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In an era of undeniable consumer change – tech, online, social – existing market players must innovate to stay relevant. Too often the dominant players don’t take action and find themselves with sick or dead business models: Angus & Robertson/Borders, Blockbuster, Kodak, Nokia, MySpace, David Jones. Even if their core business is not at threat, the dominant players should be best placed to capitalise on new market opportunities. They know their industry back to front, they have supplier relationships, they make money, they have customers.

Yet it’s these major players that don’t see the threat around the corner, or explore evolving market opportunities. While this phenomenon is not limited to Australian retail, two of our big guys surely epitomise the issue: David Jones and Myer.

I love when the big guys do innovate, which they sometimes do. I also love the disrupters, the start-ups who spot a new or evolving customer demand and solve for it.

In 2004 I co-founded a DVD rental vending machine company called RedRoomDVD with the guttural belief that there had to be a better way for consumers to rent DVDs… and we were right! We built  an awesome brand, had passionate customers and experienced significant growth (same machine sales up 25% year on year) in a declining industry. We were positioning ourselves and our customers to take the next leap into online movie distribution when it was feasible for mainstream Australians (which is only just happening now). Despite all the twists and turns that come with a capital-intensive start-up we pioneered change in the industry for seven years and would have continued to but were bought out by the Video Ezy / Blockbuster group in 2011.

And what was the first thing the new owners did…? They killed off our RedRoomDVD brand, stopped our awesome Free Tuesday Rentals campaign (which was a cost-effective way of acquiring new members) and cranked up rental prices. They rolled their existing brand, mindset and head office over this innovative fast growing start-up they had purchased… [close eyes and shake head slowly].

Why do some market players innovate well and others poorly or not at all? In the early days of RedRoomDVD people would always ask, ‘Why aren’t the major video rental chains doing kiosks?’ – and we really had no answer. But we did have a piece of butchers paper up in the office with a quote scrawled on it (which I cannot recall so I’ll paraphrase):

“Innovation thrives at the fringe, where the orthodoxies of the norm are at their weakest.”

I guess that’s the reason.

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One thought on “Innovation Thrives At The Fringe

  1. Sad fact is that legacy businesses just don’t or can’t innovate. Being wrong is not encouraged so how are you going to push the envelope? Start ups disrupt, they are not flabby cash rich behemoths, they need to find their niche in crowded market places and delight customers to get traction. Unfortunately, and specifically in Australia, big players with tired models, tired shop floors and demoralised staff are the predominance. Bring on disruption and give the customer and awesome experience be it online or bricks and mortar… Retail isn’t dead, it’s just needs a hearty kick up the ass…

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