This is what disruptive change looks like:
One of my working premises is that the ebook and associated infrastructure that enable easy and profitable self-publishing is a disruptive technology that will change the world of authors and publishers.
Netflix vs. Blockbuster is instructive in several ways:
- Blockbuster dominated its market
- 60,000 employees
- 6,500 stores in 17 countries as of January, 2010
- Over $5 billion in annual revenue in 2008 and for several years before
- Netflix was a peripheral player in video rentals prior to its release of a large library of programs on streaming video
- Business Models
- Blockbuster – Come to our stores and pick up your DVD
- Netflix – Order your show online and start watching instantly
- Blockbuster looked dominant until shortly before its collapse. When the collapse came, it was sudden, culminating in a bankruptcy filing on September 23, 2010.
Do all disruptive changes play out the same way? Of course not. They wouldn’t be disruptive if they were predictable.
One of the characteristics of disruptive technology and the changes it brings is that the biggest and most sophisticated players in the market are blind-sided by the change. Before the fall, these players are typically disdainful of both the technology/business model and the players that will come to dominate the industry after the change.
Another characteristic of disruptive technology is that before disruption, established players have built business models that include far higher expenses than can be supported after disruption. Despite the fact that their revenues and profits under the legacy business model may be high, these organizations literally can’t afford to make the change.
While Amanda Hocking and Joe Konrath may do very well on revenue of 35 cents per ebook, Random House goes broke with revenues like that.
Link to more at The Business Insider