A short follow-up to my last post on Blue Nile...
Another reason I love Blue Nile is their disruptive business model.
When CEO Mark Vadon was looking for an engagement ring, he went to Tiffany's to find what he was looking for. In the store he was largely ignored by the presumably snooty staff who must have thought that the Birkenstock and t-shirt clad guy wasn't a likely buyer. Miffed, Vadon left the store without spending a dime.
More importantly, he had just identified a part of the market that diamond retailers were ignoring—regular guys who don't understand diamonds, but need rings. They have money to spend, but need to be walked through the process, instead of being sneered at. Predictably the people with a vested interest in the status quo have fought Vadon from the beginning, refusing to do business with his suppliers and encouraging his competition to sell at a loss to hurt Blue Nile's profitability. You can read the whole story here. It's a classic tale of disruption.
Harvard Professor Clayton Christensen defines disruptive innovations:
"A disruptive innovation is a new product or service or a new business model that doesn't attack the core market by bringing a better product to established users in direct competition with the leaders in an industry, but rather it comes into the low end of the market, either through a business model that can compete at much lower costs, can compete profitably at lower costs, or it brings to the market a product or service that is so much more convenient and simple to use and affordable, that a whole new population of people who previously couldn't afford or didn't have the skill to own and use a product can now own one."
Blue Nile clearly fits the definition. Business 2.0 listed a bunch of future disruptors here (sadly they left out this one, but then they can't write about us all the time). I love this quote from Erick Schonfeld, the author of the Business 2.0 article:
"The most disruptive businesses, though, don't replace existing products. They compete against non-consumption by opening up new markets that were never before possible. Think of the airplane, the cell phone, or the Internet. Sure, some industries might get trampled by these new technologies—but only if those industries are not giving consumers what they really want. If you think about it, disruption is just another name for the age-old economic concept of creative destruction."
If you've got the bug to learn more, Christensen's books on disruption, The Innovator's Dilemma, The Innovator's Solution, and Seeing What's Next are great resources on the power of disruption. This short article is a pretty good preview of the thinking outlined in the books. Still more good stuff can be found here.