Disruption: Disruptors spin ideas, tech into perfect storms
Disruptors spin ideas,
tech into perfect storms
They alter society while building scalable businesses
Disruptor brands are like forces of nature; awesome and devastating, they transform the landscape. Trying to understand the exact nature of these whirlwinds is more difficult, especially as they tear through the middle of categories or create multiple fires at the edges. Having tracked a lot of category storms, WPP brand experts offer these insights.
The transformative power of disruptor brands starts with their ability to identify unmet needs and create something new—a solution—to meet the needs. Disruptor brands make the solution profitable and scalable in ways that alter consumer behavior and expectations, and the market share of existing brands, forcing the brands to change the way they do business.
Disruptor brands disregard category boundaries. They usually act to improve the life of the consumer or at least remove pain points. In the context of recent technological disruptions, this definition applies to two successive waves: The Amazon and Google impact on e-commerce and search at the end of the twentieth century; and the mobile revolution starting with the introduction of the Apple iPhone a decade ago.
Amazon is the perfect storm that creates a tidal wave of change. Over the past 10 years, between 2007 and 2017, when the Global Top 100 increased a healthy 128 percent, the brand value of Amazon soared 2,235 percent. But, as in nature, there are few perfect storms—brands that create entirely new categories and force business models to change across many other categories.
There are however, many brands that have a disruptive effect on one or more categories. Small, unknown startups launch on Amazon, or other internet platforms, and ripple through categories with price and product propositions that challenge long-established brands. Although not disruptors on the scale of Amazon, these small brands are disruptive. They are the craft beers, fintechs, or small, online apparel or personal care upstarts.
Ultimately, every brand fits into a triad—every brand is either the disruptor, disruptive, or disrupted. But these designations can change during the lifecycle of a brand, and every brand has the power to make that change happen.
Animating this triad are the disruptive ideas enabled by technologies such as artificial intelligence (AI) and blockchain. With AI, machines gather and manipulate data and produce useful insights, sometimes faster and better than the human brain. Blockchain streamlines transactions with transparent networks that eliminate the need for mediation. Both technologies have applications—and potentially disruptive consequences—across categories.
AI will enable more automation and potentially eliminate jobs, which produces disruption and requires new skills. AI as it is used in personal assistants, like Alexa, potentially disintermediates brands from shopping consideration. Banks, by definition, are the mediators in financial transactions. Blockchains, in the form of crypto currencies, threaten to disintermediate banks and restructure banking.
Disruption also is about recognizing unmet needs and reframing the marketplace, as exemplified by WeWork, which provides office space for the gig economy. Ultimately, the most impactful disruptors introduce a new business model that shakes up and entire category or categories. Other examples of this kind of disruption, when a new business model challenges an existing category, include Uber (mobility) and Airbnb (travel).
Perhaps the most identifiable characteristic of a disruptor brand is that it keeps disrupting. Amazon, Alibaba, Apple, Google, and Facebook are all relatively young technology brands still guided by a founder or a founding spirit. They attempt to keep customers in growing ecosystems of ever-changing exceptional products and services that give customers little desire to leave.
The disruptor brands also enable the disruptive brands to exist. They provide the online platforms and devices, which are the habitats in which disruptive brands thrive. Established brands across consumer product categories are being nibbled by these disruptive brands, which easily access e-commerce and social media platforms.
The apparel and personal care categories are especially susceptible to this phenomenon. Small brands, or non-brands, often from Asia, reach wide audiences on the internet, with promises of high quality fashion at lower prices. The online apparel brand Everlane promises radical transparency, and ethical supply chain. It shows customers the cost of production, which makes much of the competition appear too expensive.
The beauty brand Glossier says it has inverted the beauty market business model with product ideas driven by consumers, not marketers. It has moved beauty tutorials from department stores to Instagram. Taking advantage of e-commerce communication, a brand called Brandless promises to deliver lower cost quality food and household products by eliminating marketing costs and excessive markups.
Disruption may be inevitable. But the outcome is not. Until recently, the banking industry in China was replete with sluggish state-owned companies. They were easy targets for Alipay, WeChatpay, or JDpay, the payment systems of fast-moving technology brands. Recognizing the importance of customer relationships, the Chinese banks rapidly integrated AI and enhanced the customer experience. Facial identification in banking is ubiquitous now, for example.
Banks in the West face similar challenges but have moved more slowly for several reasons. First, the consumer take-up of mobile payment systems has been relatively less robust so far, in part because the broad use of credit cards, which did not exist in China. Second, the regulatory restrictions on personal data are greater in the West. Third, investments rather than retail transactions usually drive the bulk of profit. As some of these factors change, and blockchain evolves, the Western banks should face more disruption—from themselves or from other entities.
Responding effectively also requires the right attitude. Large brands are often thought of as big ships, heavy in the water and difficult to turn because of business needs and responsibilities to stakeholders. But big brands do innovate and can disrupt markets. Big brands are able to play in spaces not available to small, disruptive brands because the cost of entry is too high.