There's a lot of talk of "disruption" in startup circles, but it can be hard to understand. Here's how to tell if your company is definitely not disruptive.
As an entrepreneur, the same trait that got you in trouble in primary school wins you favor in the startup scene. That's right -- we're talking about being disruptive.
Obviously, disruption in the classroom is decidedly different than disruption of an existing market or vertical, but the main point remains -- you want to shake things up. The concept is widely discussed, and the adjective "disruptive" is making its way into more funding pitches every day.
The origin phrase "disruptive technologies" is attributed to Harvard Business School professor Clayton Christensen. A disruptive technology essentially changes the way things are done in a given market. It can take the form of a new technology taking the place of an existing one, or a similar product that operates in a unique way, bringing more consumers to a given space.
Whether or not disruption is truly necessary for startup success is an opinion that varies between individuals. For example, some investors refuse to invest in a company they don't see as disruptive, because they believe that only a company they is able to upend the current market will be able to bring massive returns.
On the other hand, some entrepreneurs and investors don't place as much value on it.
"Almost every startup is doing something different than the existing firms and I don't think you have to be 'disruptive' to be a great company," said Steve Herrod, managing director at General Catalyst.
What makes a company truly disruptive is subjective and depends on the space the company occupies and what it is trying to accomplish. However, there are a few tell-tale signs that a company is not disruptive. It begins with how other companies see you.
You're not pissing anyone off
Have you ever had a splinter in your hand that, despite your attempt to remove it, seems to bury itself deeper and deeper? That's kind of how a disruptive company feels to incumbents when it enters a market.
"If you're really disruptive, you're usually making another company's life more difficult," said Christian Jensen of Accel.
Existing companies should see you as a threat. They should view you as an enemy. You are fighting for the same space and, as a disruptor, you're breaking the rules in the process.
"Everything that's been truly a disruptive technology -- it kind of irks somebody," Herrod said.
If your startup makes perfect sense to everyone in existing roles at first glance, it's probably not disruptive, Herrod added.
The business model isn't new
Most VCs look at many potential investments every year, so they must have strategic ways of determining what makes a company matter. In trying to determine if a company is, in fact, disruptive, Herrod asks whether or not it fits in an existing space.
"When they come and they tell me where they would fit on an existing magic quadrant, in an existing category, I think that's a sign it's not truly disruptive," Herrod said. "Because the space has already been mapped out and they're pushing on certain criteria that are well understood."
But, Herrod said disruption is possible if your startup can truly differentiate itself from the competition. However, the differentiation must occur in an order of magnitude greater than what exists presently. For example, if a startup says it is disrupting something by being faster or cheaper, Herrod said his metric is that it must be 10 times faster or cheaper to make an impact.
Being able to do something faster and cheaper mean that you'll be able to scale faster. The lower price contributes to price elasticity, meaning the growth in demand that comes with the lowering of price. Ben Brooks of Southern Capitol said this is especially important in that price elasticity is an indicator of potential scalability.
You can explain it clearly...or, you can't
Mastering the art of the pitch is a necessary skill every entrepreneur should learn. And, how people respond to that pitch, whether they easily understand the value of the product or not, can be a determinant of disruption.
There are two main camps here. The first is that people should immediately see the need for your product when it is explained. According to Jensen, the best companies are unique, but their value proposition should be easily understood as filling a gap in the market, as long as it is explained with common language, not necessarily with industry jargon.
"If it takes more than five minutes to convince someone new that the product is really valuable to the customer/user -- chances are it isn't," Jensen said.
If a customer doesn't clearly understand how the product adds value or fits into their current business strategy, they might be less likely to adopt, which could hold up customer growth.
The opposing view is that if an audience "gets" the value of your startup quickly, then it is not disruptive as it isn't far enough outside of the box to challenge. If it is easy enough to understand it could be too much like everything else and not different enough to disrupt anything.
According to Herrod, potential customers won't exactly know where a disruptive product fits in their workflow, which may make them struggle to understand its value. Part of the misunderstanding comes from the fact that people see products as existing in silos or solving singular, specific problems. Many disruptive companies, however, can bridge the gap between two types of products, such as database structure and sales management.
"A lot of the big technology shifts and the really big disruptions, happen in the seams between existing categories or existing products," Herrod said.
Regardless of whether or not you need disruption for your startup to be successful, disruption is one of the key drivers that keeps every industry moving forward. If it weren't for the disruption of the automobile, we might all still be traveling by horse and buggy.
What do you think?
Does a startup have to be disruptive to be successful? Tell us your opinion in the comments.