To disrupt an industry, it's best to know it well

By Erin Griffith , written on May 27, 2013

From The News Desk

The word "disruption" gets tossed around so often in the tech blogosphere that it's become practically meaningless. But there's plenty of room in the world for legit disruption, i.e., starting a company that eats away at, and maybe even topples, a dominant industry.

The problem is that too many people set out to disrupt industries that they don't understand. Often VCs worship the idea of a naive 20-year-old engineer who is unfamiliar how an old industry is set in its ways. It takes that kind of naiveté to shake up the old dominant players who aren't incentivized to innovate, the thinking goes. Execs in the hospitality industry can list thousands of reasons why something like Airbnb would never work. It took a crazy, determined and somewhat desperate group of recent college grads to build something like Airbnb; now those same hotel execs are wondering if their businesses are under threat from the site and its many copycats.

Daniel Ek, founder and CEO of Spotify, has a similar tale of impossible thinking. Regarding his decision to take on the music industry, he said, “I’m naive enough to think things will always work out and I don’t fully understand how hard things are." When he set out to make music more accessible legally than through pirated means, he had no idea how difficult his negotiations with the labels would be. As described in his PandoMonthly interview, Ek spent a harrowing few months camping out outside of executives offices before he got his first deals:

At a different PandoMonthly in New York, Chris Dixon explained this phenomena through the story of his first company, SideAdvisor. The startup solved a very simple problem back when malware and pop-up ads were common. Simple as it was, the problem was ripe for the picking because the overall security industry viewed it as a user education problem, not a weakness in their product offerings.

"I sort of came to it from a non-security perspective, which is why I saw it this way," he said. "If you actually talk to security industry people, … they say, 'Oh that doesn't make sense. This isn't what security companies do. That's an education problem.'

"And that's exactly why there was an opportunity, I think, is the fact that I was coming to it from from a non-security world and looking at it as a consumer internet problem and not a security problem," he said.

These stories add to the myth that anyone who can spot a broken industry can jump in and fix it with a little elbow grease and hustle. Dixon noted he likes to ask the "Peter Thiel" question to founders his firm is interviewing: "Do you have a secret?" It means, do you know something about this industry, or market, or product, that no one else does?

The problem is there's a lot of backstory to these tales of disruption that doesn't get told. The second part of the "secret" question is just as important as the first. "Do you have a secret, and how did you earn your secret?" For Dixon's firm Andreessen Horowitz, the decision to back a company is just as much about the founder as it is about his or her background and how it led up to that moment, Dixon said. With SiteAdvisor, Dixon's background developing fintech software for Wall Street firms gave him insight into the security industry.

"You have to believe something that no one else believes, not because you decided to believe it but because you did something for years that led you to believe it and notice a pattern," he said.

Two weeks after the event, that point about earning secrets has resonated with me. I've begun applying it to every founder I've met - how did they earn their secret? -- and it's telling. BuzzFeed's secret is that sharing is the future of content distribution. Founder Jonah Peretti earned that through his own viral successes --, the Nike Sweatshop incident, the Rejection Hotline.

Nest's secret is that people will adopt smart thermostats not necessarily for the environmental impact, but for their beautiful design. Founder Tony Fadell earned that secret designing beautiful hardware at Apple.

Asana's secret is that collaboration and tools should be robust and easy to work with. Founder Dustin Moskovitz earned that while managing a huge team at Facebook.

But like all nuggets of wisdom, there are always exceptions. The biggest one is Mark Zuckerberg, whose secret was simply an insight into human behavior. Social networking wasn't an industry yet. Zuckerberg noticed that people like to share photos of their parties. It wasn't something he had to earn. It turned out to be a damn good secret.

(Disclosure: Dixon is an investor in PandoDaily.)

[Feature image courtesy recombiner]