The last 18 years have seen some of the most disruptive innovations to enterprise. While it has completely transformed some industries for the better, it has also completely wiped away others.
With each new industry-defining innovation, it was a select few companies who figured out the best applications and the processes to optimize its potential, blazing a trail for others to follow. Innovation needs to be paired with a good strategy in order for it to become disruptive.
However, this is much easier to see in hindsight as disruption doesn't usually happen immediately, but gradually over time.
Here are 3 of the big ones.
The integration of online transaction processing (OTLP) into retail changed the way we shopped forever. But like most of the entries in this article, there was no way to truly foresee the disruption it would cause the industry as a whole. When Jeff Bezos launched Amazon from his garage in 1995, there were only 16 million people on the internet. Plus, he was only selling books at the time.
eBay launched a bit later that year and introduced the auction function to the masses, as did a few other more established retailers like Tesco, Blackwell, and Toys'R Us. In the late 90s, joining the digital marketplace was seen as a risky, untested strategy. Although trends at the time indicated the internet would continue to grow in popularity as users had consistently doubled each year, it was still very niche. So even Bezos could not have fully predicted how integral the internet, and online shopping, would be to all our lives.
While not every company that jumped on the bandwagon early succeeded, there is a significant advantage to being an early adopter, especially when it comes to the right technological advancements. However, in this case, while the actual innovation had a lot to do with the success of Amazon and eBay, it is more what the act of joining the digital marketplace so early said about the culture these companies possessed at the time.
Everyone has heard the infamous story of how Blockbuster's CEO turned down buying Netflix for $50 million in 2000. From our lofty perch of on mount hindsight, we unfairly mock the stupidity of his choice. But upon deeper consideration, it was an extremely understandable choice to make.
At the time, Netflix still only posted films to their customers and didn't really deal with new releases. They instead focused on older favorites, making it a bit of a niche service more suited to movie buffs than the mainstream. So despite the fact they both dealt in films, this was a very different business model from Blockbuster's, which had stores stocked with the latest releases and where people walked in and picked films mostly on impulse.
The big difference and big mistake Blockbuster really made was not having that innovative strategy mindset I mentioned earlier. They were extremely comfortable and simply didn't feel the need innovate. They also failed to pick up on the disruptive tangent Netflix was on when they approached them. 'Management and vision are two separate things. [Netflix was] losing money," said a former Blockbuster exec in 2003 in defense of the CEO's choice to Variety magazine.
This is why it is so hard to come up with a disruptive strategy; it's hard to recognize one even when you're staring at it. Because of Netflix's commitment to innovation, they pioneered the online video streaming service the second bandwidths became advanced enough to make it possible. Now, save almighty Disney, they are worth more than any other media company in the world at an unbelievable $84 billion valuation.
Since then, there have been a number of industry disrupters which have also used streaming to disrupt industries. Spotify, the music streaming service, achieved a similar feat in the music industry when it was launched in 2006.
After Napster, a large number of youngsters had become incredibly comfortable stealing their content off the internet via peer-to-peer programs. Most companies in the music industry were either trying to figure out how to seal this plug or find new ways to charge for songs like iTunes, which at the time was charging $2 a song. Spotify instead took a more forward-looking position.
Understanding that people who were now comfortable with stealing music would probably never go back to buying music the same way again, Spotify chose not to fight this shift, but work around it. They found new ways of funding their library of music with advertising, coupled with a premium service which had no ad breaks (and lots of investment capital).
Because they set themselves so firmly on an innovative path, as the rest of the industry slowly began to realize that the future of content was free, it meant Spotify already had a headstart. So in 2008, they had to shell out millions to record labels in order to acquire the necessary pre-licenses for its music as they didn't care much for this new phenomenon. Yet, less than 10 years later, they were being approached by other huge apps like Uber, PlayStation, and Facebook to collaborate services.
Growth over profit
I saved this last one for Amazon alone, despite mentioning them earlier. Amazon deserves 2 mentions as they have disrupted multiple industries in their time and completely embody the ideals of disruptive strategy innovation more than maybe any other company in history.
As I mentioned above, they started the online shopping game before anyone else, and that was but the first step in a long line of bold innovative choices made by the organization. However, of the many choices they have made over the years, there has been one overarching theme: growth over profits.
This premise is so fundamentally disruptive that the company was either going to fail spectacularly or become the dominant retail force on the planet. They have had to expand and grow so fast that the only way to ensure their success with customers was to simultaneously provide such an unreasonably good service that it altered our perception of what is to be expected from a retailer. It raised the bar higher than any other retailer could possibly reach without incurring massive losses.
And Amazon definitely has had its fair share of losses; last quarter was one of the few that Amazon made a profit at $92 million. This is a pittance in comparison to other tech mammoths like Apple or Google (which in the same period netted $3.93 billion in profits). But because its strategy is unlike any other, and they simply don't follow your rules, they are fast becoming one of the most powerful and pervasive companies on the planet.