People often overestimate the power of disruptive forces in general. Many people believe that a disruptive force will always crush incumbents. However, this is not the case. In fact, companies often crush disruptive forces that arise in their industries.
The case of De Beers
Many people believe that a disruptive force will always crush incumbents. However, this is not true
One of the best example of a company that crushed a disruptive force is De Beers. It dominates and controls the world diamond market. A diamond is valued because it is a rare material. By controlling the supply, De Beers was able to ensure the market remains profitable.
You may know the four key Cs that affect the price of diamond are color, cut, clarity and carat (weight). They play a significant role in determining the value of these precious stones. As a result, flawless, large and clear diamonds have a high value versus small, dirty, and flawed diamonds have lower value.
A disruptive force in the diamond industry
Over time, technological advances allowed scientists to create a diamond in the laboratory. By simulating geological events in the laboratory, it became possible to manufacture a diamond. Chemically it was no different from a mined diamond. Moreover, you could also play around with the 4 Cs of a diamond and thus create valuable diamonds.
Imagine what would happen if such laboratory made diamonds flooded the market. What would be the impact on De Beers if people began to see them the same way as the mined diamonds? It would have destroyed the diamond industry the way cultured pearls destroyed pearls industry. I wrote about disruption in pearls in my book The dark side of innovation. I also wrote about it in an earlier blog post.
De Beers’ Response
De Beers did two critical things to overcome this disruptive threat.
- It took legal action against the laboratory diamond markers. The courts ruled that such diamonds will be called synthetic diamonds
- It unleashed an intense marketing campaign to highlight the value of real diamonds
This approach allowed DeBeers to crush the disruptive force in its industry. Its marketing blitz differentiated mined diamonds from synthetic diamonds in the eyes of the consumers. It ensured people appreciated mined diamonds more.
As a result, it was able to overcome a major threat of disruption.
Swatch was another such example that overcame a major disruptive threat to the Swiss watch industry. I wrote a great detail on the Swiss watch industry in my book as well as in an earlier blog post.
The Lesson
The key lesson here is that even if a disruptive force is threatening your industry, you can respond to that threat in many ways. In fact, many firms have succeeded against disruptive forces. My book goes into significant detail on how you can crush a disruptive force in your industry.
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Do you have a plan to manage disruptive forces in your industry?
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