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Articles
Posted: April 9, 2013
by Andrew Seale

Market disruption adaption: Netflix, Apple, Ikea and Toronto’s Kira Talent, MEC, Shifthub

When Netflix first conceptualized the idea of renting films through a website, they weren’t trying to usurp the established movie rental market.

 

But their new business did just that, catalyzing the slow death of brick and mortar video stores.

 

It’s a classic tale of disruptive innovation – when a new product or service changes the way a market operates – much like the digital movie files that rendered movie stores obsolete.

 

These disruptions are bound to become increasingly common as the digital world spits out a steady stream of new technology. This makes it vital for businesses to learn how to adapt to rapidly changing markets

 

“Any industry or market is an ecosystem. It involves multiple sets of value that have to fit together,” says Will Mitchell – Visiting Professor of Strategic Management at the University of Toronto’s Rotman School of Management. “Every time you get a change, whether it’s a big player or a small player, everybody needs to adjust.”

 

Below are three key steps to help your company adapt to this constantly changing reality.

 

Identify the new value

 

“The start of the adjustment is to say, ‘what new type of value is now relevant in the market?’” says Mitchell.

 

He points to the widespread adoption of smartphones and the market it created for cases and accessories specific to those devices.

 

Early entrants gained an advantage, but as smartphone use increased more businesses jumped on the bandwagon and began cannibalizing pre-existing products, making cheaper versions of items already available in the market. They undersold the competition, drove prices down, and led to what Mitchell calls “a race to the bottom.”

 

Apps are a prime example of an oversight in value, he says.

 

“How many people are out there are writing apps right now?” says Mitchell. “We hear about the 16 that make money from it – not the 16,000 that don’t.”

 

To fin new value, Mitchell suggests looking toward other industries or segments of your own, as Apple did when combining MP3 technology with downloadable music to create the iPod-iTunes ecosystem.

 

You can also look at ways to focus on a niche in a broader customer base.

 

“Cirque du Soleil shifted the circus from focusing on value for kids to circus that met adult’s value goals,” he says.

 

Or you can find value via a complementary service for your existing customer base – like IKEA’s childcare service.

 

You can also appeal to the customer’s emotional value, as Body Shop and Lush did when they introduced environmentally-friendly products to meet the demands of an increasingly socially-conscious marketplace.

 

“Good strategy looks for non-traditional opportunities that will spark intuition about how to create new value,” adds Mitchell.

 

Revise an existing product or build a new one?

 

Adapting doesn’t necessarily mean creating anything new. Oftentimes it’s simply finding a more creative, cost-effective way of providing a product or service, says Mitchell.

 

As universities and businesses turn towards online applications, Toronto-based tech start-up Kira Talent has devised a way to combine cloud storage and a laptop’s built in camera to create a new recruitment service.

 

Clients build a master list of questions for applicants, who then answer on video. Kira stores the applicant responses on a cloud server, allowing easy access for the client.

 

“It isn’t designed to replace the in-person interview… but it’s (giving the client) a better view of that candidate sooner in the pipeline,” says David Singh, head of strategy and operations at Kira.

 

The company didn’t invent any new tech, they just combined a few pre-existing services – webcams and cloud storage – to build a more advanced online application service.

 

Even brick and mortar businesses can find ways to add digital components that reinforce their business, says Mitchell.

 

He points to Mountain Equipment Co-op, which added in-store kiosks to help compete with online retailers.

 

“You can walk in the store and if they don’t have what you want you can order it,” says Mitchell. “The value for the people running the online business is to try and improve the overall health of Mountain Equipment – they’re perfectly happy to get the sales in the store or online.”

 

He points to big bookstore like Borders or Chapters as failed counterparts to Mountain Equipment’s kiosk approach. These companies failed to integrate their online businesses in store, instead running them as separate entities, says Mitchell.

 

Find your advantage

 

This is the most important component of surviving in a disrupted market.

 

“There are two types of generic advantages – cheaper, or different in a way people will pay for,” says Mitchell. “If you don’t have one of those you’re going to go out of business.”

 

After years of working in the retail industry, juggling employee scheduling, fielding sick calls and running a small chain of stores, Jeremy Potvin came up with idea for Shifthub – an employee communication and scheduling platform.

 

While most scheduling software was focused on big companies, Potvin created simple online software with a basic pay structure geared to small- and medium-sized enterprises.

 

“We target companies that don’t have an HR department,” says Potvin. “It’s a dollar per month per employee.”

 

When Potvin ran his string of outlet stores, he figured it was costing him $12,000 dollars a year on manual labour just to get scheduling done.

 

His software sets itself ahead of the competition by using employee smartphones like punch-in cards, and allowing users to track their punctuality statistics, which they can show off to their bosses or future employers.

 

These slight tweaks to the existing employee management technology added mobile and social elements to the product, helping differentiate it at a time when social media platforms reign supreme.

 

It all comes down to maintaining a better understanding of your market than the competition, says Mitchell.

 

“That,” he says, “is the sort of differential advantage that will keep you going.”