Disruption Zone
We are in the midst of a major disruption boom. Now, this doesn’t mean we are in the high times of actual disruption but more so of just the term itself. What do I mean? Well, look at Ford and the assembly line “disrupting” the auto, transportation and even the manufacturing industry. Even further down the line (forgive the pun) you have Toyota also “disrupting” the assembly line with the Toyota Production System (TPS).
Disruption isn’t all that new. The term disruption and it being tied to technology is what is new and it is running like gangbusters all across the global economy.
Instead of going deep into a single brand that worked or didn’t at disrupting their industry, let’s take a look a few quick hits on some that work, some that didn’t and new ones that will (or won’t).
Disruption Worked
Who: Dollar Shave Club
What: Dollar Shave Club (DSC) delivers lower costing razors and blades direct to consumer.
When: 2011 until 2016 when they were acquired by Unilever for $1 billion. That doesn’t mean disruption is stopping, but now it is owned by a major competitor to the disruptee (Proctor & Gamble).
Why: DSC cut out the middle man and gave consumers exactly the product they wanted at a low cost. Gillette was the major player in this space and perfected the razor/blades model that has been utilized across many business sectors. Consumers strongly dislike this model as the profit margin are backloaded in expensive blades, which take advantage of the consumer.
Disruption Didn’t Work
Who: Jet.com
What: Jet.com is the membership club store but online (i.e. Sam’s, Cosco, BJ’s)
When: 2014 until 2016 when a little known retailer called Wal-Mart decided to buy them for $3.3 billion.
Why Not: Jet.com went head to head with Amazon who had Amazon Prime in existence since 2005. Prime added media content in 2011. Marketing for Prime increases in 2013 when original content gets pushed out to compete with Netflix. All of this time, Prime membership was increasing exponentially. Jet.com had no idea the behemoth they were grappling with on that barrier to entry. So Jet.com modeled after the membership store which gave lower cost goods for membership rather than free shipping, which was Amazon’s angle. Jet.com’s pricing got really confusing for the consumer as they tried to limit transportation costs by lowering prices on goods nearest to the consumer based on distribution warehouse sites. Also they tried to push discounts such as using debit cards rather than credit cards (which eliminates the credit card company surcharge to Jet.com). These maneuvers felt like the consumer was being nickled and dimed, even though it was a savings choice (all similar to Spirit Airlines which has terrible customer service because they can’t afford it, like Jet.com). All of the savings is passed to the consumer with nothing for the company to spend on for customer retention.
The membership model proved to be unattainable when competing with Amazon, Jet.com abandoned it after only 1 year. Jet.com was losing money, no funding and was oddly rescued by Wal-Mart for the outrageous price they paid. Jet.com should have done more research in the retail space, instead had to become another internet retailer rather than their membership club goal.
Disruption Will Work
Who: SmileDirectClub
What: SDC delivers invisible teeth aligners direct to consumer.
When: 2013 (rebranded from SmileCareClub in 2016)
Why: Well you know when the disruption is real when you have negative articles being written about you by the disruptee. Disruption through time saved and in some cases money, what is not to love about SDC. Doctors back the company and advise consumers throughout, simple how to videos and everything right to your door. The frustrating thing about our ever busy world is taking the time out to go to multiple office visits to get to the end result. In most cases, orthodontics are cosmetic so most people put it off in favor of just seeing the dentist for the annual or bi-annual cleaning. We live in a very busy world where time is prioritized, if you can get your disruption to save on that time and either come in at the same price or even lower than the alternative: then my friends, you have disruption on your hands.
