We’ve pivoted to an idea that’s truly disruptive! If we make if freemium we’ll go viral for sure!
People saying stuff like that makes my blood boil. It’s not that they’re using the latest startup buzzwords, it’s that these shallow-seeming words actually represent deep strategic concepts. “Disruptive” does not mean “sort of, changes things, y’know?”; there’s a whole academic theory of disruption developed by someone who is probably a lot smarter than you or I.
Reading up on these concepts felt like I was levelling up my knowledge of business strategy. In an ideal world, use of the word “disrupt” would be restricted to a secret cabal consisting only of people who’ve actually read The Innovator’s Dilemma. It would be like a secret handshake — they’d ask about your well-established competitor, you’d reply that you’d beat them with a disruptive strategy (wink, wink). On discovering you were one of the cabal they’d invite you to a secret hangout, far away from social media gurus and idea guys, where you could discuss high-level business strategy over port and cigars.
Sadly this is not possible. These terms are now mainly used by morons to make themselves sound smarter. Am I being too finicky about some mere words? Maybe, but I think I’m justified. These terms let you communicate complex concepts simply. Misusing them weakens them, strips out their meaning, leaving only vague buzzwords.
Anyway, if you want to join the cabal, read on.
Term 1: Disruptive
The word disrupt, when applied to startups, is normally used to mean “change”. Something disruptive changes a lot of things, in a sexy, revolutionary, disruptive way.
The original meaning of the word is much subtler, and is actually a bit counter-intuitive. Clayton Christensen, a Harvard professor, developed his theory of disruptive innovation after years of research into how innovations spread throughout society. The innovations he looked at weren’t necessarily the cool ones — he devotes a whole chapter to mechanical diggers. He studied the hard drive industry in depth, an industry where new companies were rapidly displacing old companies that couldn’t adapt to new technology.
But he noticed something strange. Established companies were generally good at adapting to new technology. But everyone once in a while, they’d miss out on a new trend, and be replaced by a new batch of startups. Why were the incumbents able to adopt some innovations and not others?
The answer is that there’s two types of innovation. Not every innovation is disruptive. Most are sustaining innovations — that doesn’t mean they’re boring, sustaining innovations can be revolutionary –but they have one major difference from disruptive innovations. And it’s a market difference, not a technological difference.
Christensen realised that companies could adapt to new technology provided it was what their existing customers wanted. If the new technology was better on the metrics their customers cared about, they’d adopt it quickly.
What they couldn’t do was adopt a technology that their existing customers thought was worse. Why would they? But there might be a new market that cares about different metrics to the existing customers. A disruptive innovation is one that meets the needs of this new market.
Let’s use a recent example: the Nintendo Wii. The market for games consoles was power gamers; when Sony and Microsoft made the Playstation 3 and XBox 360, they made them for this group, and focused on hardware specs (these two devices could be considered sustaining innovations). The Nintendo Wii, with it’s feeble processing power, was laughed at by this group.
But granny and the grandkids didn’t care about hardware specs. What they cared about was accessibility; they wanted simple games they could play together. The Wii was disruptive because it opened up a new market — casual gamers — that was unserved by existing consoles.
That was a rare case of an incumbent (Nintendo) doing something disruptive. Normally disruption is a chance for a scrappy startup to overthrow an established player.
An example is PCs. IBM sold mainframes to corporations, who cared about performance/dollar. On a price/performance basis, PCs were much worse than mainframes. But they were much cheaper overall, and suddenly consumers could afford their own computers (new market: consumers, new metric: absolute price). Apple, Commodore and other startups took advantage of this gap left by the incumbents. PCs got better over time and eventually became good enough to replace mainframes. IBM was disrupted, and almost died.
The key lesson for startups is a disruptive strategy is necessary when you’re taking on an well-established competitor. You have to outmanoeuvre them and find a market segment they haven’t spotted, the cheese that’s too small for them to bother with. If you want to learn more, definitely check out Clayton Christen’s original book, which goes into all this in far more detail then I can: The Innovator’s Dilemma.
Next week’s misused startup term: “pivot”.