Business Innovation to Upend your Entire Industry!
Entrepreneurs are our modern-day superheroes. They can’t bend steel with their bare hands or fly, but a select few share one super characteristic: They understand the power of disruption and how to use it to transform industries through business innovation.
Disruption sounds like a bad thing, and perhaps it is for some companies. But disruption is a positive and necessary part of evolution. It paves the way for innovation in established markets that are have stagnated and gotten stuck in the rut of inefficient practices and processes, outdated products, etc. PayPal and Palantir Technologies co-founder Peter Thiel wrote in his book Zero to One: Notes on Startups, or How to Build the Future, which is about how to build companies that create new things, that disruptive companies are “fanatically right about something else those outside it have missed.”
Another common feature of disruptive companies is their approach to the consequences of exponential growth. As business owners, most of us have experienced incremental growth. We can predict and plan for it. Today’s startup companies — if they’re successful — must be prepared for the challenges of sudden, explosive growth. They may start from nothing, but these unicorn-like companies must be ready to shoot the moon.
Here’s the thing. You don’t have to be a startup to adopt disruptive strategies and spark exponential growth. A disruptive mindset welcomes contrary thinking and experimentation. Disruptive companies — whether they’re startups or established — must look at growth in a different way. That’s why Salim Ismail’s book, Exponential Organizations is required reading for the world’s top organizations.
Calculated recklessness
Companies that use innovation to create disruption have a particular approach to growth. LinkedIn cofounder Reid Hoffman recently teamed up with bestselling author Chris Yeh to chronicle and explain this approach.
They call this aggressive, all-out program of growth Blitzscaling (enjoyable reading BTW), which they describe in the book as driving lightning growth by prioritizing speed over efficiency, even in an environment of uncertainty. A company can achieve a dominant position in its market when it chooses to grow at a breakneck pace. It allows you to defeat challengers even when they have more resources.
But that’s just part of the puzzle. Massive growth brings massive customer demand, which means you need to scale — and scaling isn’t just about growth. Scaling is about the ability to handle growth in the face of uncertainty. And that’s what these companies have been so good at accomplishing: They’ve prioritized speed over efficiency.
Disruption is not for the faint at heart. You’ll push aside careful planning, cautious investment, and solving every problem thrown your way in favor of letting those small fires burn while you rapidly estimate and make seemingly inefficient investments.
As the authors explain, “It’s do or die, with either success or failure in a remarkably short time.” Hoffman and Yeh also warn that slow and steady growth is one of the greatest risks a company can take today. The only way to win is to move faster than your competition.
Here are four examples of disruption and innovation — coupled with blitzscaling — at work.
1. Airbnb
Hotels are all about hospitality, but why should they be the only ones to get paid for it? Plenty of people may have asked the question, but it took cofounders Joe Gebbia and Brian Chesky to pin that disruptive tail on the hospitality donkey. They didn’t set out to put hotels out of business, which might be how the industry sees it now. Airbnb simply used technology to help with what its two founders call “collaborative consumption.”
2. Uber
Uber is to the transportation business what Airbnb is to the hospitality industry. Why are taxis and limousines the only ones who get to charge people to drive them places? Well, obviously they have the advantages of infrastructure and reputation, but technology can level that playing field. Uber is democratizing and disrupting the transportation industry by doing nothing more than giving the public access to what used to be an industry-specific infrastructure.
3. Netflix
This company wins the award for disrupting disruption, and what could be a more fitting way to demonstrate innovation? Step one was a simple question: Why do you have to drive someplace to rent a DVD? Founders Reed Hastings and Marc Randolph soon disrupted the video rental industry that Blockbuster had almost single-handedly disrupted just a few years before.
But the overhead for all those DVDs and the cost to mail them meant the original version of Netflix was just a different flavor of Blockbuster’s business model. Hastings and his team knew that postage rates would increase — but so would broadband internet access. So, they developed a plan to flip their operating model when it became more cost-efficient to stream a video than mail a DVD. That disruptive moment came in 2007, and Netflix was ready. (Interesting note that Blockbuster turned down the opportunity to buy Netflix for $50M when the executives met in 2000!)
4. Warby Parker
Why are glasses so expensive? That was the question on the minds of four friends, Neil Blumenthal, Dave Gilboa, Andy Hunt, and Jeff Raider. The answer gets back to something we noted earlier about incumbents in the industry. LensCrafters and Pearle Vision, Ray-Ban and Oakley, and the licenses for Chanel and Prada prescription frames and sunglasses – they were all owned by the same company.
With the assistance of technology, the friends behind Warby Parker created a vertically integrated company that reduced the cost of glasses to consumers by cutting out the license fees as well as middleman and retailer markups. These expenses were increasing the cost of glasses 3X to 5X, giving Warby Parker an incredibly disruptive market advantage.
Why disruption succeeds
Innovation is associated with newness, but don’t confuse it with invention. The most successful companies today are not known for a transformative patented invention. They simply made changes in industries that were already established. They thought about the operations differently and introduced new, technology-based methods that allowed them to excel against the competition.
You could argue that these companies use disruption to foster innovation, which helps entire industries stay relevant. Disruption and innovation push organizations beyond their comfort zones, where there usually is no opportunity for growth. It isn’t necessary for you to use disruption to change an entire industry, but the innovation it facilitates will help you differentiate your own company. And differentiation is the precursor to value.
Are you looking for ways to disrupt your industry? We have proven methodologies that help you “think outside the box” to massively transform your business and industry and experience exponential growth. Learn how we can help.