I had a very interesting conversation with the leaders of a couple buying groups recently in Miami about whether the buying group/purchasing cooperative will last or whether it will be disrupted like Netflix disrupted the DVD rental business.

“Disruption”, as defined by Clayton M. Christensen, refers to a process where a smaller organization with fewer resources successfully challenges an incumbent business.

Here’s the way disruption works:

As an existing business focuses on improving their products and services for their most demanding and most profitable customers, they ignore the needs of other customers. Disruptors successfully target those overlooked customers, delivering more-suitable functionality often at a lower price. They do this partly by harnessing new technologies but also by developing new business models and exploiting old technologies in new ways. The incumbent business, which has institutionalized focusing on their more-demanding segments, does not respond fast or strong enough to the new competitors. These disruptors then move upmarket, delivering the benefits that incumbent’s mainstream customers need/want, while preserving the advantages that drove their early success. When the mainstream customers begin to adopt the entrants’ offerings in volume, disruption has occurred.

What could possibly disrupt buying groups? During our wine-fueled discussion, we came up with the following:

  • Will a nimbler buying group more adept at technology enter your space? 
  • Could online ordering portals allow independents to aggregate their purchasing power outside of the group?
  • Will Amazon’s continued growth disrupt the supply chain in a way that affects groups?
  • Will third party supply chain finance organizations provide new ways to fund purchases?
  • What effect will the rise of 3D printing have on your preferred vendors?

OK, someone always mentions 3D printing in every discussion about disruption. Most likely, if disruption comes, it will come from an unexpected direction.

So what can a buying group do to prevent disruption?

First, groups need to watch for and be aware of potential disruptors. It is important to have someone in your organization constantly asking what your competitors are doing and what you can do to either stave off or embrace disruption.

You also need to watch for potential disruptors to the business of your members.

It is worth noting that you should choose carefully what you view as disruptive. This shouldn’t become a “sky is falling” scenario. Develop a keen understanding of competitive offerings and know when a new model can offer more to your members in a different way than you currently do. Avoid an excess of attachment to today’s measure of success, and avoid the common technology trap of being attracted to the next shiny object.

If you do determine that a potential disruptor is entering your space, you should focus on focusing on the needs of smaller members. Remember that disruption starts with smaller, less-demanding customers (or in this case, members). Because your offerings are not as well-suited to the needs of smaller, less committed members, the door is open for disruptors to focus on providing them with a “good enough” service.

The good news is that disruption is creative and not just destructive. By devoting people and energy towards the growth opportunities that accompany disruption, your group may become stronger than ever.