Disruption Is Overrated; Look at Market Making Innovation Instead
Statistically, you have less of a chance to be the next Steve Jobs than Jeff Bezos, here’s why.
PHOTO CREDIT: Getty Images
I recently gave a speech about innovation at the urging of the founder of City Summit, Ryan Long, about what constitutes market-making innovation, and what we should be investing in- not only with our money, but with our time. We have over-saturated markets, we have Amazon with page after page after page of drop-shipped products and duplicates, we have more entrepreneurs now than ever before, and we have low barriers to entry. All of these shifts have encouraged this massive wave of spirited business lovers to try and find their place in this seemingly never ending ecosystem.
Warning! Highs Bring Lows
But low barrier to entry doesn't equate to high rates of success. In fact, it's quite the opposite. There is a difference between that all-too commonly used buzzword "disruption" and entrepreneurs who are market making. Let's talk about that first.
Disruptive vs. Market Making
Tesla is truly a disruptor. They went for the high end of the market, not the low end, and for the auto industry, they took a huge leap in their own direction. That means they disrupted the market and helped drive it in their own direction. Tesla has now outsold BMW, Mercedes, Acura, and Audi here in the states. Tesla sold more cars than any other luxury car brand this past year. Another well-known disruptor, Apple, is the reason we all have mobile phones. Everything about what they've done is disruptive. Then Netflix came along at the right time, because the birth of digital media helped them disrupt the market. But, be forewarned, these occurrences are rare.
Market Making Statistics Are More In Your Favor
Uber, Airbnb, Amazon, are not disruptors. They created new markets, along with massive market changes happening (the internet, online shopping, etc.) at the same time, and they went along with it. They are market makers, not disruptors. Maybe it seems more exciting to be Tesla, but let's look at this statistically.
You have a six percent chance to be the disruptor.
You have a twenty-eight percent chance at success as a market maker by building a market within an already thriving or growing ecosystem.
The Winding Path to Innovation
If you think your space is somewhere in market making, creating a deviated path from an already well traveled, well proven path, great! Let's go to the next phase of questions... are you investable? People pitch me their ideas every single day, and while I love the enthusiasm, innovation isn't an easy path based on the thought you had last night while heating your burrito. Maybe that's where it begins, but that's the first stepping stone. I've been living in this realm for twent-seven years, and I've learned that your time is more important than my money. So when I'm asking, is it investable, I'm talking to you. Is this journey worth your time?
"It" Factors to Look For:
Credibility: can you do what you say you will do? Can your technology do what it says it will do? Will regulations or market restrictions kill it before it goes live? Can you deliver the goods?
Collateral IP: At the end of the day, will you be left with something that someone else sees enough value in, that it's worth money?
Market Proof: Product market fit accounts for such a huge percentage of failure. And nobody expects it to happen this way. You have to show the dog will eat the dog food... but also that the owners will buy it. If you match the product market fit, you up your odds of success or surviving by fifty-six percent. If this isn't right, no amount of amazing teams, culture, or networking will save you.
Benefits to Market Making vs. Disruption
Less risky ROI. You aren't reinventing the wheel, and you aren't selling the first wheel either. This takes a lot of risk off the table.
Proof is there, customer education is significantly reduced or nonexistent. More market proof, which is the gold standard in my book.
Carving out a niche in a secure area. This creates an opportunity for you to ride a wave with other market makers.
I want to leave you with this. HBR did a massive study on disruptive innovation, and right out of the gate put attention on something most of us probably haven't considered:
"In our experience, too many people who speak of "disruption" have not read a serious book or article on the subject. Too frequently, they use the term loosely to invoke the concept of innovation in support of whatever it is they wish to do. Many researchers, writers, and consultants use "disruptive innovation" to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that's much too broad a usage."
This is important because it's time to get clear, not only on our terminology, but our goals, and most importantly our position in the market, which will allow us to more clearly see the path to success.