What’s Really Disrupting
Business? It’s Not Technology
Technology doesn't drive disruption—customers do. In a new
book, marketing professor Thales Teixeira argues that successful
disruptors are faster to spot and serve emerging customer needs than larger
competitors.
If women wanted to shake up their makeup
regimen 10 years ago, Sephora was the place to go. Beauty product junkies loved
Sephora’s candy store-like display of sample-size face creams, glittery lip
glosses, and eyeshadows in every shade imaginable, allowing them to test out
new products at non-committal prices.
That is, until Birchbox came along in 2010 with an
innovative offer: Pay a monthly fee and receive a curated box of beauty samples
by mail.
“They said, ‘We're going to start off doing
this one part of the customer value chain, which is helping you identify the
better products, and we're going to do it more conveniently,’” says Thales
S. Teixeira, author of the new book Unlocking
the Customer Value Chain: How Decoupling Drives Consumer Disruption,
which debuts tomorrow.
Many established companies lament the
disruption they’re facing at the hand of technologically savvy startups. But
Teixeira, the Lumry Family Associate Professor of Business Administration,
argues that these newcomers simply spotted and served an emerging customer need
faster, taking market share from established companies that didn’t see them
coming.
Are
companies looking at disruption the wrong way?
Danielle Kost: In your book, you argue
that technology isn’t the main force hobbling many companies today—it’s
changing customer needs and behavior. How did you come to this conclusion?
Thales Teixeira: When I started eight
years ago looking into what was going on in certain industries, what came out
initially was this idea that it was technology, right? We all talked about
Google, Amazon, Facebook, and Apple. But in many industries, both the disrupter
and the disrupted had similar technologies and similar amounts of technology.
The common pattern was that the majority of
customers in those markets had changing needs and wants, and their behavior was
changing.
Kost: Many of the companies you’ve
studied gained a foothold in the market by capturing one piece of the customer
value chain, or by following the steps a customer takes to select, buy, and
consume a product or service. You call these situations “decoupling.” Could you give
an example?
Teixeira: A great example of decoupling
is an insurance startup called Trov. It’s an app that allows you to quickly
insure expensive belongings for short periods of time. If you're traveling to
Rio de Janeiro next week and you just bought a $700 camera that you fear you’ll
lose, you can upload some information about the camera to the Trov app, swipe
right, and insure it from the moment you embark. One week later, when you come
back, you can swipe left and it will stop insuring it.
You don't have to do all the activities you
normally would do with a traditional insurance company. You don't have to talk
to an agent, look at the policies, list the things you own, pay for the policy,
use it, and then cancel it.
[Most] insurance companies don't want to sell
you one week of insurance for one product. They have thousands of employees,
big budgets, and huge infrastructures, so that they can offer more or all of
the activities in the customer value chain.
Kost: Incumbents that survive disruption
often embrace it and change their business models to forge new sales channels,
revenue streams, and customer segments. Could you give an example?
Teixeira: Incumbents tend to respond to
decoupling by gluing back the part of the value chain that was broken. The
other alternative is you just live with the fact that it's broken. That's
called “preemptively decoupling.” Instead of waiting to be disrupted, you just
break it.
When Amazon started selling electronics
online, it created apps that encouraged customers to go to a store and check
out the prices and products, but order them at Amazon. This is called
showrooming.
Best Buy initially tried to prevent customers
from showrooming. They considered changing the barcodes on products to make
them hard to search for online. The company even tried to use signal jammers,
like the ones they use to keep prison inmates from using cell phones.
Eventually Best Buy executives realized that
Amazon and showrooming are not going away. They decided to charge manufacturers
for putting those items on the shelf. When a company like Samsung puts TVs on
display at Best Buy, Samsung is benefiting whether you buy it from Best Buy or
Amazon. So Best Buy decided to charge for that value they create.
Kost: Many companies obsess about their
direct competitors—how to undercut their prices, outpace them in R&D, or
steal their talent. You argue that companies should focus on customers and
meeting their needs. Why is that so hard?
Teixeira: You have few competitors, so
it's easy to look at what they're doing and emulate or respond. When Coca-Cola
launches a new product or reduces prices, it's easy for Pepsi to identify that.
It's easy to go to the board or to your boss and say, “Our competitor is doing
this. We should respond.”
It’s very hard to understand your customers
because you might have millions of them scattered around the world. It's hard
to see what they're doing and to understand why they are doing what they're
doing.
Kost: So many executives are trying to
predict the next wave of disruption. You recommend that executives look for
early signs of behavior change in seven consumer categories. Why?
Teixeira: When I started doing this
research, I realized that 90 to 97 percent of consumer spending is concentrated
in seven categories. I call them the categories that better consumers, from
their point of view: where they live, what they eat, what they wear, how they
move, how they heal themselves, how they educate themselves, and how they entertain
themselves.
When consumers change their behavior, the
first signs can be seen in one of these seven industries, and it quickly
multiplies.
Kost: What lessons do you hope
executives will take from your book?
Teixeira: That the game has changed. In the
past, there were a few big companies competing with each other. Coke versus
Pepsi. Airbus versus Boeing. GE and Siemens. Now there are thousands of
startups in any market, and they're competing with the big companies without
having the resources.
But in most cases, consumers are disrupting
markets, not startups and not technology. Your way out as a business executive
requires adapting and evolving your business model.
Danielle Kost is senior editor of
Harvard Business School Working Knowledge.
https://hbswk.hbs.edu/item/what-s-really-disrupting-business-it-s-not-technology?cid=spmailing-25078499-WK%20Newsletter%2002-20-2019%20(1)-February%2020,%202019
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