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Discovering New Business Models and Disrupting Your Own

The second stage of the internet boom over the past decade has delivered a number of innovations that are disrupting their respective industries;   Apple, Uber and Airbnb have all been game changers in their respective industries.

What does it take to be a market disrupter? Is the process by which these innovations came about repeatable? Can established companies embrace certain principles in order to reinvent themselves and their markets?

Stefan Gross-Selbeck, a Managing Director at BCG Digital Ventures, as well as a former executive at eBay and Xing, is an expert in business transformation. In his Ted Talk last fall, he discusses what big companies can learn from startups. He contends that startups do not have a business model, rather they are in the process of developing one. They are malleable and able to breakdown and redefine their value in a way that naturally positions them best as a disruptive force in the marketplace. Larger corporations, on the other hand, have their business models in place and focus on executing them. Gross-Selbeck questions whether there can be a good balance of these and suggests that big companies adopt the mindset of startups in the video below.

Is there a more concrete way to engineer disruption? Martin Zwilling, Founder and CEO of Startup Professionals, outlines six points from of Paul Paetz’s recent book Disruption by Design on how to disrupt the market in a recent article from Forbes. He suspects “that several of these will surprise most entrepreneurs as being counter-intuitive to their thinking. Entrepreneurs tend to look for big changes and big markets when seeking disruptive opportunities, when the opposite may be more effective.”

  1. Initially address a small market niche. Disrupting a huge market intuitively has greater potential, but it’s also like turning an aircraft carrier. It takes a long time and lots of effort to overcome existing momentum, and both investors and customers want to see results on a small scale in their lifetime, before they line up to join the movement.
  1. Pick a technology that somehow seems inferior to the major incumbents. Existing players normally think in terms of bigger, better, and faster, whereas more customers may really be satisfied by smaller, cheaper, and simpler. Think personal computers compared to mainframes, or smartphone cameras compared to professional cameras.
  1. Target large but moderate-to-low-growth segments. Usually these are low-growth for a reason – a new technology or price point could easily be the trigger to a large opportunity. On the other hand, high-growth segments may look more attractive, but are likely being attacked by the big players and many other competitors.
  1. Look for sizable customer populations unattractive to incumbents. These may be people who can’t afford existing products due to income levels or location, but need the solution. Remember the explosion of cell phones throughout the world when cheap versions and new pricing models were introduced a few years ago.
  1. Explore industries where you are an outsider. Most business advisors recommend that you stick with the business area you know, where you have inside knowledge. Often entrepreneurs are more able to think outside the box and bring disruptive change to less-known business domains. Consider Apple’s move into music, telephones, and watches.
  1. Compete against non-consumption and non-existing markets. The most disruptive products are ones that never existed before, and no forecasts are even available to size the opportunity. Facebook built the social media market before customers even knew they needed it. Naturally, these are very high risk efforts, but have unlimited potential.