The world – especially the business world – is in constant flux. There is an ongoing disequilibrium that causes subtle economic imbalances and instability. This is a result of geo-political forces (e.g. Brexit), regulations or market trends, conflicting stakeholder objectives and most recently the regulations and social uncertainties coming from the Covid-19 (Corona virus), which could have a major impact on the economy and your business.
Destructive vs disruptive competition
On the other hand, companies are profit-oriented organizations with targets for revenue, profit, market-share and customer satisfaction. This means that companies will always strive to achieve targets by trying to do things better and differently than their competitors.
However, many companies are in copycat mode, and this leads to destructive competition. Michael Porter (2008) argues that when companies pursue a single best way to compete, it is only imitation and product or service offering homogenize, which leads to poor performance, write-offs and restructuring. Clayton Christensen (2011) adds that destructive competition is driven by only sustaining innovations; products and services meeting the demands of existing customers in established markets. And steadily improves products or services along a pathway.
There are also companies (often start-ups or spin-offs) that have a different view on success, and develop new business models and disruptive technologies that take the competitive game to a different level. These companies create entirely new markets and business models, offering a package of attributes that a current user may not yet know that they want or need.
Disruption is often characterized as a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. While incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, disruptive companies successfully identify and target the overlooked segments.
Disruptive is attractive
In a nutshell, disruptive competitors create a new business model; a different way of earning money with a new value proposition, which is often simple, platform-based, convenient and targeting unmet needs. That is what Porter calls: strategic competition because innovation flourishes, competitors chase distinctive ways of competing and a number of companies can be successful.
The new business models make use of disruptive digital platforms to bypass existing channels. Accenture is coining this as “the platform economy” being an ecosystem which is the foundation for new value creation. The incumbent suppliers try to sustain their business, which is a slow process to grow their performance, mainly at the high end of the market. Disruptive companies are much faster, starting at the low end of the market or with emerging markets, and rapidly developing their performance to the high end of the market.
The early adopters (customers with an innovator’s attitude) like the business models and related product/services offerings of the disruptive competitors. Because early adopters are asking the question: how much are we willing to keep paying for improvements that historically merited attractive price premiums? That is considered as an overshoot and that overshoot is a call for change that is seen by disruptive competitors.
Master the market
Customer preferences and habits are changing due to enabling technologies and/or changing social norms and disruptive companies see and act on precisely this.
In summary, disruptive competitors have new innovation/incompatibility business models. They leverage disruptive technologies and digital platforms and offer new ways to satisfy unmet or poorly met demand, thereby posing a major threat to incumbent models/firms.
As an intelligence professional it is very important to identify new disruptive competitors. It helps to anticipate and proactively provide the right services and products for customers and prospects. Understanding the competitive landscape is key to grow your company faster than the market.
For more insights on disruptive competitors, please contact your local M-Brain representative or contact us.