Wednesday, March 14, 2018

How Can Start-Up Brands Beat Well-Known Brands?



I was recently asked two related questions: Why are new no-name brands able to topple big decades old brands in today's environment? How can a small start-up brand effectively challenge older established brands?

There are so many different ways to answer this, many related to technology, but some also related to legacy brands resting on their laurels. The advent of digital photography (invented by Kodak) killed Kodak's previously highly profitable business model that was driven by film purchase and developing. This disruption was amplified by the advent of smart phones with built-in cameras. 

Uber's online platform not only revolutionized and democratized the way people can get rides but it also made it much simpler to find, hail and pay for a ride. Plus, it provided for a record of one's paid automotive excursions. This is an innovative model that is scalable and has network effects. Also working in Uber's favor is the general low level of quality of taxi service compared to the service offered by Uber drivers driven by a constant customer feedback loop. 

Though backed by a lot of money from Pay Pal's founder Elon Musk, Tesla also has made significant inroads vis-a-vis legacy automobile brands. It has done this by sheer strong will and innovation. From its vigorously pursuing the concept of a luxury all electric vehicle to its sales and marketing innovations, Tesla has taken the risks to do things differently. 

The Internet also makes it easy for smaller companies to seem bigger than they are and compete effectively with larger, more well-known companies. And the customer targeting offered by Facebook and other social media platforms makes it more cost effective to go after highly targeted customers. 

CarMax, though supported with major funding, came into existence because legacy used car dealerships did not treat customers well. CarMax saw the opportunity to make automotive purchasing easier and more transparent. Again, it relied on an innovative business model and a transformative technology, a database that can be accessed from anywhere through the Internet. 

Airbnb is another example of a brand that has used the Internet as its platform to achieve scalability. But it also is driven off of the concept of shared resources. This same sharing of resources has worked for Zipcar and Zagster.

So, in summary, these examples point to the following sources of legacy brand disruption and displacement:

  • An innovative business model
  • A superior model of customer service delivery
  • New superior technologies
  • The Internet
  • Software-driven solutions
  • Scalability
  • Network effects
  • Resource sharing
  • Product differentiation
  • Highly targeted marketing

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