Think Market Disruption
To Supercharge Distribution
Smart business professionals always have been keenly interested in ways to better differentiate themselves from their competitors. Traditionally, there have been 2 ways to do this: Introduce a better product into the marketplace or offer the same product but at a lower price.
However, there is a third way, and for those willing to take the initiative, it can offer exceptional opportunities. “Market disruption” is a principle of Harvard business professor Clayton Christensen. According to Christensen, companies can lose their luster if they stick to what made them successful in the first place, rather than acting on tell-tale shifts in the market and “disrupting” the marketplace.
Surprisingly, companies of all kinds often fail to recognize the power of disruptive strategies. Many companies will continue to do only what made them successful and ignore potential opportunities because it seems too risky to make the effort. Firms that continue to focus on segmenting the market and extending the products that made them successful while paying scant attention to changes that may be taking place on the fringe, could lose out entirely.
Classic retail examples of doing things the traditional way are Sears, Roebuck and Co. and Montgomery Ward. Neither responded adequately to the shift in market demand from one-store-sells-all retailing to discount selling or niche-focus selling. The result: Sears is adjusting in an attempt to make a comeback and Wards is history.
By contrast, companies such as Southwest Airlines and Charles Schwab recognized that the marketplace was changing and developed ways to take advantage of that shift and disrupt the market. Southwest emphasizes low-cost fares, first-come seating and flight attendants who brighten the trip with stand-up comedy. Now, people who had been priced out of air travel are flying Southwestand enjoying it! And Schwabs online account services approach has become so successful that its older, traditional-model business has been folded into its younger, e-business sibling. As a result, the firm now provides securities brokerage and related financial services for more than 7 million accounts.
But even companies that employ disruptive strategies can be victimized by competitors when the tables are turned on them. For evidence, look at how Lowes, in the home-center niche, captured market share from Home Depot by targeting women instead of contractors and semi-skilled craftsmen.
So, what are the lessons for insurance carriers and their distributors? The most critical one is the importance of establishing mutually beneficial business relationships. Beyond that, companies must recognize that the traditional way of doing business may not be the best way, despite past successes.