When disruptors become establishment…


A lot of the time, companies become successful by doing something different than every other player in their category, but then they tend to stop innovating. Someone new comes along and breaks the mold, thus disrupting the erstwhile disruptor, or else everyone does what the disruptor is doing at scale, thus making them irrelevant. Let me give you two quick examples and then talk a bit about how to get past this problem.

Example 1 for me is IKEA. They disrupted the furniture category by re-examining the entire supply chain, costs and consumer experience. By selling disassembled, flat packed furniture that people put together themselves they were able to achieve a cost-quality equation that most people loved. They then created a unique store experience that makes IKEA a full day family outing instead of a shopping trip. Their strategy thereafter has been physical expansion and essentially more of the same. Adding more things to the store experience, making the range of products wider and wider and so forth.

What’s likely to hit them?

Well, first of all, there is a small but clear trend towards buying furniture online (yes, I know in theory you can do that with IKEA too but bear with me for a moment). At this moment, the leaders in online furniture sales are usually the leaders in online, not the leaders in furniture. What that means is that the consumer experience isn’t built for the category, it’s like buying anything else online. It’s only a question of time before someone comes along and changes that (there are some startups doing this already). Imagine using VR to see what furniture fits in your home, how it would look along with everything else and so on. That could be an experience superior to going to the store and the technology to deliver it exists today. Delivering that experience properly would cost less than setting up one store and in the long run could provide an alternative business model for the furniture business that disrupts the existing ones.

Second, there is another small but clear trend towards renting furniture rather than buying it outright. This one has more startups behind it and a lot more disruption potential.

Continuing to build enormous stores and pack in more experiences may work for a while longer, but in the long run these two trends and the players leveraging them will change the furniture business.

Example 2 is Tesla – the posterboy for electric cars. Everyone seems to be making electric cars now but there was a time when Tesla’s visibility in this field and their solutions to some of the basic design problems were key to progress. However, Tesla is still not a successful commercial venture because they’re now trying to do what all the other car companies do – mass produce cars at a large enough volume to make the fixed costs pay out. In a world where the volume of cars from the other companies is far greater than Tesla’s, and those companies rapidly shift towards electric cars, perhaps Tesla’s disruption isn’t relevant anymore. Perhaps they need to ask themselves what business they’re really in – is it the business of manufacturing and selling electric cars? Or is it making the technological breakthroughs that make electric cars viable – in which case they’d go a completely different route than building factories and dealing with all the hassle of actually delivering cars.

The core question to ask in both cases is “What business are we in, and is what we’re doing representative of the future of that business?” If IKEA were to ask themselves that question in light of the trends in the industry, they might realize that selling more Swedish meatballs and salmon isn’t the key to their future. Tesla may realize that they don’t need to manufacture and sell electric cars – they need to keep disrupting the industry with better technology and solutions.

A quick note on the pictures – they’re of the band Rush in their youth and more recently. I used them primarily because they’re my favorite band. Any excuse to put a picture of Rush on my blog, although you could argue that they actually contradict my point rather than support it, since their skills were amazing even as they aged and became more “establishment”. Apparently Neil Peart now finds it difficult to play concerts so they’re going to retire, which is sad but understandable. Luckily I still have the video of Red Barchetta to watch, and the comforting thought that once, in a studio while practicing with my band, we pulled off an excellent cover of it which was very satisfying even though I quit the band before we played it on stage.