Understanding Disruptive Innovation

Have you ever thought of how unexpectedly very cheap, and simple products can topple very expensive or complex existing products from corporate giants.

As per Clayton Christensen

"Disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors."

[...Clayton Christensen.]

The very expensive or complex previously established product becomes Disruptee and the new simple, accessible and cheap product is known as Disruptor.

Understanding Ries definition of Startup

Erik Ries defines a startup as:

"A Startup is a human institution designed to create a new product or service under conditions of extreme uncertainty."

[Eric Ries]

The  significant aspects of Ries definition are broadness, institution building, newness and extreme uncertainty.

Broadness

An important thing to understand over here is what Ries deliberately excluded from the definition, and that in fact made this definition really broad. Please note that the definition does not say anything about

• the size of the  company
• the sector of the company
• the related industry
• or technology 

Institution building

 A startup is an institution building. This institution building is an important part of the definition. This means as  as startup we are trying to create institution building when we don't know what we don't know. In other words startup is an institution building to cope up with conditions of extreme uncertainty.

Newness

  A startup is designed to create something new. The newness of the product or service is an important aspect of this definition. That is why if you open a new business that is an exact clone of an existing business, that can not be a startup.

Extreme Uncertainty

 Extreme uncertainty is the most important part of the Ries definition of startup. Startups are designed to face the challenges of extreme uncertainty. According to Ries the harsh soil of extreme uncertainty is the place where startups thrive.

Understanding Blank's definition of Startup

Let us see how Steve Blank's defines a Startup as:

"A Startup is a temporary organization formed to search for a repeatable and scalable business model."

[Steve Blank]

When you first look at this definition of startup, a few questions may arise.

• When is meant by a temporary organization?
• What is the Goal of a startup? 
• What does a startup search for?
• What is a business model?

 Let us look at these closely.

Temporary Organization

A Startup is a temporary organization, the reason it is called temporary is because its is specifically designed to achieve a goal - and after its goal is achieved it will no longer remains a Startup.

Startup's goal is to search 

Because Startups do not know what they are doing. That is why they have some people who are comfortable dealing with "how to deal with unknowns?".
The goal of a Startups is to search for repeatable and scalable business model.

 

Business Model

Business Model is a broader subject, and requires separate article or study circle session.
In short from a Business perspective - a Business model portrays the answer of following general questions.

• how your company creates values?
• how your company capture value?
• how your company deliver value?

NOTE: The specific success criteria may be measures depending on your company's metrics of success.

In simple words a business model means how your company makes money.   

In the end I have a question which definition do you like more? and why? Steve Blank's definition or SBA definition of a Startup? Leave your comments.

Understanding SBA Definition of Startup

The Small Business Administration (SBA) defines a Startup as:

“In the world of business, the word "startup" goes beyond a company just getting off the ground. The term startup is also associated with a business that is typically technology oriented and has high growth potential. Startups have some unique struggles, especially in regard to financing. That’s because investors are looking for the highest potential return on investment, while balancing the associated risks.”

[Small Business Administration] 

Here we need to understand the three key attributes of a Startup.

Startups are High Tech

A key aspect that differentiates a startup from a small business is that the footing of a startups is high tech. This sound footing provides a solid foundation for innovation right from the formation or Ideating phase of a startup.

Startups have High growth potential

Another key aspect differentiating a startup from a small business is growth. As startups think big, they grow fast in terms of users, customers, market share. They have potential to scale up in a fast growing target market. For most of the startups, since past few years, this has become possible because of internet.

Startups have unique financial struggle

Startups strive to get investment from startup funding organizations.


What comes to your mind first when you think of Startup?
I would like to see your comments.