May 31, 2020  
 
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The Biggest Upsets of All Time

Written by James Garvin for Gaebler Ventures

This article evaluates entrepreneurs and businesses that were so disruptive, they changed an industry, removed an established leader, and have become a dominant force in their category because of their successful disruption.

The Black Swan, popularized by Nicholas Taleb, describes the occurrence of high-impact and low probability events that can have profound impacts when they occur.

The economic crisis and demise of our financial institutions that started in 2008 was considered a Black Swan because it was an event so profound and with such low probability that when it struck, it had huge disruptive impact on the worlds economies. Black Swans also occur in businesses, mostly to industry leaders who get comfortable being at the top for too long. That is until a new leader emerges that is so disruptive it displaces the industry leader and can often completely remove that industry leader from the market all together.

Black Swans in business have been more common as of late with the advent of the internet as traditional brick and mortar stores were disrupted with e-commerce stores that were able to provide greater inventory, better efficiency, and lower costs. Technological innovation can also provide new businesses with disruptive power as innovative technologies can quickly make current technological standards look pre-historic (think what the DVD did to VHS). Below are some of the all-time upsets through business Black Swan events that should provide you and your company a framework to understand how black swans occur and how you as an entrepreneur can create one.

NetFlix vs. Blockbuster

NetFlix emerged with the same idea as Blockbuster, rent movies to consumers, but created a whole new delivery channel to do so, online rather than in the store. Realizing that there were operating, cost, and convenience advantages of renting movies online, NetFlix moved quickly to steal market share from Blockbuster. Even after Blockbuster created their own online rental program, Blockbuster struggled with their high operational costs due to the costs of running their stores across the country while NetFlix's lower cost structure and rapid growth has allowed them to become the number one movie rental business in the country.

Amazon vs. (Barnes & Noble & Borders)

Long established as the leading retailers of books, Barnes & Noble and Borders have been rocked by the founding of Amazon. Year after year, Amazon has taken market share away from the brick & mortar stores that Barnes & Noble and Borders established so successfully. Amazon was able to establish an unlimited inventory of books, something that brick & mortar shops were limited to due to the size of the stores that they established. Both Borders and Barnes & Noble have struggled to stay afloat financially as they try to find ways to compete and differentiate themselves from Amazon who stormed the retailing book industry.

Mint.com vs. Quicken

For you personal finance buffs, Quicken, the long-established leader of personal financial management software who beat out Microsoft in the 90's got a taste of its own medicine over the past 3-years as start-up Mint.com emerged with a quicker, easier, and free version of Quicken software. Quicken recently acquired Mint.com for $170 million, so while they are no longer a threat, they saw how quickly competition can emerge and disrupt a leader that gets too comfortable in its top position.

James Garvin began his education studying biotechnology. In recent years he has turned his interest in technology to helping two internet startup companies. The first business was an online personal financial network and the second was an e-marketing platform created to help entrepreneurs demo their web sites. Currently a student at University of California Davis, James is spending his summer incubating two new online businesses and writing about his entrepreneur experiences.


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