New Venture Lab: Equipping Christian Entrepreneurs

Question

Regarding your post on Web-based Tutoring, this concept of "disruption" is very interesting. Can anyone explain this in more detail? Many of these ideas are new to me.

Answer

A disruptive business idea or business model is one that is so different than "business as usual" that it brings disruption to an entire industry -- causing more of a market "revolution" instead of the normal market "evolution."  Disruptive business models usually lead to massive market upheaval, tectonic shifts in customer behavior and the shifting of large chunks of market share as the innovators with the new, disruptive model roll out their revolutionary product or service.

 

Two examples of this are as follows:

• Dell led the way (and many others soon followed) with a direct-to-consumer computer retail model as opposed to the typical retail store front.  They could serve customers cheaper and with the most recent components far more effectively than the typical store-front retailer.  Read more about this in the post Business Models Matter.  Within five years or so, nearly all store-based computer retailers like the old ComputerLand were out of business.
• American Airlines/Sabre led the way with the three-step combination of: (1) online travel information through Travelocity.com (eliminating the need to call a travel agent who had exclusive access to the information prior to the Internet and its earlier online service predecessors), (2) "ticketless" airline tickets (eliminating the need for a  travel agent intermediary to fulfill the ticket), and (3) lower commissions paid to the travel agents, eventually zeroing out the commissions completely.  This disruptive new business model combination led to the following events among the massive travel agent industry: (1) agencies scrambled to offer a value proposition that they could now charge for by offering either corporate travel services to companies or by offering proprietary in-depth travel information to leisure travelers, such as morphing into a cruise specialist, (2) they scrambled to consolidate in a massive wave of travel agent mergers and acquisitions in order to gain strength and cut costs, or (3) they shut their doors.  Up to 80% of all travel agencies ended up closing due to this market disruption.