Urlocker On Disruption

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Guest post by Zack Urlocker

As you may have noticed, my onDisruption blog posts have become less frequent lately as I'm busy with other projects.  I will continue to post the occasional article and provide updates to past stories, but these will be less frequent than before.  For newcomers to the site, here's a list of some of the most popular postings on the site. 

If you're new to disruption this is a good way to start thinking about your own disruptive strategy.  And note that while some of these are classic technology disruptions, many leverage other forms of disruption, whether in distribution, packaging etc. 

So don't fall into the classic Silicon Valley view that disruption is only about new, faster, more complex technology.  Sometimes it's just the opposite. And while disruption is a good model, it's not the only strategy for success.  Apple's iPhone is only marginally disruptive, but its still a huge hit for the comapny.  But when disruption works, the gains can be impressive.  And the benefits accrue not only to the company, but to the careers of the individuals who make it happen and to investors who spot the trend early.

• Dealing with Information Overload
• iPhone a Hit, But Not Disruptive
• Disruption Investing: Picking the Next Apple, Not Vonage
• Who Killed the Record Industry?
• Microsoft Dismisses Google Apps as Inferior
• Are You A Sitting Duck?
• Management Lessons From Rock Guitar Wars
• XBox Guitar Hero Melts Face Off Old School Rockers
• Nintendo Wii Smacks Microsoft, Sony
• Heinken Disrupting the Beer Industry

As you formulate your own disruption strategy focus on the basics:

• What problem are you solving?
• How can you do it better than existing solutions?
• Who is underserved by the incumbents and what are the unmet needs?
• How can you deliver a "good enough" solution to a narrow but growing audience?

Let me know your thoughts on these and other articles.  I hope they will inspire to you let a thousand disruptive flowers bloom.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe.

Learning from Apple's Flops

NewLaunches.com lists Apple's top 10 product flops and there is plenty to be learned from it.

Apple rates highly as an innovator in my view, but the company has been inconsistent in its long history.

Two disruptive innovations were big hits: the Mac and the iPod because

• they changed the basis of competition by fulfilling new customer needs 
• they initially appealed in marginal markets
• they appeared inferior in some ways so that competitors ignored the products and their early success.

I think the new Apple TV system also will be a successful product and it rates a high Disruption Score for many of the same reasons.

Apple's top 10 Flops
10. Cyberdog: alternative browser and set of open web applications
9. Taligent: new operating system JV with IBM
8. EWorld: online ecosystem thingee JV with America Online
7. Pippin: game console
6. 20th Anniversary Mac
5. Motorola ROKR: phone + iPod sort of
4. Macintosh TV: Mac + TV sort of
3. Macintosh portable: 16lb of joy for $6,500
2. Lisa: $10k not sure why it flopped
1. Newton: Still the number one cult product of 1993

Looking at the list, some of the products were ahead of their time. Many of Apple's product flops seem to suffer from classic traps of would-be disruptors: 

• Apple sometimes bet the farm on new technology and features ahead of clear market feedback from users (Newton)
• it tried to cram a new disruptive idea into a known business (Motorola ROKR phone, Eworld)
• it tried to create an incrementally better product in a crowded market (Cyberdog web browser, Pippin game console.

**Other Views**
ArsTechnica says not-so-fast with some of the nominations.

Harvard Business School says Apple's new strategy is being second to market.

Tech writer John Dvorak says Apple's iPhone is a pending flop that should be cancelled ASAP: The cellphone market is consolidating and mature so that margins are slim and new entrants can't compete without losing money, he says. Many commenters on Engadget disagree.

Grade Your Website

Dharmesh Sharma at OnStartups.com has an interesting tool to help startup companies grade and improve their websites. Like any automated management tool, it may appear oversimplistic at first glance.

However, don't dismiss this tool because it delivers good insights into improving the usefulness of a website.

Type in your URL and a few keywords and the proprietary algorith computes a score out of 100 in a few seconds. It also produces a detailed report.  Take the  details to your web designer and you are on your way to a better website.

The system is not perfect (the algorith is described as version 0.87) but there are some lessons to be learned.

I conducted some sample runs of the system and here are some selected results from the detailed reports. To avoid embarassment I have not listed the names of the startups with low scores.

Sample scores:
Ironport.com: 89/100 (Acquired by Cisco this week for $830M) High number of meta keywords. Google pagerank 7; No RSS feed found; Technorati ranking 0; Some keywords missing;

Hardware co.:  23/100: Description missing; meta keywords missing; RSS feed not found; Signup form not found; Inbound links: Google 9;

Systems co.: 29/100: Searchwords missing in title; Meta description missing keywords; Inbound Google links: 0;  Technorati rank: 0;  Google pagerank 0;

Guy Kawasaki's VC Aptitude Test

Guy Kawasaki, blogger and venture capitalist, posted an aptitude test for VCs that applies to entrepreneurs as well. It looks at:

• Work background: Engineers and salespeople score well; Experience as an MBA or consultant is negative;
• First-hand experiences: Been at a failed startup? That's good;
• Knowledge to share: Have the right advice for a struggling CEO on how to fire a friend? How to launch a product with no budget?

Go directly to the test  or to the introductory writeup.

Kawasaki is a thoughtful advisor for startups and his advice applies well to disruptive innovators beyond the startup phase as well.

**Other Resources **
Bill Wagner: Here's an alternative Entrepreneurial IQ Test, by Wagner, author of the Entrepreneur Next Door.

The Disruption Group:  Tools for managing disruption, including the Disruption Scorecard and Brainstorm Tool.

New Competitive Analysis Tool

Why is it that almost no major department store created a successful discount chain in the past 40 years? How is it that IBM was the only mainframe computer maker able to make the transition to the PC world?

Traditional competitive analysis looks at the resources of an organization and compares to the competition: Balance sheet, strengths, channel partners, technology, etc.  But this approach, typified by SWOT analysis or Porter's five forces  doesn't fully explain the case of IBM's success or the failings of traditional department stores. 

Often, when confronted with a potentially disruptive threat, incumbent suppliers choose not to compete. Typically they do so because the new competitive disruption does not make sense to the incumbent supplier's current customers, the current business model, or the organization's way of prioritizing opportunities. Or, the organization attempts to launch the new business idea, but it is somehow smothered by the good intentions of the organization's existing processes.

Consider this: Why is it that Blockbuster and major retailers were late to enter the mail-order delivery (pdf) business that NetFlix pioneered.

Our new RPV Competitive Analysis tool, based on Clayton Christensen's work on disruption, has three important dimensions, two of which should help extend the traditional competitive analysis into a disruptive framework:

• Resources: The assets of the organization
• Processes: How the organization uses or creates resources to work in a predictable fashion. Generally fixed procedures which can't easily be changed, such as budgeting, project approval process, market surveys, quality assurance, etc.
• Values: The priorities of the organization; The factors that determine what is important to the business, such as gross margin, brand, share price, size of opportunity, etc.

The tool is a management exercise designed to help organizations think about their processes and priorities vs their top competitors and vs potentially new, disruptive competitors.

The tool is located on our new tools page along with several other tools to help create disruptive business ideas and to manage disruption at The Disruption Group's website.

Cranky Middle Manager: How to Get Disruptive Without Getting Canned

Wayne Turmel, host of the Cranky Middle Manager show, interviews Michael Urlocker on disruption for middle managers.

Turmel draws on lessons from history, including the epic battle of Agincourt, to set up the discussion on disruptive innovation and how managers can use this methodology today. Highlights from the 31-minute podcast:

• Disruptive innovation is a repeatable management method to produce new growth and to help fight commoditization;
• Typical characteristics of disruptive innovations: Initial inferiority, initial marginal market segment; new attributes that are highly valued in a marginal segment;
• Not just for CEOs: Middle managers can create and manage disruptive innovations, if they avoid the common pitfalls of would-be disruptors;
• Typical (self-defeating) reactions of succesful companies as they are being disrupted;
• A discussion of tools and resources for managers to learn about disruption.

** Resources for Managers**

From The Disruption Group 's set of tools for managing disruption:

1. Getting started: Download a CEO Guide to the Benefits of Disruption (pdf).
2. Communicating: Download a presentation on achieving the benefits (pdf) on disruption strategies.
3. Developing disruptive ideas: Download the Disruption Brainstorm Tool (pdf).
4. Scoring: Download the Disruption ScoreCard (xls) to rate your idea or business.

Innovation Tools from Fortune

Fortune's Innovation Forum conference website has kindly posted links to some useful management tools including:

• Scorecard for Innovation Leaders by executive recruiter firm Heidrick & Struggles;
• Worksheets for challenging management orthodoxy by author and London Business School Prof. Gary Hamel;
• Disrupt-O-meter, my favorite of the batch, an excel worksheet that allows managers to answer the question, "How can I make my idea more disruptive?" This is a smart and helpful tool created by Innosight and available at the company's Innovation learning lab. The worksheet is designed to show a side-by-side comparison of two projects, or of a primary approach and and alternative approach to the same idea, based on eight probing questions. It also encourages brainstorming of what-if scenarios to optimize the impact of management decisions.

 

** Other Resources **

The Disruption Group's website has a Disruption ScoreCard and other tools for managing disruption.

Innosight often uses the Disrupt-o-meter in its Strategy and Innovation newsletter to illustrate a side-by-side analysis of two companies in the same sector.

Information Week occasionally publishes its own disrupt-o-meter as a snapshot glance at new technologies. It's less rigorous than Innosight's work, but does offer a quick look at emerging technologies. (Archive.)

Online marketing strategist Christian Sarkar looks at Hamel's work on challenging orthodoxy.

Fortune's Business Innovation Insider blog is always fresh full of interesting insights.

New Disruption Scorecard

Several managers and execs have offered feedback on v1.1 of the Disruption Scorecard.  Thanks for the input, and as a result we have revised the Disruption Scorecard to include a few new tests for profitability and growth rates.  The scoring is also a bit tougher. (Aim high, we say.)

Disruption ScoreCard  (Also more tools for managing disruption at The Disruption Group website.)

We have also added areas for you to customize the tool to your needs, such as input weightings, grade thresholds and output messages.

Grading a project or business is a subjective process, but we have tried to identify the major components of successful market disruptors while keeping to a quick process.

The Disruption Scorecard is best used as a starting point for discussions on market disruption. It should stimulate questions and thinking on the subject. Not all successful disruptors score straight-A's, but we think that if you can score well on more of the criteria, you will have a greater chance of success.

Feedback is welcome on this new version and the criteria used. We will post some example Scorecard results shortly. 

Feel free to download and post your own calculations of Disruption Scores for your projects or companies.

** New Version 2.1 **
Disruption Scorecard v2.1 includes some further refinements to incorporate low-end disruption as well as the earlier focus on new-market disruption. Some criteria related to the profile of investors is also included.

Whitepaper: CEO Guide To Benefits of Disruption

What are the tangible results of competitive disruption?

• Faster time to market
• New revenue streams
• Higher margins
• High, sustainable return on equity

This eight-page executive whitepaper, CEO Guide to the Benefits of Disruption, shows how these benefits can be achieved through disruption with case studies of successful disruptors in retail, financial services and telecom. Includes guidelines to help assess potential disruptive innovations.

If you are faced with the challenge of restoring growth and are considering disruption as part of your  strategy, take a look.

**Other Information **

The Disruption Group's website includes more tools for managing disruption.

Disruption Scorecard

  Just how disruptive is that project you're looking at?  It will take 4 minutes to find out.

Check your score on The Disruption Group's Disruption Scorecard (xls). If you've got the next BlackBerry, you should score an A.  But if your project rates a C, better do some more work if you plan to disrupt the market.

To raise your grade, you might run through the Disruption Brainstorm Tool available among several tools for managing disruption.