WHAT IS MARKET DISRUPTION? (WITH CASE STUDIES)

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Market disruption is simply an evolution in the business world. Just as there's the evolution theory of man, so also is market disruption.

Over the last two decades, we have noticed clear and distinct changes in the culture and patterns that cut across different industries in the business world.

How a business activity was carried out two decades ago, a decade ago, or even five years ago is not how it's being done now. This is because many of the parameters by which these businesses operate are changing.

These changes are causing disruption in the market, and it's really important that business owners understand this concept and how it impacts the business landscape.

Do you think market disruption is a positive concept? What are the effects of market disruption? This article is meant to guide you and help you answer these questions.

It will also cover different areas of market disruption, including what it means, the key drivers of disruption, case studies, etc.

You'll also discover how to effectively navigate market disruption in your favour. If you're ready, let's begin the journey.

What exactly is market disruption?

Market disruption simply means a significant shift in the normality of a market environment and functions in any given industry because of technological advancements, changes in customer behaviour, and other innovative factors.

It's very important that business owners are sensitive to the concept of market disruption and understand its origin.

In 1997, Clayton Christensen, a Harvard business school professor, postulated the concept of market disruption.

His research led him to some findings in which he postulated the theory of disruptive innovation, which he recorded in his book "The Innovator's Dilemma."

Clayton Christensen discovered that new market operators go into the market, meeting the needs of the unreached populace.

He believed that when these new business owners meet the needs of these people, even with products of lesser quality compared to the big players in the game, they are able to build a customer base.

With time, they improve the quality of their products and services with technology and innovative business models, and they also continue to increase their customer base.

Now, because the established players are more interested in sustaining their innovation, it creates a huge gap for market disruptors to thrive.

It gets to the point where these new market operators move into the market space of these big players in the industry. When they do, what they cause in the market is a disruption, a shift.

This shift causes the big players to reconsider what they are doing and seek out ways to join the moving train or risk being left behind.

In the view of Clayton Christensen, market disruption is needed in every industry and is capable of causing desired change and improvement.

Market Disruption vs. Traditional Competition

Market disruption and traditional competition are two different concepts that every business owner should know and understand.

They differ in some ways, such as their nature of change, their innovation patterns, their impact on existing players in the industry, etc. In comparison between both concepts, the most striking difference is:

Market disruption is a disturbance or shift from the old ways of doing things into a new way, primarily caused by the introduction of technology, changes in customer behaviour, the use of better innovative business models, and other innovative factors.

The main concept of market disruption is to give the market a new shape, challenge established players in the industry, and introduce newer solutions for solving problems within the industry.

Traditional competition, on the other hand, refers to a rivalry among established players in the market. They seek out measures to improve their products and services and capture a larger portion of the market.

In traditional competition, established players seek to build customer loyalty among their rivals. The main focus of this concept is to make improvements, have a clear difference from their rivals, and gain a competitive advantage over them.

Both concepts are important in a business journey, just that market disruption demands more innovation and significant changes to remain relevant in the marketplace.

Key Drivers of Market Disruption

As I stated earlier, market disruption does not just occur by itself. It is a result of changes in some factors that influence how industries operate.

Let's take a look at a few of these drivers:

1. Technological Advancements and Innovation

It is quite common that anywhere and anytime there is an advancement in technology, there's bound to be a disruption in the market.

This is because with the introduction of new technologies, many business activities can be made easier, better, and more efficient, which new players can harness to disrupt the existing status quo in an industry.

2. Changing Consumer Behaviours and Preferences

Another key driver of market disruption is leveraging the changing behaviour of customers towards products and services.

Since the concept of disruption is about bringing a different perspective that outsmarts what already exists to the market, these changing consumer preferences will be an advantage to new players.

They can harness this change in preferences and use it as a medium to enter the market successfully.

3. Entry of New Players

One of the signs that market disruption is inbound is when new players enter the market.

As the business world grows, so does the number of business owners who spot opportunities and try to fill the gap in a particular industry.

This leads to an influx of new players with the aim of bringing better solutions than what already exists.

4. Regulatory Changes

A change in regulatory policies by the government can disrupt industries.

This can create opportunities for new business owners to come into the market with their products or services or for established business owners to improve their business practices.

5. Adoption of New Business Models

Another key driver of market disruption is the adoption of new business models.

With a lot of technological advancements taking place, new innovative business models are readily available for use that can challenge older traditional models as well as bring better solutions to customers.

Effects of Market Disruption

When there is disruption in the market system, there is bound to be a ripple effect.

This effect is based on how it affects both old and new players within an industry, the marketplace environment, and consumers.

Here are some effects of market disruption:

1. Displacement of Established Market Leaders

One of the effects of market disruption is that many established market leaders, often termed the "big players," will be displaced.

This is because the new players are coming into the market with better solutions enhanced by technology that will make the old players almost irrelevant.

Now, if these "big players" do not adapt to these changes so as to remain competitive, they risk being displaced completely from the market.

2. Creation of New Opportunities for Emerging Players

The creation of new opportunities for emerging business owners is one of the effects of market disruption.

As long as there are gaps that disruptive shifts create, there will be players to fill them. This allows for new, improved products to be introduced into the market.

3. Increased Competition and an Accelerated Pace of Change

With the influx of new players into the system, the quality of products and services provided by both players will improve rapidly.

This would also lead to increased competition, as everyone is trying to be the best in the industry.

Now, because the competition becomes intense, the rate at which change occurs within the marketplace will accelerate compared to that of a traditional competition scenario.

4. Implications for Consumers and Society

One effect of market disruption is how it affects society as a whole. Market disruption can reshape how consumers behave toward products or services.

As changes occur in the whole market space, with changes in business models, technologies, etc., it changes how much customers respond to products.

Customers will always want to go for something better than what they already have, and this can continually change based on what is obtainable in the market.

This means that they get enhanced products, services, and customer experiences.

Also, with the opportunities that business owners have from market disruption, there are bound to be job opportunities that they can create that members of society can benefit from.

Case Studies of Noteworthy Market Disruptions

Having understood what market disruption is, let's consider case studies of three major market disruptors in their different industries.

1. The Uber Effect: Disrupting the Transportation Industry

The whole Uber story began when both Travis Kalanick and Garrett Camp were stuck in a situation in Paris because they were not able to get a taxi on a snowy evening.

So they asked themselves, "What if you could request a ride simply by tapping your phone?" This question led to the birth of what we see today.

What Uber did to traditional transportation was cause a significant disruption in the old ways of doing things.

They revolutionized transportation, making it way easier to get a ride without even leaving the comfort of your bed.

Now you have the option to either wait to get a taxi on the road or make it come to you.

Since Uber came to light, other transport companies have followed their lead in different countries as they continue to challenge the old ways of commuting.

2. Amazon's Revolution: Disrupting the Retail Landscape

Another noteworthy case study of market disruption is Amazon. When it comes to the retail industry, they are one of the big players.

But before they came into existence, retail businesses had always existed.

There has always been a traditional way of making purchases: simply obtaining products from companies by going there in person.

But what Amazon came to do was challenge that old way of doing things and say, "Hey! You don't have to go to get your products physically; why don't we help you instead?"

So you can just sit in your house, place an order, and it's brought to your doorstep.

Other companies have noticed that the system of retailing as adopted by Amazon works best; hence, they are adopting it since they want to remain competitive.

3. Netflix and the Digital Revolution: Disrupting the Entertainment Industry

What Netflix has done to the entertainment industry is remarkable. Honestly, in this industry, there have been a couple of disruptions that have consistently taken place over the years.

The entertainment industry is continuously evolving, and many big players, such as Netflix, are doing their best to stay in the game.

Now, with Netflix, you do not have to bother about downloading a movie or even a TV show anymore. You could just stream from their server directly at a higher resolution for a subscription fee.

Other companies are also doing their best to adopt this digital revolution so they can stay relevant. I believe in the future, there will be more disruptions that will take place in this industry.

Navigating Market Disruptions

As a business owner, if you want to navigate market disruption in favour of your business successfully, you must learn how to adapt to changes.

Market disruption is about change, and we've considered its key drivers. You must be ready to embrace the different innovations and technological advancements that come along.

You must be willing to try out new business models that can meet the evolving needs of customers. This is really important, as it forms the basis for business—the quest to remain relevant to customers.

Finally, you must develop a culture of agility and adaptability in your business.

You need to be adaptable to the constant evolution that's taking place in the industry because it's the only way to navigate market disruption in your favour.

Conclusion

We have been able to look at the concept of market disruption, what it is, the key drivers, and some case studies of significant market disruptions and their active players. We also concluded that the best way to navigate market disruption in your favour is to be adaptable.

Market disruption is a concept that has come to stay, and for you to respond to the diverse changes that it brings, you must be very proactive even as you make the necessary adjustments that'll make you relevant to your customers.

You must also be ready to make further discoveries that'll keep you at the forefront and even make you an active initiator of a future disruption.