Investing in Disruption
March 30, 2010
I'm an advisor, investor and board member to several startup software companies including Revolution Computing, Pentaho and most recently Erply a new Software as a Service (SaaS) company. One of the common threads I look for is the opportunity to disrupt a large market.
One of the things that made MySQL successful was its use of open source technology to disrupt the multi-billion dollar database market. In Silicon Valley, people often talk about disruption, but usually what they mean is they have some new feature or a new way to do things that is 10x faster or 10x cheaper. Those are good things, but that's not necessarily sufficient to make a business truly disruptive.
The classic disruption model as defined by Clayton Christensen comes down to 4 important factors:
- There's a proven market with large incumbents
This demonstrates that customers are willing to pay money to solve this problem
- There are underserved customers whose needs are not being met by the incumbents
They may be receptive to a "good enough" product that is easy to access
- The incumbents cannot profitably meet the needs of this market
Ideally, their entry into this market would hurt their core business
- To disrupt market, you need to disrupt all the players, not just some of them
If there are other players, you need to disrupt all of them
If you have all of those things, then your business could be disruptive. But typically many startup companies ignore the third point. It's not enough to do something the incumbents don't do today, you want to do something that they cannot do, because it would hurt their existing business.
In the case of MySQL, the product targeted the underserved web developer market. MySQL was not only a better fit technically in that area, but due to its open source model, it was a business that was unattractive to the incumbents. (Or it was, until it grew to beyond $100 million in revenue. Now Oracle will leverage this force to compete against Microsoft SQL Server.)
There are plenty of great businesses out there that are not disruptive; perhaps you're creating a new market, or you're introducing a new innovation that the incumbents have not discovered. Disruption isn't the only strategy, but if you can make your business disruptive, you gain a significant advantage in the market place.
- Amazon: The Innovator's Solution
And disruption continues in the web spaces as high-scale and hope-to-be high-scale deployments have new options like HBase and Cassandra. MySQL is the incumbent and must improve to remain competitive.
Posted by: Mark Callaghan | March 30, 2010 at 08:46 PM
But in the classic model of disruption, it's about serving the under-served with a more convenient, easier offering. Is that the case here? Also, is there anything that would prevent the incumbents (MySQL, Oracle, IBM, MSFT) from offering similar products?
It's not to say these aren't significant innovations or that they don't represent valid business opportunities. But it is not clear these are disruptive as described by Clayton Christensen.
Posted by: ZUrlocker | March 31, 2010 at 04:12 PM