Why disruptive innovation and entrepreneurship is the double threat
November 24, 2014
By Matthew Tukaki
Why is becoming a disruptive thinker and innovator so pivotal to being a successful entrepreneur? Ask yourself these questions:
If the iPod hadn’t have come along would the music industry we knew had have changed?
If the iPad hadn’t come along would the way we use the internet for entertainment to connecting had have changed?
If Google hadn’t have come along would be truly as interconnected as we are today?
Consider this, before the iPod came along there was the Sony Walkman and then the portable CD player that disrupted the vinyl record market to such a point it became obsolete while the Walkman became a museum piece when the iPod came out. How many of todays generation know the Walkman or would even know what to do with a cassette?
Mind you, how many of them would know what break dancing to your boom box really meant! Today we live our lives in a world where market disruptors have had immense flow on effects to the way we live, work and play.
Hardware such as Apple’s iPad was a great tool in and of itself but the real action is where the burgeoning App market is – in fact, you could reasonably argue that Google Play and the Android App markets are not disruptors merely competitors to the original Apple platform that has now evolved, because of competition, to innovate more rapidly than before.
In this new App market we are seeing developments of products and services that are enabling us to connect more than ever before from the more well know such as Facebook and Skype to the less well known (and sometimes questionable) dating Apps. In fact an argument could be mounted about whether platforms such as LinkedIn and Facebook could have survived had they not have turned their attention to the world of handheld devices and redesigning software to accommodate on the go lifestyles as opposed to the old desktop and laptop cultures. Keep in mind Facebook was such a market disruptor that it saw off the incumbents such as Myspace.
Mind you, there are market disruptors and entrepreneurial disruptors who, when going hand in hand, can really take a market out and own it. Take Facebook as an example. When News Corporation bought Myspace back in 2005 they did so at a time when they were led by a market disruptor in his own right, Rupert Murdoch – the problem was he and his team of aging executives were good to go in the 1960’s but had no idea about the real potential of social networking in quite the same way as their younger adversary Mark Zuckerberg.
Eventually Myspace died the death of a thousand cuts and at last count only had revenue of $20 million compared to the billion dollar turnover of Facebook. So, what is disruptive innovation and why do you need to understand it in order to succeed as an entrepreneur?
Take this definition:
“A disruptive innovation is an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in a new market and later by lowering prices in the existing market.”
So lets consider this – you have what you believe to be a disruptive innovation so then what? How do you really know? Well, the first start is to ask yourself these questions:
Is what I have an innovation on someone else’s current product but not so revolutionary as to be competitively different? By that we mean, there are some subtle differences in what you have but not enough to give you a complete competitive advantage over an existing incumbent.
Is what I have price disruptive? In other words you can produce at a lower cost (usually with lower over heads) to become more cost effective than a competitor (thereby taking market share) and become profitable (or cash flow positive) faster?
Is what I have so revolutionary that it will spawn a new downstream industry such was the case with Apple and the App store? Why is this important? Because if your idea works you also want to look at investing on those complimentary downstream products and applications that will work on whatever you have (device or platform) – thereby maximising your return on investment. Keep in mind many successful entrepreneurs have re-invested money earned from selling their initial company and putting it into companies that are naturally connected in some-way to the initial idea.
Once you have answered those three questions you’ll know if what you have is truly disruptive. Then, of course, you need to marry them up with the traits of a successful entrepreneur because you can have the best disruptive technology or product in the world but you know what? You can be crap at marketing or selling to your target market.
Take Myspace and News Corporation – if I was them I would be feeling pretty sad about myself knowing I had the makings of a Facebook on my hands but failing to recognise how the market would adopt it.
To find out what those traits are you’ll just have to keep following us here at the EntreHub!
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