Last Updated on May 30, 2022
Be it for establishing a new business or making changes in an existing organization, several models are designed at the beginning to ensure that the requirements can be met easily. The models are based on the requirement list provided, the expected scenarios, data collected from the market, etc. In addition, each model is restricted to different levels to ensure that the development process can be completed separately. This offers a competitive advantage because an organization will be able to complete the development and implementation of a single model section, and once it is successful, it can move on to the other.
Several different business models are prevalent in today’s time. Each model needs to be designed in the best possible manner while keeping all the structural information and constraints. In today’s time, the most popular model is that of disruptive model technology. There are multiple technologies used to form the models, out of which the Internet of Things and mobile internet have the most important markets, worth $11.1 trillion and $10.8 trillion, respectively.
This forthcoming article will shed light on what this model is, how different models are structured, its advantages and disadvantages, and more.
Table of Contents
What is a disruptive business model?
There are two types of market requirements- the trendy ones are always considered the most by every business and the recessive ones, which are often ignored and pushed back. People often neglect the requirements that aren’t yet in demand, thinking that this way, they will have more leverage in withstanding the competition. However, that’s not the truth.
The market dynamics are constantly changing, and future predictions are very inconsistent. They can easily change once the demand and supply chain reverse turn. For example, let’s say that consumers love to play high-end 3D games on the Playstation and Xbox. This is considered a trend, and that’s why game makers launch video games that are compatible with these platforms, ignoring the mobile platform completely.
However, seeing how mobile internet is eventually gaining more popularity, it is just a matter of time before the demand to have these same video games in mobile versions. Once the demand skyrockets, game makers will have to work hard on developing the mobile versions, which will further add redundancies and discrepancies.
To focus on the recessive demands of the market, businesses cannot do with the regular models. Instead, they need to use specific architectures, also termed disruptive business models. These are formed in such a manner that the lesser-known demands of the market can be addressed quickly. This way, a business can easily focus on those market factors for which no solution is available or the leading competitors are incompetent.
What are the pros and cons of starting a disruptive business?
Pros of the disruptive business model
Several businesses and companies are based on the disruptive business model. For example, Netflix understood the suppressed demand of customers to watch movies and web series on their mobile and PCs or laptops without relying on cable. However, the need for such a platform was thriving slowly and seeing the future prospective, makers introduced Netflix- a popular online streaming platform.
Seeing how these businesses have gained success since their launch, it’s evident that the model idea is highly beneficial. This section will describe some of the significant advantages of starting a business made on the disruptive model.
One of the main advantages of starting a disruptive model for a business is the lack of market competition. Not many startups are based on disruptive models or can address the repressive trends of the market. Hence, you won’t have too many competitors targeting the same section of the consumer market, so you won’t have to struggle much to gain exposure and popularity.
No future disruptions
Businesses that are based on current market trends always have a fear of being disrupted once the trend is removed from the market. A disrupted business has a limited chance of survival, let alone gaining revenues and once again becoming successful. Therefore, focusing on the repressive demands of the market is much better than being repressed and kicked out of the industry.
Helps in transformation
If your business is not witnessing any revenue inflow or gain in terms of conversion ratio, leads, and more, the services and products you are offering have either reduced in quality or have become redundant. In such a circumstance, the only way to survive is to transform the business ops, and luckily, the disruptive model will help you a lot.
Allows you to stand out
Another significant advantage of using the disruptive business model is to make your business idea stand out in the crowd. No matter to what industry your business belongs too, the competition level will be high. Therefore, you must ensure that you aren’t offering the same things as other leading market heads. It will cause your business to suffer huge losses, which is why focusing on the disruptive model is better. Even though through this model, you need to work on something that has been suppressed for a long time, once you are successful, you can quickly draw the consumers’ attention.
Lastly, with the disruptive business model, you will be able to scale your business as per the changing cycle of supply and demand while ensuring that your services and products are based on demands that have the potential to explode in the future. When you focus on such a trend, your business ops will be scalable, and you can make modifications as per the market demands without impacting any other area of the business.
Cons of launching a disruptive business model
Despite the disruptive business model having so many incredible advantages, every decision has some disadvantages that need to be addressed at the earliest. So, before you proceed further with launching the disruptive business, it’s better to look at the challenges you might have to encounter later on.
Tends to become risker
One of the significant disadvantages of introducing the disruptive business model is the risks involved. For example, you may have to encounter risks of losing the capital, not being able to target the right repressed trend, and making the model on an idea with no prospective future. With all such risks, one needs to know the business model in depth so no room for errors can be left behind.
Needs extensive planning
As the disruptive business model is unique and will focus on trends that have been repressed in the market, you need to process an extensive planning process. Unless you do so, it will be difficult for you to launch the business properly or integrate changes without risking your organization’s productivity and performance.
No references will be available
The repressed trends of the market remain unattended for a long time, owing to which you won’t get enough resources to refer to. This can further create a problem as you won’t have good clarity about the impacts of the model you can see in your business ops in the future. Apart from this, you also won’t have much help to understand whether the disruptive model developed has any flaws in it or not.
Business idea is highly unpredictable
This particular business idea is highly unpredictable, and you won’t be able to rely on the future trends or the forecasts provided by the analytical team. With such a high level of uncertainty, the risks of losing your investment or the startup idea going out of the market will increase. Besides, the volatility will also be high, thereby putting the success of your business at risk.
Results take a lot of time to be seen
As the consumer market of repressed trends is small, it will take a lot of time to display the results. This is also another major disadvantage that needs to be mitigated at the earliest so that you won’t have to deal with a lack of results and improved measurements for popularizing your business idea.
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Different types of disruptive business models
There are several approaches to developing a disruptive business that you must know. Each model will help you target a particular repressive trend in the market, so you must have a proper idea about them. In this section, we will share the details of the most popular disruptive business models that are eventually gaining a lot of appreciation in the market.
One of the most popular disruptive business models that several businesses have adopted is the freemium model. Here, a particular series of primary products or services will be offered to the customers. This way, they can understand what your business is about and whether you can meet the demands or not. You need to reserve advanced features and services only for users willing to pay. This model will help you target a broad audience section and spike their interests with the primary offerings. Make sure to draw the margin between free and premium products or services when your business has been able to mitigate the consumer problems but not wholly.
Spotify allows you to listen to songs easily without paying any money. But if you want to listen to podcasts or audio stories, you have to pay the subscription fee and unlock the advanced features.
The subscription model is also similar to the freemium disruptive business model, with the only difference being the formulation of the base plan. The base plan will be restricted for a trial period in the subscription model, say one month. Therefore, the user can use the product or service free for one month only, after which a subscription fee needs to be deposited. Another way of implementing this model is by limiting the base plan based on the number of users.
Netflix is based on the subscription disruptive business model where it offers a base trial period of 30 days. Once this period is over, the user needs to pay the price per the chosen plan to see the movies and web series further.
When a business offers services or products completely free, with no involvement of monetary exchange, we term the model as a free offering. For startups, this can be an incomprehensive and outdated approach. Still, if your offerings are of great interest and target the right repressed market trend, you won’t have to risk a lot of funds for enjoying what the business has to offer.
Facebook and Instagram are some of the significant businesses based on the disruptive business model of free offerings. You can use the website or application and access all the features without giving out any money for subscriptions.
The marketplace disruptive business model can also be termed the ecommerce model because here, you will be creating a digital market platform. But instead of being the buyer yourself, you will connect both the buyers and sellers so that they can interact with each other and start making the purchases and sales, respectively. As a result, your business will gain revenue through brokerage, a commission on the profits, or transaction costs.
Amazon is one of the best examples of marketplaces as here, you will find both the buyers and sellers interacting with each other.
Sharing economy- access over ownership model- renting and leasing
From the name itself, you can understand that this disruptive business model is based on the idea of renting. For example, you can put up your cars for rent where the user will be able to use your services for a limited amount of time, say four to six hours.
Airbnb is one of the best examples, as this company rents out different properties to travelers for a limited amount of time. The money to be paid depends on the property’s location, type, and the time for which rent will be taken.
User experience premium model
This particular model will be based on the user experience earned by the business. If the UX is higher, you can charge premium fees for future customers.
Tesla offers a beautiful user experience, as clear from the past feedback. Therefore, the cars from this brand are sold at premium prices, and Tesla is considered a luxury brand.
Many affiliates will be hired in the pyramid model, and a community will be formed. All the affiliates will be able to promote your business and gain more revenues in the future. Also, you won’t have to spend a lot on marketing your products and services.
Amazon Affiliate is an example of this disruptive business model where people can earn money by promoting the business.
In the ecosystem disruptive business model, you will offer the services and products interlinked with each other. For example, let’s say you have launched a smart wearable. To access a particular feature, the user needs to buy an integration that is available from your business only.
Apple is the most excellent example form understanding this model because every software and hardware they sell is interlinked.
In this model, the products and services will be formed so that the users can use them at any point in time at their convenience. For example, your restaurant has to prepare the meals once you receive the order in a food delivery business without caring about the time and day.
Uber is one of the biggest businesses formed on this disruptive model. Here, you can book the cabs at any time as per your convenience.
How disruptive is your business model?
To check whether your business is based on a disruptive model or not, you can focus on gaining answers to the following questions.
- Why must people buy your services or products?
- When did you imbibe a change last?
- When did you introduce a new product or service?
- Is your business focused more on success than the processes?
- Are you comfortable with targeting new ideas?
How to develop a disruptive business model?
- Take advantage of the repressed market demands: The first thing you have to do is understand the market demands that have been repressed and how to integrate them with your business model. Then, as there are several repressed demands, you need to pick the best one suitable for your business.
- Innovation is the key: Until and unless you are introducing innovation in your business, you won’t be able to introduce the disruptive model and make it successful. Besides, with innovation, you will be able to adopt changes and transformations without suffering from any adverse impact.
- Create a new market: Rather than depending on the existing market, you have to define a new market with aspects related to the repressed market demands. This will reduce the competition and give you more leverage.
- Find opportunities in the existing structure: Look for more opportunities present in the existing market. This will reduce the risks and help you target a broad audience section.
With the help of a disruptive business model, you can take your business to a new height and increase both revenues and popularity. But you have to choose the proper model and target the right repressed trend to have more opportunities for success.