer them a radically better solution.

You hope that your solution is much better than what they have at the moment, but you need to look at the whole system your target customers use. The more they have invested in other solutions that are not compatible with your amazing concept, the more amazing your concept will have to be to get them to switch!

Understand the market to disrupt it

Here are some questions you need to answer if you aim to disrupt:

  • Am I offering a big enough benefit? Does this make a problem go away? Does it enable them to do something they couldn’t do before? Never mind how cool your solution is, does it matter to your target buyer? You are asking them to take a risk with your new idea; how important is it to them?
  • How much must they change to take advantage of my idea? How difficult is the change? What will it cost? Format wars have a long history of creating barriers that can become insurmountable. The QWERTY keyboard is an example of technological lock-in. Inventors chose the layout to avoid clashing of letter hammers on a manual typewriter. It isn’t the most efficient layout for modern computers, but good enough, and a huge population use it. Change will be hard.
  • What are the performance, compliance and cost expectations? Do you have to meet certain standards, or comply with specific regulations? Are there insurance requirements? These can prevent an innovation getting a foothold. For example, heat networks can play a vital role in the decarbonisation of the UK economy, but unlike other utilities, there is no regulator for heat networks in the UK. This makes them risky both from the user side (no protection if something goes wrong) and the investor side (I don’t get a stable return on capital). New construction methods and materials have difficulty breaking into the market because insurance against failure is hard to get. That makes it too big a risk for users.
  • Does it change the business model? If your customers must change their business model to take advantage of your new idea, the cost and difficulty of restructuring their business is a real barrier. There is also opportunity in a new business model. A new entrant has no existing investment and can exploit an innovation. However, a well-entrenched incumbent can hold off new approaches for a surprisingly long time. We hear about the famous successes, but not the strategies that faded and died.
  • Are there other critical services provided by suppliers? You may see a different way to serve the customer, but is the customer buying something else from them that you are missing? Are they a one-stop shop, offering package solutions? Are they offering finance? Part of Isaac Singer’s success was helping small traders and individuals to buy one of his sewing machines through hire purchase.

 

So, don’t be dazzled by your new product or service. Take a good hard look at how your target customer is meeting their needs now. Think about why they should change, as honestly as you can, and check whether your offer is strong enough. How much must they adapt to your concept and what will it cost them (money, time and effort). The bigger the change, the more resistance you will experience. What about the rules they must obey. Does your innovation make their life easier or harder?

 

Understanding how the market works today may not make you the next Netflix, but you stand a much better chance of commercial success.

If You Want To Disrupt An Industry, First Understand It
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