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The Disrupter’s Choices
A convenient way to work through the problem in-
volves compartmentalizing choices into four
categories — technology, customer, organization,
and competition. Being a disrupter requires partic-
ular orientations toward each of these categories, as
I have explored in work with colleagues at MIT.^1
First, consider the choice of technology. Clayton
Christensen long distinguished between disruptive
technologies (which perform worse today on metrics
most consumers care about) and sustaining tech-
nologies (which do not). Most companies pursue
sustaining technologies (such as modest improve-
ments in an iPhone upgrade) as a way of retaining
existing customers and keeping a healthy profit mar-
gin. The reason to choose a technology that is “worse”
initially is its potential to outperform older tech-
nologies in the relatively near future. Moreover,
disruptive technologies tend to be what established
companies either are not good at or do not want to
adopt for fear of alienating their customer base. In
other words, the very existence of disruptive tech-
nologies represents an opportunity for startups.
Which brings us to the choice of customer for a dis-
ruptive entrepreneur. Christensen noted that, if you
want to sell a product that underperforms existing
products in some dimension (say, a laptop with less
computing power), you need to find either a way of
selling at a discount so that a lack of performance can
be compensated for or a set of customers who do not
strongly value that performance more than some
other feature (for example, longer battery life). This
was a struggle for Webvan. The company entered the
general grocery business hoping to meet all custom-
ers’ needs instead of seeking a more targeted base
from which to build its internet retailing business.
Those low-end customers will establish a beach-
head for the business. However, the startup cannot
stop there, as Eric Ries has emphasized.^2 It needs to
move rapidly up the performance technology curve
to take advantage of its disruptive potential and
grow. This requires rapid market-facing experimen-
tation and rapid product performance improvement
that will not only retain its newly acquired low-end
customers but also allow it to compete for main-
stream customers. A recent example is Soylent.com,
which produces “pure nutritional need” food prod-
ucts. The company has experimented with different
flavors as well as product types in response to market
feedback.
Choosing to aim for mainstream customers, in
turn, requires choosing an organization tailored to
the hustle, market responsiveness, and capability
investment that will allow for such growth. Amazondid this spectacularly well, right from the outset —
gathering customer information and developing
capabilities to predict demand for millions of dif-
ferent products.
The final choice to consider is what you want to
compete with. Is your company headed down a dis-
ruptive path by adopting technology on a trajectory
distinct from market leaders? Are you targeting
customers you believe they aren’t serving well? And
have you built sufficient organizational capabilities
to take advantage of that opportunity? If so, it
wouldn’t be surprising if you chose head-to-head
competition with incumbents versus cooperating
with them. Webvan could have chosen to slot itself
in the existing value chain for groceries but did not.
Amazon could have dealt directly with existing
booksellers but did not. In each case, the incum-
bents eventually became targets.A convenient way to work through the problem involves
compartmentalizing choices into four categories —
technology, customer, organization, and competition.