How true disruptors use innovation, including digital,
to grow the market and create new business models
OR YEARS I was taught that growing the business in an industry with strong competition was mostly a zero-sum game. You took away share from competition or they took it from you. Or else, you took on the hard work of growing the entire market. I’ve learned this is not always true. Many digitally native startups seem to find a third way – a digitally enabled non-disruptive creative growth. That’s the beauty of digital capabilities. It can drive new business models, open up adjacent products and help you grow the whole market.
1: Open adjacent product areas: For the people across the 147 countries around the world who learned about colors and the alphabet from Sesame Street, there’s one more lesson that the beloved TV program can offer. We can learn about how the program created an entirely new segment of preschool “edutainment.” Sesame Street did not disrupt a prior market for childhood education. It created a new one. For more information on this and the concept of non-disruptive creation see this blog post.
2: Create new technology enabled business models: GE’s Jeff Immelt and Dartmouth Professor Govindarajan are back, with lessons on digital transformation. Other than emphasizing that digital transformation is hard work, they make a valid point about how industrial manufacturing firms that used to sell hardware and give the software away for free, have created new business models selling personalized performance-enhancing software too. This article also has good advice to leaders not to talk themselves out of the hard work of digital transformation.
3: Grow the whole market using digital capabilities: Digital disrupters affect their industries in complicated ways. AirBnB did not take market share directly from established chains. According to this article from the US Bureau of Labor Statistics, 42-63% of established hotels probably would not have taken the rooms that AirBnB gained in the lodging business. However, the overall profitability of the hotel industry went down 3.7% with the introduction of AirBnB.
While some disruptors can completely change the nature of the industry (as Netflix did with Blockbuster) others slowly change industry profitability and grow the entire market. In either case, Digital Transformation is an opportunity for established companies to play a more innovative role in non-traditional ways. Now, more than ever, you can grow your business in the new and adjacent areas enabled by technology.
Go forth and transform.
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Tony Saldanha is president of Transformant, a consulting firm specializing in assisting organizations through digital transformations. During his twenty-seven-year career at Procter & Gamble, he ran both operations and digital transformation for P&G’s famed global business services and IT organization in every region of the world, ending up as Vice President of Global Business services, next Generation services. He is an advisor to boards and CEOs on digital transformation, a sought-after speaker, and a globally awarded industry thought leader. His new book is Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead. Learn more at transformant.io.