Are disruptive companies smart? Or lucky? Or, are there common factors that many of these companies just happen to have?

Are disruptive companies smart? Or lucky? Or, are there common factors that many of these companies just happen to have?

It certainly can be argued that smarts and luck do play a part, but very often it is other factors that helped them succeed. Here are some of them:

Disrupt complacent industries: There is always more opportunity to disrupt complacent industries than innovative ones. Uber and Lyft decimated the “taxi” industry precisely because of this reason.

Invent markets: The best way to get market share is to invent the market in which you compete. A great example of this is smartphones and iPads: we didn’t know we needed them until we had them in our hands.

Crowdsourcing: Crowdsourcing can be used to collect content (YouTube), raise money (GoFundMe), build software (GitHub), or for many other purposes. Not only does this help scale at reasonable cost, but it helps build a buzz around the product or service.

Monopoly-busting: Often, monopolies become inefficient, and fail in the area of customer service, innovation, or price. A great example is the impact of WhatsApp, FaceTime, and similar digital services on the long-distance telephone market: they’ve decimated it. Another example is the impact of eBay, Craigslist (no relation), and Facebook Marketplace on newspaper classified advertisements.

Verticalization: This form of disruption is one where an entity owns up and down the supply chain. An example of this is Trader Joe’s, that only sells its own branded merchandise in the store, or Apple, which also owns both their chips through to their own retail stores.

Integration of technology and the real world: Sometimes technology by itself is not a disruptor, but how it might be used to provide competitive advantage can be. An older example of this type of disruption is real-time tracking for parcel delivery. A today example is Amazon’s logistics systems, that are able to deliver just about anything, anywhere, within a day.

Data: The entire internet is based on data. It can be used to provide a 360-degree view of a customer, identify nascent buying behaviors, or used to track people, processes, and things. An example of data-based disruption is the decimation of traditional advertising venues (magazines, newspapers, etc) which could not micro-target segments: the ad dollars flowed to internet-based platforms, such as Google and Facebook.

Network effects of scale: Disruption based on network effects is typified by when the usage of a service amplifies its usage (or self-markets) to a broader audience, making it even harder for new market entrants – or older incumbents – to compete. The earliest example of this was Hotmail, which advertised on the bottom of each email, “get your free email at hotmail.com“. This was the beginning of their ascendancy… and the end of paid email service from the likes of AOL or Compuserve. Today, network effects are typically attributed to Facebook, Google, and Apple, but are a staple of every global tech platform.

Better User Experience (UX): There is always a trade-off between a UX that prioritizes the organization – eg more upsells on a shopping cart page – vs a UX that prioritizes the client – eg an easier check-out experience. Disruptions based on UX occur when there is an imbalance, and a new market entrant has figured out a more customer-centric approach. A great example of this can be found in the e-commerce payment processing space. Stripe figured out to build a payment gateway that was far easier for developers to implement, had better fraud detection, and a better customer-facing UX. And their market share grew dramatically as a result.

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