How to Be the Next Google: Keys to Start-Up Success
Disruption is an enticing and popular buzzword these days.
Every year, hundreds of start-ups venture forth, hoping their Quixotic efforts to change how an industry operates will bear fruit. Most fail, often because they're either ignorant to several realities or choose to simply ignore them.
The truth is: Bringing about disruption is incredibly hard. And it takes an especially driven type of entrepreneur, a lot of money and even more luck and the ability to clear some pretty big hurdles.
"You have to have an appetite for high risk/high reward," says Jason Cohen, an angel investor and the founder of Smart Bear Software, which developed some of the first tools for software peer code review.
"There's no 'lower our risk' when you're doing something disruptive. You may think all entrepreneurs think like that, but it's not true at all. It's not that they're not risky, but ... if you have a small company with 10 people that's profitable and growing a little bit each year, it can go on forever. [To be disruptive] you have to say, I know there's 90 percent chance this is going to blow up, but I don't care. I want to do it anyway."
In fact, true disruption—something that produces such a large shift that long established companies are displaced—is exceedingly rare. Instead, companies more frequently iterate existing technologies in a substantial way, then continue to stay slightly ahead of the competition they surpassed.
Google , in some ways, personifies this. The company was far from the first major search engine. (Yahoo had been established three years earlier and was thriving.) But Google's algorithm and monetization methods moved the industry forward tremendously and it has since kept innovating and expanding into other fields, giving it the reputation of a disruptive giant.
Real disruption costs money—and a lot of it. Small shops hoping to make an impact won't last long, given the enormity of change they're trying to bring about. And unless an entrepreneur is well connected, the efforts are unlikely to succeed.
"You inherit the same problems that every startup has," says Cohen. "You still have to have people find out who you are. You still need to find a pain to solve or a pleasure for people to indulge in. But it's worse, because you're also going up against established companies."
Convincing people of the benefits of disruption is one of the biggest hurdles. Humans are creatures of habit—and once we get settled into one way of doing things, it's often hard to dislodge us. (For example, one of the chief reasons AOL was able to survive its own slow transition to the broadband world was because millions of people had been using the service for their email for years.) To do so, there needs to be a recognized or unrecognized pain point of significance.
Even when a company can convince users to make a switch, it faces an even bigger hurdle with gatekeepers, if that disruption should have business implications. Few groups dig their heels in further than corporate IT departments when the suggestion is made to make a dramatic shift in equipment or software.
The reason is simple: Those shifts don't always work well with other critical parts of the company's infrastructure. And any long-term gain likely comes with some pretty severe short-term pain.
"[Companies often] like to follow buzzwords and don't know what that really means for their business," says Wesley D. Radcliffe, an IT employee at Rustybrick, Inc., a small PHP shop in Suffern, NY. "Did they do research and think that this is going to solve a problem or actually promote growth? Far too often is the Dilbert-style [thinking of] 'We have to switch to X because it is so hot right now'."
Look for special coverage of the Wired Business Conference, Tuesday, May 3, on "Power Lunch" at 1pm ET on CNBC. Michelle Caruso-Cabrera will report from the event and will speak with key participants, including some of the tech world's most-watched leaders.