What is the true connotation of "subversive" innovation?

Silicon Valley entrepreneurs like to put the word "subversive" on the tip of the tongue, but there are only a handful of people who know it clearly. The CEO of online Wealth advisor Wealthfront, Andy Lachelev Andy Rachleff, a senior Silicon Valley venture capitalist, wrote about the definition of "subversive" and explained it.

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Silicon Valley entrepreneurs always like to put "subversive" on their lips, but few people know what the word really means. They think that as long as the product design better, it is destructive. So is the culture of Silicon Valley-designing things that are "better, cheaper and quicker". But this is not the same as subversion.

I've just made the same mistake when I was an entrepreneur. And then, as a venture capitalist, I spent years thinking about subversion, and even at Stanford Graduate School of Business, a course around Cley Christensen's Clay Christensen's "Innovator's Dilemma" (Innovator's Dilemma).

The definition of subversion

The Harvard Business School Professor Christensen has a detailed definition of "subversive" in the book. In short, disruptive products can open up a new market – the so-called New market subversion (New-market disruption), or provide a simpler, cheaper, or more convenient alternative to existing products-that is, low-end subversion (low-end Disruption).

Existing established companies in the market often find it difficult to respond to destructive products. "New Market Subversion" has found opportunities – many customers are not serviced, often because they are not profitable in existing business models. In the low-end of subversion, these customers are not selected by the existing models, often because of the lack of profitability of such choices, and large companies are often happy to lose this part of the user.

As a result, innovators have come to the dilemma. Established companies tend to overlook these new products because they are often unprofitable to respond. But many times, their stagnation may be tantamount to digging up graves for themselves and leading to the eventual collapse.

Subversive cases

Google (Weibo): Subversion of online advertising

Many people can make an accurate decision-Google is "subversive", but it does not understand why. Subversive, not Google's advanced search algorithm, but its advertising services AdWords. If advertisers want to create banner ads at Yahoo, they need to pay at least 5000 dollars, and the lowest ad purchase will cost 10000 dollars. By contrast, Google offers self-service advertising products that could be as low as 1 dollars.

Initially, AdWords's clients were start-ups that couldn't afford Yahoo's huge advertising costs. Five words of text ads, compared to a display ads, it is particularly shabby, but it also allows Google to attract more new audiences, to be able to publish ads online, this is a typical new market damage.

Most people may forget that, over time, Google has brought a lot of eye-catching new features to its advertising service, and then continues to use the "lower cost" business model to pursue established Internet advertisers. And this has evolved into a low-end destruction.

Salesforce: Subversion CRM Software

Salesforce, who had just started, played the role of the new market wreck, and then gradually developed into a low-end subversion. Originally Salesforce product function, than Siebel BAE Software is inferior to many. But Salesforce makes it possible to use Salesforce management software for companies that cannot afford to pay hundreds of thousands of of dollars in high licence fees. Once it reached a certain scale and developed better products, Salesforce also successfully subverted Siebel and other CRM companies.

Sometimes the product may only be a new market subversion, or a low-end subversion of one. Ebay has brought the auction to ordinary people. Amazon's stunning uniqueness is a simpler, cheaper, and more convenient experience than shopping in a physical store.

Uncover the subversive veil

Disruptive products don't have to be cheap

Low-end subversion, not necessarily lower than the price of existing products. Lower-end damage needs to be simpler, cheaper or more convenient, Christensen explains. Traffic application Uber is an excellent example of subversive services-albeit more convenient, but more expensive than traditional taxis.

Low-end subversion is often crude

That means that through a somewhat crude product, there may be unexpected low-end damage. In fact, almost all of the new subversive things, at the beginning of the launch, compared to the old strong-looking, the more inferior. And sometimes the reason for this phenomenon is that the current user, by the existing product "transition services."

Ubiquiti, a supplier of Wi-Fi equipment that went public a year ago, is a typical example of this subversion. The company sells wireless access points designed, manufactured and fabricated by third-party vendors at a low price. These devices are cheap because they cut the complexity of their features for price-sensitive consumers, and the company has few employees. It is not surprising, therefore, that Ubiquiti can successfully snatch market share from established manufacturers.

Better products are not necessarily subversive

Tesla (Tesla) has built a lot of new cars, but the company is not subversive. They have not solved the problems of existing vehicles and are no cheaper than these cars.

Many people believe that kayak, which was listed a few months ago, is subversive. Although the company offers better services than some other travel sites, it is not disruptive, according to Christensen. Because it's not an economic thing for a veteran travel site to strike back at kayak.

Disruptive is the business model, not the product.

Sometimes people say that a technology is subversive, but more accurately, it should be a business model. If a company wants to subvert, the company needs to consider the revenue and cost-price purchases of established companies, which must make it impossible for them to respond quickly. For other companies, it's not difficult to add kayak-like technology to existing products. Market occupants often rely on business models rather than technology to determine whether the attackers are economic.

If you apply this subversive model to past trends, you can even predict which products can be translated into long-term success, while others are not, and the results are very accurate.

From venture capitalists to entrepreneurs

You might think that as a person with a 25 venture experience and a number of subversive events, I would find it easy to design subversive strategies. This brings to mind the initial service of Wealthfront, which we thought would bring an earthquake to mutual funds. But now in retrospect, we do offer better products, but not subversive.

Unlike conventional wisdom, startups that have good products rarely succeed unless they are also subversive in nature. At that time, Wealthfront's growth rate was as fast as we had hoped, and, by chance, I read Christensen's chapter on competition. Suddenly, it dawned on me that Wealthfront's initial service didn't really have a chance.

Later, when we transition to a software financial advisor, we really go into the right track of success. We provide support for young people who cannot afford traditional financial consultancy services and bring about a new market disruption (financial advisers do not reduce their minimum requirements to be able to compete against us).

It is not easy to understand subversion correctly, but it is even more difficult to really "destroy" it.