Don't just change, disrupt!

Don't you think that the economic environment is moving faster and faster, and we seem to be sprinting simply to stay in the same spot? It makes one wonder what would happen if we simply took things slowly; will we even have relevance? Because we are so busy chasing the economy, we simply don't have the time to sit down and think about how to stay ahead of the game. Yet, as a strategic thinker, this should be top of mind for you. In this article, we will discuss embracing disruption as a key competitive advantage.

Revisiting competitive advantage

When I ask a company what their competitive advantage(s) is/are, invariably they will say they are the cheapest, they have the best customer service, they have the fanciest products, or they have great people. While all of these things are critical to success in a business, they are never a competitive advantage. This is because all businesses need to have these as a given. So if all companies have them, how is this an advantage over your competitors? Hence we need to remember that to have competitive advantage, you must have something BETTER than your competition. And it should be something that you own, and can cause a significant advantage to you, like a barrier to entry.

It is also important to remember that your competitive advantage is contextual. Mobile payment solutions may make your product more easily accessible and payable in Indonesia, and hence provide you with a competitive advantage over your competitors, but it would not be one in Korea where just about every retailer has a mobile payment solution. Or fuel-saving reliable cars are a great competitive advantage in the US where they build giant fuel guzzlers as vehicles, but they are not an advantage in Japan where all cars are reliable and energy-saving. Hence competitive advantage is contextual and comparative.

Disrupt for competitive advantage

When we disrupt a market, we offer something that is drastically different, and meets needs that are hitherto unmet. One source of disruptive advantage is a totally new business model. The new economy is driven by companies that do not own their products and services, they just enable people who own them to connect with customers they never knew they had. For example, AirBnB is disrupting the hospitality industry. Where this was once cornered by large hotel chains, AirBnB came up with a model of connecting home owners who have spare room, to let them out to travellers and visitors for a far lower rate than hotels. Now home owners have a means to earn some income on the side, and travellers have a cheaper alternative to expensive hotels, especially if they won't be staying in their rooms much each day. But more importantly, the visitors have a means to interact with the local populace much better. A win-win disruption if ever there was one! As a result, AirBnB managed to raise $1.5B in its latest round of funding, bringing total funding to $2.3B. Want to know something more exciting? The company was founded on 1 August 2008! Now how's that for disruption?

Let's take another example. Uber has caused a huge disruption in the transport industry that governments the world over are seeking ways to "clip" their wings. How Uber works is to combine car owners with commuters who want better service than the national taxi companies offer, and also have a shorter waiting time. Sounds quite like another AirBnB in that they don't own their assets, and connect people who do, with people who need them. Total funding so far? $7B! And when did they start? 1 March 2009!

What both AirBnB and Uber have done successfully is to disrupt the market by offering a totally different business model. They have also looked to leverage those who have assts and marry them with those who need the use them. Whereas traditional businesses own these assets themselves, and absorb the depreciation, passing them on to the customer in its price, this new model turns this convention on its head, making it cost effective for all parties involved.

So what can you do to disrupt your industry?

One way is to look at the way you and your competitors have been doing business, and see if you can turn it around. Question assumptions, flip your operations, change your supply chain. The more you can make things drastically different, the more you can share build new connections, the more you can make it difficult for others to follow you, you would have disrupted your industry.

So don't just change, disrupt.

Image from tnooz.com