Disruptors are at their best when they're shaking up industries, but when they reach critical mass, then their own success is at risk of disruption.
Once a startup comes in and shakes up an industry, it’s hardly ever smooth sailing into the sunset. It can be all too easy to grab market share with new innovative ideas and technology, push traditional businesses to change, and get caught up in the victories. However, there are three major problems disruptive brands and companies need to be aware of in order to avoid burning out in a blaze of mediocrity.
Problem #1: Scaling too quickly
Potential for long delays, high prices for economy seating, sub-par food, and one-size-fits-all entertainment–these were the expectations air travelers had before the days of JetBlue. When it was founded in 1998, JetBlue’s mission, according to founder David Neeleman, was “to bring humanity back to air travel.”
As a frequent traveler, I remember being blown away the first time I flew with JetBlue. Not only were ticket prices affordable, but each seat had its own TV and in-flight entertainment options, and rather than force feed everyone on the plane, they offered snacks instead. This airline was completely disrupting the typical flight expectations and it brought a breath of fresh air to the industry.
Originally focusing on only two routes–from JFK to Buffalo or Fort Lauderdale–the airline was able to continue to exceed customers’ expectations. However, in spite of rising fuel costs and higher prices associated with the amenities provided, JetBlue decided to rapidly expand and added several new planes and routes to their fleet.
In 2005, they experienced their first quarterly loss and hit more turbulence from there. It all came to a head in February 2007 when their disruptive practice of “never cancelling a flight” caused mass havoc during a nasty winter storm. The pile up of plans at JFK left passengers stranded on the tarmac for hours and the entire fiasco reportedly cost JetBlue $30 million.
Had they grown at a more sustainable rate, JetBlue might have avoided these profit losses and PR nightmares.
Problem #2: Inability to deliver at a larger scale
Gilt Groupe disrupted the fashion industry when it hit the scene during the height of the 2007 Recession. While retailers were forced to liquidate excess high-end inventory during this time, Gilt was able to purchase it for a fraction of the original price tag. They then sold it at a much lower cost to their members via online flash sales. The premise is similar to how Marshall’s or TJ Maxx works, but they were one of the first companies to do it online.
In 2012, Gilt Groupe was valued at more than $1 billion. But on January 7, 2016, Gilt was purchased by Hudson’s Bay Company for only $250 million–which was less than the amount it raised from investors over its lifespan.
So, what went wrong?
The very catalyst that paved the way for Gilt’s initial success–the 2007 Recession–is what ultimately lead to its downward spiral. As the economy started to level out, the overstock of high-end retailers was starting to run dry. Gilt’s growth also contributed to this problem. Having a flash sale of 1,000 pairs of Gucci boots works well when you only have a few thousand people as members, but when you suddenly have millions, you’re no longer able to keep up with the demand.
When you’re unable to deliver the products your customers expect at a larger scale, the result is frustrated customers who eventually lose interest in your brand.
Problem #3: Lacking self-awareness
One of the major issues with both JetBlue and the Gilt Groupe is they were lacking the self-awareness to understand their slice of the market. Had they been more cognizant about potential disruptors that could disrupt their business, they might have been able to grow at a much more sustainable pace.
As the CEO, founder or business leader of a disruptive startup, it’s vital to constantly check in and be aware of any potential pitfalls or issues. Your company is never impervious to disruption itself so the key is to scale with intention and remain hyper aware of current and future market conditions. With this in mind, your company will be able to continue innovating and changing traditional industries for the better.