disruption: the true scale of innovation – and its less than you think!

By in banking, general, management, products, strategy on Thursday, 29 September 2011

A writer who I follow was bemoaning the lack of change in banking the other day. Now the point was perfectly valid – until he took a pop at P2P lending.
True disruption. the effect may be massive but the true percentages are surprisingly low!
As I follow social banking – and as one of its great supporters, I had to disagree. But it raised an interesting question. How do we measure disruption?

The writer in question was James Gardner, who’s the general manager of Spigot, the leading business process software vendor in the innovation space.

In theory, he should know. But then he suggested that it could be “nearly 100%”. That sure had a disrupting effect on me – because that’s plain silly…

Overselling the product

I’d pointed out that Zopa had captured 2% of the loan market in less than 6 years. James responded that he’d have expected a near 100% market share.

The first thing to accept is that any viable market will have a number of players. Simple market forces would constrain even the World’s Most Amazing Product. There is almost no chance that it could ever realistically see 100% market share. That wouldn’t be disruption – that would be total market annihilation.

OK – let’s leave James to his blushes. But what is the real measure of disruption?

Defining disruption – the true measure of success

Rather than me pompously spewing out a meaningless figure, we should look at great products in a number of markets and see what they actually achieved.

By defining some norm, we’re more likely to set the bar for a meaningful measure. Defining a level of expectation, if you like.

Let’s take a number of products that were generally accepted as game changing. Looking across markets will balance things out.

First up – and a surprising winner, given that cleaning isn’t exactly a joy, is Dyson. Billionaire Sir James Dyson was knighted for producing his vacuum cleaner.

Market share? 40%. But that took 27 years.

Next its the world’s most successful technology company. Who could forget Apple.

Market share for Apple is 10.7%, with iPhone at 5%. They’re had 35 years and 4 years for iPhone.

Internet search is a strange one. Yes, its a market now, but it wasn’t originally, it was a function. This does have one dominant player and will skew any measure as a result. But we have to include Google.

Google dominates Search with 64.8%. But even Google took 13 years to get there.

OK, now we have some viable samples across markets. How about an average?

The Disrupter benchmark

So true market disruption has been achieved when market share touches 30%.

But don’t hold your breath – the average time to reach that position is 19.75 years.

So knowing this, can we now look at disruption logically rather than emotionally? Well, I’m no statistician, but this allows some empirical measurement for sure.

So what does this give us?

What this suggests is that disruption isn’t an overnight thing, there’s no big bang. Market share is distributed – so to gain some, someone must lose some.

The bigger the market, the more players in it and the smaller the slices available. When ten players own a market, each with 10%, to take 2, 3 or 5% is significant.

Finally, it isn’t a sign of failure for a player to take some time to cause disruption. We have to take a mature view of change and realise it can’t be instant.

We should differentiate between what causes a stir – and what causes disruption. We can do the former instantly – the latter take a lot longer!

And at least we can put to bed the silly idea of 100% penetration. Sorry James.

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