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“Disruptive innovation” is an increasingly popular idea in the business community, however, many people don’t understand what it truly means. Described as the process by which a product or service starts out in its simplest form at the bottom of the market before moving up to displace established competitors, the term “disruptive innovation” was first used by business professor Clayton Christensen in 1995.
Today, the concept can account for the emergence and meteoric rise of companies like Uber and Netflix, according to Mike Grandinetti, global professor of entrepreneurship, innovation, and digital marketing at Hult International Business School.
Grandinetti is an expert in disruptive innovation and has made a career of pursuing disruption since his introduction to Silicon Valley working as an engineer for Hewlett-Packard Company (HP). He has used his 25 years of entrepreneurial operating experience to guide high-growth startups — mentoring at accelerators such as Techstars and Startup NEXT — and inspire student entrepreneurs throughout his simultaneous 20-year teaching career at the MBA and executive education level.
“I love looking at disruption both from the point of view of the attacker — the startup — and the incumbent who has to defend against the attacker,” Grandinetti says. “I’ve been teaching a course on disruptive business model innovation across many of Hult’s global campuses, while also speaking, publishing, and blogging about it. My interest and passion just continues to grow.”
BostInno sat down with Grandinetti, who shared how early-stage startups can use disruptive innovation to mirror the success of Uber and Netflix, and how corporate empires like Nike use disruption to remain ahead of the competition.
Ingredients for Building a Disruptive Startup: Netflix and Uber
“Startups that are disruptive tend to be led by or founded by people who see the world and can’t agree with a principal model,” Grandinetti says. “They believe that the current process or business model is less than optimal and care deeply about delivering a superior experience to users.”
He points to Netflix founder Reed Hastings as an example. Hastings recognized Blockbuster as a predatory company that generated 10 to 20 percent of its profits from late fees. After experiencing the exorbitant fees first-hand, he started Netflix and changed the way we consume on-demand media.
“He did it out of a sense of frustration, in order to deliver a superior at-home movie viewing experience,” Grandinetti says. “Watching movies should be convenient and pleasant. Before Netflix disrupted Blockbuster, that simply was not the case.”
Grandinetti marvels at the fact that Hastings built Netflix at a time when broadband did not exist yet named and branded the company based on his ability to see the future and capitalize on it.
According to Grandinetti, true disruption relies on “a combination of envisioning something that you believe will positively impact the world, but also understanding when the technology will evolve to be delivered at scale.”
He notes Uber’s success: The company aggressively capitalized on the universal pain point of hailing, riding in, and paying for a taxi, and combined it with emerging technology to build a ride-sharing empire.
“They understood that there was huge frustration and inconvenience, and they were ahead of the curve in seeing the convergence between ubiquitous mobile phones, increasingly accurate GPS systems and the fact that mobile apps have now become a very important part of the global ‘always-connected’ economy,” Grandinetti explains.
Staying Disruptive After Enjoying Success: Nike and Intuit
In order to avoid becoming irrelevant, Grandinetti says that great companies constantly challenge themselves and dare to continuously innovate, pointing to Nike and Intuit as examples.
Nike recognized the strength of the Techstars venture accelerator model and chose to infuse the company with similar entrepreneurial energy. Nike invited these startups to work on the company’s campus using Techstars methodology and handpicked entrepreneurial teams to create an in-house accelerator, Nike+ Accelerator, to advance the digital products that the company was already pursuing.
Intuit Chairman Scott Cook and CEO Brad Smith also rely on open innovation, a lean startup model, and human-centric design to maintain an 80 percent market share, according to Grandinetti. He notes that Cook refers to his employees as entrepreneurs, understands they are the ones who are going to make the company great, and creates a unique corporate atmosphere that empowers them.
“He runs Intuit like a massive accelerator, and it’s brilliant,” Grandinetti says. “It takes a lot of humility for a billionaire to say, ‘I’m not the boss, I’m a mentor. These entrepreneurial employees come to me with ideas to solve our customers’ financial problems, and I coach them, mentor them, guide them along or I challenge them, but I’m not here to tell them what to do.’”
Developing the Next Generations of Disruptors:
“If we don’t bring the real world into the classroom, we are doing students a disservice,” Grandinetti says.
As an educator, Grandinetti combines classroom-based learning with the opportunity to work directly with startups to expose students to how innovative disruption is realized. During a recent digital and social marketing course, Grandinetti brought in 15 startups that he advises and had 150 marketing students consult for them.
“Over three months, 50 percent of the students’ grade was based on the quality and strength of the recommendations that they made to each of these startups,” Grandinetti says. “Marketing students rolled up their sleeves, and they ran optimized Facebook campaigns, Buzzfeed campaigns, Pinterest campaigns, LinkedIn campaigns and Google AdWords campaigns for a range of B2B, B2C and B2B2C startups.”
Practices such as this have paid dividends for the Hult student body, as alumni are impacting the Boston innovation scene with startups of their own.
Leveraging City-Wide Disruption to Advance Boston:
Grandinetti admits that Silicon Valley has the upper hand when it comes to innovations in the social, mobile and cloud arenas, but Boston’s strength in key technologies such as biotech, life sciences, clean tech and robotics is helping us close the gap.
“We’re the best in the world — and no one can ever dispute this — around biotech, life sciences and anything medical because of the world-class teaching and research hospitals in the region, the presence of research institutions like MIT, Harvard, and BU, and the cluster of startups that have sprung up around them,” Grandinetti says. “We should focus on building on our strengths and not view Silicon Valley as a competitor. These innovation clusters are the envy of the world.”
Main image via Nike+ Fuel Lab
Image of Mike Grandinetti via Mike Grandinetti