Does Size Really Matter: An Insight into Whether You Can Be Too Small or Too Big to Disrupt Your Market

Winner of the PathFinder4 student blog competition, University of Hertfordshire student Georgie Fairweather, explores the role of company size when disrupting existing markets.

It can happen at any time, by anyone, anywhere – and it will almost always take you by surprise. Disruptive innovation is a force not to be underestimated; it remains the sole suspect for countless company downfalls and is held responsible for several product demises. So, what is it that appears to have companies shielding for safety? Clayton Christensen defines disruptive innovation as “an innovation that creates a new market, eventually disrupting an existing market by displacing established firms”. To expand, disruptive innovation lives up to its name by causing high-degree market penetration and impact. This innovation changes a process or model drastically and as a result, eliminates a market through causing major changes to consumer wants. Often committed by outsiders and entrepreneurs, this type of innovation carries high-risk and often arrives undetected, with their biggest victim being market-leading companies.

Today, we will be exploring how technology and digitalisation act as drivers to disruptive innovation as well as considering real-life examples of disruption within the marketplace. I’m also going to be discussing the implication of disruptive innovation on different size companies and answering the age-old question, does size really matter?

Onto the technology

Studies show companies aren’t lasting as long anymore. In 2012, the average organisation only just reached adolescence with a recorded lifespan of 15 years, compared with our older generation of companies managing to survive until the ripe-old average age of 75 in the 1930s. But what is happening? Technology changes fast, leaving slow-moving organisations behind with little remorse.

A high rate of technological progress politely holds the door open for disruptive innovation to enter our markets and catch us off-guard; disruption thrives off periods of instability and with technology constantly changing, we can be described as anything other than stable. Technology combines with social and environmental factors to form a vector of disruption, or in simpler terms an opportunity for disruptive innovation to occur, and this interaction has acted as an accessory to several market murders.

The impact of technology is most predominant in stagnant markets that fail to harbour much movement, leading us swiftly onto one of the most recognised example of disruptive innovation. Californian company Uber managed to embrace and befriend technological change, rejecting the traditional process of taxi ordering and changing the market to depend solely on a smartphone App. Combining a consumers’ ‘moment of need’ with the possibilities of technology, Uber pulled off one of the most successful market heists in history.

Everything is digital

The world is going digital. And with digitalisation of goods and services proving to be a cheaper, more efficient and faster alternative – who would protest? Philippe Lemoine identifies three main types of digitalisation; automation, dematerialization and changes in the value chain. Or, in simpler terms, the introduction of more automatic equipment, stamping out physical materials for virtual resources (i.e. the internet) and the digitalisation in factory processes.

Nicknamed ‘the age of digital natives’, a generation of consumers have grown up immersed in digital technology and a world before digitalisation seems like nothing but a bad dream.  Others are immigrants of the digital world; these consumers have welcomed digitalisation with open arms and embraced the new-age changes. Although digitalisation is so prevalent, some consumers find themselves disengaged due to a lack of understanding or acceptance, providing a resistance to disruption within certain markets.

The process of digitalisation invites disruptive innovators to enter and re-shape markets with faster, more efficient processes. Netflix, the online film company, is an example of dematerialization digitalisation helping to encourage a new disruptive process. Eliminating rental DVDs and replacing them with an on-demand, online film portal took the rental industry by storm, with a quarter of UK households subscribing to the service by 2016 per statistics collected by the Guardian.

Does size really matter?

“Disruptive innovation is no longer the domain of industry leaders. Just about anyone can disrupt the market; all it takes is a good idea” - Ford Motor Co (2013)

The short answer is no. Disruptive innovation isn’t exclusive to larger industry leaders or small smart-ups. With technology, digitalisation and possibilities almost unthinkable 50 years ago, opportunities to be disruptive within your market are everywhere.

According to Clayton Christensen, disruption is most commonly caused by outsider start-ups or entrepreneurs, however this does not restrict larger companies or hinder their ability to cause some damage. With existing market-leaders, however, disruptive innovation does not come easy – organisations must factor in the high risk, copious amounts of effort and internal resistance that comes with a venture such as disruption. Introducing new processes that cannibalise the old ones or snatching away profits from their original products to be disruptive can be a decision hard to make for already successful companies. A build-up of people and assets can also act as a hindrance, creating barriers for a company attempting to become more flexible.

Start-up companies with disruptive ideas are huge threats to larger companies, with existing organisations often experiencing stages of denial, alarm and usually leading to them frantically waving a large amount of cash in the hope to buy the start-up before the damage is done – if you can’t beat them, join them.

But if anyone can disrupt a market, big or small, what does it take? A starting point. A good idea, often combining new-age technology, embracing digitalisation, reviewing what your company lacks and what your consumers are crying out for or a complete revamp of an old process. These ‘starting points’ enter a market and are ready for war; they attack existing technology, create barriers of entry, destroy consumer relationships and claim their land – companies who become disruptive often evolve into an eco-system, such as the empire of Google, Google Maps, Gmail, Google Apps, Google Chrome, Google Alerts… the list goes on.

Time to present the evidence

Netflix, Uber, AirBnB, Wikipedia – all familiar names that altered the way we do things forever. Take Netflix as an example of a start-up successful enough to disrupt an entire market. So successful, in fact, that it forced one incumbent company in its market to bankruptcy in 2010. Clayton Christensen refers to Netflix as a “classic example” of disruptive innovation, eliminating a market of physical DVD rentals and altering consumer needs into a completely different direction. Before Netflix, consumers were not aware they needed on-demand access to a portal of online movies, yet after its introduction a Netflix consumer would ask for nothing less.

And start-ups are not the only ones at it. Apple is a great example of a market-leading, well-established company who manage to continually disrupt their market with new branches of their business. Several of Apple’s products wouldn’t be considered as disruptive – innovative, yes, but disruptive, no – however the idea of apps, created by other people/companies/organisations and available to purchase on the ‘App store’ carved a brand-new market and changed the way consumers shop.

So, what about you?

We’ve looked at disruptive innovation in all its glory. We’ve discussed when it occurs, why it occurs and how it occurs. We’ve covered who can and who can’t. But, how can you use this information?

  • Review processes. Whether you are wanting the role of disruptor or disrupted, it’s important to review your company processes, services or products. Are there needs my consumers have that I’m not fulfilling? Am I leaving a gap for outsiders to enter my market? Is there a cheaper, easier, more efficient method for my consumers to use my services? Ensuring an air-tight operation can deter disruption, or stumbling across a problem can help you make the splash yourself.
  • Embrace digitalisation. It’s coming – and there’s nothing you can do to stop it. Keep an eye out on digital trends, recent changes and consider low-cost and efficient options. Start-ups can easily threaten established companies and remaining knowledgeable and aware can be an aid to survival. 
  • Think a little deeper into vectors of disruption. Use these opportunities to your advantage to embrace innovation; factors such as technology, digitalisation, consumers are all sending you an invitation to disrupt or be disrupted. RSVP soon.
  • Think future. “Companies get so caught up in everyday operations that they don’t take a step back to think what future may hold” - Professor Rita McGrath. It is easy to get lost in the everyday when running a business, but casting your mind ahead to future possibilities can help you arm your business towards possible threats.
  • Never underestimate a threat. “Neither Redbox nor Netflix are even on the radar screen in terms of competition” - Blockbuster CEO Jim Keyes exclaimed, three years before Blockbuster closed for good. 

Interested? To read more on Clayton Christensen and his concept of disruptive innovation, click here: http://www.claytonchristensen.com/key-concepts/


References


Capgemini (2015). “Digital Transformation Review n° 7: Strategies for the Age of Digital Disruption”, Available at: https://www.uk.capgemini-consulting.com/digital-transformation-review-ndeg-7-strategies-for-the-age-of-digital-disruption-0  [Accessed 19.04.17]

Dowd, M. (2017) “Disruptive Innovation: Lecture 11.1-11.5” [Online Lecture] 4BUS1013: Creativity, Technology and Innovation. University of Hertfordshire

Dowd, M. (2016) "Do You Layer Vectors of Disruption" Available at: http://managedisruption.com/case-studies/vectors/ [Accessed 16.06.2017]

Forbes Magazine (2015). “The 25 most disruptive brands of 2015” Available at: https://www.forbes.com/sites/avidan/2015/11/29/the-25-most-disruptive-brands-of-2015/#58b6214e7bbd  [Accessed 17.04.17]

McKinsey (2016). ‘Which Industries are most Digital (And Why)?’ Available at https://hbr.org/2016/04/a-chart-that-shows-which-industries-are-the-most-digital-and-why?   [Accessed 20.04.2017]

McKinsey & Company (2014). “Why every leader should care about digitalization and disruptive innovation” Available at: http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/why-every-leader-should-care-about-digitization-and-disruptive-innovation  [Accessed: 15.04.17]

Munter, M. (2017) “Digitization from a Strategic Perspective” [Online Lecture] 4BUS1013: Creativity, Technology and Innovation. University of Hertfordshire

OCED Insights (2016). “Digital innovation – what does it really mean?” Available at: http://oecdinsights.org/2016/06/03/digital-innovation-what-does-it-really-mean/  [Accessed: 18.04.17]

The Guardian (March 2016). “Netflix races ahead of Amazon and Sky with 5m UK households”  Available at: https://www.theguardian.com/media/2016/mar/22/netflix-amazon-sky-uk-subscribers-streaming  [Accessed: 19.04.17]

 

Georgie Fairweather is a first year Hertfordshire University student studying BA Hons Marketing. She hopes to take a year in placement during her degree to gain an insight into the industry she wishes to peruse.

 

Comments

No comments so far - why not be the first?

@
http://
(HTML markup not supported)

Quantifying the Beautiful Game: How Analytics and Big Data is Helping to Shape Football.

In a world of rising transfer fees and ballooning costs, Premier League clubs are turning to data to streamline the running of their organisations.

Questions CIOs Are Asking About Digital Disruption

Last week we had the pleasure of meeting CIOs and key decision makers responsible for innovation and IT at the True North Breakfast with a View briefing. Their observations and questions about disruptive innovation are perhaps common to many

Defining Training Needs in a Disruptive World

Organisational psychologist and coach, Hugo Immink, explores why conventional corporate training no longer works in a disruptive world; and what to do about it.

Cybercriminals Cause Havoc. People and Culture are the Answer.

In the defence of our businesses against cybercrime, Tony Dimech discussesa holistic approach to security with people and culture at its heart

Practicing Law in a Different World

50% of UK business leaders think their business model will cease in the next 5years. Lawyers need to know how disruption affects clients and their practice.

Disruptive Alliances: Six Lessons from Antony and Cleopatra

The do's and don'ts of creating successful alliances for disruptive innovation in the digital economy, looking at the lessons from Antony and Cleopatra's union.

Get Ahead of the Pack and Disrupt

Investment in digital is essential to stay in the game. The only way to get ahead of your competitors in many industries to lead the pack and disrupt.

Video: The Impact of Disruption on Business

The world is changing fast, very fast. Watch Marc Dowd discuss the changing world of the technology, how the consumer responds, and how business should react.

Corporates and Start-ups Should Collaborate - But How Can It Succeed?

Many corporates see the need to partner with start-ups to innovate. This article looks at the challenges from the start-up's point of view.

PathFinder4 Africa Launches 9th February

Announcing the launch of PathFinder4 Africa. We are pleased to announce the launch of the first PathFinder4 leaders meeting outside of the UK.

My Children May Not Need a Driving License to Get to Work, But Will They Even Have a Job.

The world is being disrupted. Perhaps no-where is this more obviously challenging to our psychology and the world of work than the driverless car.

Isn't Blockchain Illegal? And other questions............

It may come as no surprise that Blockchain specialists have identified this as one the of top FAQs We explain the good and the bad of Blockchain.

Disrupt or Be Disrupted: The Impact on Businesses Large and Small

Marc Dowd talks about Disruptive Innovation at the Hertfordshire Chamber of Commerce Lunch 17th January 2017

Are You Ready to Disrupt in 2017?

New features emerging from the PathFinder4 ecosystem for disruptive innovation.

Why I Joined an Ecosystem for Disruptive Innovation

The benefits of working with thought provoking people in an ecosystem for disruptive innovation.

The Benefit of Disruptive Innovation: a Day of Illustration

The benefit of disruptive innovation: a day of illustration. Reflections on differing views of disruptive innovation.

What is Disruptive Innovation?

There are a number of buzz phrases from digital transformation, to digital disruption, and disruptive innovation, but what does it all mean?

PathFinder4 contact details

info AT PathFinder4.com

Europe: +44 (0)207 993 9043
North America: +1 514 242 0810
Africa: +27 82 442 3397

PathFinder4 Company Details

PathFinder4 Limited

Registered in England and Wales
Number: 10267577

©Copyright - PathFinder4 2017