Economist Joseph Schumpeter called waves of industry change “creative destruction.” He argued disruption of the current industry structures and companies built a nation’s wealth. Most economists agree, viewing creative destruction as a necessary ingredient for economic growth. But Schumpeter was writing in 1942. Is creative destruction still a positive force in today’s world? Or are the benefits of creative destruction more nuanced and the costs far greater than Schumpeter argued? As I reflect on this question, I observe three types of disruptions to markets: new-to-market capabilities, reshaping of the industry value chain, and consolidation. While all three create winners and losers, the net benefits to society differ. New-to-market capabilities disruptions include examples like the steam engine, the telephone, the electric bulb, genetic profiling, and personal computers, creating industries that allow us to do things previously impossible. When an entrepreneur brings new-to-market capabilities to…
Uber: A business model innovation that benefits and exploits
“Is the Uber disruption of local taxi and town-car markets a positive business model innovation for consumers?” a former colleague asked me. Uber, and its competitors Lyft and Sidecar, are disrupting the regulated taxi and limo-service markets by enabling ride-seekers to secure transit in privately owned cars using a mobile app. The entrepreneurs have used technology to both transform what has largely been a local market into a national/global market and dramatically improve customer service (e.g., automated billing, knowing potential drivers’ locations, cleaner cars, customer feedback on specific drivers, etc.). I am not in the least bit surprised about the emergence of Uber and its direct and indirect competitors (like Ridejoy, an on-line car pooling service). These disruptions demonstrate a number of consumer-friendly trends underway in our economy. Technology automates human tasks and makes markets more efficient and effective. Who needs friends–with-friends when…
WTN Fusion 2014: It’s all about disruption of business models and IT
Last week, WTN Media’s Fusion 2014 conference in Madison, WI captured information technology-driven external business challenges and IT leaders’ responses. Small or large, government or private, non-profit or for-profit, the challenges are shared. Here are my take-away thoughts. IT’s Role IT leaders now largely accept a distributed model. “Shadow IT” is here to stay. The shift is correct from my perspective now that insight is one of remaining sources of advantage. Data is abundant and its interpretation must be real-time, predictive and prescriptive. As Greg Pfluger, VP for Information Systems at American Family Insurance, commented, “Marketing … better understands technology than IT people understand marketing. Treat them with respect.” Despite the complicating issues, Software as a Service (SaaS) is a winning business model; the benefits far outweigh the cons for customers and suppliers. A primary IT role is to ensure integration and security…
Disrupt your business model before you’re disrupted
A well-known case study by Harvard Business Review documents how Dow Corning elected to disrupt its own silicon business rather than allow competitors to steal market share by offering lower price points. The story is worth retelling because Dow Corning’s business model innovation keeps evolving to meet the needs of price-driven customer segments. As the information age took full hold in the 1990s and markets globalized, Dow Corning recognized that its high-end offering of services surrounding its product left the growing number of price-driven customers shopping elsewhere. “We recognized that a number of product lines were becoming commodity-like, and customers were no longer willing to pay a premium for them,” comments 20-year Dow Corning veteran Stacy Coughlin, an architect of the 2001/2 business model innovation project that created a price-driven brand, XIAMETER. Now the head of Global Marketing Communications for this brand, Coughlin…
Insurance solutions, fast from a model business model
Here’s the situation: Just sold my Wisconsin home, my car in Wisconsin is about to be sold and I’ve yet to purchase a new one in my new home state. So I’ll lack car insurance. I don’t want to pay my rental car company’s expensive insurance rates. My Wisconsin insurer can’t help me – they don’t do business in California. Who to call next? Of course! That clever Australian commonly known for his sage advice on car insurance. Never mind that he’s a lizard, and a cartoon, he’s a cracker-jack sales and service guy. I visualize his chartreuse coat and over-sized burgundy eyes first, then the name GEICO pops into my mind, true evidence of the power of effective advertising. GEICO has more than a well-known name and brand characters. It also has a largely on-line business for selling insurance, a business model…
5 open-market trends fueling business model innovation and disruption
Imagine being a 4h grade teacher with a class of 25 students with widely different levels of math aptitude and competency. How do you challenge the most adept students? How do you help the laggards without boring the stars to tears? The only practical option seems to be to teach to the middle. That it, unless you and your principal are lucky enough to have discovered Kahn Academy, which is in the process of disrupting the long-staid textbook publishers market and K-12 education. Kahn Academy is a stellar example of how any business today can thrive by capitalizing on open-market trends that are melting barriers to entry in most markets. Kahn Academy was started by a Salman Kahn, a hedge fund manager and brilliant communicator, an educator with a passion for teaching math and other lessons to kids. He developed effective on-line math…