When launching a startup centered around disruptive innovation, traditional wisdom often falls short. Most investors advise startups to constantly engage with customers to find product-market fit. This approach makes sense—by understanding customer needs, startups can fine-tune their products to better serve the market. However, this method may not be as effective for disruptive innovations that create entirely new markets or redefine existing ones.
Steve Jobs and the Risk of Relying on Customer Feedback in Innovation
Steve Jobs, co-founder of Apple, was famously skeptical about the value of customer feedback when creating groundbreaking products. He believed that customers often don’t know what they want until you show it to them. Jobs once said, "People don’t know what they want until you show it to them," reflecting his belief that true innovation requires vision and foresight beyond what consumers can currently articulate.
Jobs' perspective is particularly relevant for startups aiming to create new markets or fundamentally change how existing markets operate. In these cases, relying on customer feedback can be misleading. Consumers may not recognize the limitations of existing solutions until they experience the benefits of a new technology or approach.
The Challenge of Product-Market Fit in Disruptive Innovation
For a startup like Cprice, which proposes a new way of conducting commerce through electronic price tags, a customer feedback-based approach may not be the most effective strategy. Cprice's model challenges the traditional centralized retail structure by enabling sellers or manufacturers to exhibit and sell products where the customers are. This approach allows for dynamic transactions across various decentralized locations.
Consider the example of transportation before the invention of the automobile. People were accustomed to horse-drawn carriages and may not have considered them particularly inconvenient. However, once they experienced the speed and comfort of a car, the limitations of the carriage became obvious. Similarly, Cprice’s electronic price tags offer a new retail experience that customers may not realize they need until they try it.
The Innovator's Dilemma: A Theoretical Foundation
The difficulty of relying on customer feedback in the development of disruptive innovation is well explained by Clayton Christensen’s concept of the “Innovator’s Dilemma.” According to Christensen, successful companies often hesitate to pursue disruptive innovations because these innovations initially appeal to niche markets or fail to generate immediate profits. This hesitation is largely due to existing customers demanding improvements to current products rather than entirely new solutions.
In the context of Cprice, this theory suggests that the market for electronic price tags may not be clearly defined because it offers a new form of retail experience. The true potential of this innovation lies not in the current market demand, but in the market that will be created once consumers understand and embrace the benefits of this new system.
How to Explain Disruptive Innovation to Investors
Faced with these challenges, how should startups with disruptive innovations like Cprice communicate their value to investors? Here are some strategies:
- Emphasize Vision Over Current Demand: Instead of focusing on current market demand, highlight the long-term vision and market transformation your innovation will enable. Explain how your product will change consumer behavior and market interactions.
- Use Analogies to Explain: Use historical analogies, like the transition from horse-drawn carriages to automobiles, to help investors understand the potential impact of your innovation. This can help them appreciate the importance of a product that doesn’t fit neatly into existing market categories.
- Focus on Market Creation: Emphasize the idea that your product isn’t just about fitting into an existing market, but about creating a new one. Explain how your innovation will generate new growth opportunities.
- Highlight Unmet Needs: Even if customers haven’t clearly articulated dissatisfaction with existing solutions, identify and emphasize the potential problems your product solves.
- Stress the Disruptive Potential: Build a compelling case for how your innovation could disrupt the existing market. Highlight inefficiencies or limitations in the current market and how your solution overcomes them.
Conclusion
Disruptive innovations like Cprice’s electronic price tags require a different approach to communication with investors. By focusing on market transformation potential, using illustrative analogies, and emphasizing the creation of new markets, startups can effectively convey the value of their disruptive ideas. As Steve Jobs famously noted, customers may not know what they want until you show it to them. For startups aiming at radical change, it’s crucial to help investors see the future potential of innovations that might not be obvious in today’s market landscape.