Disrupter’s Dilemma: Compete or Collaborate with Incumbents?

Coffee Break with Game Changers: Startup Focus is live now on the VoiceAmerica Network with this week’s episode: Disrupter’s Dilemma: Compete or Collaborate with Incumbents? The million question for an innovative and disruptive technology: compete or collaborate with the established players in your industry or business niche? Hear how two young startups in very different industries are dealing with these challenges to their market entry and growth.

Host and Panel

Host: Bonnie D. Graham was joined by three experts to fill our panel:

Yusuf Jazakallah: Founder and Director of Recruitment of Smart Technologies: A startup in London focused on creating AI and Machine Learning solutions for HR. Having started his career working for companies like Ernst & Young, American Express and Lloyds Banking group, he brings a unique perspective on how large companies can collaborate with startups to bring disruptive technologies to the market. His start-up was featured as one of the top 20 Global Future creators of 2017.

Frederick Ronse: Founder and CEO of Ovinto: a company specialized in IoT and next generation rail freight supply chain efficiency. Before starting Ovinto, Frederick worked for one of the largest environmental companies in Europe, specializing in ‘polluter-pays’ systems. After leaving this large corporate environment, he had to learn how to innovate and grow his own company with much smaller means and bootstrap financing. From this, he gained experience on how innovation works in corporate environments and in startups.

Mayank Mathur: leads the Value Engineering team in the SAP Startup Focus Program. Mayank leads the VE team to enable Startups, early stage ISVs and Partners to build the next generation of applications and solutions on SAP Hana Technology and Platform. Mayank has been with SAP for 17 years in various Development, Support and Partner Management roles.

Failure is an Option, Darkness for the Light to Shine, and The Market

The panel kicked off the discussion with three quotes focusing around the constructive influence of failure as a necessary step towards innovating. Mr. Jazakallah started the conversation off with a quote from Elon Musk, “Failure is an option here. If things are not failing, you are not innovating enough” illustrates the need to push boundaries stating “You cannot do anything if you are too afraid fail in a disruptive environment”. Mr. Ronse agreed offering some insight from Francis Bacon on when to you are actually doing something new, “In order for the light to shine so brightly, the darkness must be present”. He related this to what disruption looks like, “everyone is going one way and all of the sudden some else does it differently and better than the tradition way, it will shine bright in comparison.”  Mr. Mathur quoted Clayton Christensen, ” Disruptive technology should be framed as a marketing challenge, not a technological one,” to illustrate the challenges of finding the right niche and market for an innovation. Mr. Mathur related experiences with companies bring in new and interesting technologies, ”but if there isn’t a market that can be tapped into or developed, then the technology will fail.”

Start-ups Moving Slower to IPO

Bonnie started a roundtable discussion about a trend in with start-ups taking longer to have an IPO and what that signals to the broader market.  Mr. Jazakallah sees the reason for is easier access to funding. Mr. Ronse also sees a factor is the sometimes stormy waters a startup needs to go through before it can gain traction Therefore, rather than getting punished by the market as a public company, many choose to stay private. Mr. Mathur agreed with both points, but also sees much less pressure on startups to go public. Investors are more willing to wait to allow the company to invest itself, focusing on innovation rather than profitability.

Roundtable

Mr. Jazakallah started the roundtable discussion with a set of strategies to avoid the “compete or collaborate” dilemma. He uses a “stealth mode” strategy.  Many times the incumbent companies do not want to collaborate and a startup cannot yet compete in the broader market. He looks for one customer to work with, but does not further market the company. This allows the startup to get established and avoid an incumbent beating the startup to market.  If the incumbents do not want to collaborate he uses a strategy of “customer brute force” where the customer who is using the product put the pressure on the incumbent to work with the startup. Another strategy is to compliment the incumbent product until direct competition is possible which he calls “pseudo positioning”.  Mr. Ronse agreed that any of these strategies can work, and the product will determine what will work best. Mr. Mathur also sees opportunities for a startup to pursue markets that for whatever reason, the incumbent is not interested in. He cited Netflix’s extended international offering that helped establish the company, then Netflix swiftly was able to disrupt much larger players.

Mr. Ronse opened the next discussion on how to innovate. His and Mr. Mathur position is that innovation does not just happen by command or pressure, but rather is a process. A manager cannot just tell his or her employees to go out and innovate, but rather the disruptions come from unplanned and unexpected applications of novel ideas. The computer was originally a computational machine, but it eventually replaced the typewriter. The disruption was finding a new application almost by accident, rather than a command to disrupt typewriters.  Mr. Jazakallah disagreed and thinks that disruptions come from asking the impossible of the best people you can find. While not always successful, surprises can come from the constant pressure to do more.

Crystal Ball Predictions

Mr. Jazakallah sees AI taking over almost all mundane tasks leaving people to work on the most interesting fields, including driverless cars. He also sees bank adopting block-chain and crypto-currencies becoming the preferred method of payment.

Mr. Ronse thinks that by 2020 traditional telecoms will be disrupted as players like Google, Amazon, Facebook, Apple will start to offer connectivity as they seek to avoid the bottleneck that the telecoms control.

Mr. Mathur sees enterprise software moving into B2C and innovation coming from more unexpected places.