Every company wants to achieve innovation-driven growth (disruptive innovation). Incumbents want to remain current and disruptive or they risk losing their position to the budding startups. The top tech talent wants to work on disruptive technologies, be it Blockchain or AI or Quantum Computing, etc. But, what does it take to create a disruptive product? Is there a pattern, formula or framework? Does it depend on the prowess of a company’s tech and design soldiers or are there other outside forces at play too?
In business theory, a disruptive innovation is an innovation that creates a new market and value network and eventually disrupts the existing ones displacing established market-leading firms, products and alliances.Wikipedia
Theory of disruption
If you were to look at and compare the market-leading companies from 10 years ago and today, what differences do you see? Very few tech companies were present in the list 10 years ago. Today they are the majority. What happened? If these market leaders of the last decade knew about their competition, monitored them, why didn’t they just acquire these present-day market leaders or launched a competing product? How is it that a company like Facebook sneaked passed giants like Google, Microsoft without getting crushed or bought; and managed to make it to the same list as them?
To understand these tectonic shifts, many thought leaders employ the concept of the theory of disruption. According to this, every great product initially starts out looking like a toy. Disruptive technologies are dismissed as toys because when they are first launched, they often undershoot the user’s needs. History is full of such examples. When the first telephone was launched, it could carry voice only up to a mile or two. Western Union, the leading telco of the time passed on acquiring this technology because they couldn’t imagine how this could serve their existing and potential future customers. The same was the case of PCs with respect to mainframe companies and that of Skype with respect to modern telecom companies. Everybody knows that Yahoo passed on acquiring Google.
The graph explains why the above-mentioned events occurred. The black line in the graph goes up much faster than any other line. When a disruptive product is launched, it just meets low-quality use-cases of the users and often doesn’t meet the expectations. But, a very important thing to understand is that these technologies evolve very quickly and as a result, they easily surpass even the most demanding use-cases of its users. This is the reason why the rate of adoption of disruptive technologies is non-linear.
Will every toy-like product be disruptive?
Whenever people read about this theory, they immediately come up with doubt. And it is a valid one. Will every product that initially starts out looking like a toy be the next big thing?
Every product goes through its product lifecycle. And each stage of the life cycle affects the product in different ways, with different forces trying to pull/push it into different directions. Every product is as good as the features that a designer puts into it. But, compared to other forces, it is relatively a weak one. There are more powerful forces that exist such as microchips getting cheaper, infrastructure being provided as a service, bandwidth becoming ubiquitous, devices getting smarter, etc.
India is a prime example to witness and understand the effect of external forces. The cost of using 1GB of 4G data used to come around INR 200. With the launch of Jio in 2016, this came down to about INR 15 per GB. Not even a year after the launch, India added around 100M users to platforms like Facebook, Youtube, WhatsApp, etc. No wonder streaming media giants like Prime Video and Netflix flocked to the Indian market. So, yeah, you could have created and launched a perfect product to provide a streaming video platform with the best compression and encoding algorithms to Indians and it would have still failed, miserably. For a product to be disruptive, it needs to be designed to be able to ride these changes up the utility curve.
A paradigm shift
Talking about disruption, it’s not the product with the most features or best hardware that is most often disruptive. But why so, one might ask?
Before World War II, the middle class in developed economies struggled to afford the basic needs. Post the war era, the mean household income and the standard of living rose dramatically. People started consuming products far beyond what was needed and everyone raced to own the biggest car or the biggest house available in the market. In other words, the product economy overshot the needs of the mass market.
Today, however, the situation is different. People realize that they own more than enough products and they don’t want to pay extra to own a feature-rich version of the same product. An economy based on experiences is emerging with the notion that experiences make people happier than products.
The popularity of live concerts has skyrocketed compared to that of recorded music. Apple, a company that thrives on experiences right from using the product; down to it’s unboxing. Amazon, a service-oriented company that captured the mindset of the customers with its superior delivery experience. Just pick any product that you think is disruptive – take Airbnb for example, and see how the positioning of the company has evolved with respect to this new economy. Airbnb, today, is not in the business of renting rooms, but in the business of selling experiences and the same is evident in their branding as well as positioning down to the most minute design details.
Today, people not only care about their online experience but offline experience associated with the brand too. This is a very important trend for tech companies to look out for and possibly ride on. The era of competing over technical specifications is over. People who create great experiences will be valued at startups and startups that offer great experiences will be valued by users.