In the ever-evolving landscape of today’s consumer markets, certain industry giants exhibit a fascinating paradox: the art of killing their own successes in pursuit of relevance and innovation. In analysing some of today’s most relevant and disruptive tech giants, a striking trend of self-disruption is undoubtedly noticeable. While this phenomenon is one that has mostly characterised the technology industry in the past, marketers, innovators and entrepreneurs are left to ponder the following question: as more and more industries undergo a digital transformation, does self disruption become inevitable in order to survive?
Self-disruption involves the process of proactively disrupting your own innovative products, services or business models, by introducing to the market a new offering that renders your previous solution obsolete. Self-disruptors are therefore capable of identifying changing trends in the market, and have the courage to take the risk and question the status quo, even when it might seem detrimental to the established ‘cash cow’ business. Self-disruptors understand that in today’s world innovation is not an option, and holding on to your pot of gold has become less important than looking for the next one, and if you don’t, someone else will.
The theory of self disruption takes its roots in the idea that customers don’t know what they want. Nonetheless, such theory is not novel: to quote the inventor of the modern car, Henry Ford, ‘If I asked customers what they wanted, they would’ve said a faster horse’. To contextualise this idea in a more modern era, one of the first modern innovators that comes to mind is surely Steve Jobs, which made Apple one of today’s best example of a firm that successfully, and continuously cannibalises its own products, to innovate.
On October 23rd of 2001, Apple launched the iPod. This might be considered the company’s first large scale and revolutionary success in the mass consumer markets. By the mid 2000s, the iPod had gained immense popularity and had effectively become a cultural icon that dominated the market for portable music players. Apple had introduced different models, the iPod Mini, Nano and Shuffle in a multitude of different colour-ways. If in 2006 Apple had asked their customers what they wanted, they would have most likely answered ‘a better iPod’, yet, on June 29th of 2007, Apple presented a product that would change the industry like nothing before: the iPhone.
From a traditional perception, iPhone represented a threat to Apple itself: it would render the company’s best selling product, the iPod, completely obsolete. If your phone could now stream music, what was the point of buying an iPod? iPod sales slowly decreased, until it was completely forgotten about and finally discontinued last year (2022). However, it is safe to say that no one would consider Apple’s choice an unsuccessful one. Without the courage to disrupt their own cash cow, Apple would have never had the chance to become the undisputed protagonist of the next phase in consumer electronics: the smartphone. They understood that disruption was coming, and it would’ve inevitably forced their iPod out of the market, but, by killing off their own success, they were able to grow to a level that was previously unimaginable.
Success in self-disruption is surely not limited to Apple, especially in the tech industry. Netflix is another player whose success can be traced back to a decisive process of self-disruption. Netflix first started out as a dvd-by-mail business, where you could order films to rent online and have them shipped to the comfort of your own home, with no penalties applied to overdue returns (instead, late fees were one of Blockbuster’s main sources of revenue back in the day). Through this disruptive business and the introduction of a subscription based pricing (that proved to be much more convenient and affordable than Blockbuster’s offering), Netflix was able to disrupt and dominate the video rental industry, killing the industry incumbent in the process.
Once they reached market dominance, the dvd-by-mail business was indeed a very profitable cash cow for Netflix; however, once again, had they remained stagnant they would have most likely been dominated by a competitor willing to innovate. Successful innovation almost always exhibits the snow ball effect: once it picks up, it only grows and it is essentially inevitable to stop. With the explosion of the internet and bandwidth power increasing year on year, online streaming of films started to seem like a realisable possibility, and Netflix thus understood that their business model was under threat. The introduction of the streaming platform disrupting the dvd-by-mail business is what propelled Netflix to global industry dominance.
The proof in the efficacy of self-disruption goes both ways: the tech industry created more obsolesces in the past two decades than any other industry before in such a short period of time, and more often than not, the defeated were those who fell victim to marketing myopia, lacking the foresight to innovate beyond their previous successes.
Perhaps the most incredible example can be found in Kodak. Many forget that Kodak, an undisputed market leader in the consumer film-camera industry, was actually the pioneer behind the development of the digital camera. Kodak invented the digital camera in 1975 but quickly killed it off, or rather kept it as a quiet and secondary product, possibly fearing that its advent would turn their very profitable network of film development machines into a worthless business. Back in the day, the company was operating on a razor-blade strategy: their core business was not selling cameras, but rather selling the rolls of film and developing them for their customers. Indeed, they were thus correct in concluding that the advent of the digital camera would eliminate all of this business, however, it would not be too far off to say that if Kodak had the courage to take a bet on a disruption that would have cannibalised their current offering, they would have been in the perfect spot to dominate the digital camera market.
In conclusion, the examples of Apple, Netflix and Kodak underscore the profound impact of self-disruption in shaping the fate of companies in a dynamic market environment. The evolution from iPod to iPhone, dvd-by-mail to streaming, and Kodak’s missed opportunity to lead a new market all emphasise the importance of innovation from within. Many other companies and success cases come to mind when thinking about innovation and success; it is safe to say that in today’s landscape, where technological advancements and market demands evolve rapidly, the ability to self disrupt if not just a competitive edge, it is a survival strategy. Embracing change, fostering innovation and challenging one’s own status quo will be the linchpin for companies operating in the volatile markets of the future, ensuring not only relevance but enduring success in an ever-changing world where an increasing number of industries undergo a digital transformation.