Over the years, there has been a lot of discussion around disruptive technology. Clayton M. Christiansen first introduced the term in his 1995 article Disruptive Technologies: Catching the Wave. Today, the investment community is still focused on disruptive products.
So what does it really mean to you and me? Wikipedia defines disruptive innovation as “innovations that improve a product or service in ways that the market does not expect, typically lowering the price or designing for a different set of consumers.” The innovation changes the way people or businesses are currently doing something.
More often than not, true disruption occurs when two or more technologies are combined. Take the iPhone, for example. My friends and associates know that I am an Apple fan. However, the iPhone doesn’t really represent disruptive technology, even though many are claiming it does. Apple combined features existing in PDAs, touch screens, and cell phones and developed an innovative design which is now displacing many phones. The iPhone represents a evolutionary innovation that has improved upon the design and development of the cell phones before it.
Skype is another company heralded as a disruptive innovation. Today, Skype owns about 12% of the market for international calls being made worldwide. It combines VoIP and cell phones to create a viable alternative for traditional calling. I bet the major telecom companies are scrabbling to figure out how they will address this fierce competitor.
In my last post, I discussed the state of the investment community and its continued desire for disruptive technology. The Texas Emerging Technology Fund typically will invest up to $1 million in disruptive technology companies. However, for a technology to be truly disruptive, investors will have to put up more than $1 million to be successful.
I read a post a few months back titled “An argument against disruptive technologies” by Jason Cohen, and I agree with his perspective. In his post, he states the “disruption is rare and expensive. It’s hard to think of disruptive technologies or products that didn’t take millions of dollars to implement. Most of us don’t have access to those resources. . . . There’s nothing wrong with incremental improvement. What’s wrong with taking a known problem with a known market and just doing it better or with a fresh perspective or with a modern approach? Do you have to create a new market and turn everyone’s assumptions upside down to be successful?”
Few of us will be involved in truly disruptive technologies. In the end, it is better to create and grow sustainable revenue with a product and company in which you are passionate. If you have an idea that you think it exciting and new, then take the time to develop the idea. Identify your market, build your plan, and be ready to fund the beginning with your own money. Set your expectations to be successful, one step at a time.