Lesson 5: Industry Fit

How do You Fit into Your Industry? Disruption or Improvement?

Another key to framing your industry story is how your company’s arrival will impact the broader market. Your company is ultimately geared toward improving or disrupting your market. Start-ups fall into either one of the two categories, regardless of their strategy or business model. Figure out whether you are a disruptor or an improvement and be prepared to clearly explain your logic.

It’s helpful to first define each term. An improvement adds value to an existing industry without “rocking the boat”. A disruptor destroys and redefines an industry while creating a great deal of value in the process. (For a full overview of the theory of disruptive innovation, read Clayton Christensen’s classic The Innovator’s Dilemma.)

Let’s look at two specific examples to help you decide whether your company is an improvement or a disruptor. Whole Foods (before it was purchased by Amazon) was an improvement. Its founder, John Mackey, envisioned a world where customers could find organic, high-quality produce instead of processed or packaged foods. He also invested in training his floor staff and creating a welcoming atmosphere. Whole Foods targeted an affluent niche in urban centres and never sought mass-market appeal. Other grocery chains eventually started copying aspects of Whole Foods’ strategy, but the company remains an improvement, not a disruptor. Most people don’t shop at Whole Foods, which still targets a specific niche. If you are gradually raising the bar above competitors’ offerings, you’re an improvement and should market your company accordingly.

Now think about Airbnb, the travel booking app. Airbnb maintains a relationship with people across the world willing to rent out their homes for short stays. Airbnb managed that relationship and the payment process through a simple, intuitive app. Airbnb is not an improvement over hotels and the traditional hospitality industry. Airbnb is a disruptor that has the potential to replace hotels and is capturing a growing share of the travel market. The company has since branched out into “travel experiences” to complement its rental inventory and operates in 191 countries. In response, hotels are racing to improve their apps and digital experience. If your idea has the power to fundamentally change an industry and siphon revenue from incumbents, you’re a disruptor. Your message needs to emphasize that your idea is a game changer that will leave your industry looking dramatically different than it does today.

You will have to make a clear decision on whether your company will be an improvement or a disrupter. Then you must explain the rationale behind your decision. What excites you, and most importantly, what’s exciting for your future customers will be different depending on which path you choose. For improvement, you want to get your audience excited about the growth you’re going to bring to the industry and how that will translate into a quality-of-life improvement or monetary return for them. For disruption, you must get your audience excited about the vision you have and the world you’ll create once whatever old industry is torn down.