Market disruption is a term that has been thrown around in the business world for decades, but what does it really mean? And who gets to be in charge of disrupting an industry. It’s not something we typically see in a job description.
And yet plenty of people are happy to tell you who can and cannot cause a disruption in a line of business. I’m pretty sure they’re not talking about what Professor Clayton Christensen was when he first used the term “disruption” in a business sense, some 20 years ago.
From the beginning, Professor Christensen gave disruption a specific definition to describe specific phenomena. In a conversation with Harvard Business School’s Jake Schroeder, he said a disruptive innovation is one that “transforms a complicated, expensive product into one that is easier to use or is more affordable than the one most readily available.”
Well, it seems like there is plenty of room for disruption in the mortgage industry.
In search of a better definition of disruption
As Schroeder points out in his article, the definition of disruption has diminished somewhat over the years until he says when people talk about it today, they generally mean something that is “cooler or faster or based around more advanced technology.”
The leading business school took another shot at defining disruption in an article that appeared in the Harvard Business Review:
“Simply put, market disruption occurs when a new product or service enters the market and changes the way business is conducted. This can happen in a number of ways, from introducing a new technology to completely revolutionizing an industry.”
This definition makes it sound like just about anything can be considered disruptive and it can come from just about anywhere. That sounds a lot like marketing noise to us.
It reminds us of all of the articles we’ve been seeing in the trade press discussing who can create disruption and where disruption starts. It’s a rather confusing mess and we don’t agree with any of it.
There is exactly one place where disruptive innovation can take place.
Where disruption occurs and who drives it
When market disruption occurs, the companies that have been operating within the industry are forced to either adapt or risk being left behind. This provides an important clue as to where disruptive innovation actually occurs.
From a B2C standpoint, new entrants that cause the disruption are often able to offer lower prices, better products, or a combination of both, which makes them attractive to consumers. It creates market disruption and drives other companies to follow suit.
We saw something like this when companies like Uber and Lyft moved into the taxi industry. New technology gave consumers more control and it changed everything.
It’s different on the B2B side. To disrupt an industry like mortgage servicing, you have to win the participation of the companies who will be using the products or services you offer. Without adoption, there is no disruption. It’s what makes real disruption so much more difficult in the B2B world.
But it also means when it does happen, it happens faster. Mortgage servicers won’t use something that doesn’t work. But if it truly allows them to create the kind of servicing business they want in a fully compliant manner, they’ll come on board quickly.
Which is what we’re seeing happen with our own mortgage servicing platform.
Yes, we built the software, but it’s only when servicers take advantage of the power we’ve built into it that innovative disruption occurs in their businesses. They are the architects of the innovative new workflows that our software makes possible.
This means that only mortgage servicers can disrupt the mortgage servicing industry. They’re doing it today by embracing new mortgage servicing software that allows them to be agile, adaptive, and more borrower-focused.
They are the innovators who have the experience to disrupt the industry and now, finally, they have the software tools to get that job done.