5 Barriers To Disrupting Your Own Marketplace

The holy grail within innovation is to disrupt current market dynamics. Yet it is rare for established brands and companies to be game changers; to truly upset the apple cart and upend their competition. This role tends to be the job of new entrants from other categories, entrepreneurs or small, regional, niche players that are hardly on anyone’s radar.

Why do the established players find it so difficult to develop a new business model or a product/service that is a radical departure from the current market dynamics?

1. Current Revenues

3 pots of Robinsons Squash'd in 3 fruit flavours on a fading grey background

Image source: Creative Pool

Businesses are usually intently focused on growing revenue. Yet a big game changing innovation often means changing the rules in such a way that it offers a cost saving to the consumer.  A good example of this is Robinsons Squash’d. The consumer can add a few drops of this portable concentrate to water instead of splashing out on a more expensive bottled drink.

Most companies would be incapable of slicing one of their most profitable lines or brands by half for instance or cannibalising profit streams. Instead they are driven by delivering on their financial commitments to shareholders.

2. Short Termist

road going into the distance. one lane signposted 'short term and one lane signposted 'long term'
Image source: Shutterstock

Established, successful players tend to be more focused on measuring themselves against current market dynamics such as winning share or capturing one additional percentage of growth.

Very few look to the future and allocate enough resources to working out how they reconfigure their business, so it stays relevant in a fast, changing world. Only when a business is in trouble or is not winning short term does it tend to get braver and more challenging of the status quo.

3. Tight Parameter Thinking

3 business people with cardboard boxes on their heads. sketches of lightbulbs on the fronts of the boxes
Image source: Shutterstock

Companies like P&G and Unilever have a sound record in innovation. However, it is within very narrow, safe parameters. Things like new ingredients, packaging, product formats. Or breakthrough advertising campaign such as Dove and Cadbury’s Gorilla. They tinker and tweak but rarely change the rules of the game.

This is because as businesses grow they tend to get fragmented and siloed. Responsibility and reward is given for understanding a very small part of the business, in great detail. The consequence is that there is very little scope for helicopter thinking where the whole business process can be scrutinised; where the focus is not just about the customer experience and touchpoints.

To be truly upset the status quo, the whole proposition – all along the value chain – needs to be rethought. And this is notoriously hard for incumbents. It is often a real struggle to even see the potential possibilities.

4. Experience Rather Than Product Marketing

Most established brands think in terms of product marketing rather than experience. This limits their ability to innovate in a big way. Marketplace disruption usually involves telling consumers a new story about how a product or service is being delivered, and why this represents a benefit to them, if it’s not a product story.

Aldi advert for their great value steak on a blue background
Image source: Aldi

Aldi is a good example. They have reconfigured the supermarket business by reducing customer choice and explained why that is a good thing.

The Dollar Shave Club took a provoking and educational stance around the idea of why ‘rational’ people would want to pay for overpriced razors and blades when they could have a quality, monthly supply delivered to their door at substantially reduced prices.

5. Retailer Relationships

shopping basket with a ball and chain attached against a white background
Image source: Shutterstock

Big brands and companies have the power and scale to carefully cultivate strong relationships with retailers. These very beneficial relationships deliver stronger presence in store and thus sales. So of course, they are highly valued.

However, this reliance can become a burden for change. When trying to disrupt a category, traditional business models and routes to market need to be challenged. It takes a brave company to potentially take away business from or upset their key retailers.

So; the barriers do not sit with the skillset of the individuals within larger organisations. Or the lack of entrepreneurial attitude. Instead it is the business environment and practices within which people operate that restrict the ability to disrupt.

Change has to come at board level around fundamentals like organisational structure, long term visioning, and shareholder engagement.

 

Published 12th January 2018 by Natalie Reed @ the Strategy Distillery