The term “disruptive innovation” comes from a brilliant book about marketing theory titled “Seeing What's Next.” If you've read “Blue Ocean Strategy,” “Good to Great,” “The Wellness Revolution” and the “E-Myth” books, then this is a natural next step.
Disruptive innovation theory points to situations in which organizations can use relatively simple, convenient and low-cost innovations to create growth and triumph over powerful incumbents. In our business, Curves and Planet Fitness are two good examples of this theory. They were innovative. Health clubs need to think about where the industry is heading, not where the industry is now. As hockey great Wayne Gretzky once said, “I always tried to skate to where the puck was going to be, not where it was.”Former NBA great Bill Bradley, in his book “A Sense of Where You Are,” described moving without the basketball, knowing that when you got to the place where you were going, the ball would be there.
Our equipment-dominated, stale mode of fitness delivery is in dire need of a transformation. Customers by the millions have exhibited their disgust with our get-'em-in, get-'em-joined, get-'em-an-equipment-demonstration, get-'em-out-of-the-way methodology. How do I know that? They have voted with their feet. Customer retention always reflects customer satisfaction (or dissatisfaction), and our nearly stagnant 40 percent annual attrition rate tells us a lot about our members' responses to our practices.
What has caused our current state of commoditization within the club industry? Overshooting. Thousands of clubs have overshot what customers want and need by relying on archaic methods of delivering fitness — by becoming super-dependent on equipment technology. Many facilities have entirely missed the point and made it impossible to differentiate their products and services from their competitors.
“Seeing What's Next” authors Clayton M. Christensen, Scott D. Anthony and Erik A. Roth point this out in their chapter titled “The Signals of Change,” in which they state that commoditization starts at the bottom of a market and then creeps upward. Three forms of industry change usually result in:
- Low-end disruptions (the low-price players rapidly emerging in our business).
- Specialists entering and displacing integrated players (big-boxers, specialty studios, mid-price chains, express clubs, etc.).
- The development of new rules or standards that allow savvy providers to meet the requirements of customer segments. (We're just beginning to see the emergence of this phenomenon.)
The authors' research into dozens of companies in dozens of industries found that “disruptive innovations enable [solutions] that are less expensive and more consistently effective, allowing more people to [become consumers].” What this means to health club entrepreneurs is that they must re-think their entire structure of operation, from how they present their product physically to appropriate staffing, to a move away from one-on-one training and more towards group and small-group orientation of members. Health club operators also have to consider pricing, membership and the possibility of no-contract offerings as a standard way of doing business.
Does this mean doom and gloom for fitness facility operators? Not necessarily, but current clubs will have to avoid mastering sustaining innovations (being better at what they are already doing) in favor of establishing new markets or attacking from the low end. The authors wrote, “The findings indicated that incumbent companies almost always ultimately master sustaining innovations but often are unable to cope with disruptive innovations.” In other words, the tendency of those already in the marketplace is to stay the same rather than change.
There is great hope, however. This book states that unprecedented opportunity exists for disruptive innovation to reshape health care. This means that health clubs have got to finally become more than just fitness centers. The challenge for us will be to enter the mainstream of American lifestyling and end our reliance on an outmoded model that attracts and keeps only a relatively small percentage of consumers.
Michael Scott Scudder owns and operates MSS FitBiz Connection, an online-based club consulting and training service. Scudder can be reached at 505-690-5974 or email@example.com.