Do you want your company to be the next Facebook? Creating a piece of disruptive technology is something any eager founder aspires to be. Why wouldn’t you want to be? But how do you get to that point where you can actually topple a large, established platform?
In a recent Harvard Business Review article called “What Would It Take to Disrupt a Platform Like Facebook?,” Joshua Gans, a professor at the University of Toronto, explored the concept of new companies taking the reins from industry standards. He illustrates that once a product is ingrained with a large group of people, it is hard to dislodge the top dogs from power.
“Given this, it might be tempting to conclude that platforms, once established, cannot be disrupted,” writes Gans. “Yes, there might be a niche group who are underserved, but as long as what ultimately matters is who else is on the same platform, no entrant who targets just that niche will be able to do any competitive damage.”
What is a disruptive piece of technology? To simply put it, a disruptive piece of technology provides new services to the market and overturns the traditional business models and practices on their head. In the new digital economy, we have seen successes and failures.
Kodak is a prime example of seeing digital technology rip apart a traditional business model. When digital cameras started to appear, the hundred-year-plus company failed to account for the shift, which resulted in the company filing for bankruptcy in 2014. Facebook, on the other hand, has taken a model of connecting people and turned it into a sustained disruption.
Even though Facebook is one of the most visited sites on the web, the platform has seen a slight exodus. More and more older people have started signing up, it’s main demographic have started to leave. In the earlier days of the company, a young crowd flocked. But as more and older people started to join, the younger generations started to leave and distance themselves from their parents’ online activity.
In order to combat the loss of traffic and revenue, Facebook began acquiring other apps and services, leaving them with their own branding and development teams. The purchase and development of both Instagram and Whatsapp are prime examples of the company’s strategic innovation.
“Facebook’s tactic appears similar to that of other established companies: It controls possible disruptive events that appear to pick off customers based on initially niche cases by buying the competition,” writes Gans.
In order to disrupt the value and the traffic Facebook (as a company) sees, a company needs to offer a great value to both a niche group and a large subgroup. The management team at Facebook had the foresight to account for a coming shift in user activity, and created space for that movement to mature.
As a result, they piled resources into mobile technology. Now, the company is able to generate large amounts of ad revenue from creating a suite of mobile apps. Some more recent developments include a partnership with KLM Royal Dutch Airlines. Now, passengers with the dutch airline service can receive their boarding pass, get timely updates, and chat with KLM’s support all through Facebook’s Messenger app.
To summarize, if you want to disrupt a platform or any established industry leader, you have to have the foresight of shifts in the market. If you are a market leader, you can’t wait until a threat is real before you react. You need to know that a threat could arrive someday, and organize yourself accordingly.