The Opportunity Of Disruptive Innovation

Steve WunkerApril 27, 20234 min

Bed Bath & Beyond didn’t respond well to e-commerce taking much of its business. The retailer shifted its assortment a bit, tried to hone its promotional pricing, and targeted its marketing. But it just couldn’t compete with the assortment found online, nor the convenience of e-commerce, nor with many of the low prices. It never found a coherent response.

The category killer retail store announced on Sunday it will wind down its operations during bankruptcy. The company peaked at $12 billion in revenue in 2017, shrinking to almost half that amount in 2022. And the compass needle was still pointed south, with few glimmers of turnaround. What happened, and how could it have been prevented?

Clayton Christensen, my mentor, used to explain disruptive innovation by talking about waves of disruption in retail. The corner stores of the mid-1800s were disrupted by cheaper and highly accessible catalogs like Sears Roebuck in the late 1800s, which were disrupted by convenient department stores like Marshall Field at the end of that century, which were disrupted by mass merchandisers like Walmart in the 1960s, which were disrupted by category killers like Bed Bath & Beyond in the 1970s and 80s, which were disrupted by Amazon and e-commerce in the 1990s. The disruptions kept on coming. A few retailers like Walmart developed a sustainable strategy and lasted. Many just shrunk or disappeared.

Bed Bath & Beyond Disruption

After a brief run-up during the meme stock mania, the company continued its steady slide into irrelevance.

To see what might have happened instead, look at another category killer: PetSmart. Threatened by e-commerce, the company bought its biggest online competitor, Chewy. It leaned into the disruption and made a handsome sum on that investment. The company also broadened its identity to include grooming, pet hotels, veterinary services, dog training, and more. It became a true authority in the pet space. Furthermore, it insisted that manufacturers provide it with products tailored just for the pet specialty channel that it occupied, like Purina One foods.

PetSmart saw a disruptive innovation opportunity when it recognized that pet owners wanted a single place to trust – a go-to resource for the sometimes difficult and confusing role of raising a pet. It understood that pet owners had both functional and emotional Jobs to be Done, such as finding merchandise for very specific needs, having services provided by a place they could trust, and feeling reassured that they’re being responsible. With that understanding of pet owners, it then developed a 360-degree solution that continues to sustain the business at healthy levels today. In contrast to Bed Bath & Beyond, PetSmart had $7.3 billion in revenues in 2017 and over $10 billion in 2022. It’s thriving.

What might Bed Bath & Beyond have done? Think about what homeowners buying those products might be seeking to get done. They’re not just buying stuff; they’re furnishing a home. So, they likely wanted to know what products would be best for their home, or have help in designing a certain look, or understand how they might best execute basic remodeling.

All sorts of businesses in those areas have blossomed over the past few years, and those ventures could have helped the store not just develop new engines of growth but also reinforce its authority as the best place to go for specific decorating jobs to be done. The company could have developed a range of solutions, internally or via partnerships, to expand its business and cement the loyalty of these customers. But it didn’t.

There are three lessons from this tale:

  1. Disruptive innovation eventually comes to hunt every business. You might hold out for a while, but you need to formulate a coherent response. Maybe you embrace the disruption and buy into it, or you might change your business model to win customer loyalty in new ways, but you have to respond.
  2. An effective response stems from first deeply understanding the customer and the full range of their Jobs to be Done, including ones adjacent to your current business.
  3. Then, design a 360-degree solution that focuses on the customer’s priorities first and adapts your business model to suit. You can optimize your current offering only so long, and eventually you need to re-orient to what the customer really needs today.

PetSmart is joined by other survivors like Walmart and Best Buy as companies that adopted this playbook and continued to grow. Bed Bath & Beyond goes the way of Circuit City, Toys R Us, and many other once-fabled names into retail history.

Spot the disruptions, lean into them, understand the customer, and adapt – this is how to survive and thrive while less nimble rivals just fade away.

Contributed to Branding Strategy Insider by: Stephen Wunker, Managing Director of New Markets Advisors and author of Jobs to be Done: A Roadmap for Customer-Centered Innovation.

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