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In the last layer, incremental innovation
When the incremental innovation is based on decoupling, all successful decouplers manage to perform the five critical steps outlined earlier:
Entrepreneurs can use this formula to create innovative business models in a more systematic and structured way, thus reducing their risk.
Instead of looking at the trajectory of each new threat, you might well need a “radar system” in place to monitor your space for threats, in order to keep track of the decouplers entering and operating in
your market. You’ll also need to consider more fully how your company should respond to any threats.
fund-raising capabilities.
Many people assume that startups armed with new technology drive disruption. But decoupling generally arises from business model innovations designed to help satisfy shifting customer needs and desires.
risk of loss due to the wrong action versus the risk of loss due to inaction)
1895,
King Camp Gillette
If the blade was beyond help, Gillette would have to pay up to $1.50—about the price of a pair of shoes—to buy an entirely new blade.
In the absence of a modern-day venture capital industry, it took Gillette eight years to get investors, figure out the technology, and start production.
1903
One challenge that emerged was copycats.
2011,
a thirtysomething entrepreneur named Michael Dubin with no experience in the shaving industry built a website to offer razors online via subscription.
Dollar Shave Club (DSC),
How did an undisputed industry leader whose name was virtually synonymous with the category
fall prey to an outsider with nothing but a website and a product outsourced to a manufacturer in Korea?7
posed
raise (a question or matter for consideration) • a statement that posed more questions than it answered.
razor-and-blade pricing model that made you feel like a hostage.
Its value proposition: “No hidden costs. Cancel anytime. You’re never locked in.”9
pay-as-you-go model.
How can a maker of disposable razors and shaving creams require so many more patents than makers of helicopters or pharmaceuticals?
Gillette used patents to protect a new and highly innovative product from copycats.
turned to another tactic: acquiring companies
But there’s a big problem with creating these moats around your castle.
Rather, it works too well—until one day it doesn’t.
the product went viral.
the rest is history.
a near-unanimous no.
Just as people who leave abusive romantic relationships are loath to return, so, too, are customers in abusive commercial relationships.
Going against the customer’s desires can work for some tim...
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The simple truth is this: there is no larger risk to your business than going against c...
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How do I respond to this new wave of digital disruption?
It occurs in situations where the incumbent company delivers two or more consumption activities to customers and then charges for the coupled activities.
When a new entrant decouples the two activities and attempts to deliver a value-creating activity without a value-charging one, and when the decoupler monetizes this either by charging others (such as advertisers, retailers, or heavy users) or by simply charging less, established businesses face a serious threat. If they are to survive, they must mount a response.
Most established businesses often attempt to respond in one of three ways: they imitate the entrant, they buy it out, or they attempt to suffocate it by drastically reducing prices.
Incumbents that imitate startups might see dramatically reduced profits.
Buying the disruptor isn’t risk-free, either.
flopped,
fail totally
Finally, drastically reducing prices to stifle a disruptor also impacts profits, and it might carry legal ramifications if the U.S. Justice Department perceives it as an anticompetitive practice.
Mimicking, buying, or launching a price war are not really local and isolated interventions; they potentially affect the incumbent’s entire organization.
It turns out that the responses fall into two broad avenues.
In other words, you can recouple the cake and the frosting back together, or you can preemptively decouple your cakes, allowing each part to be sold separately.*2
These recoupling approaches have often appeared to work, yet their long-term sustainability remains in question.
Celiac Supplies,
Other retailers have succeeded with such subtler forms of recoupling—for instance, charging membership fees (as Costco does),
Any recoupling attempt should thus attend closely to two issues: how long can you, the incumbent, keep the floodgates closed?
Pay attention to
And how much is it going to cost you to do so?
