Disruptive Businesses Face Some Extra Challenges

How many times have investors heard startups start their pitch by touting that their technology is “disruptive?” What entrepreneurs forget or don’t realize is that most customers are wary of all technology, educating the market on new technology is expensive, takes a long time, and people buy problem solutions rather than technology. Investors will likely wait for more traction.

The concept of disruptive technology was first introduced by Clayton M. Christensen in “The Innovator’s Dilemma” way back in 1995. Such 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 be too slowly to save initial startups in the space.

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

1Confusion. We don't quite get it. We sign up for the new app, or buy one of the new devices after we see our cool friends using it. 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.

2Repudiation. 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 more social capital in saying that we don't like the technology than that we do. We all hear snappy one-liners like, "Twitter. What could I possibly say in 140 characters?"

3Shaming. This is when we are so persuaded 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 $2.5 billion.

4Acceptance. 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.

5Forgetting. 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 a 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 much faster, but it still takes longer that the survival lifetime of a struggling startup. Smartphone acceptance is now over 50%, over six years after the first Apple iPhone was introduced. There is other evidence that may be the new norm.

Marketing guru Seth Godin mentioned in an article a while back that “it takes about six years of hard work to become an overnight success.” Mark Zuckerberg spent about 7 years and $150 million before Facebook became cashflow 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 who 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 fail by being 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?

As read on the Startup Professionals blog.