the proven Blockbuster business model.
Netflix struggled and even reached out to
Blockbuster for an advertising partnership
to enable Netflix to market its DVDs in
Blockbuster's store. The partnership was
rejected and forcing Netflix to rethink its
business model.
Netflix’s new model gave consumers
access to stream-able movies across all
devices, from anywhere around the globe
at a fraction of the price. The result was
mass adoption of Netflix by consumers
across the globe. Netflix offered services
to already existing Blockbuster consumers
by offering simplicity, accessibility, and
affordability through an innovative
business model. It is interesting to see
how Netflix will innovate the current
business model with key partners such as
Disney & HBO looking to stream their
own content.
Nespresso
In the early 80s Nestle unsuccessfully
attempted to penetrate the restaurants
and office market through its Nespresso
Espresso system. In 1986, Nestle set up
a subsidiary and changed focus to private
households. Nespresso’s value proposition
was to offer consumers an opportunity to
enjoy premium coffee like those enjoyed
in the cafeteria and coffee bars at home.
Nespresso’s business model departed from
the traditional model of producing and
selling coffee to offering coffee drinking
experiences.
By creating a separate business model
and serving a distinct customer segment
through new distribution channels and
external partnerships, Nespresso achieved
immense success. This innovation had
moved away from a commodity product
to a lifestyle product and turned the
common process of drinking coffee into
an experience. By 2012, Nespresso had
achieved revenue sales of $4.1 billion and
experienced a sustained average annual
growth rate of 30% for over a decade.
Nespresso coffee machines and capsules
offer consumers an opportunity to enjoy
premium coffee similar to those enjoyed
in the cafeteria and coffee bars at home.
Uber
The Uber model is considered disruptive
because it has transformed the old taxi
model by delivering convenience. Uber
leverages technology to deliver better,
faster, and cheaper services compared to
traditional taxis. The Uber model creates
a platform that connects drivers to people
seeking transport.
On one side of the platform are people
who do not own a car, who own a car but
want to be driven or people looking for
a cost-effective taxi. On the other side
of the platform are drivers who Uber
considers partners. These are people that
love driving or people that own a car and
want to earn an income. Both sides engage
in a convenient exchange that delivers
value to all players within the network.
Through its innovative business model,
Uber has disrupted the transport industry.
Uber does not own any cars or drivers yet
every day there are 15 million uber rides
across 600 cities in over 78 countries
across the world. The adoption of Uber
across the globe has resulted in the loss of
market share and profitability for old taxi
businesses.
In many countries especially developing
countries in Africa and Asia where
taxis were considered a luxury uber has
massively been adopted. Uber recently
diversified its services from the primary
offering of ride-sharing services to
delivering food (Uber Eats).
Bringing it All Together
Disruptive innovations have a role to
play in business because of the increasing
pressure on market share growth. Factors
such as recession are forcing companies to
innovate in uncertain times. Companies
seeking profit in the long term must
compete with disruptive innovation by
not only introducing new products and
services but also innovating their business
models.
The case studies of Uber, Airbnb,
Nespresso, and Netflix shared in this article
exemplify the need for Business Model
Innovation. Business Model Innovation
enables a firm to deliver existing and new
offering with simplicity, accessibility, and
affordability.
Sources: Harvard Business Review,
Wall Street Journal, Fortune and Simon
Whisler (VisualPolitik).
Senorine Wasike is an innovation
champion with over 10 years’
experience in FMCG, currently
working
as
the
Innovation
Commercialization Manager at
Kenya Breweries Limited. You can
commune with her on this or related
matters via email at: Senorine.
Wasike@gmail.com.