Businesses often don’t realise that they are vulnerable to attacks from disruptive new players until it is too late. Andrew Wilkins considers some of the strategic issues created by creative disruption.
For those of us who shave using a razor, the routine is pretty well established: you buy a razor and a packet of razor blades, use the blades until blunt, throw them away, then head to the shop to buy some more.
The refills always seem pretty expensive, but what choice do you have once you’re locked into the routine? Buy a cut-throat razor? Find a barber with a steady hand? Grow a beard?
None of these are without risk, it might be said.
As with printer manufacturers and their expensive toner cartridges, the profit in razors is in the consumables: the blades that inevitably go blunt and must be replaced.
For years, consumers have had little choice but to pay for them. It is the main reason why the global wet shave market has been predicted to grow to US$31.41 billion (K102 billion) by 2020!
‘Arguably, the biggest business disruption to take place in PNG in recent years was the entry of Digicel into the telecommunications market in 2007.’
High profits, a suspicion of price gouging and a mass-produced commodity: a market surely ripe for disruption.
Enter Dollar Shave Club. A tiny startup in 2012, it sought to disrupt the existing razorblade market in the US by offering to deliver cheap but decent quality razorblades direct to the homes of members of its online ‘club’. It aimed its marketing at younger men, and emphasised how much money they would save over time.
This year, just four years after commencing business, this humble startup was bought by giant Unilever for … US$1 billion (K3.24 billion).
In the four years since its launch, online sales of razorblades have soared from zero to hundreds of millions of dollars.
The Harvard Business Review earlier this year reported that market leader Gillette had seen its market share drop from 71 per cent in 2010 to 59 per cent in 2015. Little wonder Gillette now has its own online shave club, too.
Is PNG immune?
Papua New Guinea may or may not be ready for a Dollar Shave Club, but businesses in PNG are certainly not immune to disruption.
Arguably, the biggest business disruption to take place in PNG in recent years was the entry of Digicel into the telecommunications market in 2007.
‘So, how do you tell if your business is ripe for disruption? And what can you do about it?’
The state-owned incumbents Telikom PNG and Bmobile (now Bemobile Vodafone) have arguably never really recovered from the entry of such an aggressive, cashed up and marketing-savvy new entrant. Nine years on Digicel is the dominant player in the market.
While widely-reported impediments such as law and order issues, and poor infrastructure, may deter some new entrants from entering PNG’s marketplace, the Digicel case shows that others may not only not be put off; they may even regard such impediments as an opportunity.
So, how do you tell if your business is ripe for disruption? And what can you do about it?
Well, Google’s and Facebook’s decimation of traditional print media (these two online giants now receive 50 per cent of all online advertising revenues) suggests no industry is safe. And technological prowess isn’t necessarily a protection.
‘The message is, surely: sooner or later, the disrupter is likely to come for you, so you’d best be ready.’
Think of Blackberry’s and Nokia’s dominance before Apple launched the iPhone, or the popularity of MySpace before Facebook came along.
Look at how the rise of renewable energies is disrupting established business models of gas, coal and oil-fired power producers and their suppliers. Online-only banks such as Atom Bank in the UK are going after traditional retail banks too.
A recent article in Fortune magazine identified: construction, agronomy, robotics, real estate, and batteries and charging as five industries ripe for disruption. But, in reality, any business that can be undercut on price or service by a competitor able to do things more simply, or better, is ripe for disruption.
The message is, surely: sooner or later, the disrupter could come for your customers, so you’d best be ready.
‘Sometimes, too, being ready means being a bit of a disruptor yourself, even if it means disrupting your own business.’
Indeed, like the proverbial lobster in a pot of ever-warming water, you may even now be in the process of being disrupted, but you do not know it yet.
Many of PNG’s companies are currently looking at their costs and striving for better productivity and more efficiency. If the benefits of these improvements are passed on to customers, that could well be some protection.
Being ready sometimes means being a bit of a disruptor yourself, even if it means disrupting your own business. The world’s major breweries responded to the trend for craft beers by launching craft beer brands of their own.
Power producers in many markets (including PNG) now sell renewable power alongside power from non-renewable resources. Unilever has plans to introduce Dollar Shave Club’s disruptive spirit to some of its other businesses.
Is this disruptive spirit one we can afford to ignore?