Disruptive Innovation: A Check List
1. Your innovation has to be disruptive relative to something else. What is that something else?
-Netflix was disruptive relative to Blockbuster
-iPod/iTunes was disruptive relative to Sony Walkman/CDs
-Amazon is disruptive relative to Barnes & Noble
-HPs inkjet printers are disruptive relative to laser printers
-Uber is disruptive relative to taxi cab bases/companies (not taxi themselves as Clayton Christensen notes)
2. Disruption doesn’t occur as a result of technology/innovation. Disruption occurs as a result of the business model built on a technology/innovation.
Consider Napster vs. iTunes. They both functioned on essentially the same technology — file sharing. One disrupted the music industry, the other is Napster. Don’t get me wrong, Napster founders are doing very well, but because they didn’t develop a business model around their technology they didn’t end up disrupting the music industry in a way that allowed their company to benefit from it. Napster’s technology opened the door for Apple’s disruptive innovation, which was built around a successful business model.
Disruptive Innovation: Checklist
▢ FIRST FOUR
Every disruptive innovation meets the following criteria. If your innovation doesn’t meet these first four indicators then your startup will not be disruptive — period (but it can be).
1. Cheaper — your innovation must be significantly cheaper than the existing solution
2. Convenient — your innovation must be more convenient to use than the existing solution
3. Accessible — your innovation must be easier to access than the existing solution
4. Simpler — you innovation must be simpler to use than the existing solution
Now, compare your innovation (plus, business model) to the existing solution. Does it meet the first four indicators of a disruptive innovation? If yes, continue. If no, read Developing Sustainable Innovations.
▢ VALUE CHAIN
Do you make money the same way the existing solution makes money? Or is the way you make money in contrast to the way the existing solution makes money?
For example, Blockbuster made most of its money by charging people late fees. Netflix didn’t charge any late fees.
If you make money the same way the existing solution makes money, then you’re on the same value chain and you won’t be disruptive. If you are on an asymmetrical value chain, then check this box and continue.
Disruption occurs with customers who do not currently buy or use the existing solutions. Those folks are called “non-consumers.”
Ask yourself, is our product/service targeting non-consumers or are we targeting an established customer based? If you’re targeting folks who aren’t using any of the existing solutions, then check this box and move on to the next step. If you’re targeting folks who are currently using an existing solution then you won’t be disruptive (read Developing Sustainable Innovations).
▢ JOBS TO BE DONE
Jobs to be done theory applies to both disruptive innovations and sustainable innovations. For the sake of consistency with this post, I will reference disruptive innovations.
The “jobs to be done” theory is a dense nuanced process that will help you figure that out what causes customers to choose your product over another. Jobs theory states that people pull in products into their lives not to have the product, but instead to have the product help them do a job — hence, “jobs to be done.” Your job is to figure out what job your customers are trying to get done and then figure out the best way to position your product/service help them do that job. If your product/service doesn’t do the job better than an existing solution, customers will not pull your product into their lives.
5 Questions to Jobs
1. What problem do my customers have?
2. When do they have that problem?
3. Where do they have that problem?
4. What are the existing products/services on the market that aim to address that problem?
5. If/when customers pull the existing products/services into their lives to address that problem what is the specific job they’re trying to do with that product/service?
Now that you have the job to be done, answer the following questions to tailor your product/service to do the job better than existing solutions.
5 Questions to Clarity
1. What are customers currently doing to address their problem at the time they have the problem?
(Specifically, what product/service (if any) are customers pulling into their lives to address their problem?)
2. How do existing products/services overshoot customer’s needs (either in quality, cost, accessibility, or complexity)?
3. What problems or shortcoming do customers experience when pulling other products/services into their life?
4. How can you help customers do that job better than existing solutions?
5. How do you know? (Hint: Get out of the building.)
Each question deserves a considerable amount of attention and thoughtfulness. You can learn more about Jobs Theory in Competing Against Luck: The Story of Innovation and Customer Choice. If you want to work with someone on developing customer profiles based on Jobs Theory, Cezary Pietrzak is an incredible resource and consultant.
Most times startups position their product and/or service to solve a problem that customers have, but often overlook when, where, and why customers have the problem they’re looking to solve. In other words, startups aim to solve problems as if those problems occur in a vacuum and not as they actually do, in a specific place and time. No product solves a problem a customer has all of the time. Products solve problems customers have in a given moment for a very specific reason.
Consider what causes someone to pull Netflix into their life over YouTube, or vise versa? Or what causes someone to pull Netflix into their life over Hulu? Similar technology, similar markets, different problems. What causes someone to pull Amazon into their life over Walmart.com, or vise versa? What causes someone to pull Barnes & Noble into their life over Amazon, or vise versa? If you identify when, where, why, and what problem your customers have, you can then identify what causes them to pull one product over another into their lives and how your product/service can improve upon their current solution (i.e. the job to be done).
Major takeaway: When targeting customers don’t categorize them into demographic categories (race, age, gender, location, etc.) but rather identify their job to be done if you want to identify what causes them to pull your product into their lives over another product. When you do, develop systems around resources, process, and values to support them pulling your product into their lives as seamlessly as possible.
▢ EMOTIONAL, SOCIAL, AND FUNCTIONAL NEEDS
Identify the Emotional, Social, and Functional elements of the job to be done. Customers rarely pull products/services into their lives solely for reasons of necessity or functionality, but you already knew that. They almost always pull products/services into their lives for the emotional, social, and functional elements of a product/service. If people pulled products into their lives for purely functional reasons no one would go to Equinox, no one would shop at American Girl, or Tiffany&Co. Customers shop at those places primarily for social and emotional reasons. It’s clear that most luxury products are purchased for those reasons, but so are low-end products.
Consider Little Caesar pizza chain. For just $5 customers can walk into their pizza shop grab a Hot’n’Ready pizza and go. Think about the social and emotional considerations Little Caesar had in mind when identifying customers job to be done. Usually located in low-income neighborhoods, Little Caesar imagined customers coming home after working long hour, typically living paycheck to paycheck, working long hours and either have to provide food to one’s family or grabs a quick meal before finding a moment of solitude and rest(if that’s even possible). So rather than grab a slice from a traditional pizza shop at $3 per slice, or call Dominoes and pay a minimum of $15 for dinner, plus tip, at Little Caesars you can provide a meal to your family inexpensively and quickly making the most of your time with the hopes of finding a moment for yourself.
Successful products/services meet the social, emotional, and functional needs that are the driving motivators for customers. Identify what your customer’s needs are and figure out how you can tailor your product/service to meet those needs.
▢ INTEGRATING FOR SUCCESS
Whenever a customer has a job to be done that can be improved upon they pull a number of products and services into their life to do that job. For example, prior to the iPod/iTunes people bought a Sony Walkman, batteries, about 20 CD albums, a backpack to carry all of the CDs and batteries, if they wanted free/inexpensive music they would go to their computer download music from Napster, and burn the downloaded music to a CD, which they would then put into the backpack with the other 20 CDs. Apple saw the opportunity here and integrated for success by creating a device (iPod) and application (iTunes) that allowed its customers to buy and download 1,000 songs on a music device that fit in their pocket.
Another example of integrating for success (and there are many) is Amazon. They didn’t just set up an online store. They identified the job to be done as “get a product as soon as possible that’s worth the money I pay and does what I want it to do.” To ensure that they helped customers do that job better than existing solutions, they established shipping centers all around the country, created processes that prioritize certain shipments over others, let’s the customer read and filter through unvarnished reviews, and let customers know when the product will arrive at their home prior to checking out. Shipping centers existed before Amazon. Online shopping carts existed before Amazon. Customer reviews existed before Amazon. Priority shipping processes existed before Amazon.
What Amazon did was identify these resources and processes that already existed and figured out a way to integrate them to successfully help customers do the job they want to get done.
▢ RESOURCES, VALUES, AND PROCESSES (RVP)
This is where the rubber meets the road. One of my biggest pet peeves is seeing incredibly intelligent and gifted founders get the concepts that will help them succeed but fail to develop the resources, processes, and values to help them do so. The fact of the matter is, it’s hard to do. Amazon is successful because they not only identify the job to be done of its customers, which is basically “I want a product that’s worth what I’m paying as soon as possible,” but they also have the resources, processes, and values in place to do that job.
-It has user moderated customer reviews, which allows customer to filter our reviews that match their specific need and base their decision to buy off of people with similar needs
-It has the date the product will arrive (not the date it will ship). When you order from Amazon, during checkout you see a notice that reads “Your shipment will arrive at your home on Tuesday before 8 pm the latest.” Walmart’s checkout reads “Your product will ship in two days.” Who gives a fuck when it will ship? That doesn’t mean anything to me.
-To support that process, Amazon has shipping centers all around the world with teams of people who are trained to prioritize orders to meet the customer’s expectations and needs.
So, what resources are you allocating to solve customers problem?
-Do you have the manpower to do it?
-Do you have the money in the bank to do it?
-Do your investors understand your processes and values so they can either be patient or pushing with their money and expected returns?
-Do you have the metaphorical shipping centers in place?
-Does your team know what your company values?
-Does your team know how to translate those values into their most granular activities?
-Are your values being translated to your customer through your startup’s action?
Basically, if your resources, values, and processes do not support the job your potential customers are trying to get done then you will never capture those customers. If your resources, values, and processes do, then you’ll never lose them. To learn more about RVP read The Innovator’s Solution: Creating and Sustaining Successful Growth.
Please note that each section above is so incredibly nuanced. I tried to capture the overarching purpose of the section and will delve in each other in later posts. If you are inclined, you can get the information directly from the horse’s mouth by reading the four books mentioned below.
Many of the following books build upon the work of disruptive innovation theory by either narrowly focusing on an aspect of the theories developed by the HBS professor or by expanding on it. Some of these books have applicable techniques you can use to grow your business and for that reason have become staples in the startup world.
- The Lean Startup, by Eric Ries (or any book by Eric and the Lean series)
- Running Lean, by Ash Maurya
- Venture Deals, by Brad Feld and Jason Mendelson
- Rework by Jason Fried and David Heinemeier Hansson
- Crossing the Chasm by Geoffrey A. Moore
- The Art of the Start (2.0), by Guy Kawasaki
- The Startup Owner’s Manual, by steve blank and Bob Dorf
- Four Steps to the Epiphany, by steve blank
- Insanely Simple, by Ken Segall
- Do More Faster, by Brad Feld and David Cohen
- And pretty much anything by Gary Vaynerchuk or Seth Godin.
But, before you do read these four books, by Clayton Christensen, that introduce and codify one of the few causal-methodologies of starting up and innovating: