In the 5th and final part of Simon's new series on Disruptive Innovation, he explains how a company's technology should match what the market is asking it for.
August 5, 2022
This is Part 5 of a 5-Part series on Investing in Disruptive Innovation. Here is Part 1 of the series, here is Part 2, here is Part 3, here is Part 4, and here is a primer on what disruption means and why it’s so important in investing.
As written by Clay Christensen in his book The Innovator’s Dilemma, the fifth and final principle of disruptive innovation is technology supply versus market demand.
Technology moves fast. Sometimes, a bit too fast.
Software developers, cryptocurrency token creators, and techies from every industry are eager to showcase their innovative new ideas and businesses. After all, building something new is sexy and exciting.
Entrepreneurs also assume that customers will immediately flock to the new businesses they have created. Revenue projections always shoot up like a hockey stick. Perhaps it’s ego, perhaps it’s optimism, or perhaps it’s caffeination that keeps us motivated and ambitious!
Yet the market isn’t always quite as excited about these new businesses as the founding entrepreneurs are. Sometimes new technologies are hard to understand. Other times, it’s hard to change the existing way of doing things. If a new product isn’t immediately intuitive and easy to implement, there’s a very high likelihood it won’t be successful.
Technologies often overshoot mainstream market demand. By definition, over-engineering is an inefficient use of R&D spend.
However, smart companies are willing to pay attention to how the market is actually using their new products. They create feedback loops and hire ‘customer success’ teams, to go on-site and make implementations as easy as possible. If they can prove the value of their new solution, they can displace the incumbents in a relatively short amount of time.
One example of a company who understood how technology needed to fit into market demand was…
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