Feb 25, 2020

How Do You Spot a Disruptor?

While performance and momentum are important criteria for evaluating investment opportunities, I am particularly drawn to companies whose products and services are truly disruptive.

We frequently receive pitches from companies claiming they will disrupt their industry, change human behavior, and transform life as we know it; but what does it really mean to be a disruptor? How can investors sort the true category creators from those putting a fresh marketing spin on what’s already been done? And why do these distinctions matter?

  1. Disruptors Define Entrepreneurship
    Disruptors notice problems or gaps in the marketplace (business entrepreneurs) or in the community (social entrepreneurs) and deploy creativity and innovation to fill those voids. This is what defines an entrepreneur: the vision to see what is not there, and the willpower and resourcefulness to bring it about. You can be a great operator or manager; that makes you a business administrator. You can be an innovator; that makes you an inventor. To be an entrepreneur, you need both the creative spark and the temerity to execute.Disruption emerges when you can isolate false assumptions and challenge them with better solutions. It often starts with asking, “Why is something being done this way? Why do we need to accept a compromise? Is there a better way to solve the problem?” We often live in the expedient world of “Or” but a Disruptive Entrepreneur follows the “And” philosophy. Instead of accepting a false compromise – say, to make a product that is healthy or tasty, but not both – a disruptor will approach these purported trade-offs with skepticism. Even it if it takes the disruptor longer to decode a solution, it will seek ways to achieve two seemingly incompatible objectives by seeing the world through a different lens and taking on the arduous path to achieve its vision.
  1. Disruptors Change the Game
    To level the playing field in a land dominated by goliaths, a disruptor must exercise creativity and resourcefulness. While some big companies favor predictability and stability (for fear that re-thinking a business model or pattern will be costly, timely, and destructive), the new guys on the block have a much smaller downside and bigger incentive to disrupt. True entrepreneurs will recognize “doing business differently” as their competitive advantage.It is not just the innovative products or services that differentiate the disruptor; it’s the disruptor’s entire approach to bringing these products and services to market. The startup cannot thrive playing by the rulebook of established companies who may enjoy the advantages of scale and entrenchment; these rules are rigged against it. So Disruptors ideate on how to change the game itself. While an established company pays slotting fees to gain shelf space and advertises on TV to generate awareness, a Disruptor may lack the funds to deploy such tactics. Instead, it pours itself into creating products that are so fantastic that word of mouth and grassroots buzz handle the marketing for it. In a quest to stay relevant and on-trend, retailers will then actively court the Disruptor to meet consumer demand and to get its products onto their shelves.
  1. Disruptors Anticipate Consumer Needs
    We often think about disruption as being aimed at competitors. But real disruptors are even more focused on their consumers than on the competition. Yes, they are doing things differently, but above all they are doing things the way that consumers prefer. Disruptors are both differentiated AND appreciated.In the food space, we refer to unimaginative imitators as “copycat” items – products trying to ride the coattails of a successful pioneer. But, while it may be easier to copy an existing product, mimicry is unlikely to gain traction. Consumers will opt for the leader who introduced the innovation, unless the new product brings a truly incremental and unique value proposition to the table.Take the Greek yogurt category. Head to your local supermarket, and you’re sure to encounter over 300 types of yogurt. In a sea of so many choices, how could more yogurt be the answer? And what makes all the “new” choices special?I recently invested in Ellenos, a Seattle-based company making Greek yogurt unlike any yogurt I’ve ever tried before. Instead of “competing” with other yogurt brands, Ellenos does its own thing. The brand uses an authentic Greek family recipe handed down through hundreds of years; it involves a five-day artisanal process as opposed to the typical hours-long production period utilized by more industrial brands. Ellenos relies on locally-sourced fruits and flavors without any artificial ingredients.Why would anyone go through such a complex process to make the product? When you try Ellenos, you will stop asking that question. While its impact on the competition is secondary, the brand is growing the category by anticipating and meeting an unmet consumer desire.

LinkedIn Article Published February 25, 2020

More from Daniel

2022 High Point University Commencement Address

Today, I want to talk about a light and fluffy subject: your generation’s role in steering humanity in the right direction. No pressure, Dalton. 

But in all seriousness, Dalton, I love what you shared about “leaving everywhere you go better than you found it…and finding ways to give grace and inspiration to the people around you.”  

I want to talk today about HOW to do that as you are all simultaneously challenged and blessed with graduating as our world is re-entering a stage of dramatic consequence. 

The ship of humanity is moving in the wrong direction, and it will be upon all of you to steer it back on track. 

To illustrate this point, I want to compare the circumstances when my father’s generation came of age, to those when my generation and your generation graduated from college. 

My father was fifteen-and-a-half when he was liberated from the Dachau concentration camp by American soldiers. He was barely alive.  He never got to go to school past third grade, let alone college. Several of your grandparents were around your age when they were sent to free Europe from tyranny and darkness. 

By contrast, when I was fifteen years-old, my family immigrated to America from Mexico. I was able to attend college during a period when passionate but cordial debate was the norm. I remember observing political leaders vehemently disagree on a particular topic, while maintaining a friendship rooted in respect. Our world was far from perfect – but the arc of human progress trended in an upward direction. Freedom, open markets, human rights, civility, and the quest for knowledge were all advancing.  

It seemed almost too good to be true.  In fact, it was so good that we began to lose sight that Our Great American Experiment isn’t so much a fixed state of affairs as it is a purposeful daily affirmation – something that we opt into, live out, and vote for not once every four years, but every single day – through how we engage with one another. 

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Understanding the Tricky Balance When Launching Social Startups

At a time when our world is facing unprecedented challenges, from climate change to political polarization to a global pandemic, entrepreneurs and nongovernmental organization (NGO) leaders cannot afford to operate in silos. Entrepreneurs possess resourcefulness, creativity, and initiative; heads of nonprofit organizations are equipped with depth of knowledge, purpose, and the patient determination that comes with that purpose. Together, these partners can turbocharge impact if they properly calibrate their respective contributions to create new social enterprises.

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Both Sides Are Minimizing Violence. Americans Must Fight for Our Nation

Shocking news emerged this week from the bipartisan committee investigating the January 6 attack: On that dark day, Fox News hosts and former-President Donald Trump’s son sent text messages begging for Trump to address the nation and stop the violent riot. Yet many Republicans continue to downplay the insurrection that dangerously undermined electoral integrity and the rule of law and threatened our democracy.

But minimizing violence isn’t only happening on the Republican side. From Philadelphia to Los Angeles, District Attorneys promoting an anti-police narrative and lax crime-fighting policies have contributed to an alarming rise in homicides and spiraling crime rates. Yet despite the skyrocketing crime in liberal bastions, many of us have family and friends living in these cities who refuse to accept that controversial policies to suspend prosecution for many crimes may have played a role in the violent wave.

There is no comparing an attempted insurrection with day to day crime; one is significantly worse, and a much bigger threat to our democracy. But both sides are suffering from a partisan blindness that has led to minimizing any violence that appears to implicate their leaders. And it presents a huge threat to our country.

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