The Innovator’s Dilemma is a path-breaking idea floated by Clayton Christensen (1997), that talks about how innovators disrupt established incumbent products / services and why incumbents don’t realise the threat until its too late.
The idea has inspired tens of thousands of would be disruptors across the world and is one of the most often quoted innovation models. This author has been a “fan” since 1999. This partly explains my fascination & passion for “startups” as opposed to running/leading established enterprises (which my astrologer is convinced would have led to glowing success given my stars and their “dashas” (transits)).
In India, a majority of “innovators” have gone on to build digital marketplaces and Unicorn valuations — trading platforms modelled after global first-movers (and of late Chinese models) that have truly disrupted good old establishments used to govt cronyism and favouritism but slow on the digital bandwagon. It started with eCommerce but has quickly moved to payments, food delivery, manpower & skills hiring, insurance & loan products, logistics, transportation, hotels and with global VCs financing their “spend” based valuations, many traditional manufacturing, trading or financial services companies are wondering if they have been in the wrong business of making “profits”.
(The largest chunk of innovators in India are probably found on “LinkedIn” J Our profiles are full of “innovation”, “visionary”, “disruption” and “first to do X” epithets). But I digress.
The handful of “real” innovators who tried to build next-gen tech products — mobile OS, video management on cloud, voice recognition engine, digital hand-writing tools, mobile games, AR/VR etc. are mostly unsung, unknown and licking their scars wondering why their talents, ideas, skills and hard work did not pay off in building strong businesses while many “similar” silicon valley startups became successes in the same time-frame.
This came up yesterday again (schadenfreude happens twice a year for me!) during a review with a young SAAS startup I have been mentoring. The startup, founded by two top professionals with 30+ years of experience behind them, chose the then emerging area of cloud, collaboration & no-code platforms for enterprises as their playing field. Given their strong technical backgrounds (IIT, IIM, blue chip work experience) this desire to “disrupt”, to “innovate” and to “leave a dent”, a new emerging enterprise area with wide open future possibilities was strongly attractive.
For the next year and some change, they worked furiously to build their product — a top-class enterprise class data engine / dash-boarding with Trello like task management and a highly configurable model that could be used to churn out any enterprise application in quick time (remember no-code smarts?).
When the MVP was ready, the (Indian) innovator’s faced their 1st dilemma — Sell abroad or sell in India?
The Indian enterprise market is notoriously late adopter, cost sensitive and usually years away from catching the latest global tech trends. The overseas markets (US in most cases) values new ideas and adopts (even drives the need) the latest tech trends but needs money, lots of money. With Indian risk capital being mostly risk averse, especially for early stage B2B startups with a promising but unproven product and execution risk of US markets, a majority of the innovators don’t get any financial support to “sell” their world leading innovation to the world’s leading innovation customer.
So, our innovators decided to try selling within Indian markets and reach global markets thru mostly digital, social and inside sales. This is a path followed by 99% of the folks, even though the path itself is littered with startup stumbles btw. The hope within early innovators is always to be the 1st to cross the famed graveyard to the promised lands.
Now, the second of the (Indian) innovator’s dilemma kicked-in? Should they sell to SMEs or large enterprises?
Selling to large Indian enterprises means building a field sales team, long sales cycles, significant customisations (mostly unpaid) and deep discounting. One needed to have deep pockets and deeper reserves of patience to survive and thrive. Selling to SMEs and MSMEs on the other hand involved mostly digital, social and inside sales lead generation with reasonable quick buying cycles but the risk of deeper discounting and/or very low pricing / payment ability. The SMEs would hardly grow their business over time, collaborate little on building a stronger product and yet demand fairly high customisation and service levels (mostly unpaid). Also, significantly, the value of the disruptive innovation on the product would be mostly lost on them, it’s the low cost / nice looking product that’s the key attraction.
But since beggars can’t be choosers, our disruptive innovators put their heads down and started ploughing thru the SME/MSME targets hoping to build ARR (annual recurring revenue) to a level where it would be feasible to raise capital to sell into larger enterprises and possibly the more lucrative global markets. A year and some change later, there were a few successes, a few wins, many losses and some churn. All of the scenarios of risk and reward painted above were experienced and handled. Many lessons learned.
The product, as happens, was pulled into all sorts of direction to meet revenue needs. Resources were taken from engineering / innovation to fund lead generation and inside sales. The current customers didn’t need some key features / modules, so they were deferred to a later stage.
And now the (Indian) innovators are at their 3rd dilemma — Is the product disruptive / innovative for global markets anymore?