Do you know why Amazon stands to be such a successful business giant in the market? How come Tinder managed to overcrowd the online dating market, and how did Spotify make people pay for music again?
If you observe finely from the beginning, Amazon based its innovation strategy on constantly disrupting its sales and delivery channel in the market, which is, in fact, an essential part of a business model of a company.
They started by disrupting channels for the books market. Instead of going to the library to purchase and read books, you can order them online and get them posted directly to your home address. That was the channel innovation, through which Amazon consistently breakthrough ever since by selling more and more products online.
The Kindle launch emerged as a new sales and delivery channel for books. You could both buy and receive your book through Kindle, and now Amazon is experimenting with drone delivery, which is yet another exciting delivery channel and is further innovating with the aqua device, that is Alexa and the Dash buttons, which are both new sales channels. So instead of hopping onto Amazon.com to order something, you can now tell Alexa to do it or press your Dash Button before giving a second thought. So, both these devices are innovative sales channels.
If you notice, you will see that Amazon is continuously focusing on updating a particular part of its business which is the sales and the delivery channel. Well, Spotify had attentively followed the pattern in yet another area of the business model, which is the Revenue Model.
If we get back to the 90s era, we needed to pay a considerable sum of money to buy the whole CD album, even if we did only like a few songs in it. Then, Apple introduced iTunes and disrupted this market by allowing people to pay for each song individually which was the first massive revolution model in the music industry. But illegal downloading was still an obstacle, and the music revenues were going down. Eventually, Spotify came and proposed a streaming model, where you could listen to your favorite music for free but with advertising, and the ad revenues were distributed among the artists. So, this was once again a revenue model innovation for the music industry. Here, more and more people downloaded the app, but it still didn't make considerate money to pay for the artists.
Thereby, in the later stage, Spotify came in with the paid version of its app without advertising and with relatively better features. So the whole revenue model turned into something called freemium one, that's when you had both free and paying users, and Spotify managed to capture a stunning conversion rate of 25%. Thereby it struck that finally, the music industry has reached the right pricing and revenue model.
So the success story of Spotify was based on its disruptive revenue model in the music industry. And once again, this is just one block of their business model, and finally, tinder dramatically disrupted the overcrowded online dating industry by innovating on design.
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Yes, it was just the design of their app and service. Instead of filling the complex form on an online dating portal about your body measurements, eye color, height, and income, interests, to be somehow matched with the person that coincide with you, Tinder went all the way back to the roots, which is actually the looks of a person.
The application innovation of just looking at the picture of the person to feel the attraction was behind the success. Did you connect? Yes/No, then swipe right or swipe left accordingly, which is super easy, and as long as the other person didn't swipe back at you, you can't contact them. So, here the girls can't be harassed anymore and don't need to filter through dozens of guides writing them and so they are more willing to use the service.What is all this is what innovation seeks.
A designed innovation, wherein both the visual design of the app and also the design of the service on how it works in comparison to the competitors, and design speeds are right here in the value proposition block of the business model. This is what leads the traffic.
Another successful company thanks to the design mainly is UBER, but we will stop here for now and wish to discuss the same in the next blog. There are many areas of the business where the companies innovate or can innovate. Some become successful by innovating on their target customer; others by disrupting the customer relationships and their marketing strategies, yet others do it by optimizing the operational processes and cost-cutting and evolve themselves to be much more efficient and effective than most of their competitors.
So, this was all about disruptive innovation. Now, check the best area of agility particularly applicable to your business model and stabilize after reaching it because this is the treasure secret of all the successful business idols. If overall, it sounds interesting then, do let us know it with your arresting comments, so that we can bring you more knowledge around companies and other interesting businesses.