April 26, 2011

Proactive vs. Reactive -- Server Farms & Mosquito Bites & Vacuum Cleaners, oh my!

If you want to create a disruptive product then choose any "reactive" product in your industry and develop a "proactive" product that makes the "reactive" product unnecessary.

"Reactive" products are often developed when an "idea guy/gal" (call him/her: IG) identifies a pain point. Once the pain point is identified, the IG develops a product or service to take away the pain. Think of this like you would think of a chemist who develops a drug in order to cure a disease or ease an ache. Can you think of a few products or services that are "reaction" oriented -- they serve the purpose of eliminating a pain when the pain arises?


Server farms --> the solution to the pain many enterprises experience when they don't have enough space to store their electronic information on their own machines AND/OR when they need the information stored in "the cloud" so it can be accessed anywhere.

Server farms truly are a "reactive" solution to this pain point because they don't prevent the pain, they just act as a solution when the pain occurs. A product that would prevent ("proactive") the pain would be something that would prevent the small/medium enterprise from ever needing to outsource their "clouding" needs. When someone invents a way to store LARGE amounts of data on a small chip or machine that could fit in any office AND that machine has wireless capability THEN that person will be stealing business from companies like Rackspace and Amazon (among others).

Companies are often slow to prevent (be "proactive") the pain because they make so much money off of solving (being "reactive") the pain. For them, it truly is a matter of "no pain, no gain". But if you can prevent the pain all together, then the gain will be yours!


Mosquito bites? Yes, our only real solution to mosquito bites is calamine lotion. (I haven't found a great repellent, have you? And even if you have, who wants to spray it on every time you go out?) What if someone invented an annual shot (like the flu shot) that either repelled mosquitos OR when bit, the chemical would immediately neutralize the impact of the bite? Crazier things have been invented! And I think this "proactive" product would be a great seller if anyone could ever put it together to bring it to market.


What do you do when your carpet gets dirty? You lug out the Dyson, move the toys/kids/furniture out of the way, and you clean! It's a "reactive" product. Pain arises and the Dyson is there to soothe your pain...for a while, at least, until the carpet gets dirty again. What's the solution? Create a "proactive" product! Create self-cleaning carpet. Crazy idea? Maybe, but it's the start of a disruptive idea. It's a brainstorm off which disruption can be built.


Disruptive products aren't just the next step up in terms of quality or customer service. Disruptive products don't simply do a better job of solving a "pain in the pocket". Disruptive products prevent the pain from ever happening.

What industry are you in? What are the pain points that businesses or consumers feel in your industry? What current products or services "respond" to these pain points? Find a way to "prevent" the pain points from occurring and you will have a disruptive product/service, and it will likely make you a lot of money!

April 9, 2011

A Disruptive Story: What happens when a disruptive product enters a market?

What is the end result when a disruptive product is introduced to the market?

1. More money is made by all parties in the (disruptive product's) supply chain

2. Consumers save money

Why? Because competition increases --> market forces shift so that better, more affordable products are produced. Prior to the introduction of the disruptive product, the industry had likely become stagnant. A stagnant market means that the quality and affordability of the product/service was not increasing -- it plateaued.

The Kindle ignited (pun intended) a revolution in the book industry on at least a few key fronts:

1. The ebook industry, since the introduction of the Kindle, has grown significantly

This is as clear a picture of accelerated disruption as one can find. Amazon entered the ebook market at the exact right time:

1. Supply was there: ebooks were available to some extent because libraries had begun offering them in the early 2000s and Sony introduced its reader in 2006.

2. Demand was there: consumers had time to adjust to the idea of reading an electronic book; they were just waiting for a more affordable and more convenient (downloadable anywhere) product.

Amazon accelerated the effect of the disruption by quickly and increasingly solving the two key pain points mentioned in #2 above = price and convenience.

2. Kindle's impact on the market meant increased revenue for all players in the supply chain. ebook revenue sharing differs significantly from print because the cost as a percentage of price is much lower.

A disruptive invention alters the incentive structure of an industry. In this case, it increased the incentive of every player in the supply chain to produce more content that is attractive to mass market readers more frequently. One example, romance novels are best-selling ebooks and authors/pusblishers are writing more (and shorter) novels than previously.

3. There are more readers and readers are reading more!

A 2010 Harris Interactive poll shows that e-reader owners are significantly more likely than average to buy books. Among the e-reader users polled, 17 percent said they bought between 11 and 20 e-books, while 20 percent purchased 21 or more over the past year. By contrast, 11 percent of all Americans bought between 11 and 20 books last year, while 12 percent bought more than 21.* Add to this that the decline of overall book sales has slowed and will possibly flatten out and begin growing from 2011-2014, and you can see that more people are reading and readers are reading more.

The cumulative effect is = more people buying more books at lower costs while still allowing the players in the supply chain to own a greater percentage of revenue compared to what they received with print.

Disruptive products create win-win-win situations for industries and the consumers they serve because of the "stir it up, turn it upside down" impact these products have on markets. The only players left out are the ones who refuse (or simply don't try) to disrupt!

*Source: http://www.teleread.com/ebooks/survey-shows-nearly-1-in-10-using-e-readers-and-e-reader-users-buy-more-books/