Every industry, from trucking to healthcare, is being disrupted by non-traditional competitors, or by direct competitors that have reinvented their business model. To ensure relevancy, it is critical to create effective strategies and to understand the driving factors fueling this disruption.
Disruption happens in two different varieties, each driven by specific dynamics in the marketplace. Ian Bogost, professor at Georgia Tech, says “the big difference between even disruptive innovation and plain disruption is that the former was focused on some improvement to a product or service or sector or community, while the latter is looking first at what it can destroy.” Service or product disruption is a response to an underserved customer need in a given market. A new-market disruption, most commonly defined as the Blue Ocean Strategy, typically redefines a category’s business model by offering simple, easy-to-use alternatives to the existing offering.
Disruption has become a common issue. A recent study by Accenture identified that while 93 percent of executives are aware their companies will be disrupted, only 20 percent feel prepared to respond. Irrespective of if it’s a product/service or a bigger market change, we can link the roots of disruption to two key factors.
The first reflects the removal of friction points in the customer journey. In the banking industry where major disruption is occurring at all levels of the customer journey, fintech companies have been able to offer easier ways for customers to borrow money, transfer money, and pay for things without the need for hard currency. These startups have gained a significant foothold in the banking industry, disrupting long-standing relationships. As part of a stealth attrition study, our sister company found that more than 68 percent of respondents would switch to a non-conventional bank in the future. The study identified that some of the key reasons are greater control over personal finances and the decrease of banking costs.
In order to remain relevant, organizations need to conduct a thorough evaluation of the key friction points throughout the customer journey. A specific focus should be put on areas that are easily disrupted by new start-ups. Through the process of identifying these various friction points, companies can also determine their true value in the customer/client relationship. For example, by using automation and digital experiences, banks are able to alleviate some responsibilities from their front line staff. This would allow them to focus on building stronger client relationships with a higher level of personalized service.
A second factor driving disruption is the fulfillment of an unmet customer need in the marketplace. Google, Tesla and Amazon are all companies that have disrupted incumbents by delivering on customers’ unmet needs, resulting in the creation of a new business model. These disruptive companies meet needs that current industries are either ill-equipped to meet, or do not have the culture and agility to respond. This very often results in an entire industry either consolidating or becoming obsolete.
The car manufacturing industry is going through a disruptive change because Millennials do not want to own automobiles. They are happy to subscribe to a car service, either through ride sharing services such as Uber or through subscription car services such as ZipCar. It is important to understand the majority of these needs are emotional and that companies need to go beyond customer satisfaction scores to track the emotional connection of their brands with consumers. A recent study by Motista identified customers who are emotionally connected with their bank are more loyal, and are more likely to purchase additional services from their primary bank. Answering the emotional needs of customers is where the true market battleground will be won.
Companies need to become nimbler and grow their ability to build bridges between their current capabilities and the needs of emerging customer segments. With digital transformation being the norm across all businesses, it’s imperative companies rethink their value proposition and business model to remain relevant.
This post originally appeared on Shikatani Lacroix news here.
Photo credit: iStockPhoto.com
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