Disruptive innovation

It was 1995 when the term Disruptive innovation was first coined by Clayton M. Christensen in his bookThe Innovator’s Dilemma. Over the next 4 min we will answer, what is disruption? how does it apply in my market? and where to start?

Before getting into it, I would like to stress the importance of looking ahead instead of “watching your back” during times of uncertainty. Now is the time to double-down, redefine your business model and differentiate yourself from competitors.

Disruptive innovation is the creation of a new market and value network that eventually displaces existing markets, market-leading firms, and products. Even though Clayton’s idea of disruption is over 20 years old, it is still compatible and applicable to every sector.

If your company is currently scaling upwards and you’re providing a similar product/service at lower price, you have what the business world would call a competitive advantage. Leveraging your competitive advantage will enable you to continuously eat away the bottom of the incumbent’s market share. Subsequently, maintaining your advantage as you expand and upmarket will make you a disruptor.

How does it apply in my market?

An important question to ask yourself as you scale your business – what am I innovating? I personally like to draw on, PayPal co-founder, Peter Thiel’s perception on innovation through his book Zero to One.

The first step would be to distinguish whether your business is horizontally innovating (1-n) or vertically innovating (0-1). By way of example, Revolut’s multi-currency account is a horizontal innovation in which they imported what already works (Online FX transfers) and transferring it elsewhere (Virtual banking) through a better service. Google and Uber however, are examples of vertical innovations that has produced new industries.

The second step is to understand what drives your business, the product/service, or the experience? –  in simple terms, are you an Airbnb/Salesforce or an Apple/Coca-Cola. Whatever business you own, you can design your “flywheel” around your product or business model. In most cases this decision will strongly depend on your team, culture, and value proposition.

However way you go, the solution to success is clear – serve and sell to as many customers with the lowest cost A.K.A economies of scale, the foundation of every successful business. Let’s take a look at some examples:

Google Adwords – A singular product of targeted ad space that sells to both the smallest and biggest businesses and institutions in the world.

Amazon & Facebook – Monetize existing value network by mass cross-selling hundreds of unrelated products/services using a singular platform.

Uber – Serves millions of city dwellers transport needs via a singular all-rounded application.

Some inspiration?

Alas, disrupting a market is not as easy as this short article might make it sound. Albeit, I would like to leave you with two case studies that are always a source of encouragement. They are what I call the most exciting – boring companies.

Slack

Launched in 2013, Slack’s software was hardly game-breaking, yet it serves as a perfect example of horizontal (1-n) innovation. Being late commers to the collaborative tool market, Slack had a fair share of sceptics, but this did not phase co-founder Stewart Butterfield who firmly believed a products success is equally determined by the consumers’ behaviour. Making the world believe that his tool would reduce costs, improve-decision making and transform organisations.

Over the last 6 years Slack has reached a valuation of $24bn and this can be easily traced back to the company’s strong leadership team coupled by clever marketing that has leveraged the world’s lack of knowledge on collaboration tools.

Zoom

Launched in 2013, a late comer to the communication-as-a-service market this horizontal innovation shows that success is not dependent on when you enter the market, rather how well you play within it.

Zoom provides the same VoIP services as any other provider except differentiated themselves with a customer-driven business model. Co-workers and friends were convinced Eric Yuan was barking up the wrong tree when attempting to penetrate an over saturated market with over 10 leading players.

In 4 short years the video conferencing start-up reached a valuation of $1bn using two main ingredients, excellent video/sound quality and product delivery. The lack of unnecessary features helped the company concentrate on the one thing people wanted when downloading the application and this proved to be the right decision as they reached over 300 million daily participants in April compared to 40 million on skype.

In conclusion, you can disrupt whatever market you are in, with the right team and value proposition. Slack and Zoom are great examples of how you can be late to the game, emulate existing products, replicate business models (UCaas), and still disrupt market leaders.

 

By Ismail Ibrahim | Business Development Manager

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