“Disruptive innovation” seems to be the current hot trend for many management gurus, but it certainly has big risks too. An alternative for many companies or brands threatened by new products created with advanced digital technology is re-branding. Some traditional brands have successfully re-positioned their value proposition to leverage its core benefits and brand image to find new customers and rejuvenate their business.
A recent “Economist” article compared the virtues of older brands using traditional technologies to the astonishing advances from new internet technology, often the result of the “disruptive innovation” process. Some of these established products have been able to resuscitate their business by re-positioning their brand proposition to create a viable, profitable niche in their markets. These turn-around examples raise insightful questions on the merits of “disruptive innovation” for many companies.
Management gurus rave about the importance of “disruptive innovation” for creating new ideas today.
Disruptive innovation as an explanation of how change happens is everywhere – we hear all about disruptive consultants, disruption conferences, and disruption seminars these days. The notion of disruptive innovation was first described in Clayton Christensen’s 1997 book “The Innovator’s Dilemma,” where he explained that executives often made “good decisions” that reflected previous decisions which made their company successful. The dilemma was that “doing the right thing was the wrong thing,” or what Christensen called a missed opportunity. His primary example of this involved mainframe computer manufacturers focusing only on refinements (or “sustaining innovations”), and completely missing an untapped customer desire for a cheaper, poorer quality personal computer, which eventually took over the entire industry.
However, there is growing skepticism about the true rewards from “disruptive innovation,” especially when there is a reasonable likelihood of a disaster instead. In Jill Lepore’s recent article in The New Yorker on “The Disruptive Machine – What the Gospel of Innovation Gets Wrong,” she states that Christensen’s sources for his case study analyses were often “dubious and his logic questionable”. Jill sites two other examples, Morrison-Knudsen and Time, Inc. that did embrace disruptive innovation, but their new businesses turned into disasters. Furthermore, when comparing disruption to evolution, advocates of disruptive innovation use a circular argument: “if an established company doesn’t disrupt, it will fail, and if it fails it must be because it didn’t disrupt”.
These gurus claim that several staid businesses such as law firms, book stores and universities are threatened by the key drivers of change, technology and globalization, behind disruptive innovation. On the other hand, this “Economist” article identifies some enlightening examples of how such threatened companies have re-positioned their brand to create a new meaning based on its traditional model and image. The classic example is the Swiss mechanical watch, which was almost wiped out by the introduction of cheaper digital watches. Instead Swiss watchmakers re-branded to offer the more emotional benefit of status, as prestigious fashion items (e.g. Swatch, Omega, Breguet), rather than just an instrument for telling time, with higher prices to reinforce the perception of greater value. In doing so, they leveraged their brand reputation for tradition and craftsmanship to attract an additional set of customers.
Another example is independent bookshops. Many are re-defining themselves as communities where people who care about books meet and socialize. Also, some sunbelt cities have re-positioned trams as an important green solution to both pollution and urban sprawl.
The key to successful branding is to establish a close relationship with the customer, one that is ideally based on trust, credibility and other important emotions. These old fashioned industries and brands focus on quality rather than quantity, and heritage rather than novelty. They are all emotion driven, making the brand seem more distinct and hence valuable to a core group of customers who are willing to pay a higher price as a result. Instead of relying on “disruptive innovation” to respond to external threats from advanced internet technology and globalization, these brands went backwards and found a novel way to leverage their core meaning and create a rejuvenated and profitable, niche business that has a new life.