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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
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Overview
1) What is disruptive innovation
2) What are the trends driving disruptive
innovation today
3) What does this mean for your business
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“The Myth of Technology Innovation”
(…or why established companies fail)
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Misconceptions about Innovation
Company A releases an innovative product and
dominates a particular market
Earns outsized profits
Becomes complacent
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Misconceptions about Innovation
Competitors innovate more quickly and bring
better products to market
Company A loses market share
Company A becomes insolvent
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“Technology Mudslide Hypothesis”
- Clayton Christensen
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“Technology Mudslide Hypothesis”
- Clayton Christensen
MYTH
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Reality
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Good management teams don’t turn bad
overnight
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Types of Innovation
Sustaining
Innovation
Breakthrough
Innovation
Disruptive
Innovation
3 Main Types of Innovation
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Disruptive Innovation
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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
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What happens to companies that don’t react to
market disruption?
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• 1975 Kodak introduces the world’s first digital
camera
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15.
• 2012 Kodak files for bankruptcy
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So what happened?
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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
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• Eventually digital cameras became “good
enough” and disrupted the market
• The same is now happening to digital cameras
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A current example of disruptive innovation
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Harvey Norman Share Price
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Many more examples
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We are in an age of unprecedented rate of
technological innovation and disruption of
incumbent companies
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What are the driving forces behind these
changes?
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Trend 1
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What does this all of this mean?
“Software is Eating the World”
– Marc Andreessen
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What does this all of this mean?
Advertising
Physical Software
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What does this all of this mean?
Telecommunications
Physical Software
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What does this all of this mean?
Retail
Physical Software
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What does this all of this mean?
Books
Physical Software
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What does this all of this mean?
Scrapbooking
Physical Software
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What does this all of this mean?
Notepad & Pen
Physical Software
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What does this all of this mean?
Maps
Physical Software
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What does this all of this mean?
Music
Physical Software
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What does this all of this mean?
Retail Estate
Physical Software
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What does this all of this mean?
Hang with Friends
Physical Software
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What does this all of this mean?
Photography
Physical Software
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What does this all of this mean?
Video
Physical Software
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What does this all of this mean?
Travel
Physical Software
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What does this all of this mean?
Education
Physical Software
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What does this all of this mean?
Coupons
Physical Software
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What does this all of this mean?
Drug Dealing
Physical Software
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What does this all of this mean?
“The Reimagination of Everything”
- Mary Meeker
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What does this mean for your business?
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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?
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Trend 2
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70%
The other
of the world’s
population are
about to join
the Internet.
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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%)
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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
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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
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81% of Users of top sites outside USA
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Twice as many Chinese than Americans
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The other 5 billion
are on an average wage
of $10 or less per day
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The first thing they are
doing is looking to raise
their economic status.
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And it’s never been easier
to learn a trade.
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Free Stanford
Course in AI.
Over 170,000
enrolled, 8x the
total number of
students at
Stanford.
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Simultaneously
every industry is now
digitised.
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The World is Flat.
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The World is Flat.
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The World is Flat.
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Today Tomorrow
Goods Services
What does all this mean?
What does this all mean?
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We are the global labor exchange
Some statistics
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Users– 4,130,000 and growing
Covering 234
countries,
regions and
territories
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Demographics - 20 regional & growing
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Economy – 2,400,000 Projects so far
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Economy – Global
–
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Turnover US$ million
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Banking System
We are the sole
provider of bank
accounts to
some freelancers
in emerging
economies
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36 BidsUS $268
Design a fully
functional Dune
Buggy I can drive at
30km / hour
Outsourcing
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280 choices for
$290!
Crowdsourcing
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Crowdfunding
Broke the CSS!
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What does this mean for your business?
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Opportunities:
• Flexible labour force
• Skilled labour on demand
• Labour at next to no cost
• Build fast and experiment
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Trend 3
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What does this all of this mean?
Distribution is
unprecedented.
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What does this all of this mean?
% of US
Households
Technology adoption is accelerating
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➔ 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.
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What does this all of this mean?
Computing mutates as it goes pervasive
Desktops, Laptops Mobile Phones, Tablets
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.. and faster
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.. and faster!
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.. and faster!!
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.. 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)
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What does this all of this mean?
Parabolic growth
comes from harnessing
distribution fire hoses
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Facebook Firehose
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Apple Firehose
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Google Firehose
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Reddit Firehose
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Other Unconventional Firehoses
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Virality. Social. Reviews. Friends. Inviters.
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What does this mean for your business?
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Opportunities:
• Provide your products through popular
distribution platforms
• Increase product virality and user
uptake
• Increase marketing ROI
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Trend 4
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What does this all of this mean?
Every business today is
an Internet business.
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What does this all of this mean?
All this stuff is free.
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Virtualised computer..
Only this computer is a
hotel reservation system!
• PBX
• Hotel Reservations
• Wifi
• Minibar
• Movies
Free!
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What does this all of this mean?
All this stuff is cheap.
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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!
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What does this all of this mean?
You can start a company off a credit card
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What does this all of this mean?
A new class of Venture Capital has arisen
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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
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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.
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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.
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5 Billion Internet Users by 2020
Internet
Users
Mobile only
Internet Users
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• 350m users in 6 years
• 950m users in 8 years
• 100m users in 45 days?!?
Internet Scale
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Internet Scale Growth
2% of.. The Internet.
Alexa rank #16 in the US
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• 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
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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
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What does this all of this mean?
How can your
business benefit?
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What does this all of this mean?
Think what your
business can do with…
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What does this all of this mean?
…infrastructure at next
to no cost
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What does this all of this mean?
…unprecedented
distribution at next to
no cost
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What does this all of this mean?
…labour at next to no
cost
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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
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Case Study
Solution:
They used Freelancer to translate their product
A Chilean freelancer translated it:
– In 2 days
– For $75
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What does this all of this mean?
Think what your
business can do…
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