2. Exploit taboos.
Every industry comes with its own set of taboos. These are known as the way things are done, and incumbents consider them to have an almost religious importance. But for the average startup, these taboos are nonsensical. Even better, they’re a competitor’s blind spot — and an indication of where large incumbents will never look to innovate!
For example, consider the taboo of traditional banks. These institutions had long considered their slow, bureaucratic processes to be a source of competitive advantage and, ironically, pride. After all, you could never be too careful when a customer’s money is exchanging hands.
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Revolut, an upstart digital bank in the U.K., felt otherwise. By developing a secure technology stack that rapidly did checks and balances with minimal error, the bank’s founders publicly shunned the idea that slow banking was good banking. The implications of this change in mindset have been significant. Revolut has grown to 12 million subscribers in less than five years of launch, achieved a market cap of $5.5 billion, and pushed Europe toward open banking. Meanwhile, traditional banks are struggling thanks to collapsing fees, unhappy customers, and incomplete digital transformations.
If a large bank is toppled by a startup like Revolut, it can blame its taboos. The way things are done was not, it turns out, the way things ought to be done.
3. Optimize for power.
When an army invades, it doesn’t sweep in all at once. Instead, it targets places where it can gain power over key resources — cities, rivers, and other spaces that’ll give it a foothold into a new land.
Business conquests are similar. This is what my Cambridge colleague (and former strategy professor!) Dr. Kamal Munir identified in his research. He found out that successful disruptors deliberately create a series of dependencies, where suppliers, customers, and even competitors end up relying on the disruptor.
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For example, as Tesla set out to become a major player in the automobile market, it did more than build electric cars. It also developed a country-wide network of electric charging stations. Now Tesla’s competitors are in a bind: They have to either make their cars compatible with Tesla’s stations or limit their market potential. This will give Tesla an advantage for years to come.
Munir thinks of this as a power move — and, ironically, it comes at the cost of short-term profits. In the above example, Tesla founder Elon Musk could have saved much-needed cash and let someone else develop a charging network. But with the support of patient investors, his power move enabled him to set new standards of customer experience, strike symbiotic partnerships, and change the industry cost and pricing structure. This worldview of disruptive strategy, while deceptively simple, is incredibly powerful and can explain the slew of successes of loss-making disruptors such as Uber, Airbnb, WhatsApp, and others.