Disruptive Technology startups require a different set of evaluation criteria

Uber, Airbnb, and, I would argue, Yelp and Groupon can each be categorized as a disruptive technology startup. But the importance of the adjective appended to the business type for this category of early stage business should not be over-emphasized. Here’s why:

For each of the businesses mentioned above, an important objective is to capitalize on an opportunity to enhance the efficiency of a social process. In the late 1990s this phenomenon was referred to as “dis-intermediation”. Back then, online versions of print publications popped up to challenge the hardcopy hierarchy of newspapers. The whole process was disruptive, even down to the tense internal relationship between teams at, for example, the Conde Nast set of publications, and their print counterparts. Back then, I worked with Human Resources at Conde Nast in effort to help them fill some editorial management positions for their online publications. So I can personally attest to the disruptive nature of the process.

So disruption is nothing new. But why all the buzz about “disruptive tech“? Perhaps it will be helpful to consider the scope of the impact of a business like Uber. Car services are used by a much larger segment of the US population than, one can argue, even print newspapers. Therefore, when a well-funded albeit early-stage business like Uber tries to step into the New York City market for private car transportation services, it makes a very big noise. I would argue businesses like Yelp and Groupon are doing the same. The size of the US markets impacted by Yelp and Groupon are comparably massive. So the moniker “disruptive” makes sense for them, as well.

Disruption is actually nothing new to new businesses entering already established markets, and certainly predates the Internet. One need only consider Henry Ford’s Model T and the impact it had on the horse-drawn carriage trade to identify the surroundings of a massively disruptive business plan. Bottom line, anyone choosing to evaluate the likelihood of success for the next Uber should be comfortable with business process “disruption” and on the lookout for the resources the business will require to succeed.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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