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And while she can choose from different options in each case, she does not have a different thought process for choosing.
the primary force driving it—customer costs—is pervasive.
It pays to understand your customer’s buying and usage behaviors across all of his or her primary purchasing choices.
To be profitable or worthwhile: It doesn't pay to get angry.
it all starts with the customer.
Ultimately, most customers will favor the option they perceive to cost less—not just in terms of price but in total.
There is a common pattern to the latest wave of digital disruption. It is driven not by technology but rather by customers’ desires to reduce the costs of acquiring goods and services. It’s not that technology is unimportant, but that it often serves as the enabler of disruption rather than as its primary originator.
drop to his knees
The story began ten years earlier, in 2004, when Kan and his childhood friend Emmett Shear graduated from Yale.
Why not give the entrepreneurial life a shot?
to everyone’s surprise,
launched a new website called
Justin.TV.
Why not modify their business plan, allowing users to stream their own video on Justin.TV?
With money drying up, the founders had to figure out what to do.
Interviewing forty power users, Emmett learned that the best gamers were like sports stars—other fans wanted to see them play.
Twitch
stumbled upon
(stumble across/on/upon) — find or encounter by chance
Five years after embarking on the entrepreneurial life, Emmett and Justin finally struck gold.
By 2014,
Finally they had a business model that worked.
Later that year, Emmett, Justin, and their
friends sold the site ...
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Much of the time, entrepreneurs take long, circuitous routes to success, with many missteps along the way. Success is anything but straightforward or formulaic. But that doesn’t mean that a more predictable, streamlined approach to disruption isn’t possible.
Whether you’re an incumbent looking to preemptively disrupt your business or industry through decoupling or an entrepreneur looking to build a successful startup, you don’t have to tread the sort of winding path that led to the Twitch founders’ billion-dollar payday. You can deliberately engineer business model innovation and decoupling. In other words, there is a “recipe” that will help keep risk to a minimum.
After many twists and turns, they arrived at their eventual business model of allowing gamers to decouple playing games from the activity of viewing top players playing them.
I typically recommend that entrepreneurs or executives embrace the customer’s vantage point and organize their thinking in terms of three layers.
The first layer is to articulate the current or standard business model.
If you want to thoroughly understand a new business idea, you must take the current reality as your foundation.
The second layer is to develop the digital equivalent of the standard model.
TaskRabbit,
Washio
With this digital equivalent layered on top of the standard business model, the third and final layer for entrepreneurs and executives is to determine how to innovate on top of digital business models.
Considering the benefits and costs, smart entrepreneurs try to layer on top of their digital business idea an innovation that transcends mere digitization, and that produces a functional benefit for customers.
Hello Alfred innovated upon the TaskRabbit model by
But when you view Twitch through the lens of the three layers, their business idea doesn’t seem so crazy.
(layer one).
(layer two),
Now gamers of all ages, anywhere, at any time could go online, learn about new games, and discover better playing strategies. Still, a problem remained.
Fortunately, Twitch’s founders arrived at a business model innovation (layer three),
monetize
earn revenue from (an asset, business, etc.) • the company has not said how it expects to monetize the game • some of this content can be monetized.
Twitch founders created financial opportunities for players, giving them a cut of any advertising revenues generated on the site.
[in sing.] — ‹informal› a share of the profits from something • the directors are demanding their cut.
Unfortunately, most business innovations are not instant successes.
In attempting to innovate via decoupling, the last layer, the incremental innovation piece, is the critical one to build.
Without it, purely digitized versions of traditional business models tend to contain many downsides, not just benefits.
After research into decouplers of all types, I’ve come to realize that successful decouplers perform five key steps, either deliberately or instinctively, that unsuccessful ones don’t.
Collectively, these steps address a key customer need—namely, a desire to specialize—by reducing the customer’s costs of acquiring products and services.
To disrupt markets through decoupling, successful decouplers must do the following:
Step 1: Identify a Target Segment...
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When customers decouple their consumption activities, they implicitly decide that they no longer wish to perform all of the activities required to acquire a product or service with the same company.
The way to do that is to first understand a group of customers with similar needs—a target segment—and
