Consider three financial services:
Wealthfront — an investment platform targeting older Millennials in their 30s and 40s with a technology-only approach to financial advising and investing. Their underlying hypothesis is that this segment does not want to schedule a phone call or an in-person meeting to talk finances; they want 24/7 access to get input and adjust their investments.
Ellevest — an investment platform targeting women; not in the pink and patronizing way companies usually go after women, but in a “hey, women are likely to live longer and their earning trajectory often differs from men, so they need to invest differently” way.
Acorns — an app for beginning investors, for the person in their first job that knows they should invest something somewhere but doesn’t have much capital to do so and doesn’t quite know where to begin. Acorns allows them to link credit cards to the app so that every purchase is rounded up and the change is invested, i.e. Thirty-five cents are invested if you purchase a $1.65 cup of coffee.
In a market that used to be dominated by few players where the primary differentiation amongst services was price (proxy for degree of personalized service), the above services are just three examples of a market that is now filled with companies dialed in tightly to meet the unique needs of a specific niche market.
Instead of appealing to the masses to drive low margin off a high volume of customers like the incumbents do, these companies are building sizeable businesses by generating greater margin off a niche market of customers for whom they are providing distinct value. These companies are saying “no” to some markets in order to provide an emphatic “yes” to other markets.
Now shift back to the meat, milk, and egg markets.
For decades, the industry moved towards a one-size-fits-all, commodity-based, s/he-with-the-lowest-cost-wins strategy.
But with the rise of new distribution channels (Amazon, grocery delivery, meal kit subscription services) and increasing consumer segmentation by retailers at the brand (i.e. Fiesta) or store level (i.e. HEB stores where selection varies store by store),the trend towards sophisticated segmentation will inevitably drive further upstream.
In the era where consumers expect products to be low cost, always accessible, and have wide variety, perhaps the disrupting business models will be those that enable the degree of customization that consumers want with the degree of efficiency and profitability that producers need.
My money is on the fact that disruptive business models will be built around this notion of segmentation and driving significant value for a specific segment, rather than providing *some* value for the masses.
How do you think disruptive business models of the future will look?
This article was originally published on Meatingplace.