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Monday
Jan172011

Creating Disruptive Products and Companies

When looking for a disruptive company, investors often look for a product idea that has never been done before. With this mentality, they also miss out on the best, most disruptive opportunities that take place in our industry. Yahoo and AltaVista (remember them) along with dozens of other VCs and individual investors passed on the opportunity to buy or invest in Google for a mere $1 million valuation in its early days. The investor reasoning was sound: the field of search was already dominated by Yahoo, Excite, Alta Vista and others. What chance would a newcomer have in a market that already has multi-billion dollar players?

It turns out being first to market, while it has great advantages, is not the predominant characteristic of disruptive companies. Think about portable digital music players. By the time Apple entered the market, there were more than 130 different MP3 devices in the wild. Apple was also late to the smart phone business. Facebook was late to the social media game, which was dominated by Friendster and later by MySpace before Facebook took over. YouTube was late to Internet Video as a brand new entrant in 2005. Or take the latest multi-billion dollar disruptor, Groupon. I can only imagine the pitch to potential investors: "We're going to create a coupon business where the receivers of the coupons will promote the coupon itself. Will you invest?" Ha!

So what makes a product or company disruptive?

If it's not first to market, then what is it? Superior technology? Nope. The landscape of the tech sector is covered by the corpses of companies and products with superior technology. Analyzing any of the disruptors of the past decade also quickly shows that none of them had superior technology at the time they first came to market.

So is it better marketing? Nope. That's not it either. Google had spent a total of $0 on advertising and marketing before it was a billion-dollar entity. Same with YouTube. I don't recall ever seeing a FaceBook ad. Today Facebook is valued at $50 Billion. Marketing and advertising can help accelerate the adoption of disruptive products. Apple has been great at that, but it wasn't and has never been the key to their success.

Disruptive products have one thing in common: A Disruptive User Experience.

Google's Disruptive Search Engine

Google's "Page Ranking" algorithm is often wrongly credited with being the reason behind Google's success. In fact, when random samples of search users are surveyed, time and again users are unable to detect a significant difference in organic search results across various engines. The Page Ranking algorithms used in Google's code was also quickly approximated by other search engines. So why did Google get the stickiness that so many dominant search engines of the time failed to replicate?

To answer that question, lets take a look at time-appropriate screenshots of AltaVista's home page and Google's home page:

If you knew nothing about either search engine, which of the above web sites would you prefer to use? The answer seems obvious now, but somewhere along the line, the dominant search engines had forgotten the most important reason they existed. Instead of leading their users to perform quick searches, they were after more page views and more ads per visit. They also had another problem: they had revenue. While Google was free to experiment with any user interface it wanted (it didn't have any revenues to worry about), existing search engines had to make sure they protected the millions of dollars they were already generating.

Google was disruptive by changing the user's experience when doing search. The home page popped up in sub-second time. There was hardly anything there. Google had to add a footer to their home page just so users would know it was done loading. It was faster than any other search page on the planet and you could do what you wanted and get the results before other search engines had loaded their front page. That was disruptive!

Apple Disrupts with iPod, iPhone then iPad

Looking at the string of disruptive products that Apple has released over the past decade, it's hard to remember they were on the verge of going out of business in 1996. What are some of the lessons we can learn from Apple's incredible comeback? Apple was first to market with the PC and even a GUI-based PC. Neither was enough to save it from a near-death experience in the 90s. In fact, when Steve Jobs took over in 1997, he had given up on trying to be first-to-market with new products. He already knew it didn't matter. My Rio MP3 player had been out for years before the iPod came out and I was a Windows Mobile phone user for more than 7 years before the iPhone 1 came out. It was also more feature-rich! It could multi-task, run any application, it had an SDK and could even copy and paste. None of that seemed to matter.

So what is it that made Apple so disruptive? Again, it's the user experience. Whether it's the iPod, the iPhone or the iPad, a 2-year old child can master the interface. No other product in its class could make such a claim. While I "could" do anything the iPhone could do with my Windows Mobile phone, I never had any desire to because of how complex the simplest actions were. Trying to scroll the screen on a phone made prior to the iPhone in 2007 was to ask for a slow and painful death. 

Facebook Disrupts with 600 Million Users

Think about the single most important feature of a tool that would be used by nearly half of the Internet's population: Ease of Use. When FaceBook was launched, MySpace had already dominated the social network scene and was the single most popular site to put up a personal page and connect with friends. So what made Facebook so disruptive and gave it the ability to crush its largest competitors? Again, the answer lies in the user experience.

The difference was that when you visited a MySpace page, things appeared to be in chaos. Music would start playing. Random things would flash at you. There were sections with bits and pieces of information all over the page. And then there was the horrible use of colors. Looking back, it was terrible and so obvious that it couldn't be a site used by the masses.

Facebook changed the experience by having a uniform look and feel for user pages. It made it brain-dead simple to add friends and even used the social graph to recommend new friends. 

Disruptive is: Easy. Intuitive. It Just Works!

The three most common things that disruptive technologies have in common is that their users would describe them all in the same way: Easy. Intuitive. It Just Works. In the early days of these technologies, if you had asked a user why they would have recommended Google over Yahoo, a MacBook over a Dell, an iPhone over Windows Mobile, FaceBook over MySpace -- their answers would be similar. All of these products have a disruptive user experience. So much so that they dominate their fields.

So when you search for that next disruptive product or company, forget about trying to solve a problem that nobody else has solved before. Look for problems where others have solved it in an inefficient way. Make your solution stand out by making it brain-dead simple. Make it disruptive by surprising the user with the ease of use. Make sure your users would fall in love with how your solution "just works."