When a major company is disrupted by an innovator, it doesn’t happen overnight. The innovator generally takes a series of evolutionary steps down the path to disrupting the incumbent. It is not enough for the innovator to identify and focus upon consumer dissatisfaction with the incumbent. The innovator will not disrupt the incumbent unless the innovator has developed the strengths needed to do so.
An excellent example is Diaspora, an upstart company written about in the most recent issue of Bloomberg Business Week (Our Data, Ourselves, May 14-May 20, 2012). Diaspora seeks to be a Facebook alternative that lets users control their own data and, thus, have more privacy.
The timing was right for Diaspora. Bolstered by negative consumer sentiment regarding Facebook’s privacy policies, Diaspora easily attracted some investors. Bloomberg reported that Diaspora raised over $200,000 in funding, obtained at first from sources like the founders’ faculty advisor, then as a result of tweets by well known open internet advocates, and ultimately a story in the New York Times.
Bloomberg also reported that Diaspora signed up 600,000 users, a relatively small slice of the market when compared with Facebook. Google Plus soon debuted, with features similar to Diaspora. Like Diaspora, Plus did not attract anywhere near Facebook’s usage volume, even with Google’s mighty resources. According to what Bloomberg reported, Diaspora continued to struggle, and the stress of it all may have contributed to the suicide of one of the founders.
As Bloomberg reported, Diaspora has since added some experienced key people, and now works with a start-up accelerator, Y-Combinator, whose track record includes helping to launch several highly successful tech ventures. Bloomberg also reports that other start-ups are pursuing businesses related to Diaspora’s, and two of those ventures each have over $7 million in funding.
What is the lesson here?
According to my 25+ years researching business success and failure patterns, disrupting an incumbent requires moves down an evolutionary path. Merely recognizing marketplace dissatisfaction with some aspects of Facebook is not enough for a successful disruption by Diaspora. To address those marketplace concerns as a successful disrupter, a company must have the necessary strengths. This is the case regardless of whether the potential disrupter is a venture launched by inexperienced college students, or whether it’s an endeavor of a huge organization with enormous resources, like Google.
Either way, companies must go beyond identifying marketplace dissatisfaction, and must also have or ultimately develop the strengths needed to compete. This might entail starting in a niche and ultimately expanding to adjacent markets–like Facebook did by initially serving only students at Harvard, then expanding to other universities, and eventually to the general public. Or, it could involve starting with technology vastly different from the incumbent’s that may not be an obvious direct threat early on, but ultimately shifts the competitive landscape.
But, aiming to dethrone Facebook primarily by addressing current consumer dissatisfaction, and apparently intending a head-on challenge, without expecting to start with niches, and without evolving the strengths to draw consumers away from Facebook, is not an approach that generally disrupts a dominant incumbent. Instead, to become successful, Diaspora will have to evolve into its eventual competitive position in the marketplace.
Yet, Diaspora’s efforts are not in vain. The surviving founders made early progress and gained valuable experience. This can be built upon to ultimately evolve toward bigger goals. Those goals may call for building Diaspora into a stronger company, or they may involve the founders’ personal career plans. Either way, the early experiences of Diaspora can be part of the evolutionary path to future success.
