Full Stack Innovation Startups Will Change Traditional Businesses In The Middle East

This article was originally published in Forbes, Middle East - August 2016.

Most business innovation is incremental: a startup or established company tries to improve — but not reinvent — an established industry practice. They take an existing product or service and make it incrementally better, faster, or cheaper. But full-stack startups seek to completely replace a practice or even an entire industry; their goal is to offer a complete end-to-end solution that is transformational, a true breakthrough.

For example, when Mitsubishi comes out with a new car model, it represents a common form of innovation. The result may be appealing and even highly successful, although it’s not disruptive. But when a new competitor like Tesla introduces a lightning-fast, ultra-stylish electric car, that’s an example of full-stack innovation. Tesla is reinventing everything, from the power source of its vehicles to the design of the batteries that power them and even to the way the car drives itself. The company built a new manufacturing and distribution system from scratch, completely bypassing all existing automotive players.

In many cases, full-stack is the only way to significantly innovate and improve customer experience. If you own a Tesla, your car will get better over time, because Tesla routinely adds new functionality or improves existing features, and then downloads updates to your vehicle. Until Tesla, once you drove a car off the dealer lot on day one, your car started to decline in value and function.

The supply chains of many industries have grown almost inexplicably complicated and inefficient. Companies have been following certain commonly accepted practices for so long that all the established players simply accept the status quo as the way things will always be.

This, of course, is flawed thinking, because everything changes. If you mistreat customers or ignore their needs long enough, a full-stack competitor will recognize the opportunity and rise up to disrupt the status quo.

This is especially true for Middle East-based businesses, where some might say that the status quo has been especially well established. Many traditional companies essentially enjoy a monopoly or at the very least exert significant control over their market because they are so big. They have strong government relationships and lack any motivation to reinvent their industries.

Said another way, the dominance of large and long-established players create numerous opportunities for full-stack startups to reinvent the customer experience; this is because in many cases the best way to improve customer experience is to completely redesign the entire supply and value chains. By doing this, you create a powerful incentive for customers to defect from traditional competitors.

The prevailing common wisdom in most industries was established long before today’s technologies existed, before everyone had a smartphone and companies realized that a well-designed app could topple an industry leader.

Try this thought exercise: think about your industry and consider how significantly the customer experience has changed over the past 5–7 years. I would argue that in most industries, the answer is: not much.

There is no reason for this to be the case, except that established supply chains don’t allow significant improvements. But with a full-stack approach, a new player can improve pricing, quality, delivery time, product offerings, and service. In doing so, such ambitious startups create meaningful economic value, because they offer a demonstrably better experience.

The longer the time that has elapsed since the last significant innovation in an industry, the greater the potential disruption on established leaders. In the Middle East, this opportunity for disruption is especially pronounced.