Could there be a better example of a disruptive technology, much less a company that is generally regarded as disruptive, than Amazon and its Kindle? For just about as long as books have been in print, in order for authors to get their written work to an audience, they had to go through publishers. Over time this process has gotten slightly more complicated with the introduction of various middlemen. These middlemen include a literary agent, who an author hires to sell their creation to a publisher. Others include editors, illustrators, copywriters and marketers. What this all means is less money for the author. With each middleman comes cost, thus taking away profit from the author. Let’s say a standard Hardback book runs $25.00. Of that $25.00, the author can expect to see around $1.00 after everyone has been paid to get that book to the bookshelves. Then here comes Amazon, and the Kindle. An e-book reader, that costs virtually nothing to distribute. Which in turn is bad for the publishers. Authors now have the ability to publish directly to a kindle, and by taking out the middlemen, are making twice as much per cheaper e-book, as they were when making hardbacks. An e-book costs let’s say around 3 bucks, authors are making $2 off each 3 dollar book. An author could produce around 8 e-books for the same price as 1 hardback and make $16.00 off that $25.00 vs the previous $1.00 off $1.00. That’s price efficiency that just cannot be matched by any publishers. Factor in, the cheap price of the kindle, the electronic books, and the ease of having whatever an individual wants to read, right now, without going to the bookstore, and you have a prime example of a disruptor. But what’s even scarier, is that it just isn’t stopping with books. It’s moving into all platforms of downloadable media.
Speaking of Media, the next disruptor I would like to talk about is Netflix and its takedown of the Movie rental market as we knew it in the late 90’s/early 2000’s. Blockbuster and Hollywood Video were the two main retail chains when it came to the renting of theatre released movies. Renting was a significantly cheaper alternative to buying every movie you wanted to watch on DVD or going to theatre to see it. The inherent problem with Blockbuster lied in having to make two trips to the store in a 24 hour period. Thus Netflix found its niche. You could order movies to rent and receive them in the mail which doubled in appeal to those not wanting to venture out to see the movie in the theatre or driving to the video rental store. Another factor that appealed to the lazy consumer, was the program Netflix used to find your interests, making recommendations based off those interests. Which in turn meant less time scanning the walls of Blockbuster looking for something that might interest you. It was the perfect platform for Netflix to take down the market, because of the extensive number of Blockbuster storefronts, it couldn’t start a mail service of its own, because it would just cannibalize in store sales, canceling one out for the other. Netflix has evolved greatly since then, and continues to innovate.
The final Disruptor I would like to discuss today is the ride sharing tech startup, Uber. All Uber did was take advantage of what most people carry around in their pocket, a cell phone with access to the internet. Granted it’s a bit more than that, but the basic gist is ease. And in this case the ease of catching a ride on Uber, coupled with the ease a person can become an Uber driver vs a taxi driver equates to easier to deal with fares. The licensing, testing and training that a taxi driver incurs means higher prices in fares. Somebody has to pay for it. It isn’t the taxi company. On top of that when you create an artificial demand by limiting the number of taxi licenses a city can have, you have a customer base that is more than willing to help usher in change. Uber is just another example of how technology, in this case an app, has helped drive a number of disruptive innovations to archaic markets.
2. First and Foremost, I don’t believe the definition of management is changing. I believe it’s being added to, but fundamentally the key points which lead to success remain the same. And I honestly don’t think it’s always the fault of the business that they fail, because the managers are doing the right things, to be successful, in the present and near future. I mean let’s face it, it’s tough to see every underdog coming. It’s tough to predict what type of innovations may be disruptive, and at that point, once a company does. It just may be too late. Unless of course the disruptor doesn’t disrupt to its full potential. Tesla, may be this type of disruptor. Planning for contingencies is a good part of any good leaders plan, but at what point do you stop making contingencies? I guess that’s the golden question. Because the possible innovation you may have stopped looking at, because of various reasons, is the one that may hurt your business. For me the key would be to always have a think tank or small division that was constantly theorizing or evaluating all types of innovations, to include possible disruptors, and furthermore keep testing new ways to innovate, even if it could mean disrupting the industry you are succeeding in. Because if your company isn’t doing it, someone else is. In war, the contingency you didn’t plan for is the one that could get you killed. The enemy action, no matter how ludicrous, is the one they may use. I don’t feel like it’s any different in business. Keep managing in a way that is successful, but don’t be afraid to take risks, and definitely don’t be afraid to fail in those risks. And don’t underestimate any innovation. Policy needs to address the what ifs, creativity needs to be explored from every avenue. Create a policy to reward innovating thinking at any level. The intern down in R;D may have a great idea, encourage that kind of thinking.
3. In the United States automotive industry, companies are constantly in a battle to determine what fickle consumers want in a vehicle. What could be popular right now, may be the 4th or 5th factor in what a buyer considers most important tomorrow. Ford Motor Company has taken research done by JD Power, the Avoider Study, which points out the reasons why people buy a particular car, or why they walk away, and uses that information to focus its product, based on what users find important.
Fuel Economy continues to rank #1 as the most influential reason to buy a particular car. Exterior design was a big reason why buyers would walk away. Surprisingly though, interior design, was the second leading factor of why individuals would not purchase a particular car. Let’s start with fuel, Fords Marketing of Eco boost equipped turbo charged engines has been quite successful since its initial launch in 2009. Performance remains the same, while increasing gas efficiency. But the innovation didn’t lie there. It was tied to Ford equipping its Mustang, a car always considered to be a muscle-type, with a gas saving Eco boost engine. Sales absolutely soared. Because now, People who knew what they were getting when buying a Muscle Car weren’t the only one interested, people who enjoyed fuel economy were too. Based on this, Ford is looking at bringing its higher performance engines, to its cars that don’t typically carry it. When looking at the demand for better interiors, Ford is delivering in that department as well. Using biometric scanners and eye trackers, to measure where consumer’s eyes are lingering most in the car. Ford is showing a commitment to actually giving people what they want. And that is where the innovation lies. Big companies tend to just rest on their laurels, cranking out a similar product year in and year out, with minor changes. They hear the consumer, but they don’t truly listen. Ford appears to be doing the exact opposite, giving consumers exactly what they are looking for. I honestly think you cannot go wrong with supplying the consumer with what it likes. It has worked in the Past, is working presently, and I truly believe will work in the future. Cars are cars, when push comes to shove they will get you from point A to point B. I think fuel economy will always be a big factor in consumer’s decisions. And when the industry gets on pace with Tesla, it will come down to saving the consumer even more money, while maintaining a high level of reliability.
4. In what is really becoming a competitive time of cord cutting and cord shaving. I thought I would delve into the market of cable television. For many years now, we have been at the mercy of Cable Companies when it came to watching the live television shows we all find immensely intriguing. Forced to pay for expensive packages with a handful of channels we watch while never knowing when our bill will rise higher, people wanted change. Thus, the start of streamable tv, in the form of cord cutting and cord shaving services. On one hand, you have the cable companies. These include companies like Time Warner and Comcast. On the other hand, you have a wave of streamable tv options. These Include YouTube TV, Direct TV Now, PlayStation Vue, Netflix, Hulu, and Sling TV. In this scenario, streaming pioneers like Netflix and Hulu offered alternatives to paying for the expensive premium movie packages like HBO and Showtime that were offered by Cable Companies. One would pay for Cable to watch live TV, and add Netflix or Hulu for Movies and shows at a cheaper cost than Cable. Now recently, the streamable market has gotten even a little more innovative. The introduction of Streamable Live TV through companies like YouTube TV and PlayStation Vue. The differences in the viewing experience itself is unremarkable. What draws customers to streamable TV vs using cable companies is the differences in price, the ability to tailor packages (cord shaving) and the ability to avoid long term contracts. A customer can cancel at any time without penalty. So when given the choice of a more expensive viewing platform, that requires a long term commitment, less customization at a higher cost vs. a cheaper alternative, that offers a choice in channels with less hardware, no installation and can be canceled at any time, one would think the answer is pretty clear, right? Consumers are beginning to say yes. The biggest hurdle the streaming services had when they started were licensing rights. I know for myself, that I wanted the ability to watch local channels on top of channels like ESPN and AMC. With each passing month, that hurdle becomes a bit smaller, as all the streamable options are offering those channels in the bigger markets. Honestly, I personally believe availability is really the only thing stopping streamable services from completely taking over, as consumers become more informed about what’s out there. It’s becoming clear to cable companies, as they try to add services like Netflix to their existing packages, that the streaming threat is very real. There hold on certain markets will evaporate once the agreements are available. ON top of that major players like Disney, are set to launch their own streaming channels. Thus making Cable companies even harder pressed to keep customers. The competition will eventually move from away from cable to streaming, and more towards which streaming service do I choose. When you look at my other thoughts on Netflix, you can really see they have become real giant killers. Who in turn may become victims of their own doing, if they don’t evolve as well. Ultimately though, regardless of what a consumer chooses and why. Its abundantly clear, that having many options is better than the alternative we faced 15 yea