What makes a startup “disruptive”?

Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in April 17, 2012 on MarkEvansTech.com.

CC-BY-20 Some rights reserved by Kevin Krejci
Attribution Some rights reserved by Kevin Krejci

I had coffee recently with a VC who talked about how “disruptive technology” was a key part of his firm’s investment approach.

On the surface, it makes sense. After all, “disruptive” is impressive because it sounds like something that could make a difference and, in the process, attract a lot of users and be worth a lot of money.

But after thinking about it, I began to wonder what “disruptive” really means and, in particular, what makes a startup truly disruptive. Is it a product that leaps ahead of the competition in a major way? Is it a product that solves a problem or a need in a new or different way? Is it a product that’s easier to use or less expensive than what exists?

  • Is Wave Accounting, for example, disruptive because it launched a free online accounting service into a market in which most players were offering a fee-based service?
  • Is 500px disruptive because its elegant and service displays photographs so beautifully.
  • Is Engagio disruptive because it offers a “social inbox” at a time when people are getting messages from multiple sources.

In many respects, “disruptive” can be defined in many ways. This makes it an alluring but, arguably, difficult creature to discover and identify. For one investor, disruptive may be one thing but it entirely different from another investor.

The problem with “disruptive” is it’s a sexy term for entrepreneurs and investors to throw around. Suggesting your product is “disruptive” is easy to do and get away with because it can be difficult to argue otherwise because “disruptive” is so slippery. How many times have you heard an entrepreneur proclaim their technology is “disruptive”?

The reality is we love “disruptive” because it’s elusive, multi-faceted and difficult to pinpoint until a startup enjoys success. Then, everyone can confidently say: “I know Instagram/Pinterest/Path, etc. was disruptive when I first saw it”.

So, how do you define “disruptive”?

Editor’s note: This is a cross post from Mark Evans Tech written by Mark Evans of ME Consulting. Follow him on Twitter @markevans or MarkEvansTech.com. This post was originally published in April 17, 2012 on MarkEvansTech.com.

  • http://twitter.com/pphilp Paul Philp

    Disruption is defined by the category being disrupted. A technology is disruptive if it makes the value of the category less expensive and/or more convenient to a larger number of buyers or users. In the typical case, disruption takes an expert skill and makes in broadly accessible to non-specialist users.  Perhaps engagio is disruptive – if it simplifies social interaction to the point that it becomes a mainstream activity. However, Wave and 500px seem like substitutions for the existing market – they are better in important ways to buyers but are not changing the economics of adoption.

  • http://davidcrow.ca/ davidcrow

    Clayton Christensen describes disruptive innovation as “An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.” http://www.claytonchristensen.com/disruptive_innovation.html

    I think @twitter-18000316:disqus is right, @500px:twitter feels like a sustaining innovation. It’s the opening of new markets, for example the Ford Model T with production and pricing was the disruptive technology not the automobile http://en.wikipedia.org/wiki/Disruptive_innovation 

    I wonder if this is an example of @startupcfo:twitter Vision Can Come Later http://www.startupcfo.ca/2012/04/vision-can-come-later/ where a company is described as disruptive after the fact
     

  • Ovi

    Disruptive is advanced technology that will wipe out all the competition, regardless of its size, it will transform how business is done for a lot of industries. Internet was disruptive yet compared to Artificial Intelligence it will be nowhere near close to that impact. FYI: AI is about to pop soon.

  • http://startupcfo.ca/ Mark MacLeod

    Disruption is a pretty clear concept to me. It implies a technology, product or business model that has the potential to change an industry. This usually manifests itself in the form of incumbents losing market share. Google this to Yahoo! And others in search. Facebook did it to Myspace. Many, many examples.

    By that definition, I would say based on what I know today that only Wave has disruptive potential. Intuit sells some clunky old software and is vulnerable.

    But as David says, in many cases, tu disruptive label is applied after the fact.

  • http://www.rocketwatcher.com April Dunford

    I had a great discussion about this once with a senior analyst at Gartner Group. His take was that “disruptive” solutions make customers question what they have always done and think about doing it in another way (for a large B2B purchase, disruptive technologies make decision makers call their Gartner rep for advice :). The label “disruptive” is a lot like branding in my opinion. Companies don’t get to label themselves that – the market does. 

  • http://www.mattroberts.com matt roberts

    Disruptive Technologies are sustainable advantages that allows the innovators to influence existing markets to their advantage or control the dynamics of a new one well beyond the size of the existing organization or its pedigree.  

    The word sustainable is probably the most important, can your ‘disruptive’ differentiation be easily copied by your competition – if so its not all that disruptive as it not a sustainable advantage. Rarely are these seen in the web software world, I’ve seen it in the semiconductor market. There a company introduced a new process to design chips that led to a 3to1 cost advantage. They patented it and disrupted the premise of all existing adoption, costing and pricing views for those chips, bending the market curve with technology. 

  • Cyril Arnaud

    In my opinion, disruptive is linked to the “blue ocean strategy “. Your idea is disruptive when you bring a new solution to an existing problem. You then create a disruption in the market if your idea creates a new ocean where you have virtually no competition (a blue ocean).
    For instance I think that Wave accounting was indeed disruptive because they bring “sexy” in accounting.
    That’s a feat in itself.

  • http://engag.io/ William Mougayar

    I don’t think you start out by being disruptive, but your vision and roadmap must exhibit that characteristic.

    The disruption part happens when enough users adopt your product, and they become the ones disrupting the market. Otherwise, it’s just an idea. Ideas are not disruptive, but their execution is.

    It goes back to starting out with the “thin edge of the wedge”, then making the wedge fatter and fatter til it becomes a sledge hammer. Then you change the world with your sledge hammer.

  • http://engag.io/ William Mougayar

    Exactly. Users do actually, by adopting your product (see my other comment above).

  • http://engag.io/ William Mougayar

    It’s definitely after the fact, because it will depend on the users’ adoption of that technology. When users stop using a product in favor of another, that’s disruption.

    Engagio is not disrupting other market players, but it is filling a void that is out there, and if the market for online conversations grows, and our users grow with it, then potentially we could become disruptive to other products down the line. It would be presumptuous to say we are. But to say that we have “disruption potential” may be more accurate.

  • http://www.RohanJayasekera.com/ Rohan Jayasekera

    It annoys me that people are now using the term “disruptive” without sticking to Clayton Christensen’s definition; he coined the term and it’s a tremendously useful one. With enough misuse, useful terms become useless.

    But I do think there’s an understandable reason behind it. Many of us who work in the innovative parts of the Internet industry are getting a sense that Internet-era businesses are now taking on traditional businesses on a large scale where “nobody is safe”. Sometimes the situation meets Christensen’s definition and sometimes it doesn’t, but it still meets this pattern: an innovation causes large numbers of customers to go with a new company rather than an established one. We’ve already seen the destruction of the traditional classified-advertising business (and with it the mortal threat to newspapers), and we’re about to see the destruction of the traditional book business. Umair Haque pointed out some years ago that the media industry would be merely the first one to suffer, and now with things like Square and Uber we’re getting a taste of what can happen when we young upstarts decide to take on the old guard (our first attempt might not work, nor our second — but our attempts are now cheap and there are more and more of us). Marc Andreessen’s WSJ essay “Why Software Is Eating The World” describes it well, but while we could say that established companies are “having their lunch eaten” it sounds better to say they’re being “disrupted”.

  • http://philgo20.com/ philgo20

    I wish you could tell me if we have the potential to be disruptive Mark ;-)

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