Disruptive Innovation - the key drivers behind today's unprecedented rate of market disruption and how your business can benefit from a shift in the global workforce

1. Dino Talic Senior Product Manager Freelancer.com email: dino.talic@freelancer.com twitter: @freelancer, @dtalic Disruptive Innovation – key drivers and how your business can benefit from a shft in the global workforce You are here
2. Overview 1) What is disruptive innovation 2) What are the trends driving disruptive innovation today 3) What does this mean for your business
3. “The Myth of Technology Innovation” (…or why established companies fail)
4. Misconceptions about Innovation Company A releases an innovative product and dominates a particular market Earns outsized profits Becomes complacent
5. Misconceptions about Innovation Competitors innovate more quickly and bring better products to market Company A loses market share Company A becomes insolvent
6. “Technology Mudslide Hypothesis” - Clayton Christensen
7. “Technology Mudslide Hypothesis” - Clayton Christensen MYTH
8. Reality
9. Good management teams don’t turn bad overnight
10. Types of Innovation Sustaining Innovation Breakthrough Innovation Disruptive Innovation 3 Main Types of Innovation
11. Disruptive Innovation
12. Disruptive Innovation • Disruptive innovations are often worse than the incumbents when first introduced • They create a new market and value network • Market disruption is usually not a function of technology but a change in application
13. What happens to companies that don’t react to market disruption?
14. • 1975 Kodak introduces the world’s first digital camera
15. • 2012 Kodak files for bankruptcy
16. So what happened?
17. What happened? • Early digital cameras were inferior to film • Suitable for niche applications only (low volume, low profit) • In 1978 Kodak had 90% market share of photographic film sales in the US
18. • Eventually digital cameras became “good enough” and disrupted the market • The same is now happening to digital cameras
19. A current example of disruptive innovation
20. Harvey Norman Share Price
21. Many more examples
22. We are in an age of unprecedented rate of technological innovation and disruption of incumbent companies
23. What are the driving forces behind these changes?
24. Trend 1
25. What does this all of this mean? “Software is Eating the World” – Marc Andreessen
26. What does this all of this mean? Advertising Physical Software
27. What does this all of this mean? Telecommunications Physical Software
28. What does this all of this mean? Retail Physical Software
29. What does this all of this mean? Books Physical Software
30. What does this all of this mean? Scrapbooking Physical Software
31. What does this all of this mean? Notepad & Pen Physical Software
32. What does this all of this mean? Maps Physical Software
33. What does this all of this mean? Music Physical Software
34. What does this all of this mean? Retail Estate Physical Software
35. What does this all of this mean? Hang with Friends Physical Software
36. What does this all of this mean? Photography Physical Software
37. What does this all of this mean? Video Physical Software
38. What does this all of this mean? Travel Physical Software
39. What does this all of this mean? Education Physical Software
40. What does this all of this mean? Coupons Physical Software
41. What does this all of this mean? Drug Dealing Physical Software
42. What does this all of this mean? “The Reimagination of Everything” - Mary Meeker
43. What does this mean for your business?
44. Opportunities: • Switch to digital distribution channels • Integrate with mass platforms • Is there a cheaper and more efficient way in which you can provide your product or service?
45. Trend 2
46. 70% The other of the world’s population are about to join the Internet.
47. Source: Internet World Stats & United Nation It’s 2012. World Population 7,030,000,000 Number on the Internet 2,267,233,742 (32.3%)
48. North America 266 million users 77.4% penetration Europe 475 million users 58.4% penetration Latin America 204m (of 592) 34.5% penetration Africa 110m (of 1014m) 10.9% penetration Asia 825m (of 3834m) 21.5% penetration Worldwide Internet Penetration 2011
49. 146% 179% 352% 445% 621% 1033% 1825% 2357% 0% 500% 1000% 1500% 2000% 2500% North America Oceania / Australia Europe World, Avg Asia Latin America / Caribbean Middle East Africa The other 5,000,000,000 people are coming… Worldwide Internet Growth 2000-2010
50. 81% of Users of top sites outside USA
51. Twice as many Chinese than Americans
52. The other 5 billion are on an average wage of $10 or less per day
53. The first thing they are doing is looking to raise their economic status.
54. And it’s never been easier to learn a trade.
55. Free Stanford Course in AI. Over 170,000 enrolled, 8x the total number of students at Stanford.
56. Simultaneously every industry is now digitised.
57. The World is Flat.
60. Today Tomorrow Goods Services What does all this mean? What does this all mean?
61. We are the global labor exchange Some statistics
62. Users– 4,130,000 and growing Covering 234 countries, regions and territories
63. Demographics - 20 regional & growing
64. Economy – 2,400,000 Projects so far
65. Economy – Global –
66. Turnover US$ million
67. Banking System We are the sole provider of bank accounts to some freelancers in emerging economies
68. 36 BidsUS $268 Design a fully functional Dune Buggy I can drive at 30km / hour Outsourcing
69. 280 choices for $290! Crowdsourcing
70. Crowdfunding Broke the CSS!
72. Opportunities: • Flexible labour force • Skilled labour on demand • Labour at next to no cost • Build fast and experiment
73. Trend 3
74. What does this all of this mean? Distribution is unprecedented.
75. What does this all of this mean? % of US Households Technology adoption is accelerating
76. ➔ In 1900, <10% of families owned a stove, or had access to electricity or phones ➔ In 1915, <10% owned a car ➔ In 1930, <10% owned a fridge or washer ➔ In 1945, <10% owned a dryer or air-conditioning ➔ In 1960, <10% owned a dishwasher or colour TV ➔ In 1975, <10% owned a microwave ➔ In 1990, <10% owned a cell phone or Internet ➔ Today.. more than 90% own all the above. Not so long ago.
77. What does this all of this mean? Computing mutates as it goes pervasive Desktops, Laptops Mobile Phones, Tablets
78. .. and faster
79. .. and faster!
80. .. and faster!!
81. .. and faster!!! 0 100 200 300 400 500 600 700 800 900 1000 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Facebook (millions of users)
82. What does this all of this mean? Parabolic growth comes from harnessing distribution fire hoses
83. Facebook Firehose
84. Apple Firehose
85. Google Firehose
86. Reddit Firehose
87. Other Unconventional Firehoses
88. Virality. Social. Reviews. Friends. Inviters.
90. Opportunities: • Provide your products through popular distribution platforms • Increase product virality and user uptake • Increase marketing ROI
91. Trend 4
92. What does this all of this mean? Every business today is an Internet business.
93. What does this all of this mean? All this stuff is free.
94. Virtualised computer.. Only this computer is a hotel reservation system! • PBX • Hotel Reservations • Wifi • Minibar • Movies Free!
95. What does this all of this mean? All this stuff is cheap.
96. What does this all of this mean? All this stuff is cheap. Even if none of this stuff makes sense to you, freelancers can put it together for you.. cheap!
97. What does this all of this mean? You can start a company off a credit card
98. What does this all of this mean? A new class of Venture Capital has arisen
99. What does this all of this mean? Digg.com • Outsourced original software for $60 • $6000 to get site up and running • $1200 for domain and 12 months hosting Offer from Google for $200 million 4 years later
100. What does this all of this mean? PCTools / Spyware Doctor • Outsourced original software for $1000 • Bootstrapped to profitability • Raised financing only at very late stage Sold to Symantec for $300 million 6 years later.
101. What does this all of this mean? RetailMeNot.com • Built with $30 in one weekend • Bootstrapped to $30m in revenues Sold to WhaleShark for $90 million 5 years later.
102. 5 Billion Internet Users by 2020 Internet Users Mobile only Internet Users
103. • 350m users in 6 years • 950m users in 8 years • 100m users in 45 days?!? Internet Scale
104. Internet Scale Growth 2% of.. The Internet. Alexa rank #16 in the US
105. • Founded in July 2007 • Financed in July 2008 • Makes silly flash games • 2011 revenue $1.2 billion • Founded Nov 2008 • 2011 revenue $1.6 billion • Spams you deals of the day • WSJ “made $1 billion in sales faster than any other business, ever” Internet Scale Revenue
106. Years to reach $1 billion in revenue 0 1 2 3 4 5 6 7 8 9 10 1976 1984 1986 1994 1994 1995 1997 1998 2007 2008 Year of Incorporation
107. What does this all of this mean? How can your business benefit?
108. What does this all of this mean? Think what your business can do with…
109. What does this all of this mean? …infrastructure at next to no cost
110. What does this all of this mean? …unprecedented distribution at next to no cost
111. What does this all of this mean? …labour at next to no cost
112. Case Study Company: an Australian software provider to major telcos Opportunity: • Had a potential client in a Chilean telco • Needed to demo their product quickly Problem: Only one issue: it was in English
113. Case Study Solution: They used Freelancer to translate their product A Chilean freelancer translated it: – In 2 days – For $75
114. What does this all of this mean? Think what your business can do…

Notas do Editor

About me:
Product Manager at Freelancer.com. Freelancer.ocm is the world’s largest outsourcing marketplace. With over 4MM users. It was started in 2009 and has seen over 100% YOY revenue growth since.

Prior to that I’ve worked as a Software Engineer in R&D for companies like Canon and Cochlear where I helped bring new products to market.

I hold degrees in Engineering and Accounting. So I feel right at home here. I actually did a summer internship with Deloitte when I was at uni in their audit division. Unfortunately those 7 weeks were enough for me to realise that my talents lay elsewhere. But yeah, I was an accountant for about 7 weeks.
This is the simplistic idea that an established firm fails because it doesn't "keep up technologically" with other firms. In this hypothesis, firms are like climbers scrambling upward on crumbling footing, where it takes constant upward-climbing effort just to stay still, and any break from the effort (such as complacency born of profitability) causes a rapid downhill slide.
Incumbents rarely fail because they are out innovated. It is because their business models get disrupted
Performance vs time.
Dotted red line is the performance from a product that customers can utilise

At the high end of every market there are demanding customers who are difficult to satisfy. At the low end of every market there are less demanding customers who are relatively easy to satisfy.

The blue line represents the pace of technological progress for a particular industry. In every industry, the pace of technological progress is faster than the customer’s ability to absorb or utilise that performance.
Humps represent incremental and breakthrough innovations.
The leaders in the industry tend to stay the leaders from the inception of the industry through to end. Innovations serve them to provide better products and serve the highest profit customers.

Disruptive innovations are not so much technological innovations as changes in application and value networks. These are products inferior to the leaders, but are cheaper and simpler and can take root in an undemanding application at the bottom of the market and then grow from there. E.g. Dell computers – made very cheap computers for the low end of the market. Had a business model where it could make money at very low prices and moved up from there
Why is Harvey Norman being disrupted?
Company designed to exploit a certain value network:
Physical stores
Sales staff
Local distribution centres
Early e-commerce did not have the volume? Prob not. More likely:
- In other words every industry is becoming digitised. This is shifting the traditional value networks and is creating opportunities as well as dangers for incumbent companies.
Need a bigger google search result picture – not sure what I’m supposed to be looking at
- Too many pictures, are you gonna be talking about them? Or just flipping the slides?
A completely flexible labour force – it changes the way you budget and respond to operational and competitive pressures
For the first time you can get skilled labour truly on demand – ¼ of Freelancer projects get awarded within the first 24 hours.
Labour is cheap. No overheads, no bureaucracy and best of all global competition
This is the most important point. It allows you to build things…fast and experiment. The quickest way to arrive at a good idea is to have 100 bad ones. Iterate quickly and experiment.
Distribution in every sense is unprecedented – both physical goods and people as well as that of information.
This in itself is a catalyst for disruption – as it changes existing distribution channels and value networks.
What are the catalysts for an acceleration in distribution? Accelerating adoption.
This is an indicator of mass adoption and the widening of distribution channels. A shift from desktops and laptops (fixed computing devices) towards a greater adoption in mobile technology.
People want to consume and interact wherever they are. This presents new distribution channels and greater consumption of both goods and information.
In the first 2 years of the release of of the iPhone it sold over 60MM units. This adoption indicates the fast formation of new technology ecosystems and new distribution channels.

Businesses need to recognize and act on these shifts early in order to be able to capitalize on the opportunity.
iPad saw a 3x faster adoption rate compared to the iPhone. The adoption curve is increasing.
Andoid adoption – 4x that of the iphone. This again presents challenges and opportunities for businesses. A completely new distribution channel has formed overnight essentially.
Recognising this shift and understanding the demographics behind it can allow businesses to capitalize.

Android demographics are different from iPhone user demographics. As is the ecosystem. Understanding these is important.
50% of users who have access to the internet are users of Facebook

Now I know what you’re thinking, thanks for telling us that IPhones and Facebook are popular.
What is a firehose?
Distribution firehoses are distribution channels which gives a business a potentially huge exposure at next to no cost.
46MM app downloads/day. Again at a very low cost of distribution.
Every day billions of people are sitting at their computers typing in search queries. That is a distribution firehose. Some of those people need you products or services.

SEO is a very inexpensive way to get a lot of eyes on your content.
Tap new and developing distribution firehoses and find your customers where they are.
Build in virality into the core of your products where possible. All users to connect with they networks share to their networks. Enrich the experience of your app by allowing social interactions.
These methods are cheaper than traditional advertising. And much more scalable.
- Every business today has some online presence and conducts a portion of its operations online. Whether that means that they provide their services online, carry out marketing or PR.
- A bit of an advertising here?
Insert pictures of graphics illustrations as examples?
One of our customers I met by chance at a Product Management conference

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