Disruptive business model

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Due to the high opportunities in the development of new technologies, more frequently these innovations establish the new markets. Such an event always has the consequences and usually it can be seen in the change of market share and customer preferences in the specific economical sector or industry. This new innovations are called the disruptive inventions, which by their nature disrupt other businesses and create a powerful competition. Currently, there are two main strategies for the companies and corporations. Either the company has to work on their main product and improve it, or the other choice is to innovate and create something new and different from what they have. However the main issue of innovating is investments, risks and fears. Many companies these days concentrate more on the risk management rather on the innovating processes (Clayton M. Christensen, McDonald R., Raynor M., 2015). The CEO fear to change the system, which works and makes profits. This strategy is working until your competitor invents the disruptive business model, after the invention of such a technology keep operating as before is a perfect recipe for disaster. Therefore, the innovation process has to be present in every business, if it wants to survive in the era of development and changes.

Disruptive business models

Chart 1.0. The development of the disruptive business from the low-quality users to the mainstream (Hübner S., 2018)

There are specific features for every business model and for understanding the disruptive business model, I have decided to start with the meaning of disruption, which already includes the first feature in the definition. Disruption means breaking away from the old, what means the disruptive innovation is creating a new market, which was not existed before, or creating a new values and propositions (Rogers D., n.d). The second symptom of such a model is that disruptive innovations don't catch on with mainstream customers until quality hits to their standards. Also, it is usually misleading that disruption innovation is a product; however, it is not like this. Disruptive innovation is a process of evolving and improvement of the invented product.

For instance, when the first electric cars were created, nobody thought of them, as of disruptive invention, because they simply did not meet the minimum customer requirements. The studies had showed that the main points, which were considered by the customers before the purchase of the automobile, were the acceleration, minimum cruising range and the possibility to be personalized (Clayton M. Christensen, 1997). The electric cars were losing by all these factors; however, nobody took to a consideration the fact that the technology is moving ahead at a faster rate than the market's trajectory of needs. This situation was happening in 1990s, and now after more than 28 years, the electric cars are in the demand and are valued as a privilege by the customers due to the cost of purchase and the convenience.

The summary of the main theoretical features of the disruptive business models

  1. Disruptive business models start as start-ups, which launch their product on the low quality customers and improve their products with the time, gaining the market share, challenging and disrupting the incumbent. By incumbent, I mean the established business, which is operating on the large scale with the mainstream customers.
  2. Disruptive product is the one, which opens the new features on the market for customers and supply's people with unique product. The product or service that was moderated, improved cannot be disruptive, as it remains the market offer and it is main features. Therefore, it is significant not to be miss leaded and misguided, when identifying the business model.
  3. Innovation is not a result; it is the process, which is followed by the failures and constant attempts.

Examples of Disruptive business model

  • Uber: Uber is an American multinational ride-hailing company that offers services including peer-to-peer ridesharing, ride service hailing, food delivery, and a bicycle-sharing system. It disrupted the transportation industry by introducing an innovative business model that allowed customers to book a ride from their smartphones. Uber revolutionized the way people commute and provided a convenient and reliable alternative to traditional taxi services.
  • Airbnb: Airbnb is an online marketplace that allows people to rent out their homes or apartments to travelers. It disrupted the hotel industry by introducing a cost-effective and convenient alternative to traditional accommodation. Airbnb was one of the first companies to successfully capitalize on the sharing economy, and its success has spurred the growth of similar services.
  • Amazon: Amazon is an online retail giant that has disrupted the traditional retail industry by introducing a convenient and cost-effective way to shop online. Amazon offers a wide range of products, from books and electronics to groceries and apparel. It has revolutionized the way consumers shop and has become one of the most successful companies in the world.
  • Netflix: Netflix is an American streaming service that has disrupted the traditional TV and movie industry by introducing a subscription-based streaming platform. Netflix offers a wide range of movies and TV shows, and has become one of the most popular streaming services in the world. It has revolutionized the way people consume media and has become an integral part of the entertainment industry.

Advantages of Disruptive business model

The disruptive business models bring numerous advantages to the companies which are willing to implement them. The following is the list of the main advantages of such models:

  • Firstly, the disruptive innovations create a much more competitive environment for the companies, which leads to the better quality of the products and services. This allows the companies to provide better products to the customers, which increases their loyalty.
  • Secondly, the disruptive models allow companies to enter the new markets and expand their customer base. This significantly increases the potential of the company to make profits.
  • Thirdly, the disruptive models often provide a more efficient way of doing business, by simplifying and automating the processes. This can lead to the decrease in the costs and increase in the profits.
  • Finally, the disruptive business models can help companies to open up new possibilities, such as new sources of revenue and new products. This can help companies to become more successful in the long run.

In conclusion, the disruptive business models can bring numerous advantages to the companies, which are willing to implement them. The main advantages are the increased competitiveness, the ability to enter new markets and the possibility to open up new revenue sources.

Limitations of Disruptive business model

Introducing the limitations of disruptive business model, there are several issues to consider:

  • Firstly, the lack of resources can be a huge obstacle to successful innovation. Companies may not have the necessary funds to invest in research and development, or the right personnel to develop and implement new ideas. This can create a lot of financial and operational challenges to the company, which can affect the success of any disruptive business model.
  • Secondly, the complexity of the disruptive technology can be a major limitation. Many disruptive models rely on complex algorithms and require a lot of resources to develop and maintain. The complexity of the technology can lead to a long development process, which can limit the speed of implementation and adoption.
  • Thirdly, the lack of understanding of the disruptive technology can also be a limitation. Companies may lack the knowledge and experience to understand the implications of the technology, and thus may not be able to develop the most effective business models. This can lead to costly mistakes that can have a detrimental effect on the success of the disruptive model.
  • Lastly, the regulatory environment can also be a limitation. Many disruptive models require the companies to comply with certain regulations, which can be difficult to do. Regulatory compliance can be costly and time-consuming and can limit the success of the disruptive technology.

Other approaches related to Disruptive business model

  • Developing new technologies and business ideas - One of the main approaches to the disruptive business models is to develop new technologies and business ideas which challenge the existing ones and bring more effective and efficient solutions to the market. Such innovations can be seen in the development of new software, hardware and services.
  • Creating new markets - Another approach is to create new markets and target them with the new inventions. In order to do this, it is important to identify the new and growing markets, and then develop the appropriate product or service which will fit the needs of the customers.
  • Utilizing existing resources - Companies can also take advantage of the existing resources and use them to create the disruptive business models. Such resources can include the existing customer base, the existing infrastructure and the existing technology.
  • Utilising the existing competitive landscape - Companies can also use the competitive landscape in order to develop the disruptive business models. It includes understanding the competitive landscape and how the competitors are operating in the market. This can be used to identify the opportunities in the market and develop the disruptive models which will be able to challenge the existing players.

In summary, Disruptive business models involve a variety of approaches which include developing new technologies and business ideas, creating new markets, utilising existing resources and utilising the existing competitive landscape. Companies should consider all these strategies in order to develop the disruptive business models which will be able to challenge the existing players in the market.


Disruptive business model — recommended articles
Benefits of innovation — Market Challenger — Innovation and entrepreneurship — Radical innovation — Growth company — Imitator strategy — Related diversification — Value innovation — Importance of international marketing

References

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