When Disruption is Afoot
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A company’s capabilities can sometimes become its disabilities when disruption is underway in a market. This often forces companies to reappraise their strategic engine (the component of the business that is currently driving the strategy and has made the company look the way it does today in terms of products, customers, markets, channels, etc.) and make new choices about where to participate, how to compete, how to organise and simplify the operation.
A disruptive business-model is when a competitor chooses to offer a more affordable or more convenient product typically to the incumbent’s customers who are over-served in some way. The disruptor is choosing a different set of trade-offs in price/non-price: more affordable, more convenient, less risky, less features and benefits, less complex, better access, less quality.
This is when accessing or understanding of different business models and benefiting from independent critique and build of internal thinking, is most useful to our clients:
Disruptor’s Rationale – understanding the business model’s underpinning assumptions, the target audience and profit pool, the disruptor’s strengths and how these undermine the company’s own strengths, etc. Knowing why and what’s likely to be the disruptor’s next move.
Disruptor’s Momentum – evaluating the timescale in covering the disruptor’s operational costs, the speed of customer take-up and the rate of the incumbent’s customer attrition.
Viable Options – appraising the incumbent’s response options: do nothing, reposition up-market/down-market, increase differentiation, optimise low profit customers, introduce a new low-cost or fire brand, evolve or transform the business.
We think poor decisions are not the outcome of getting the wrong answer to questions but instead the result of not asking the right questions.