Disruptive Strategy: Disrupting Your Own

self

At times, companies are forced to reinvent themselves, due to the growing availability of
lower-priced and higher quality innovations, a change in consumer behaviours or even, a
market re-invention – as we can see in the move from the traditional investing firms to the
now prevalent online and quick trading platforms.

It is important to note that whilst disruption is key to innovation and competition, disruption
can easily spell doom for a startup or a centurial established company – as in the fall of the
long-term traditional steel processing plants of the ’50s.

Disruption – and Disrupting Smartly.

Disruption refers to the art of innovative take-over or inclusion, referring to the adequate
service of the market using innovative and usually better quality services, products or
machines.

Disruption occurs when a company, usually a startup, provides goods or services, normally
reserved for an elite few (as in the case of the development of computers and phones), this is
known as vertical disruption. 

Here, the start-up carves a niche for themselves., thus disrupting the market entirely.

Progressive Disruption:

None can be more defined than the progressive disruption encountered in the steel industry.

Steel manufacturing for many years enjoyed exclusivity and specific inclusion by a very few
companies (ten companies) that controlled the entire production of steel in America, this was
because the steel manufacturing machines were big and cost millions of dollars to fund. 

During this period, the ten companies manufacturing steel enjoyed unrivalled profits until the
Bessemer steel manufacturing process was invented; this cut the cost of manufacturing in
half, reduced the size of the traditionally huge machines, and also gave room for more
investors to enter the market.

Although the quality was not as pure as those of the traditional machines, the market was
open to low-end production which was highly beneficial.

Prices of these low-end products soon began to fall, and the BIG TEN decided to leave the
market for the newcomers (disruptors), and focus on more prestigious and profitable steel
categories. They moved higher in the production table.
After a while, the prices of the low-end products fell and profit margins were lost, this forced
an invention, that reduced the cost further, the sizes and most of all increased the quality of
the steel produced, effectively making the higher category of steel easier to produce. Again
the BIG TEN met and decided to leave the market and move to the most exclusive part of
steel.

As of today, only one of the BIG TEN is in operation. this begs the question, what should the
BIG TEN have done differently.

Disrupting Rightly – A Tale of Guinness

Guinness, known for its low-water content, high alcoholic value and strong bitter taste, ruled
the market of alcoholic stout beverages, such that, the category Stout is synonymous with
Guinness Foreign Extra Stout. Few years along the ling, a new generation of people began to
emerge, with very different taste habits as compared with the previous generation, Guinness
was faced with a dilemma; appeal to this new and increasing demography and lose its
identity, or disrupt itself.

Learning from history, Guinness knew the only way to retain its identity and the lots of
people personally identifying with its stout, was to effectively disrupt itself, Guinness began
the process of acquiring, producing and manufacturing new beverages under a different brand
name, structure and strategy, targeting the new demographics, whilst retaining its core brand
– Guinness Foreign Extra Stout. Such products like; Smirnoff Ice, Baileys, Gordon Spark,
Malta Guinness etc. were produced by Guinness.

This strategy of maintaining the core identity and brand, whilst appealing to the new
demography through a different branding sustained its brand identity so much so that only a
few people are aware that Guinness produces Baileys.

Quick Question:

How would you feel if you heard First Bank of Nigeria PLC opened a hospital or began
operating a Brewery? Would you Patronize the hospital in full confidence?

Odd right? this is because the core branding of the First Bank of Nigeria PLC is banking, not
medicare. this will greatly disrupt its core brand and even lead to a loss of high-value
customers who will feel betrayed and believe the company is in for a fall having lost its
identity, so will the potential patients of the hospital have serious doubts about being treated
in a hospital owned by a bank.

However, if the First Bank of Nigeria PLC decides to purchase a hospital, and disassosciate
its core branding with the hospital, the hospital will flourish and the brand identity will be
intact.

This is effective Disruption.