The question of whether technologies—new and existing—or strategically thought-through business models are the more important ingredient for great disruptive businesses has been debated for decades. The one side firmly believes that without advances in technology, even the best disruptive businesses never get past the idea phase. The other side argues that technology doesn’t cause disruptions— it’s business people’s ideas that have the power to disrupt and transform people’s lives.
The fact is both are equally important. Most big and audacious disruptions start with someone identifying a problem, want or need for which there is no widely available solution. Sometimes the right technology that could potentially provide a platform for a disruptive business hasn’t been developed yet but sometimes no one has figured out how to make money by inventing a solution to a particular issue.
Uber and Lyft, for example, developed an easy-to-use mobile solution to a perennial urban problem—individuals having to stand at curbside, often in terrible weather conditions, trying to hail a taxi. Their solution also gives people living in rural areas who are not able to drive a car themselves have access to cheaper and more convenient individual transportation.
Of course, car services have existed as long as taxicabs, but they often require pre-booking, long telephone conversations, and considerable expense. Taxis and limousine services are also subject to complicated and daunting regulations that arose out of safety concerns with licensing models that could be cost-prohibitive for most potential drivers.
As simple as the concept is, however, Uber’s, Lyft’s and other such companies’ business models was only possible when the right mobile technology had been developed.
The digital revolution, which has already had one of the most transformative impacts in the recorded history of the world, started in earnest at the beginning of the 1990s. Until then, the prevailing thinking was that users were slow in adopting disruptive technologies. And to a certain degree this was true, as so much technology—especially for businesses—involved significant investment in equipment and infrastructure. Often, new technology was often difficult to learn to use or highly counterintuitive which required many hours of training.
In contrast, the newest digital and mobile technologies are inexpensive, simple to install and use. Most importantly, they have automatically leveled the playing field for entrepreneurs around the world.
When it comes to the subject of timing and technology there are two popular myths I’d like to debunk. The biggest myth of all is the belief that “unicorns” exist in business – that is, companies whose unique solutions to big problems provide them with high barriers to entry that protect them from potentially disruptive competitors.
On the contrary, I would say that if you can’t find anyone else trying to compete in the space you have defined, the opportunity is most likely not that attractive.The greater the opportunity, the faster players will jump on it.
Patents certainly help to sustain some sort of competitive advantage, but aggressive entrepreneurs have proven adept at developing alternative technologies that often offer similar solutions. Their lawyers can circumvent existing patents and/or successfully apply for new ones. In the software industry, a slight change in a string of code can be enough justification for a new patent. In other industries, a modification to a process or a slight variation in outcome can be sometimes enough to justify awarding the inventor a new patent. The consumer rarely knows the difference.
The other myth that has blinded many otherwise intelligent people to the realities of life and business is an unfounded belief in what we often call the “first mover advantage.” I can’t think of any instance when a business had a significant and sustainable advantage because they were the first one out the door. In fact, it’s often the first movers who get disrupted the fastest. Most first movers get trampled in the dust simply because someone else has more money, a better plan, or a more developed organization. Sometimes first movers are up against savvier entrepreneurs, or they simply aren’t at the right place at the right time.
About fifteen years ago I worked at a start-up with a team of senior executives and technology experts we firmly believed had a first mover advantage that would mow everything down in its path forward until we discovered quite the opposite was true.
I took a year off in 2001/2002 before joining Sony and spent the time working with a few small companies. One of them had purchased the rights to technology developed by the military to harvest intelligence “buried” in thousands of documents. It was essentially an early version of e-discovery software that would take off several years later.
The CEO of the company wanted to repurpose the software as a business development tool for professional service companies. Hundreds of thousands of documents comprising both structured and unstructured data found on a company’s servers and/or employees’ hard drives could be fed into the tool. These documents would be scoured by powerful search engines which in turn could find hidden connections between individuals that were not otherwise evident without a lot of manual processing. A salesperson or business developer could then map out a path of connections to eventually get in front of an important target client.
We were clearly a few years ahead of our time, and the software had a lot of bugs. In addition, poor economic conditions at the time made it almost impossible to get the funding necessary to fix the problems and develop the software to the point at which it could process huge amounts of data. Within a year, the money that the founders had invested disappeared, and I went to work for the CEO of Sony in Japan.
About five years later I was invited to “link in” with a former employee of mine and quickly realized that our basic idea had been further developed and refined. Using a much friendlier user interface and a process that didn’t rely on countless proprietary documents, but instead on building an open community of users, a company named LinkedIn used similar connection-mining technology to become the leader in online B2B business development and recruitment.
And let’s not forget that Facebook had its forerunners as well—most notably MySpace, which in subsequent years has become not much more than a footnote in the annals of online social networking services.