I mentioned earlier in the year that I was helping researchers at the Clay Christensen Institute as they work to make some revisions to disruption theory for an upcoming book Clay is writing. In the conversations since it has become clear that disruption theory will face more and more challenges in the consumer era. There are key areas where the theory and overall framework are applicable, and there are other areas where they are not.
It is also important to understand disruption theory is a multifaceted theory. Most people gravitate to one particular angle of the theory around low-end disruption. The basic premise with low-end disruption has everything to do with the price of a product or service. It is a framework to understand how low-end competitors can displace high-end premium competitors and take the lions share of the market from them. In this scenario, the high-end competitors entrench and go even more premium to protect their margins but in doing only maintain a small share of the pie.
What stands out to me when you look at much of the framework for disruption theory is that it tends to work best when we talk about products which are, or will become commodities. Commodity products seem to be the ones most impacted by the low-end disruption. This is the fault many made when they assumed the iPhone would be disrupted (this is a long and complicated debate). The assumption was that smartphones would become a commodity and in that scenario, those with the lowest prices would win. This assumption missed how indispensable smartphones would become to their owners and even in markets where consumers are price sensitive, and economically disadvantaged, we still observe consumers move upstream and spend more with their smartphone purchases not going cheaper each time they buy a new one. The reason this bucked conventional wisdom was because the smartphone was and is not a commodity.
However, there is a bigger trend emerging that I think will pressure this theory even more. When we look at how retail is changing, computing is changing, travel and leisure are changing, etc., we observe consumers are developing an insatiable appetite for experiences. They want unique, differentiated, one of a kind experience and are seeking out products, brands, and anything which provides this for them. At a high level, it appears that consumers are raising their expectations annually and this may challenge some traditional thinking around disruption theory.
It doesn’t matter what business you are in, the consumer experience is going to matter more and more each year. Consumers will become harder to please, and expect more and the result will pressure the need to innovate significantly.
We see this happening in pockets but most visibly in travel, leisure, and food. I’m certain it will spill over to tech as well if it hasn’t already. Interestingly, a contributing factor to the high demands of consumers on experiences is social media. The pressure from the crowd to “one up” your friends and share your unique experience on social media is mounting. Everyone wants to get a selfie of themselves doing something no one else in their group has, or show off the amazing experience they had. Fascinatingly, in a recent poll I conducted with 300 mainstream consumers indicated that 58% of them had willingly put themselves in what they consider a dangerous situation just to get a selfie. Over half of the group put themselves in a dangerous situation just to capture a unique experience or moment. The idea of this poll hit me when I saw some teenagers take a selfie with a wild bear not too far off in the distance. No I didn’t encourage it, and yes I wish it was me that did it ;).
At a high level, what I’m proposing is that in the consumer experience era there will be fewer areas for commoditization and more opportunity for specialization which consumers will gladly pay for thanks to the vastly improved customer experience. This shift benefits those companies and brand who focus more on consumer experience over being the lowest cost competitor. The truth of consumer markets is it is not a winner take all market. There is room for many to play, and when that is the case it is better to not try and compete on price but on quality and overall customer experience.
