I like to joke that I chose to study engineering in college as a career move. After all, it’s a growing field which will open up numerous avenues for future growth. The truth is, I am studying engineering because I love to engineer solutions to problems around me. We all have different perspectives and when we observe problems with our personal lens, we give them meaning, we give them purpose.
In my freshman and sophomore years, I tinkered with a lot of ideas which were solving problems around me (virtually at least). They lacked a Proof of Concept but they had enough purpose to get me excited. In a bid to attach a tangible goal with solving that particular problem, I used to take part in numerous competitions. I ended up winning many and got the chance to present my solutions at the national/international levels.
All of them shared a single broad theme: They were disrupting something.
I never understood the meaning of the word (not talking about the definition in the dictionary) until my third year.
What is disruption? What drives it?, I pondered.
In simpler words, and the context of this blog post, disruption is a new way of doing something that exists. That’s about it.
The emergence of new technology is often cited (confused?) as what drives disruption of an industry or business. But that’s rarely the case. Startups/innovative companies disrupt established companies by disjointing the customer value chain.
It’s easy to not notice the underlying details which render technology merely as a tool. Just because it is interesting and sexy to read and hear about new technologies, it need not necessarily be the next game changer. Internet and mobile phone would be two if you ask me. If you look at the two sets of companies — incumbents and disruptors — you would notice that disruptors would have lesser resources to invest in the newer technology and leverage it enough to disrupt an incumbent.
So why do we see so many incumbents being disrupted?
I have a certain framework which I use. I hope you find it useful. Let’s dive into a couple of examples to grasp it better.
It’s a battle of owning the customer/end user. To own the customer, you need to understand the customer value chain — looking at your (potential) customers and mapping out all the activities that they are in need to do in order to acquire products or services. It’s that simple.
Disruption is eliminating or simplifying some parts of the customer value chain using a tool (which often turns out to be technology.
India has over 600 million young people. Each of them is subject to falling prey to lifestyle-based diseases which would require them to pop at least 2–3 pills/day before they turn 40. They need to go to the doctor, wait in long queues, consult the doctor, get a prescription, get their meds, go home and sort them out as per the various time slots viz. after breakfast, before dinner.
These are all the activities required for patients to take their meds is called the customer value chain. The next task is to segregate each of the activities in the customer value chain by observing them under the lens into —
- Activities which create value.
- Activities which make the customer pay for the value.
- Activities which can be done away with because they are the necessary evils.
For the specific case, we ’re discussing — taking the pills is a value-creating activity. Paying for medication and consulting the doctor are the activities which make the customers pay for the value. While waiting in the queue to see the doctor and physically going to buy the meds are two necessary evils.
Thereby, most of the healthcare innovation in the country has been around discovering the best doctors around you and facilitating the appointments part.
Ride Hailing —
Disrupting a market means rapidly acquiring a sizeable amount of customers/market share from the established players.
Let’s try and analyze this part. Customers who wish to buy products or services, do so using three tokens (currencies) — time, effort, and money.
Convenience is an effort cost which was tackled beautifully by Uber. Obviously, it’s cheaper than getting a cab, which is because they’re subsidizing the costs to a great extent, but the real lens of observing it is convenience coupled with reliability.
Uber was never this brash technology giant having the ability to summon a car. If you had to book an Uber initially, you had to text/call them which was handled by an Uber employee who then tried to call the car operators to send a car your way.
You booked your cab hassle-free, had some insight into the potential cost (convenience) and knew that the cab will drop you at your destination (reliability).
Nothing was as automated as today. There were no flashy ML/AI algorithms working to try and balance the supply and demand nor did you have the ability to pay for the service using mobile wallets without leaving the app. Tech develops as you grow your business and as funds pour in.
Uber didn’t start with anything supernatural, all they had was a GPS and a phone. They identified a customer pain point and stuck to addressing that — a move which might well be worth $120 billion.
Jeff Bezos highlights this with a classical explanation. The only things that remain stagnant in business are customer needs. All the tools you use to make the successful will change with time but not the needs. Therefore, if you find a way to cater to their needs and provide them with convenience, they would pay. And once they start paying, it doesn’t really matter which technology you use, he says figuratively.
Building a startup (even a tech startup) is almost never about the idea or your tech stack. It’s about solving a problem you’re passionate about and for which users would pay you. Let’s look at one last example —
When my holi vacations ended, I used Paytm to book my flight tickets. After arriving at the Varanasi airport, I used Uber to get a cab back to the campus. I paid Uber using Google Pay. Upon reaching the hostel, I found out I had no deodorant so I ordered one on Amazon and ordered food from Zomato as I was hungry.
These little decisions which we consumers make, multiplied by the (b)millions like me doing it all the time is what’s disrupting the market. Not the underlying technologies.
Find the activity with which customers are not satisfied by. This is the weak link in the customer value chain and is your low hanging fruit.
The key is not to replicate something which the established players have done but to find an area which the consumers are not satisfied with. If you find a way to satiate their needs, you will lure them away from the incumbents. The way to do that is by helping them with convenience, saving their time or offering it cheaper. The way to do that is by using innovative business models staying on the right side of the law and leveraging existing technologies.
A note of caution — This framework is a culmination of my numerous explorations of ventures combined with several interactions with eminent personalities in this space. I am not a pro-venture builder by any means.
I hope you enjoyed reading it as much as I did penning it down for you. In case you liked it, please don’t refrain from the appreciation it deserves and give it a few claps to help it reach a wider audience.
You can follow Pratyush Choudhury for breakdowns of the hottest technology trends, translations of the business use cases involving tech buzzwords, and analysis of the business strategies that power the tech industry.