From the research, we categorized three types of disruption and the appropriate response strategies for each:
1. Customer Experience Innovation – Improving the customer experience (CX), or removing barriers, associated with purchase or usage of the product.
2. Product Innovation – Increasing consumer utility over existing products with feature/
function additions or subtractions.
3. Market Innovation – Solving an unmet or unaware consumer need, expanding the
marketplace or creating new markets.
Ultimately, disruption is happening because the value consumers attribute to the product or service has changed.
Hortz: How would a firm go about determining the nature of their response to industry disruption?
Lewis: A successful short and long-term response strategy stems from understanding the specific threats your business is facing. While technology provides the catalyst for disruption, customers finding different sources of values (as noted above) is the real cause of disruption. Too often incumbent firms’ strategies focus on a response from their own biased points of view.
For example, they may view an incumbent offering as merely a product (functional) innovation, when the disruptor is actually changing the entire experience for consumers. Robinhood isn’t about lower fees, it’s about the promise and opportunity for unbound investing riches. In other cases, disruptors create whole new product value that incumbent firms read with their established emotional trigger bias.
Hortz: What are the steps you recommend a firm take to develop an immediate pathway to industry disruption?
Lewis: For incumbent firms facing disruption, gaining an accurate and clear understanding of how and where customers are attributing value is paramount to a successful response. That is step one.