Pricing Disruption

The words disrupt and disruption are used more and more in the areas of business strategy and innovation.

The definition of disruption in Wikipedia is “an event which causes an unplanned, negative deviation from the expected delivery … according to the organization’s objectives”. Clearly this definition is too limiting and fairly negative. The word disruption carries negative connotations. So does the word revolution for that matter.  I used these words quite a bit in my writings and I adopt a different definition which includes a more positive and dynamic tone. For me the word disruption in business, innovation and pricing conveys a sense of dynamism, pro-activeness and counter-intuitiveness that can generate excitement in markets. It is about being alive and injecting positive mindful energy in business.

Disruption is about thinking differently and proactively, making choices and decisions that might be seen as different but in the end are breakthrough, and generating different customer reactions.

Disruption means looking at problems differently, adopting innovative problem solving approaches and implementing programs that are unexpected or surprising.

Disruption is about anticipating issues and making proactive moves to go around them. It is not waiting for crises to happen to take actions, to make changes, to challenge the status quo.

Being positively disruptive in pricing means taking a leadership position in value and pricing management, inventing pricing models that the rest of the industry wants to imitate, launching innovative offerings that are priced high and right and that competitors cannot compete against. When Apple launched the iPad at the initial price point, competitors laughed at them and called the whole idea ridiculous. Who is laughing now?

Pricing disruption is also introducing ideation and creativity in the design of new pricing models to match innovative and potentially disruptive business models. You will be surprised at the number of companies that are very innovative in product development and business model innovation but that apply outdated and legacy pricing models to introduce them to market. It might just help explain why so many new products and startups fail during the launch process.

So pricing model innovation or “innoruption” (innovation+disruption) is a critical dimension of the overall business model innovation process. How this new model will create and capture value is in integral part of the equation.

Being disruptive in pricing and value management can carry business risks and has to be carefully evaluated. Just read about how JC Penney and Netflix fell flat on their face with disruptive changes in their pricing strategies. This is risky business. Changes in pricing have to be mindfully tested with customers and carefully experimented with.

Be bold. Join the pricing revolution!

image credit: stephanliozu.com

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Stephan Liozu Stephan Liozu is the Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management.  He earned his PhD in Management from Case Western Reserve University and can be reached at  sliozu@case.edu