You Are Either Disrupting or being Disrupted

June 21, 2011 § Leave a comment

There are those who look at things the way they are, and ask why… I dream of things that never were, and ask why not?

– Robert Kennedy

A good friend of mine (and an elite entrepreneur) Tim Chi started Blackboard.  It is a great entrepreneurial story.  5 guys in a dorm room at Cornell.  Solving a pain that they had.  Using their relationships as students to get their first customer.  A few years, and a lot of sweat and pain, later and they were IPO’ing.  I admire Tim’s skills tremendously.  He has since left and started another successful company in  He has changed two industries.

Although he is still probably a shareholder of Blackboard, I think that he will appreciate this story.  I had a meeting with a VC recently, who mentioned that he just funded a start-up looking to disrupt Blackboard.  I had to chuckle.  Come on now.  How could you disrupt a company that is only a few years old and is currently disrupting?  But it is happening.  The hunter has become the hunted.  Disrupting entrenched players is a great spot to look for innovation, contrary to what most non-entrepreneurs believe.

Want another interesting example?

Text messaging is a run-away train.  Skyrocket growth.  From 25 billion texts in the second half of 2004 to 1 trillion in the second half of 2010.  It is simply amazing consumer adoption of a technology.  Seems unbeatable as a standard.

But in the summer of 2010 a few hackers attend the TechCrunch Disrupt Hackathon, and in 24-hours come up with a service they called GroupMe.  Very soon after a service called Kik launches.  Sleeping through this all was a General Manager of the texting business line at XYZ big telecom.   Ha…these guys have no idea how f’ed they are.  In a 24-hour period a pair of sleep deprived hackers just found a way to disrupt a multi-billion business.  Don’t believe me?  Just watch.

How did this happen?  The telecoms got drunk on profits.  They assumed (incorrectly) that they had long-term scarcity of a service.  But now, thanks to Kik and GroupMe (and now Apple) the value that texting provides is not scarce anymore.  Actually, I can have the same services, but with some usability enhancements (like group texting)….oh, did I mention that Apple’s, Kik’s and GroupMe’s service are free?  That’s right, free texting-like services with enhancements.  All done via the web and monetized by advertisement instead of usurious subscription fees.  Bye, bye fat telecom profits.

This the behavior of big companies is what creates so many entrepreneurial opportunities.  Big companies get fat.  They get locked into the way they do things.  The have a “legacy revenue issue” that blocks them from innovating.  And along comes a few kids in a dorm room or running on zero sleep at a hackathon who have nothing to lose.  No fat profits.  No employees to worry about laying off.  Everything to gain.  They don’t ask why? They ask, “Why not?”  They find great investors who are willing to take a risk (mostly because they are only looking for 1 hit in 10 bets).  They get a livable wages, hire a few more hackers and go after their target market. They find a passionate early adopter base, who uses their service and spreads it to friends.  Oh boy…just watch what happens to those text fees over the next few years.

This system of creative destruction is what makes America great.  Our early stage investing ecosystem is the envy of the world.  And for good reason.  It is what creates continuous innovation cycles that creates jobs. Groupon and LivingSocial are doing the same thing to local advertising.  Man, I would not want to work for the yellow pages right now.

God Bless America.  God Bless Entrepreneurs.  My favorite question in the world…Why Not?  I friggin love it!


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