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Disruption is sometimes an abused term, bandied about to imply great technical capabilities or an ability to extend reach to new eyeballs or an ability to leapfrog current products, etc.
Yet many so-called disruptors ignore business basics to their peril. The great challenge in disrupting a market, as in all business, is to ensure that the customer is offered a service or product of value. The only sustainable indicator of meeting such customer needs is profitability.
Entrepreneurs struggle with this balance because they recognize that to break into a market also has startup costs etc. My bias is to avoid the following eight traps of disruption, each linked to a struggling or now-dead business:
- Excessive initial investment (3G wireless, Webvan.com)
- Excessive startup losses (Alien Technology's RFID)
- Using a big company approach in new markets (Pandesic, Wireless Knowledge)
- Preventing management learning by betting heavily on a 'sure thing' (Boeing's WiFi service)
- Counting on 'educating the market' (Electric cars)
- Focussing too heavily on being first to market (govWorks)
- Excessive focus on the growth of non-financial metrics (Skype, many social networking sites)
- Putting a premium on growth instead of profit (Vonage)
- Focussing on masterminding a new world order or grandiose ecosystem instead of facing the well defined immediate needs of well defined customers. (Flooz)
Some of the new media and Web 2.0 companies might be analyzed from this standpoint.
I got to thinking about these pitfalls when I came across the Web 2.0 BS Generator, a funny but jaded comment on the latest tech darlings. It reminded me of Valley of the Geek's mythical report of the billion-dollar Business Server (BS) market.
** Other Views / Late Addition**
Dead2.0 highlights the lack of business-thinking among some Web 2.0 startups and even their VCs.
Big 10 Innovation Killers: A fuzzier list including with innovation pitfalls related to corporate culture and diversity.
Full archive of On Disruption columns published in the Financial Post.
The Disruption Group lists the benefits of disruption, including new revenue growth, higher margins and sustainable high return on equity.
Peter Drucker offers this list of Don'ts in his 1985 classic Inovation and Entrepreneurship, also reprinted in The Essential Drucker: Don't try to be clever; Don't diversify; Don't try to do too much; Don't try to innovate for the future. Innovate for the present! "Unless there is an immediate application in the present, an innovation is like the drawings in Leonardo DaVince's notebook -- a brilliant idea."
The Museum of E-Failure has a collection of hundreds of screenshots from some of the tech sector's biggest collapses, including Petstore.com, Webvan and Boo.com.
Why Iridium failed: Academic study from Dartmouth;
Why Webvan failed: Academic study by NJIT;
Why Boo.com failed: Former insider's view.
F'd company: The book: A dark chronicle of the worst excesses of the dot-com bubble.
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