Building The Next Disruptive Startup

The most disruptive word in Startup Ecosystem is ‘disruption’. Its used / abused / misused by almost everyone – entrepreneurs, investors, advisors, mentors, press and so on.

Founders love to call their product / startup as disruptive and so do investors who keep saying they are looking for disruptive ideas, both have very limited explanation of what disruptive startup actually means for them or they run out of examples or ideas when you ask them what exactly is disruptive about it. Most of the answers are – ‘If this becomes big, it could disrupt the market’.

Disruption

This is a random post, not intended to draw any conclusion or summary but sharing few things I have learned about disruptive startups and ideas. Probably also on how to get ideas to build your next big ‘disruptive’ start-up.

Circa 2008

Early 2008, I moved in my new role at Rediff as Product Head for Ecommerce. This was still the time when Ecommerce was extremely small in India, concentrated with some players – Rediff, Indiatimes, Ebay and couple of others; and the other side of Ecommerce was Travel which was growing steadily. At Rediff, we had 3 ecommerce products – Rediff Shopping, Rediff Books and Rediff Auctions (We shut down auctions soon after).

These were the early days of Ecommerce and to say we were not innovating then would be wrong. To bring up more users to Ecommerce, COD (Cash On Delivery) was introduced. To expand reach beyond (limited) online audience, experiments like Reader’s Offers (in Newspapers) were attempted by many. We introduced real-time customer support calls to users who dropped out during checkouts and assisted conversions via IVRs. Debit Cards were integrated. Top 20% products in top 20 cities were delivered in less than 3 days. Back then, all major players were marketplaces – that involved a lot of co-ordination with vendors / sellers for inventory, logistics, deals, order status and operations.

Few days into my new role a colleague mentioned to me about a new service – Flipkart. It was selling books. I loved what I had seen on Flipkart. The product was good if not best, but for a site that was launched just few months back – it did all that it was supposed to do perfectly with attention to detail. Prices were comparable if not the best; what blew my mind was the shipping times – awesome 4-6 days of delivery time.

In 2008, books sold on any ecommerce service took 6-10 days to dispatch (most of them had common vendors) and books that required procurement from US took 25 days on a minimum side (and customers used to wait!). Flipkart was quickly dismissed as a niche website, and books contributed to a smaller percentage of overall business. In fact there was a time that competition was more worried about Futurebazaar for its blistering marketing budget (oh, btw its in dead-pool now).

By end of 2009 I moved out of Rediff. And over time I started ordering books (and then other products) much frequently on Flipkart and was never disappointed by its service. I knew friends and colleagues were admiring loving it too. Flipkart kept growing and so did the word of mouth for them. Flipkart was rejected not just by many Investors, but also by its competitors. Over a period of time, all its competitors lost out on Flipkart as it emerged to be the face of Ecommerce in India.

So what did Flipkart do differently to disrupt Ecommerce? Instead of marketplace approach, it started off as a self-managed service. It picked up Books – the most under-served category then (under-served, but large – in 2008 Rediff Books had 1.2 Million Titles listed). It used most simplest channel for $0 marketing – Search Engine Optimization. Adding a million books to Google Index (this is in 2008) in a category that had less than 10 players helped them rank up well. And they rarely did goof up on delivery, dispatch or customer experience.

That was Flipkart. And the story about ‘disrupting a industry’ by a startup or underdog remains similar across the world. Startups / Entrepreneurs don’t disrupt a industry or vertical by ‘launching just another product’ in existing market. There needs to be a remarkably different approach, addressing a large market which is loved (or appreciated) by its initial users / customers.

So how do you get ideas for a disruptive startup?

Another example in Indian context is Housing.com – picked up real estate as a vertical that had more or less no differentiation and existing players were hardly innovating on product and consumer experience over years. Everyone was a copy-paste product of everyone else. Housing launched with a better product from day one for discovering real estate properties, focused on verified data, authentic photos and awesome user experience. While its competitors were serving advertisers, Housing started serving users. It is still in its initial days, but I am hoping Housing.com will become big someday (PS: its product is now bit more complex that it was in the initial days).

Coming back, a existing market / vertical, a large category, that has not changed for a long time are prefect for disrupting with a product that brings a fresh approach to it. While existing players keep thinking that their ‘yet another feature’ will kill this new startup that is making a dent, unfortunately this never happens. ‘Yet another product’ in a large market does not really disrupt a industry.

This probably is true for almost every big startup or product that is out there today.

  • AWS for Hosting:
    Huge market, frustrating times to set up & costly infrastructure, disrupted by on-demand computing and pay-as-you go.
  • Gmail for Email:
    Huge market, competition offering 4-10 MB inboxes, disrupted by 1 GB mailbox and of-course better product.
  • Square for Offline Payments:
    Huge offline payments market, under-served, simple product to accept payments with a phone.
  • Dropbox for Syncing Files:
    Huge need; users mailed files to save on multiple PCs or used USB drives. Simple & fast web storage.
  • Stripe for Online Payments:
    Huge need; developers where busy doing complex PG integrations. Simple to use payment APIs.
  • Uber for Transport:
    Huge market, demand > supply; Under-served market. Cool product that made the customer look smart.
  • … and so many more I can think of…

So where do you go looking for big markets to disrupt and build large businesses?

 

1. Look for market segments that have not changed for years.

In India context, Flipkart and Housing mentioned above fit in this example. We are (probably) done with phase of getting most of the products / services from offline world to online. Some of the verticals are still broken despite being online for so many years.

Examples that come to my mind are – Travel (Vacations – it is still an broken and under-served market), Matrimony (Nothing has changed in this vertical for more than 10 yrs, however people and culture has changed a lot), Classifieds (Largely served by few players and the model hasn’t evolved much) and so on.

Some markets are so big that there is room for multiple big players – Fashion being one of them. Some of the verticals just came online (Online Grocery & Vegetables) but are struggling to grow, maybe they need to approach differently.

One of my favorite examples here is Stripe and how it differentiated itself from others in Payment Gateway vertical. Or even Quora that came up in QnA space that had sleeping products like Yahoo! Answers or Answers.com

 

2. Look for large products that are ageing fast.

Look for large products that are ageing fast and its early users are complaining or it fails to provide value to them.

Some of the examples, LinkedIn (The product has not changed much over years, its early adopters are not using it as they did earlier or now they have other ways to connect with them) or Facebook (Its evident that the engagement levels are dropping and instant messaging has taken over Social Networking). Twitter (Yes, Twitter is ageing. For new users its complex to use, to understand).

More directions – Facebook was default private product; then came Twitter that was default public product. There is lot of opportunity for both products to reverse privacy. For example, Twitter is a public identity to many people, its private aspect ie. direct messaging is massively broken. Forget private product, even Twitter as a public conversation platform is also broken or difficult to explain to new users. Twitter itself is experimenting with removing @ replies to appeal to new users (while existing users will miss the feature most).

 

3. Look for large products that serve multiple purposes.

Look for large products that serve multiple purposes. Perfect one of their use-cases.

Best example here is Facebook. Large products like Facebook serve(d) multiple purpose – Status Updates, Messaging, Photos, Staying in touch with friends, etc. WhatsApp took up Instant Messaging, Instagram took up photos, perfected the use case and in turn made a big dent with their products. Since usage on a large product already validates the market need, build something that makes it work for users.

One of my favorite examples here is Vine how it figured out a niche for itself in the online videos vertical owned by YouTube. Though Vine was not the first to start off (there was Viddy and Social Cam who focused too much on spamy growth hacking techniques on Facebook), it was Twitter’s push that built this one up.

Also recently Zuck announced ‘Un-Bundling of Facebook‘ which serves similar use-case.

 

4. Look for missing components in daily used products that are ignored

Look for broken / boring experiences in the products around you that are in daily use. Broken, because you can fix them. Boring, because you can make them cool (or add value).

This probably over laps the above mentioned use-cases. Mobile OS features like Camera got replaced by Instagram, Text Messaging got replaced by WhatsApp, Mobile Phone Book got replaced by Gmail Contacts. There is a big opportunity if you can identify and replace basic utilities around you with products.

PS: The biggest broken experience on phone or devices today is battery / charging. And this is a tough one!

 

5. Look for big news or market changes around you

If you are too much into technology news look for changes around you and a need for product that you could build because of market changes and opportunities that come up.

Skype was acquired by Microsoft in 2011. Ever since (and even before that) there have been tons of connectivity issues with Skype. Its time for a reliable Skype, one that works as it should. Big opportunity! There is Google Hangouts, but it still doesn’t make a cut and unfortunately Google still treats this product as a part of Google+ and/or Google Talk. It requires attention as a independent product like Chrome, YouTube or Android.

Another big blow was when Google decided to make Gmail for Business a paid service for all. There are other paid business service providers, I tried a few myself when I recently was looking out for a free / alternate solution, finally giving up and settled for a paid Gmail account. Its a great opportunity to build a awesome product here.

My favorite example here is AngelList, Naval is an angel investor in 100+ startups – sensed the opportunity of creating a platform that connects startups to angels much before anyone else did. Another one is how Admob discovered mobile advertising when the world started making mobile websites (WAP sites then).

——————

Concluding Notes:

How to find Disruptive Ideas for Startup?

Listing down the 5 methods mentioned above:
1. Look for market segments that have not changed for years.
2. Look for large products that are ageing fast.
3. Look for large products that serve multiple purposes.
4. Look for missing components in daily use that are ignored.
5. Look for big news or market changes around you.

Wait, your existing startup does not fit in the above criteria? Nothing to get disheartened with, this is just a reference point. In fact I also realized that my own startup does not fit in this :)

Some takeaways,

  • The above 5 pointers all lead to a large addressable market. So next time a investor tells you he/she is looking for a large market, you fit in.
  • Just another startup or just another feature in large market does not make a cut. It should be a differentiated solution / product.
  • Disruptive ideas are plenty, it is the execution and team behind that matters most.
  • Most importantly, don’t build a product or startup in a market that is considered hot. Instead build something that you understand (or understand it well before you start).

And Flipkart, you have my respect for life!

PS: All notes referring to Rediff are expressed as my personal opinion. Most details mentioned here are in public domain already.

  • snemax

    Helpful indeed

    • http://www.beingpractical.com/ Pravin J

      Thanks

  • Mansi Khurana

    Nice thoughts.
    I find accounting software space a good opportunity. Tally, which is around 20yrs hasn’t adopted to new technologies. Cloud accounting applications like ProfitBooks look promising.

    • http://www.beingpractical.com/ Pravin J

      Absolutely Agree. This is one industry / vertical that has not changed a lot.

      Most people don’t move out because the old data on Tally is big factor and accounting professionals don’t feel the need to data availability on the go.

      • Mansi Khurana

        Interesting part is, these biggies don’t see it coming. Tally’s MD, in one the interviews, clearly mentioned that they do not have intentions to introduce online accounting 😉

        Being in financial accounting field, I read a lot about Xero and how they grew rapidly in NZ and then US/UK/AUS within couple of years. At home, I get to read about ProfitBooks on various blogs (YourStory, etc).

        Given the nature of SaaS products and the way they grow rapidly, some cloud accounting application will disrupt Tally before they know it.

        • Mukund BS

          I recently stumbled upon a free online accouting tool – Nutcache. Has a lot of nice features.

  • http://www.kaushikmukherjee.com/ Kaushik Mukherjee

    I think Flipkart’s introduction of COD was the most important growth-hacking innovation in Indian eCommerce in the past decade. Their customer service is great (usually) but you’ll probably look towards Zappos for the gold standard. Great read!

    • http://www.beingpractical.com/ Pravin J

      Thanks Kaushik. Flipkart doing COD is PR driven. Media probably doesn’t know that it existed much much before Flipkart came in :)

  • Satish Basavaraj

    “Disruptive ideas are plenty, it is the execution and team behind that matters most.” – Couldn’t agree more. Very well written.

    • http://www.beingpractical.com/ Pravin J

      Thanks Satish

  • Sandesh Kumar

    Good one.. Nicely written!

    • http://www.beingpractical.com/ Pravin J

      Thanks Sandesh

  • http://www.think201.com/ Anurag Rath

    Great post ! Was able to connect with most of the pointer. Would definitely help in the journey ahead :)

    • http://www.beingpractical.com/ Pravin J

      Thanks Anurag

  • kanwar

    “Another example in Indian context is Housing.com – picked up real estate as a vertical that had more or less no differentiation and existing players were hardly innovating on product and consumer experience over years. Everyone was a copy-paste product of everyone else”

    Do you know that the map based UI that they touted as the big innovation was a copy paste from US websites (padmapper, zillow)? Please do your research properly.

    • http://www.beingpractical.com/ Pravin J

      Thanks. I know about this and may have also tweeted about it long back. On that note, no one stopped other players from doing a map based UI. Flipkart ~ Amazon ~ Books. Cheers

      • kanwar

        :)! Why would i want a map based UI for flipkart/amazon? The way media started praising these guys for their ‘innovative’ map based UI was really funny. little did they know that it was again another copy-paste job from the west!

        • http://www.beingpractical.com/ Pravin J

          Sorry, I meant even Flipkart did few things remarkably similarly to what Amazon did (Books). Execution matters right.

          Yes. Not just the media. Lately I have discovered startups that project themselves as innovative and most of them take features from the valley counterparts.

          • kanwar

            yep..execution is key..ideas are dime a dozen ;-)!

  • http://www.marketcalls.in/ Marketcalls

    I should say it is a must read if you are a Startup! Nice thought process!

    • http://www.beingpractical.com/ Pravin J

      Thank you

  • Nikhil

    I am following your posts for a while and love all of them. There is lot of thought behind them and it is possible to relate with almost each one of it. Very few people in Indian startup ecosystem come close to you, unlike many others who just keep sharing and tweeting gyan that is mostly googled or heard from someone else. I love how honestly you put thoughts in to words and that you are ok with others benefiting out of this. I mean who gives startup ideas to others????

    This post in particular has given me some good pointers to think about my own startup. I had a idea that I wanted to startup on but this post changed my entire perspective towards it. Maybe I will take some more months before I startup to do it right. Will definitely get in touch with you when I am ready, would prefer to meet someday.

    • http://www.beingpractical.com/ Pravin J

      Thank you Nikhil. Startups are hard, I personally discourage people from taking it up unless they are completely sure about starting up.

      If you are in Mumbai, happy to meet.

  • Another Entrepreneur

    Me and my co-founders met so many investors while raising investment for our startup. I must admit that not a single VC or angel we met ever demonstrated this clarity of thought when they talked about addressing large markets. Very helpful. Please write more and cover topics like fundraising also.

    • http://www.beingpractical.com/ Pravin J

      Thanks. Those are very kind words. Fundraising is too vague topic to cover for me, honestly I have raised venture capital only once. I will not be the best person to write something on this. I prefer writing topics close me – mostly products.

  • Rakesh

    Good post thanks for sharing it

  • http://www.justaparna.wordpress.com a p a r n a

    I was looking for this kind of post for a long time now :) thanks for sharing it!

  • ObjectMethodology.com

    “The most disruptive word in Startup Ecosystem is ‘disruption’. Its used /
    abused / misused by almost everyone – entrepreneurs, investors,
    advisors, mentors, press and so on.”
    .
    True ‘dat!

  • Nischay Nahata

    Wow amazing post. However I can’t understand how someone can analyze existing problems pick one up and create a startup. I think there’s more to it then this.

  • https://twitter.com/Gaurav1105 Gaurav Sharma

    Great insights, granular and distilled wisdom. So applying your 5 point scorecard-Are there any big opportunities left in the Indian market?