From McKinsey Quarterly – -An Incumbent’s Guide to Digital Disruption

A decade ago, Norwegian media group Schibsted made a decision to offer classifieds—the main revenue source of its newspaper businesses—online for free. Today, more than 80 percent of their earnings come from online classifieds.

As Reed Hastings, Netflix CEO, pointed out (right as his company was making the leap from DVDs to streaming), most successful organizations fail to look for new things their customers want because they’re afraid to hurt their core businesses. He added, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”

Incumbents needn’t be victims of disruption if they recognize the crucial thresholds in their life cycle, and act in time.


Market Leaders Can Succeed As Challengers and Brand Innovators

McKinsey & Company presents a blueprint for a market incumbent to innovate and act as the challenger in an entirely new market.

The authors, Jean-Baptiste Coumau, Victor Fabius, and Thomas Meyer, discuss brand-driven innovation.  By capitalizing on the unique links between its current brand and customers, an incumbent company can pursue innovation in an entirely new market.  Benefits of this strategy include the achievement of sales and growth targets, sharpening a brand’s positioning, and creating a halo effect for the original brand.

Examples offered include:

-Apple’s introduction of the iPhone.

-Disney’s launch of a children’s English-language teaching business in China.

-Virgin’s challenger business in retail banking and insurance in the UK.

-BMW’s joint venture with DriveNow to enter the car-sharing business.

Three advantages that brand extensions can use to be successful:

-Distinctive brand equity and trust.

-Strong relationships with customers.

-Access to data, capabilities, and other institutional assets.

The authors conclude that strong brands can successfully enter entirely new markets.


See all 5 Cups articles.

For more on this topic, check out the Marketing Tab in Morning Coffee.