Disrupting markets have for years been a formula for success for startups. Be nimbler, nicer looking and cheaper than the incumbents in your market, grow at a blistering pace whatever the costs associated with it and you will be on to doing great things taking your idea from it’s inception into potentially a unicorn scale-up.
While these startups have been blasting the competition to the roadside, there are a couple of things, we haven’t really discussed. One is the obvious fact that the expansion has only been possible due to a presence of excessive funding, sometimes with very little prospects for developing a viable business model going forward (Uber comes to mind as the poster example of this). The other is the more important one; that in the quest for disruption, more value has been destroyed than has been accrued by the startup.
Of course there is no rule anywhere in the capitalist world that suggests that challengers should be mindful of not destroying more than they create, and you could also very well argue that for customers that are left with a better service at a cheaper price, it’s a pure win. But in terms of the prospects of economic growth on the longer term, I would still suggest that the business of disrupting things just for the sake of disrupting it runs counter to what should be our common interests.
The challenge with disruption is that in the absence of real innovation, disruption doesn’t create anything. To put it in other terms the size of the pie stays the same, as there is no real growth anywhere. Now, you could argue that customers being able to get more for less increases the overall economic activity and make the individual better off, because he gets access to more, but we need to ask ourselves whether we really do think that improving our economic prospects by going cheap is really sustainable?
Just ask the American middle class. Think about how much of their economic growth is really down to the availability of ever more cheap products and services – aka crap IMHO – than, say, an ongoing positive development in their disposable income? It’s a lot more of the former than the latter, and it’s actually quite a systemic problem that we have done preciously little to try and fix but will need to fix sooner rather than later. If not for anything else then for ensuring social stability in society.
It might be a small detour to take, but in essence my point is this: The things we celebrate as being innovations and creating value are really the opposite. A lot of it is piggy backing on extracting value that already exists other places while creating nothing meaningful new, and the end result is that while it undoubtedly leaves a few better off, it leaves more worse off. That’s not a winning recipe long term. It is a race to a bottom, you don’t want to reach.
So the question then really becomes how we might work to change this dynamic? How do we get from celebrating the gold calf into innovating in a way that is not only positive in itself but net positive for economic growth and with that society itself?
We need to get back on the track where innovation is about creating breakthroughs that unlock new kinds of value instead of sucking existing markets dry. We need to come up with technologies that create new markets that can in essence function as amplifiers of new markets.
For startups this means that instead of looking to disrupt someone already there and try to get their slice of the cake, the focus should be on how to ensure that the cake itself gets bigger, and whatever is added to said cake the startup in question will be well positioned to grab its significant share off.
Doing that will surely require a vision above and beyond 99,99 % of all vision statements ever presented by startups or corporates. But think about the opportunity? Think about being the innovators edition of Christopher Columbus setting sail to find something that no-one has found before only to end up with far more than what you were able to imagine, you would ever find?
We need that kind of imagination to replace the fighting for scraps in areas we already know really well. We need this to get a situation, where innovation is a net positive of a more significant nature than used as a cover up for ideas that could in essence very well be net negatives for all.
I’ll be curious to see who sets the standard first, and what kind of vision could emerge from this.
(Photo by Daniel Chekalov on Unsplash)