How to Know if a Startup is Really “Disruptive”: 5 Questions to Ask

It's one of the biggest buzzwords in the startup landscape: “disruptive”. When you hear or see this term you might initially think of Uber, Apple, Amazon. At the same time, it may feel like every other startup is claiming to be on par with major trailblazers. As an entrepreneur, you might be unsure of whether or not this is a word you can claim for your own business. Or, if you’re an investor, it may be difficult cutting through the noise. To help, we've outlined 5 questions to ask to find out how disruptive a startup really is.

Interested in learning about raising capital remotely? Contact us today.

Defining Disruptive Innovation:

Using ‘disruptive’ as a way to describe startups traces back to the 1990s. Specifically, when then Harvard Business Professor Clayton Christensen published an article in the Harvard Business Review about technology and coined the term “disruptive innovation”. One thing to keep in mind: disruption isn’t limited to tech. In fact, there’s no coding or leading edge technology needed to have a startup that’s disruptive. Instead, the original meaning of disruption is all about people.

People walking in NYC

According to the Harvard Business Review, traditionally, what makes something disruptive are the markets a company starts from: consumers who are usually overlooked by the industry or consumers that don’t exist, at least not yet.

Disruptive Innovations are NOT breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable, thereby making them available to a larger population —  Christensen Institute

5 Questions for Determining a Startup’s Disruption Potential

Question 1: Is it New?

One surefire way to disrupt an industry is to create something completely different. Innovation is all about coming up with new and creative solutions to existing problems. The best way to determine if the solution you’re building is new is by doing extensive research. Get to know all of the incumbents in your industry. And then try to find the upstarts too. Subscribe to industry publications, talk to any experts you know. If you can find key differences, or if there’s truly nothing out there like your company, you may be a disruptor.

"Think Outside the Box" written in chalk on a chalkboard

Question 2: Is it Solving a Problem People Have?

However, just because a business idea is brand new, doesn’t mean it’s disruptive. Someone has to want whatever you’re selling for your company to create a new market or address the needs of an underserved market. Determining if your company’s service or product makes people’s lives easier can get you one step closer to both disruption and a better business model.

Question 3: Is it Better Than Existing Solutions? 

If your idea isn’t new, is your product or service better than what’s already out there? One way to tell if your idea, product, or service is better and disruptive is to test, test, test. Startups are smaller, leaner, and scrappier than industry heavyweights and can use this to their advantage by pivoting and improving faster.

Group of people looking at analytics

Looking for more information about entrepreneurship and raising capital? Follow us on social media: Twitter, LinkedIn, Facebook, Instagram and YouTube

Question 4: Is it Cheaper Than Existing Solutions?

In Christensen’s definition of “disruption”, affordability is key. If your product or service is great quality but expensive, your idea likely isn’t very disruptive. This is because it’s not scalable — only a select population can purchase it. Even if your startup sells to other businesses, there are only so many large companies to market to, and you’ll have to compete with other companies in your industry.

Question 5: Is it Easy to Understand?

If using your solution takes hours of on-boarding and pre-existing knowledge that the average person does not have, your business may be great for a niche market but not a broad consumer base. Traditionally, a disruptor targets neglected markets, proves their worth, catches on like wildfire, and then moves into the mainstream. Disruptors become popular because their solution is so easy to use that everyone just starts using it.

People around a meeting table, business partners shaking hands

Ultimately, your company is disruptive when it’s a threat to established companies. This happens when a startup offers similar, better services that are cheaper and easier to use for consumers who haven’t been addressed before. You can get closer to disruptive innovation when you innovate your own thinking and focus on people, particularly the consumers that the industry has left behind or never bothered with in the first place.  

Interested in learning more? Sign up for updates below!

Paige Robinson

Paige Robinson · Author

Paige is the Content Marketing Associate at Netcapital Advisors. She is a graduate of Wellesley College, with a double major in American Studies and East Asian Languages and Cultures. Outside of her work at ValueSetters, Paige pursues creative writing and keeps up with the latest cultural news.

Subscribe to get email updates on our equity crowdfunding blog

Subscribe Here!