What Does It Take To Be An Effective Disrupter?
There’s so much written these days about disruptive strategies and companies. But new ideas, technologies and products come and go. What does it take to really shake up an industry?
Years ago I went to a conference and heard a presentation with a number of predictions that turned out to be so accurate they seem self-evident in retrospect. The presenter was futurist Stan Davis, author of the then-new book Blur, and one of his predictions went like this: Manufacturers of all kinds of products will increasingly be willing to practically give away the “hardware” in order to lock us into buying the “software” from them.
As we’ve all seen, this prediction has come to pass in a number of industries. The first that comes to mind is the manual shaving razor: Gillette and Schick want you to buy the razor at a reasonable price so they can sell you the cartridges at a high price. That model worked for years.
Then Dollar Shave Club and Harry’s started offering their own razors with cheaper cartridges (Dollar Shave Club offers one for about 20 cents vs. Gillette’s $2-$6.) One article says Gillette’s market share was 54% in 2016, down from 59% in 2015 and more than 70% in 2010. They’re responding by cutting prices, and who knows whether they’ll be able to bring back lost customers that way.
In the shaving business, the disrupters make and sell both the hardware (the razors) and the software (the blade cartridges), giving them the ability to completely replace the incumbent’s product in all its aspects.
Consider another story — printers and ink cartridges. The manufacturers — HP, Canon, Epson — have been steadily reducing prices on their hardware (printers) to under $100 and some even less than $50, while increasing the price of their ink cartridges.
Interlopers like Cartridge World don’t make printers, but rather have focused on selling ink cartridges compatible with the big companies’ machines, cutting into their ink cartridge sales. Until recently, the machine makers seemed content to respond with tactics to frustrate and annoy customers who purchased their machines as and when they try to use third-party ink. They put up artificial roadblocks in the installation process to make these companies’ products appear incompatible. And even when they work correctly, there’s the annoying message that says you’re out of ink even after you’ve installed the new third-party cartridge. But they’ve made no effort to deal head-on with this competitive threat to the mainstay of their product strategy.
Then last fall Epson moved to change the game — essentially disrupting its own traditional business model along with that of its competitors — by introducing the Eco-Tank line of printers that don’t use cartridges. These more expensive machines — the cheapest one is $299 — are delivered pre-loaded with an ink supply that is projected to last 2 years. Now bloggers and industry observers are attempting to predict the extent to which Epson’s new product launch will affect the market for printers and ink.
One article concludes you’d have to keep the Eco-Tank printer for five years for savings to materialize, and that since most people replace their printers about every two years, it probably doesn’t make sense to spend the extra money upfront for the new technology.
If the manufacturers — HP, Epson, Canon — keep increasing, or don’t reduce, the price of ink cartridges, that alone could drive consumers to the new product.
But the cost of the software — ink — may not be all there is to the buying decision. Think about whether Epson will be able to capitalize on one or more of these additional points of perceived value:
- Convenience. Who likes to worry about running out of ink in the middle of a critical project or the inconvenience of running to the store?
- Heightened awareness of sustainability. As mentioned in a Harvard Business Review article, 10 Sustainable Business Stories That Shaped 2015, “A Morgan Stanley report found that Millennials are twice as likely to buy from brands with good management of environmental and social issues, and twice as likely to check product packaging for sustainability performance. For packaged goods and food in particular, it’s the era of what many call the ‘clean label.’ It’s a sweeping change in expectations, as people want to know how everything is sourced, made, and delivered.”
- Coolness and community. Harry’s and Dollar Shave Club have quirky marketing messages and have capitalized on the community aspect of building a brand using social media. Can Epson do that?
- Standing against “The Empire.” In the case of both blades and ink, every time you go to buy replacements you get the queasy feeling that “they’ve got me” — that you’re a captive consumer with no options, and they can charge you whatever they want. Harry’s and Dollar Shave have tapped into that frustration, and have pitched their marketing and advertising to make you feel like buying from them is a vote for taking back some control over your purchase decision.
It’s also interesting to look at the emerging market for hybrid and electric cars. It’s been reported that the demand has been almost exclusively driven by the price of gasoline. Most of the projected growth for those cars is expected to come from outside the U.S. So far, Europeans have been quicker than Americans to buy electric and hybrid cars, and that’s said to be because their gas is so much more expensive than it is over here.
Tesla seems to be an exception. Despite heavily restricted marketing and the number of showrooms they’re allowed by the state regulators, people have lined up to buy. Why? Coolness and community? Check. The car itself is a beautiful status symbol. Sustainability: Check. No gas consumption, unless you count the fossil fuels used to produce the electricity needed for the charge. Plus, zero emissions. Standing against The Empire? Check. You’re not at the mercy of gas prices.
A lot of people are betting on Tesla to win, and one of the reasons might be that they’re not just a car (hardware) company. Unlike their competitors, Tesla is also in the fuels business. Sure they want you to buy electric cars from them. But if you buy one from someone else, they’re planning to be ready to sell you the software — the replacement batteries.
Before predicting the success or failure of a particular upstart to disrupt an industry, it pays to check to see whether that player is in both the hardware and software ends of the business and whether it is offering other value points (such as 1-4 above) in addition to just reduced costs of software.