Small Business How-To: Disrupt entire industries with your startup’s technology
In 1888 the Coca-Cola Company began printing and mailing what is believed to be the first coupon ever distributed, establishing a practice that has remained relatively unchanged since — until recently.
Toronto-based startup Checkout51, launched in December of last year, sought to revolutionize the way consumers and retailers thought about couponing by building an app that allows customers to simply take a picture of their grocery receipt, and have a rebate mailed to them for participating in selected promotions.
In less than 10 months, Checkout51 has reached 430,000 members in Canada and has plans to move to the United States. It has also signed deals with nearly every major packaged good company in the country, including Kellogg’s, Kraft, Nestle, Johnson & Johnson, and Unilever, to name a few.
The company has found massive success by changing their industry. But creating disruption is a risky proposition, and far more businesses fail at the task than succeed. So what are the key spices in Checkout51’s secret, industry-disrupting sauce?
Identify Pain Points
According to Noah Godfrey, CEO of Checkout51, disrupting a practice as well established as couponing was a matter of identifying the pain points for brands and consumers.
“Traditionally, it’s really hard to disrupt a market,” he says. “For us, because there was so much pain associated with traditional coupons, having a clean, reliable solution that works seamlessly has been unbelievably well embraced by both brands and shoppers.”
The key to finding these points, he says, is empathizing with users.
He advises entrepreneurs to sit in the shoes of their customers to try and understand what keeps them up at night. Bringing massive change to an industry, he adds, is simply, “a matter of you helping them achieve their objectives.”
Know Your Market and Your Niche
Bruce Kasanoff, managing director of Now Possible, a Connecticut-based innovation consulting firm, agrees that disrupting an industry requires a deep understanding of pain points, but says ambitious companies need to delve deeper.
“If you focus on an industry you know well… something your team has real experience in, and you take that mindset of making it dramatically simpler for customers to do business, than you can really change your ability to be successful,” he says.
While many entrepreneurs dream of causing a major disruption to large and well established industries, Kasanoff suggests that, in many cases, entrepreneurs should instead focus on a niche market or subsection that they know intimately.
“The entrepreneurs who are really disciplined are successful,” he says. “You don’t hear so much about those companies, they’re not the ones saying they’re going to change the world, but they’re out there making a nice $10, $20 million business.”
Find Early Adopters
Finding early adopters requires a lot of patience and groundwork, explains Jesse Rodgers, Director of the Creative Destruction Lab, a mentorship program for early stage companies at the University of Toronto’s Rotman School of Management.
“Identify who you think you should be selling to, talk to them, find out what they’re interested in, and find out how you might be able to implement your technology with them,” he says.
Finding those first few customers is an enormous challenge, but can quickly lead to a snowball effect.
“It’s all about word of mouth,” says Aron Solomon, a senior advisor with MaRS Discovery District’s Information Technology Communications and Entertainment practice (ICE). “Imagine you do a really good job getting your first 10 users. The idea is that those 10 will help you get to 100 and those 100 will help you get to 1000, if you do it well.”
Find The Right Investor
According to Solomon, the biggest challenge for entrepreneurs trying to bring a disruptive innovation to market is finding investment.
“There are very few people in 2013 who are funding minimum viable products, even if they are ‘disruptive,” he says.
Since most disruptive innovations are either a big hit or a big miss, Solomon suggests that entrepreneurs seek out investors with risky ventures in their portfolio, as they’ll be more open to taking a chance on a potentially disruptive company.
“Investors will miss more often than they hit, so when they hit they need to hit relatively big,” says Solomon. “If you feel that you know a space well, and you feel that you’re investing in something that is truly disruptive, there’s a chance you will make a bigger and better hit.”
And, Solomon adds, even though finding investors willing to take such a risk is difficult, disruptive change drives technological advancement, and there will always be money for the right idea.
“If we’re not open to disruptive technology, than all of the things in our lives, in our societies, in our schools, in our governments,” he says, “everything that we want changed, won’t change at a pace that is meaningful.”