Entrepreneurs have an affinity to create a new way of doings things. Sometimes it’s completely restructuring an industry, other times it’s just tweaking the smallest spoke in a large wheel.
Matt spoke at last year’s GrowConf on just this topic: Disruption: Building a Marketplace by Crowd-sourcing. Touching on how his team at 99designs “really fucked up the industry and pissed off the establishment” and how they were successful doing it.
“The thing that Wikipedia misses in its definition [of disruptive companies]” explains Matt, “is that disruptive companies can also create liquidity in markets where no liquidity existed before”.
He argues that the most innovative companies from the last few years have done exactly this. From flipping the merchant payment industry on its head, Square, to parking the taxi industry, Uber, and even changing the late-stage investment game, Second Market. Time and time again, the companies that are going against the grain (or against the establishment) are the ones that are most successful.
The Dawn of Disruption
Before 99designs, the process of finding a good freelance designer was long, risky, and potentially expensive. Or, in Matt’s words, “it really sucked”. This meant that small business owners were shying away from getting professional graphic design services that they desperately needed.
“We decided to flip the model on its head by using crowdsourcing”, explains Matt. Harnessing the power of the crowd allowed small business owners to define a budget and have dozens of designers competing for their project with results in seven days and a money-back guarantee. This opened up a whole new customer segment in the graphic design industry.
Matt tells us that he often gets asked “how did you come up with 99designs? It’s such a great idea, it seems so obvious now”. He confesses that he actually didn’t come up with the idea himself, but that it evolved from friendly design contests among the designers at his first company, SitePoint, an online forum for designers and developers.
Eventually, business owners and bloggers found these competitions and started independently crowdsourcing work from designers on the forum. “That was sort of the genesis for 99designs” says Matt, “we started charging small business owners just $10 to post their request for design work, that became our minimum viable product”. Quickly, they began seeing more mainstream adoption. It became so successful, that 99designs spun off as it’s own company in 2008.
Haters Gonna Hate
Disruptive innovation has two sides to it. On one hand, you’re making a whole bunch of people very happy, on the other hand, people who are very invested in the status quo lash out and fight back against you. – Matt Mickiewicz
Within 6 months of launching, 99designs got a letter from the American Association of Graphic Designers asking them to shut down their business, because they thought it was negatively impacting the industry. Uber and Airbnb have also faced their fair share of regulatory battles with regional governments over policy and taxation issues.
Messages like these are the reality of the disruptive entrepreneur. Like Matt explains, disruption isn’t about pleasing everyone. It’s about capturing market share in new and innovative ways…which is bound to piss off industry vets sooner or later. And when that happens, you need to be able to stick to your guns.
5 Golden Rules of Disruption
One of the most important points that Matt makes is that disruption is not a process, it’s a way of thinking and seeing things. He explains that there are five essential questions you need to ask yourself in order to turn an industry on its head:
1. What processes are inherently broken, overpriced, or frustrating?
2. What type of assets currently have no liquidity and need a marketplace to connect buyers and sellers?
3. How can you create an offering 10x or 100x better than the alternative?
(Make something so irresistible that people will advocate for it)
4. What could be provided 90% cheaper and apply to a much wider market?
5. What could you provide for free, or at a cheaper rate, through alternative monetization strategies?
The best disruptors are outsiders – Matt Mickiewicz
In Matt’s opinion, anyone can be a disruptor. In fact, most of the best disruptors come from outside of the industry that they’re working in. “If you look at people who created Square and Airbnb, there is nothing in their background that suggests industry experience”, explains Matt: “they’re not tied to any status quo”.
From taxis to banking, disruption isn’t really about the product. It’s about solving real-life problems in a way that makes people say ‘how did I ever live without that’?
And when the day comes where you have loyal followers singing your praises, and crowds of people wanting to take you down – you’ll know that you’ve truly disrupted an industry.
Tell us: Who gets your vote for most disruptive startup?
Tags: disruption, entrepreneurship, expert advice, Matt Mickiewicz, startup advice