We’ve been unseasonably busy with two new fintech projects and two new media projects for very different markets happening at the same time.
The fintech projects could be disruptive, while the media projects would be exponential opportunities for our client. Neither are first to market, which is a big plus … because very few first to market (and I struggle to think of any) really end up the winners in a disruptive industry or are necessary in an exponential one (actually second or third is best).
There is an interesting distinction in the type of business model you adopt between “disruptive” (which for the sake of cynicism we will re-phrase as demand-side expansion at price points that traditional sector competitors cannot sustainably meet) and exponential (new customers and new revenue opportunities from existing customers) products.
The big difference is the business model… no, not the customer experience (I can already feel the heat from the burning torches, shouts of the mob and threatening glints of the pitchforks waving in the air) … the underlying way you generate value must be priced differently to unlock a market that previously could either not access these services due to distribution OR increase demand by making it cheaper.
Here are some examples:
Google – Google was not the first search engine, it was probably the 50th. All it did was do less, faster and appear to do it better (initially, this could have been debated). The cost per click model (which they “borrowed” from another competitor) was what made them so disruptive. Instead of paying for ads served, you paid for clicks delivered and it was an auction (genius). The self service component meant you could place the ads yourself and many small businesses that struggled to afford advertising before, plus large businesses that understood the benefits of paying for clicks vs impressions were on board. Print ads suddenly looked ridiculously expensive and unfairly priced.
Uber – nope, not the first call-a-car service. Initially it was aimed at high-end hotels and car services and “borrowed” the low cost model from Lyft…but they made it really easy to become a driver and opened up the market for “non-licensed” cabs to be added to the service at a lower cost of operation for the cab, which meant a lower price per mile, which meant more customers would use the service. Yes, it’s a great experience… but a great experience at double the cost doesn’t mean disruption and massive consumer adoption.
A great experience with a real price benefit to consumers that existing companies struggle to meet due to their cost base – that’s all kinds of sexy. It means you get existing customers and attract new ones. This leads to a “disruption” as the entire value chain gets up-ended with both new suppliers and customers at a new price point.
By Nevo Hadas – Nevo is the Founding Partner of &Innovation, now DYDX