Photo: Birchbox
Knowledge@Wharton
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
The emergence of a new technology is often cited as what drives the disruption of an industry or business. But that’s not true in most cases, according to Harvard Business School professor Thales Teixeira.
“In the vast majority of the cases, these startups have the same technologies as the incumbents that they are fighting,” Prof. Teixeira told Knowledge@Wharton show on SiriusXM.
Instead, startups disrupt established companies by decoupling the customer value chain — picking one aspect of the business and doing it better than the incumbent.
His findings, based on eight years of researching startups, tech companies and incumbents, are explained in his new book, “Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption.”
He states, “The key point of decoupling is not to replicate what established players do; it is to find something that consumers are very unsatisfied with. If you offer something better, you will steal away customers. The way that you do that is by reducing one of three costs: reducing monetary, reducing effort and reducing time costs. The way to do that is you use business models and technologies.”
For instance, online subscription services such as Birchbox focused on convenience as the weak link in the beauty buying experience in delivering samples to homes.
“That was the disrupting force,” said Prof. Teixeira. “It wasn’t that Birchbox had a website, it wasn’t that Birchbox had the ability to put samples in a box and ship it to your house. This is trivial; all companies can do that. It was actually this reduction in [convenience] cost.”
Still, the key finding is that it is the customer who is driving the disruption, and disruption in one industry spreads to changes in others.
”What we noticed through the data is people who start buying on Amazon, using an Amazon app, are more likely to sign up for Uber versus those who don’t buy frequently on Amazon. And those who are buying on Amazon and using Uber are more likely to sign up for Airbnb and start using Airbnb. And when they use these three apps, they are even more likely to use Birchbox and Trove and Venmo,” said Prof. Teixeira.