By Bill Scott, founder of StoreReport LLC & Scott Systems Inc.
Congratulations! You’ve come up with a fantastic, new idea that will change the way the world works. You’ve built a prototype, identified your target market, studied your competition and received encouragement from your clients, family and your friends. Some may have even invested small sums of money in you. And now, you’re ready to get serious and raise a war chest of operating capital to make your dream a reality…. STOP!
Beware of the disruptive technology
If your technology requires a change in the habit of your market, it’s called ‘disruptive’; one that doesn’t is called ‘non-disruptive’. The higher you go up the ladder from evolutionary to revolutionary, the grander the prize and the greater the risk. Unfortunately, unless you are prepared to wait a decade or more before the market sees things your way—meaning you will have to find a way to survive during that time—you will most likely fail.
The adoption life cycle of disruptive technologies is typically ten years, a period when castle walls crumble, kings topple from their thrones, millionaires claim bankruptcy and insignificant visionaries are mysteriously catapulted to the top of the heap. The ones who were victorious include Steve Jobs, Fred Smith and Henry Ford, but the names of those who failed dissolved into oblivion.
Disruptive technologies are rarely planned. It’s a rare period when fortunes are made and lost, and when men and women with vision both win and lose in the glorious game of ‘Do or Die’. Their inventions and ideas often come out of nowhere, are envisioned spontaneously and more often than not, result in the ruination of the innovator and everybody who dared to get involved. Did you know that Alexander Graham Bell’s benefactors tried to sell his telephone technology to Western Union for a mere $100,000, and failed to secure it? They got tired of waiting, I guess.
But that’s not all. Things change, people change, and competitors will have all the time they need to suck all the wind from your sails and sink your ship before it even leaves port. The life of an innovator can be a glorious rise to the heavens, or it can be a painful slide down a long razorblade into a pool of iodine.
Twelve years and counting
In 2003, three years after I had put my computer programs on the Internet, a well-known technology writer wrote about it in Inc. Magazine. He created a firestorm of controversy when he wrote, “If this guy lived in Silicon Valley, he’d be a zillionaire.” This statement prompted a Mississippi university professor to take exception to the idea that “high-technology money was hard to find in ‘backwoods’ Mississippi, where the cotton is high and computers come from Walmart.”
Still, the chances are, if I had lived in Silicon Valley in 2003, the only advantage I would have had was better weather, because the writer, like me, is a ‘common nerd’… a guy who absolutely refuses to see ‘reality’ through his high-technology blinders. Do you really want to follow in the footsteps of Johannes Gutenberg, E L Cord and Nikola Tesla? They all failed you know.
Empirical research puts the failure rate of disruptive technologies at 90%. 90%? And as far as investors go, if they can’t see where they can get their investment back five times in five years, they are just not interested. Venture capital firms are like wildcatters, who hastily drill seven holes to find one producing well. This tactic may work for investors, but it’s not conducive to progress.
Everything changed in the 70s
The personal computer was a disruptive technology, because it required giving up paper Gantt charts and ledger books filled with rows and columns of handwritten numbers, in favor of electronic spreadsheets and computerized accounting systems. Not to mention the $8,000 price tag just for the CPU. You might be thinking, ‘Man, I wish I had gotten into the computer business before 1980.’ Think again. At least 400 microcomputer companies died like beached whales when IBM entered the market. And even Moby Dick failed in the end.
Other examples of earlier disruptive technologies are the printing press, the telephone, automobiles, the cotton gin, the steam engine, the sewing machine and electricity. Johannes Gutenberg died an impoverished derelict, and had he not printed the Bible before his death, he might have fallen through the cracks of history and into the annals of obscurity.
Trying to raise serious money for a disruptive technology generally falls to someone with deep pockets who has taken your idea and exceeded your lifespan. Normally, disruptive technologies take years to produce a profit, and are reserved for obsessed individuals that just can’t take ‘no’ for an answer. Nerds, every one of them.
Non –Disruptive Technology
A non-disruptive technology builds upon a technology that’s already accepted by the market. Good examples might be an antenna booster for a cell phone, or a new batch of chemicals that gives your car better gas mileage, a vitamin that treats the effects of a cold, filtered cigarettes, lime beer and tapioca flavored chewing gum where the market doesn’t have to dramatically change their habits in order to participate. Here we find entrepreneurs like Sam Walton, Michael Dell and the founders of Google. It took two years before I used Google, but it didn’t take ten. You don’t have to change your lifestyle to shop at Walmart. You just need a car and strong legs to make it to the front door.
On the brighter side
Disruptive technologies can change the course of history. When Wilbur and Orville Wright made their first successful flight in a heavier than air machine, it’s doubtful they were thinking about trips to the moon. After their flight, it took ten years before the US airline industry was born, and a mere fifty years later we saw Neil Armstrong make his ‘first giant leap for mankind.’ Untold billions of dollars were spent and lost to see that event happen. If I had suggested air travel, atomic bombs or cell phones during the Civil War, I would have been labeled a kook and directed to the front lines to die for my country.
What? Are we nuts?
Our society, our form of government, our willingness to take risks, our tenacity and spirit, all these things are what made Americans the leading innovators of disruptive technologies as no other nation in the world could have done. ‘Daring to dream’ is a necessary quality of this kind of entrepreneur, and they are the seeds of the American Spirit. Innovators are the guys that spark the American dream for the benefit of others. Looking back, I would have done the same thing. I can only hope there’s a special place in heaven for people who in spite of the odds, are just too darn stubborn to quit.
Freedom is an American thing
“Freedom” is the environment that makes innovation possible. Equality is only possible where innovation doesn’t exists. Exceptionalism and freedom are joined at the hip. Where else in the world is risking it all even worth the effort? Win or lose, American businessmen and women reached for a dream, and even after they are humiliated and have watched their dreams ground into the dirt, they jump back on their feet and start all over again. Is this a sign of insanity, or is it just American?
If you’re one of these, tortured and unappreciated souls, I’ll pray for you; both for you, and for the future of America, because, without disruptive technologies we cannot hope to make those giant leaps in progress that will become the era known as the 21st Century. I’m proud to be a red-blooded American nerd. Win or lose. I’ll ride that train until it flies over a cliff, and then I’ll pick myself up, dust myself off and buy a ticket on another one going in the same direction.