New Market Disruptive Innovation for Web 2.0

July 2nd, 2008 seph250 Posted in Internet, Startups |

New Market Strategies for Disruption

New market strategies for disruption are different than low-end disruptive strategies.  Instead of simply entering the market with a lower cost, lower performance product, new market strategies involve “coming off the backplane” into a new market.
An example of a new market disruptive innovation is Sony’s portable transistor radio.  When originally released, the transistor radios sound quality was completely inferior to that of existing radios on the market.  However, existing radios were so large they were often built into furniture and thus not remotely portable, and prohibitively expensive for most customers.  When Sony’s low cost portable music player came on the market, it was not really a direct competitor to the existing radio businesses.  If someone was in the market for a high end radio, they would balk at the poor sound quality of the transistor radio.  Likewise, most customers interested in the transistor radio could never have afforded an expensive home radio.  By positioning the product for a new market, Sony was (according to  Christensen) “competing against non-consumption”.  Customers were either going to get a Sony radio, or not get anything at all.

New Market Strategies to Disrupt a Web-Service

In most of the examples Christensen describes, new market disruptive strategies seem similar to low-end disruptive strategies because price is the factor that separates different markets.  In free consumer internet services, markets are not defined by pricing categories because the prices are already zero, a price that anyone can afford.  However, there are other factors that separate markets in consumer internet and thus still ways to position a service such that it “competes against non-consumption”.

Foreign Language Applications

One proven strategy is to offer a consumer internet service in a certain foreign language.  Many consumer internet sites target the US market and ignore the rest of the world.  If you don’t speak English, you can’t use these services.

Xiaonei Disrupting Facebook

An example of a company employing this strategy is Xiaonei, dubbed by many as the “Chinese Facebook Clone”.  In April 2008, Xiaonei reportedly raised $430 million in venture capital, and had built a community of over 8.8 million active users.  As in all disruptive innovations, it currently seems that the two social networks do not compete with each other.  As globalization continues it’s possible these companies will become direct competitors.  If Xiaonei is able to focus on the unique needs of their Chinese customer base and to develop real innovations in their own right rather than just mimicking what Facebook does, it may be able to build enough momentum to compete with and even disrupt Facebook in the English market.

Baidu Disrupting Google

Similarly, Baidu is a search engine that targets the Chinese market.  The interface, while resembling Google’s search page, is in Chinese, but the differences go much deeper.  For a search engine to adequately address the Chinese market, it needs to be able to index and search through pages that use Chinese characters.  This provides unique challenges that companies focused on the US market are not well positioned to address.  In 2006, Baidu was “the first choice of 62 percent of Chinese users, up 15 points over 2005”, according to a study released in September by the China Internet Network Information Center.  As globalization continues, Baidu may one day expand into offering a US search engine that can disrupt Google at home in the US.

Provide Mobile Access

Another new-market disruptive strategy is to initially focus on mobile.  Around the world, many people have access to a mobile phone, but no access to a computer.  Mobile services are generally lower performing products than their personal computer browser counterparts limited by the smaller screen, user interface and slower data rates.  Some mobile services work by simply sending text messages to the service, which responds with a text message, others work in the mobile phones browser, and others work as a Java application installed on the phone.  Mobile services with value propositions similar to desktop browser internet applications could provide a foothold to disrupt the leading internet application.  Some companies that seem to be employing this strategy include 4Info and Babajob.

4Info Disrupting Google

4Info was one of the early local/mobile search companies that functioned via text messages.  In order to submit a search a user only has to send a text message to short code 44636 (4info), of what they want to search.  Sending the message “Starbucks Boston” will return the address and phone numbers of Starbucks locations in Boston.  Sending “SWA 436” will return the details of Southwest Airlines flight 436.  By using text messages as the interface to the service, 4info is available to anyone with a text message capable mobile phone.  People without a broadband internet connection on their PC are able to use the service.  Unfortunately for 4Info the leading search engines have recognized this service as a potential disruption, and launched similar services, making it seem unlikely that 4Info will be able to disrupt Google or Yahoo.

Babajob Disrupting Monster

Another startup that is using mobile access as a new-market disruptive strategy is the India based startup Babajob.com.  Babajob is a service to connect employees with employers.  The business takes advantage of the fact that although most workers in India do not have personal computers with internet access, they have text message capable mobile phones.  Once signed up, job seekers get text message notifications of job opportunities they might be interested in, and can respond with their availability.  As the Indian job market grows and more Indians begin to use personal computers with internet connections, Babajob may be able to move up market and find itself in a position as the Monster.com of India, and a disruptor of the US market leader.