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Decoupling is a flexible and multifaceted concept indeed.
Decoupling of the consumption and disposal stages remains a potentially significant, untapped opportunity.
Spoiler Alert
Decoupling has been cropping up all along, without many executives realizing it.
If you’re being disrupted, look at companies in completely different industries that find themselves in similar positions. And before seeking out solutions, try looking for common problems. What are companies going through? What can you learn?
2013,
This was the first time, to my knowledge, that a retailer in the electronics category charged a manufacturer a substantial sum for space (not sales) in the store.
After securing the Samsung deal, Best Buy began to drastically change its business model, transforming itself from a standard retailer to a business that essentially served as a showroom for major manufacturers.
As of 2019, a sizable portion of Best Buy’s profits came from so-called slotting fees paid by manufacturers for the opportunity to showcase products in the best areas of the store, away from competitors, and with well-marked brand signage.
Although Best Buy eventually solved its decoupling problem, it took years of trial and error.
lends itself to
5. (lend itself to) — (of a thing) be suitable for • bay windows lend themselves to blinds.
Armed with a broader view of disruption that transcends your industry, you’ll be able to arrive at effective responses to disruptors more quickly, avoiding trial and error and much of the stress, chaos, and uncertainty that come with it.
A key principle of my framework is to do exactly what Best Buy eventually did: find ways to coexist peacefully with decouplers and decoupling, rather than trying to destroy or buy them out.
You
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it’s only a matter of t...
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it’s only a matter of time before
To fend off disruption, coexistence is key!
Executives have so much trouble responding to disruption in part because they get lost in the noise.
Surprisingly, though, the decoupling phenomenon isn’t just or even primarily about technology. Business executives focus so much on technology that they often miss the essence of what most decouplers do: innovate on top of the dominant business model in an industry.
foie gras
The deregulation of U.S. and European airlines during the 1970s, 1980s, and early 1990s expanded competition and set off pricing wars.
In 1988,
Ryanair
bare-bones
If the company charged so little, how did it make money? That’s where Ryanair’s story gets interesting.
thanks to its high-margin cross-selling business.
in search of a bargain.
Ryanair’s extraordinary success alerts us to an important and counterintuitive truth about consumer markets.
And yet technologies may not be the grand solution that executives in the digital age often suppose.
On average, I found, the number of patents granted was a consequence of revenues, not their cause.
So how could Ryanair win in a highly competitive market with an inferior product? The company possessed something else that competitors lacked: an innovative business model.
But if you can spot a wave of digital business model innovation early enough, you can get ahead of it.
“Wave-spotting” is an essential skill for executives seeking to understand and master digital disruption in their industry.
A business model specifies how the firm creates value (and for whom), and how it captures value (and from whom).*1
A business model, as defined above, describes how a business is supposed to function in theory.
Take supermarkets.
created value for shoppers
have captured value by purchasing produce and packaged goods from growers and food
manufacturers and selling these items to shoppers at a markup.
mom-and-pop
To make up for their lower profits, they developed a new revenue source: they charged suppliers for space on their shelves.
Innovative supermarkets created value in two distinct ways.
they created value for customers by allowing for one-stop shopping and low prices.
they also created value for manufacturers by allowing them to launch new products without compromising the performance...
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Unlike their predecessors, the new supermarkets captured value from suppliers a...
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slotting fees
A supermarket is no longer an establishment that just buys groceries, adds a markup, and sells the food to you. To the extent that it attracts and sells attention to brands, it resembles a media company more than a retailer.
As an example of this new business model, Costco created value by offering one-stop shopping and extremely low prices. It captured value through its membership fees (upward of $60 per year), as well as by selling products at a markup.
Costco lost money in its traditional supermarket retail business model and more than made up for it with membership fees. Costco stands as an incredible example of business model innovation in the groceries retail sector.
These two variations of business model innovation illustrate how even relatively minor changes to a business model’s value creation and value capture components can dramatically change the face of a firm.
