Startups Should Be Wary of Disruptive Technologies



How many times have investors heard startups begin their pitch by touting that their technology is “disruptive?”  What entrepreneurs forget, or don’t realize, is that most customers are initially wary of any technology, and that educating the market on new technology is expensive and takes a long time.  People buy solutions for their problems, rather than the technology itself.  Investors will wait for more traction before they invest in the entrepreneur’s idea.

Clayton M. Christensen introduced the concept of disruptive technology in The Innovator’s Dilemma way back in 1995.  These technologies, like the digital camera and mobile phones, introduce such novel concepts that they displace existing technology quickly, by societal standards.  Unfortunately, this “quickly” may still be too slow to save initial startups in the space.

In this time of constant change, it’s easy to conclude that everyone is an early adopter.  But we tend to quickly forget the time and stages we go through while adapting to new technologies.  I saw a recent article on HBR, “The 5 Stages of Disruption Denial,” by Grant McCracken, comparing technology adoption to Kubler-Ross’ 5 stages of grief.

1.     Confusion.

We don’t quite get it.  First, we sign up for the new app, or buy one of the new devices after we see our cool friends using it.  Then we give it a whirl, and quickly complain that things were easier the old way.  By this time, gurus are reassuring us that it is the greatest thing ever.  But that doesn’t help.  We decide to wait another year for the next version.

2.     Repudiation.

There are many people who don’t get the new technology, and now social life is a little like a competition to show that we’re not “falling for it.”  At this point, there can be more social capital in saying that we don’t like the technology than that we do.  We now hear snappy one-liners like, “Twitter.  What could I possibly say in 140 characters?”

3.     Shaming.

This is when we are persuaded so much into believing that we’re right and the new innovation is wrong, that we are prepared to make fun of the credulous among us.  “This Twitter thing.  It’s just a fad.  Give it a couple of months and it will go away.”  We heard a lot of this sort of thing about Pinterest in the early days.  Now it’s valued at $3.8 billion.

4.     Acceptance.

By this time, the innovation is taking off.  The middle adopters are signing on.  It is clear now even to late adopters (the great majority) that there is at least one useful aspect of the new technology, and it’s here to stay.  Confronted by accomplished, irrefutable fact, the rest of us cave in, sign up and brag about how modern we are.

5.     Forgetting.

This is where we destroy the evidence, even in our own mind.  Now we are inclined to act as if we always understood and approved of a world instilled with new innovation.  One minute, we are too smart to be fooled by Twitter.  The next we are fully on board.  It’s like high school.  We are captives of what Mark Earls calls “the herd.”

In the old days, it typically took 20 years for this process to happen.  Now it happens at a much faster rate, but it still takes longer than the survival lifetime of a struggling startup.  Smartphone acceptance is now around 50 percent, about 6 years after the first Apple iPhone was introduced.  And there is other evidence that suggests this may be the new norm.

Marketing guru Seth Godin mentioned in an article that, “It takes about 6 years of hard work to become an overnight success.” Mark Zuckerberg spent about 7 years and $150 million before Facebook became cash flow positive.  MySpace and several others, who arguably pioneered the disruptive social media technology, never really survived to enjoy it.

Too many of the startups I know that highlighted their disruptive technology early ultimately ran out of money and had to shut down for being “ahead of their time.”  They did everything right, but the market just wasn’t ready.  Sometimes this is just an excuse for other problems, but don’t forget the old investor saying, “Being early is the same as being wrong.”

Overall, I think more startups do fail by being too early to market than because they are too late.  This is probably a hard message to swallow, but it’s usually the second mouse that gets the cheese.  What are you doing to avoid this trap with your disruptive technology?

Republished by permission.

About the author: Martin Zwilling

Martin is the CEO & Founder of Startup Professionals, Inc., a consultancy focused on assisting entrepreneurs with mentoring, business strategy and planning, and networking.

Martin for years has provided entrepreneurs with first-hand advice, mentoring and business plan assistance as a startup consultant. He has a unique combination of business and high-tech experience, and executive mentoring and connecting startups with potential investors, board members, and service providers.

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