VIDEO TRANSCRIPT:
Here’s a drinking game…every time you hear someone claim a business or idea is “disruptive” take a shot…
[Headlines about Disruption fill the screen]
…Actually don’t to that; you’ll definitely die.
Businesses everywhere, from those in health care technology to those making dog food and virtually anyone building a mobile app are eager to describe themselves as “disruptive.” Or, at least business publications are eager to claim something is disruptive in their reporting.
All these businesses and products can’t be authentically disruptive. Authentic Disruption is actually pretty rare. So, what is Disruption, really?
Joseph Bower and Clayton Christensen originally coined the term as presented in a Harvard Business Review article from 1995 and revisited again in 2015. According to them true disruption generally has three main aspects: Lower cost, simpler offering, and increased convenience. And each of these tends to reach an underserved audience in the market. Though, I contend there is one more aspect that increases the likelihood that disruption will be successful. We’ll get to that in a bit.
First, let’s take a look at an historical example of early disruption to get a better idea of how it works. At the end of the nineteenth century a British Biologist named William Saville-Kent discovered how to control pearl production in oysters by inserting a small bead into the shell. By 1916 the process was perfected and patented by the now famous pearl company Mikimoto.
Prior to cultured pearls, a jewelry-grade natural pearl was considered one of the most precious gems one could own. Conservative estimates suggest only 1 in 100,000 oysters have a gem-grade pearl in them. Even at at the height of the natural pearl market a full year of harvesting might only produce enough pearls to fill a shoebox. Compare that to the 128 million carats of cut diamonds produced in 2016, for example. That equals 28 tonnes of diamonds. It’s a shipping container vs. that shoebox.
One of the most famous stories about the value of pearls involves Cartier’s 5th Avenue location in New York City. When Jacques Cartier, moved to New York City at the turn of the 20th century he had a double strand pearl necklace, made entirely of natural pearls. He displayed it proudly in the window of his first location on 5th Avenue. Even in 1916 this necklace was estimated to be worth around $1m.
As the story goes, railroad tycoon Morton Plant and his young wife Maisie were walking by Cartier’s humble New York location. Maisie saw the necklace displayed in the window and knew that she must have it. Apparently, Morton knew that too. So, a trade was suggested. In exchange for the necklace, Plant would give Cartier his 5th Avenue mansion. This seemed like a good deal to Plant since his mansion was worth slightly less than the $1m necklace and Plant wanted to get rid of the mansion anyway. So, for the necklace and an extra $100 the deal was struck. Maisie Plant got the necklace and Cartier got its now iconic 5th Avenue retail location.
But, that deal was made the same year Mikimoto patented the pearl culturing process. Soon, pearls, truly beautiful, well-shaped cultured pearls, became available. And, these pearls checked all the boxes for disruption. They were cheaper and provided goods to an underserved customer (not millionaires), as well as more convenient to produce and simpler to harvest than natural pearls.
But more importantly, cultured pearls undermined the value of natural pearls even though they didn’t change the rarity of natural pearls. By the time Maisie Plant died and the famous pearl necklace went up for auction in 1957, it only fetched $181,000 from an unknown buyer.. Not even 20% of the original value it held decades earlier. No one is really sure where necklace or its pearls are today. Though, when asked directly if they knew the location, the Cartier company merely replied, “no comment.”
Now, there’s something the cultured pearl industry did that is more than merely making pearls cheaper, simpler and more convenient. The activity of culturing pearls undermined the stronghold of rarity of the natural pearl jewelry industry.
So, let’s explore this concept of undermining a bit deeper. See, it’s undermining that’s the key to understanding how to both identify and plan around a disruptive entry into a market.
Back in thirteenth century England, Dover Castle was under siege. Multiple stone walls surrounded the keep making it impenetrable by enemy forces. Even head-on attacks from siege engines didn’t work. So, opposing forces turned to a technique called “undermining.” (Yes, this is where that word comes from). Workers dug tunnels underneath the castle walls and fortified them with timbers along the way. Once a tunnel was underneath the base of the wall they set fire to the timbers burning these supports away. As the supports burned and failed, the weight of the castle wall proved to be too much for the now unsupported tunnel beneath, and the wall collapsed. The sheer weight and mass of the wall, which had formerly been its strongest aspect, literally became its downfall.
Fortunately for the English, Dover had several levels of walls so, they didn’t end up succumbing to the enemy during that battle. But, undermining posed a huge risk to them and other fortifications that relied on the strength of their seemingly impenetrable walls.
It’s this act of undermining a stronghold that makes disruption such a threat to incumbent businesses. Usually, the incumbent doesn’t see it coming before it’s too late. And, it turns the very aspect that makes the incumbent’s market share seem impenetrable into its weakness.
For a modern example, take Netflix. When Netflix began its business of mailing DVDs to consumers it didn’t seem to directly compete with video rental stores like Blockbuster. However, once they built a subscriber base and introduced online streaming video the real damage began.
Streaming video undermines the strength of the previously impenetrable wall of physical media storage that is DVDs and BluRays. Blockbuster found their stronghold of quick access to renting DVDs crumbling as the truly immediate access to streaming video from Netflix undermined its value. Netflix didn’t merely beat Blockbuster at the video rental game; they undermined the very stronghold of physical media storage formats as a whole.
Likewise, Facebook was a direct competitor with Myspace. But, it was a disruptor to the film photography industry as it undermined the value of printing photos for the purpose of viewing and sharing. Kodak didn’t view Facebook as a competitor, but Facebook, even more than digital camera technology itself, undermined the value of the physical film format and therefore of Kodak’s stronghold.
Startups and established businesses can each be disruptive, but merely agitating your competition with a differentiated product isn’t disruption. To be a Disruptor you must introduce something into the marketplace that is cheaper, simpler or more convenient and that has the potential to undermine the stronghold value of another business or entire industry.
So, if you’re an incumbent business or a hopeful startup, don’t look at direct competitors to find disruptive threats or opportunities. You need to consider what could undermine your brand’s stronghold value. What is it that could make your greatest strength an irrelevant burden?
Original illustrations by Wendy Torres. See her work at http://www.surlyqueen.net/
Editing and animatic motion graphics by Mike Rivera