The New Retail Brand Frontier: Disruptive Innovation
As we enter a new year in a slow-growth economy, it's worth considering which retailers may excel in this competitive environment and those which may fall behind. With limited opportunities for growth, it takes something extra to stand apart from the pack. In a word, it takes disruption.
"Disruptive innovators" are essentially game changers — think Amazon.com, Facebook, Apple. Whether creating an entirely new market, offering a better product or service than anyone else, or even producing a "good enough" product or service at a much lower price, these companies take advantage of underpenetrated positions in large markets, and can grow much faster than the general economy.
At a broad level, three distinct forms of disruptive innovation impact our world today:
- high-quality innovation;
- low-end disruptive innovation; and
- new market creation.
High-quality innovators focus on meeting the demand for higher-quality products, services and experiences from consumers willing to pay more for the improvements. Disney, for example, has pulled customers away from existing competitors by offering superior content and a higher-quality experience (at a higher price).
Conversely, low-end disruptive innovation is when a company introduces a disruptive product or service at a lower price to a large existing market that's already overserved in terms of satisfying demand. Wal-Mart, which pioneered the "superstore" concept emphasizing convenience and affordability, is a classic example of this type of innovator.
The third form of disruptive innovation refers to the creation of entirely new markets through the introduction of products or services meant to address unmet demand. One of the best examples for new market creation may be Apple's iTunes, largely responsible for the explosion of the digital music market.
The disruptive innovation of e-commerce presents the biggest challenge to traditional retailers. No company exemplifies the power of this threat more than Amazon, which first disrupted the bookselling market when it launched in 1995, and continues to transform the way people shop today.