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

Industry Game Changers

Over time, there have been a large number of industry game changers. They completely disrupt an industry and often put even dominant share leaders out of business. As examples:

• The Ford Model T largely put horse and buggies out of business
• Computers replaced typewriters
• Vacation timeshares created a whole new industry, as did timeshares of private jets
• The Internet made the world a whole lot smaller
• Digital photography replaced film-based photography
• Smart phones have far surpassed any functionality Star Trek imagined for its communicator device and have largely replaced land lines
• Robots are replacing more and more manufacturing jobs
• Airbnb is disrupting the hotel industry
• Uber and Lyft are giving taxicab companies a run for their money
• Zipcar car sharing has changed things as has Zagster bike sharing
• Amazon.com and other online retailers are making shopping malls obsolete
• Self-driving cars will play havoc with a number of industries
• AI and medical diagnostic learning systems are already replacing Internists in remote areas
• Eventually, people's vitals will be routinely measured and fed back to health care monitoring systems
• Stem cell research is leading to organ regeneration techniques
• Photonics may one day replace silicon chips
• E-learning may one day replace the way colleges and universities deliver their services
• With energy storage improvements, it may become routine for individual residences to be self-contained regarding their energy usage
• With energy storage improvements, electric vehicles may just upend gasoline powered vehicles
• A break-through in hydrogen fuel cells will have a similar impact on the petroleum industry

So, what are some of the disruptors one should consider?

• Any Internet-enabled business
• Any business that benefits from network effects
• Any business that is scalable
• Anything that can create disintermediation
• Any business model that allows for the sharing of specific resources
• Any new source of energy
• Any receptor that can detect a new bandwidth of energy along the electromagnetic spectrum
• Any technology that allows for increased storage of energy
• Any human activity that can be replaced by robots
• Any expertise that can be replicated by AI and learning systems
• Any new mobile phone application that can replace something else

And what are some of the critical skills required to create marketplace disruptions?

• An entrepreneurial mindset
• Out-of-the-box thinking
• Risk-taking
• Software expertise
• Internet proficiency
• Systems thinking
• Design thinking
• Some minimum proficiency in science and technology
• Broad exposure to a wide variety of disciplines

Market Disruption

Robots have replaced a large number of factory workers in many industries. Robotics have largely replaced people in most distribution centers. Digital photography made film-based photography obsolete. Smartphones replaced lower end cameras. Digitally delivered music is replacing CDs. Uber and Lyft will hugely disrupt taxicab service. Self-driving cars will eventually impact the trucking industry. Airbnb has brought new competition to hotels and motels. Medical diagnostic systems based on AI will radically change the role of Internists. The Internet has changed the way news is created and delivered. Drones may become a major method of package delivery. We now have smart homes that can be monitored and managed remotely. CreateSpace allows for on demand printing of books sold on Amazon.com. 

Everywhere you look, there is disruption and there is no industry or job that is safe including knowledge worker jobs and other professional jobs. To be able to anticipate these disruptions and even capitalize on them, you must first understand their sources. Here are some of the sources of disruption:

• The Internet
• Robotics
• 3D printing
• 3D printed body parts
• Digitization
• Artificial intelligence
• Voice recognition
• Augmented reality and vision
• Virtual reality
• Aerial photography
• Remote sensing
• Wearable and ingestible sensors
• Smartphones
• Network effects
• Nanotechnology
• Big data analytics
• Photonics
• Advanced battery technologies
• Composite materials
• Exotic meta-materials
• Self-driving (or autonomous) vehicles
• Distributed embedded experiences
• Gene editing
• Organ repair and regeneration
• Smart infrastructure
• Distributed ledgers and blockchains
• Smart cities
• Seemless intermodal transportation
• Deep learning
• Providers become platforms

Underlying all of this is Moore's Law. In the 1960s, Gordon Moore predicted the continuous improvement in price, performance, size and power utilization of computing power.  

The business owner or marketer who is not aware of these sources of disruption is likely to be left behind by them. The person who is aware of them and is entrepreneurial and opportunistic may just create the next eBay, Uber or airbnb. 

Brands, Change & Innovation

The rate of change in our society continues to accelerate. This causes many people quite a bit of anxiety. Emerging technologies have replaced millions of jobs but, so far, they have created more jobs than they have eliminated. 

Consider what digital photography (invented by a Kodak scientist) did to Eastman Kodak company. Consider what Uber is doing to traditional dispatcher-led taxi cab companies. Consider how airbnb.com is impacting the growth rate of hotel chains. What did laptop computers do to desktop computers? How are pad computers and smartphones impacting laptop computer sales? Consider how Hallmark and American Greetings are impacted by digital technology. Consider what CreateSpace and other self-publishing platforms have done to traditional book publishers. What will artificially intelligent medical diagnosis systems do to medical internists? With self-driving automobiles, how will the auto insurance business change? What will Tesla and its battery-driven vehicle revolution do to the oil industry (and the auto industry and gas stations)? Where will drones ultimately take us? What will increasing aerial surveillance do to our ability to capture criminals and prevent wars? Consider that AI experts are exploring how to give computers the capacity to innovate. And this is just the tip of the iceberg.

Consider how Einsteinian physics superseded Newtonian physics and consider how quantum physics recast Einsetinian physics and consider the potential impact of superstring theory and multiverse theory. 

Research universities and company R&D labs are working on these disruptive technologies - energy storage, fuel cells, genomics, advanced materials, autonomous vehicles, renewable energy, advanced robotics, 3D printing, mobile Internet, automation of knowledge work, cloud technology, integrated digital design and photonics.

We were recently approached by a company that is on the verge of commercializing human organ regeneration. And consider the LED revolution. Incandescent and florescent lightbulbs may soon become historical artifacts. And several companies are working on developing direct computer-brain interfaces.

In a rapidly changing world, no business is safe from technology-driven obsolescence. So, what is a brand manager to do? For that matter, what is any business manager to do? Here is what will matter for future survival, and more importantly, to thrive well into the future - higher education, advanced degrees, lifelong learning, a solid understanding of math and science, diverse interests, diverse reading, personal flexibility, ideation skills, courage in the face of uncertainty, the ability to change course at a moment's notice, understanding the intersection of many different scientific disciplines and technologies, an opportunistic attitude, entrepreneurship, the ability to take risks, a penchant for action, an optimistic attitude and the ability to discern patterns and recognize meta-themes.

Disruptive Technologies and Business Models

Disruption: inducing radical and sudden change; a radical change in an industry, business strategy, etc., especially involving the introduction or a new product or service that creates a new market. 

The Internet was perhaps the most disruptive development. Timesharing was a disruptive concept in many industries. Low-cost airlines (Southwest Airlines, JetBlue, etc.) disrupted legacy carriers (United Airlines, American Airlines, etc.). ATMs made it much easier for consumers to bank 24/7. Amazon.com disrupted Borders and other brick and mortar bookstores. Some would claim that Amazon.com is beginning to disrupt Wal-Mart. eBay and Craigslist have disrupted traditional classified ads. Netflix disrupted Blockbuster. Digital photography (invented at Kodak) disrupted Kodak's film-based photography. SmartPhone cameras have changed the way people take pictures. Electronic greeting cards are disrupting traditional greeting cards. CarMax was intended to disrupt traditional used car dealers. Uber is disrupting traditional taxi service. Airbnb is disrupting the hospitality market. SmartPhones have made traditional phones obsolete. They are also making major inroads in the the markets for other computing devices.

Match.com, eHarmony.com and other dating websites have changed the way we find romantic partners. Online universities are intended to disrupt traditional colleges and universities. All-electric cars (such as Tesla) will eventually disrupt gasoline powered cars. And more powerful batteries/energy storage will elevate electricity as an energy source. Artificially intelligent medical diagnosis software is projected to radically change the role of the internal medicine doctor. Big data is radically changing the way marketing is executed. Facebook is changing the degree to which customer targeting can occur. 

Nanotechnology makes devices and components significantly cheaper, faster and more functional. 3D printing will be disruptive to many industries. Photonics is radically changing the traditional semiconductor world. Cloud services are changing the way we back up computers. Crowd sourcing is changing the way people raise money for projects. The Square and similar devices have made it much easier and less expensive for anyone to accept credit cards as a form of payment. Alta Devices is making it easier to embed thin, flexible solar panels into any device or material. 

Is your brand defined in a way that it can transcend and incorporate disruptive technologies? Or is it so linked to an approach or technology that could be obsolete that it will die with the old approach or technology? Further, are people in your organization willing to make their current approaches or technologies obsolete with the latest disruptive technology or are they fighting the disruptive technology all the way to maximize profits until the business and brand crashes and burns. This is something worth thinking about.