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with a more residential feel—places
with a view over the Eiffel Tower.
Yet Four Seasons and other big chains didn’t necessarily identify the real reason customers wanted multi-room suites in residential areas of cities like Paris. It wasn’t just because customers wanted to feel comfortable when traveling with their families. It was because they didn’t want to feel like regular tourists during their tenth trip to the City of Light.
Airbnb understood this insight.
As its founders realized, hotels, airlines, restaurants, and attractions all purported to offer travelers an immersion in local life.
The platform got its name (originally Air Bed and Breakfast)
with views over the lava coastline,
As Airbnb realized, travelers wanted to adapt to the living conditions of the place, not the other way around.
Such authenticity and proximity to local life were precisely what hotels were failing to deliver.
In the travel industry, the decoupling of owning from using enables an experience of make-believe, a chance to fantasize about an alternative lifestyle.
Airbnb didn’t disrupt Four Seasons Hotels. Customers did—by changing their behaviors to satisfy their evolving desires. Travelers wanted family spaces beyond bedrooms.
To get ahead of disruption, we need to pay far more attention to customers than we ordinarily do, and commensurately less attention to competitors. We need to discipline ourselves to look at markets from the customer’s perspective, not just the company’s, and to understand customers’ evolving desires and behaviors.
“business as a competition”
“business as war,”
Meanwhile, traditional competitive strategy frameworks have downplayed the critical role of customers.
Michael Porter’s Five Forces,
Game theory models,
One reason for this traditional emphasis on competitor over customers no doubt has to do with the accessibility and interpretability of data.
Focusing on competitors has worked well in the past, and it might still work in some situations, but it has become less applicable for companies competing in markets threatened with disruption. Traditional corporate strategy assumed a situation in which companies faced only one or a few competitors, and in which opponents’ actions were somewhat predictable. Under such conditions, competition really did bear more similarity to a chess match or to warfare. In today’s markets, incumbents across many industries often square off against not one or two large and predictable opponents, but dozens
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Planning for war or deliberately thinking many steps ahead as a chess player does is a requirement of game theory, and it just isn’t practical in such industries anymore—a big reason why executives frequently feel so overwhelmed and baffled.
For these reasons alone, executives would do better to return to the basics of business—not “winning,” “beating,” or “defeating” competitors, but acquiring and retaining customers.
Entrepreneurs at disruptive startups see the world in precisely this way, paying heed to Peter Drucker’s famous dictum “The purpose of a business is to create a customer.”7 Indeed, entrepreneurs perceive the focus on customers as a defining quality of startups as opposed to incumbents. As Amazon CEO Jeff Bezos has remarked, “When [executives of other companies] are in the shower in the morning, they’re thinking about how they’re going to get ahead of one of their...
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businesses exist to create value.
Once they achieve this, it might be possible for them to also capture some of this value as revenue by charging for their products and services.
A business model from the customer’s point of view: “A business model consists of the value a business creates for me, what it charges me in exchange for that value, and what value it erodes for me.”
From a listener’s standpoint, the station delivers value, charges for the value it has created, and erodes value to some extent, too.
Founded in 2000, Pandora Radio disrupted the traditional radio model by decoupling all four stages of what I call the customer value chain.
Whether an offering is a physical product or a service, consumable or durable, all of these activities can be classified as either value creating, value capturing, or value eroding. The person who bought the object was implicitly or explicitly trying to get more of the first, reduce the second, and avoid the third altogether. That is all customers do. Ever!
If your customers discover an opportunity to accomplish any of the multiple activities in the customer value chain better with another incumbent or entrant, watch out. They just might take this opportunity. Paying attention to value from a customer’s standpoint helps you understand what your customers really care about, and what they have to give up or part with in order to get it.
Twitch.
Just as customers acquiring a product or service engage in only three distinct types of activities, so only three types of decoupling exist.
Value-creation decoupling
value-eroding decoupling,
Steam
The third type of disruption, value-charging decoupling,
SuperCell
Clash of Clans,
When it comes to classifying types of decoupling, the critical factor is not the kind of activity that the disruptor decouples and takes for itself. Rather, it’s the activity that the decoupler leaves behind for the incumbent or someone else to continue providing.*6
That’s what makes these forms of decoupling different.
At the beginning of their life cycle, startups sometimes don’t have a mechanism for generating revenue, or what is commonly referred to as monetization.
Waze
Integration forces
Specialization forces
For decoupling to occur, the specialization forces must outweigh th...
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Walmart,
they’re happy to visit multiple retailers and forgo the convenience of one-stop shopping.
This partially explains why Walmart is the market leader in the United States but is only in third place in Brazil, despite having similar stores.
(an integration force),
(a specialization force).
Disruptors have sought to poach customers from Sephora by increasing the specialization forces between each stage of the beauty customer value chain.
