I sat alone in my small 9 X 9 box office in central London looking at the phone and wondered whether I could build and grow a new business in Europe from scratch.
I’d just negotiated a 3 month contract with a start-up tech business from the US that was starting to do well over there. They wanted to test whether they could replicate that success in the UK and Europe. It was the days when the now ubiquitous term “Cloud” was only really understood by cutting edge IT directors from big companies.
I had read Clayton Christensen’s book “The Innovators Dilemma” so I understood that the key to my success was going to be, being able to execute what he calls a Low-End market disruption.
His well-researched business growth and innovation concept described the enormous problem that powerful CEO’s leading companies with huge resources had in dealing with Low End disruptors of their markets. Yes, they had deep pockets to compete against all comers but the terrifying dilemma they faced was knowing that they were exposed to low end disrupters like us with products that targeted their least profitable customers at a much lower price point with less functionality.
Their big company business models drove them to reluctantly dismiss the lower value customers that had difficulty affording their profitable products. They were driven by what Christensen called Sustaining Innovation – Introducing ever improving products to their best customers at higher profit margins.
On the other hand, the strategic imperative for the disruptors was to avoid going after the big profitable demanding customers and instead sell to those customers that had less of a need for all of the bells and whistles that the big company provided. Even better if the disruptor could bring in what he called Non-Consumption (customers that hadn’t been able to afford the product before because of it’s cost, complexity or location).
This was my badge of owner, I was now a Disruptive Innovator!
All of my training and experience in the IT sector up to that point had been in selling to large blue-chip companies with huge IT budgets like The Royal Bank of Scotland, Nat West, Goldman Sachs, Merril Lynch, BBC, Orange etc. Now here I was staring at the phone praying that all my outward confidence during the negotiations could help me grow the business by delivering a Low end, New Market disruptor model, selling to smaller companies I’d never heard of.
I still remember trying to explain the concept of our Infrastructure as a Service, SaaS product to an entrepreneur that owned an online accounting business. I described how he could have all of the improved web performance that he would normally have to pay 5 times the money we were discussing for our service from the big boys.
He struggled to understand why he would need it until I explained how his competition were able to deliver their web pages much quicker to their customers because of the powerful, expensive infrastructure their hosting companies were providing. He could have similar performance, quicker and for much less investment.
He said Yes!
It was the first of thousands of sales that we made targeting these smaller businesses. We scaled the business with a fast-moving disruptor mindset in the UK, EMEA and into the far East. Every time we made a sale at this level it provided vital cashflow and perhaps most importantly, feedback for how we could improve our Low-end disruptor product ready for the next assault up the value chain.
Over the next few years we followed Christensen’s business growth Innovation model by gradually improving our low entrant product. We targeted the next level of the value chain up and again competed aggressively against our big established competition and started to sell to some much bigger companies.
Approximately Six years from that day staring at the phone in my 9 X 9 office in central London we were bought out by Oracle for upwards of $600 million dollars. My understanding of Christensen’s business growth Innovation strategy helped me keep my strategic focus while there was so much temptation to go after the much bigger paying clients during the early days.