Disruption 101: What makes a company a disruptor?
Every once in a while, a newly launched company manages to shake up an industry by using a new technology or by adopting a recently developed business model. Many of these “disruptors” become wildly successful, stealing market share and profits from incumbents.
What makes some disruptors more successful than others?
Let us examine some of the top disruptors in recent times and understand how they have achieved such remarkable success. If you’d like to learn more about how to invest in disruptors, click here.
Founder Jack Ma had humble beginnings as a school teacher. Today, his personal net worth exceeds US$30 billion.
Alibaba capitalised on the growing number of internet users in China who were willing to make online purchases. Simultaneously, the firm provided an opportunity for large numbers of small enterprises in the country looking for new customers.
A major hurdle that the firm faced initially was the lack of trust between buyers and sellers. In a unique initiative, Alibaba introduced Alipay, an eWallet which shoppers can use to securely store funds online. This escrow based payment mechanism provided Chinese consumers the ability to make online purchases without the fear of being cheated.
As increasing numbers of people carried out online transactions successfully, the volume of business done through Alibaba’s platforms grew exponentially.
The e-commerce business that he has set up did transactions of US$463 billion last year. The target for the next 20 years? Alibaba will create 10 million profitable businesses and a 100 million jobs as it expands.
Interested to invest in disruptors like Alibaba? Find out more here.
Harvard dropout Bill Gates and his childhood friend Paul Allen started the company way back in 1975. At that time, computers were a rarity and were available only in companies, government institutions, and other large organisations.
The duo’s business got a boost when they created MS-DOS (Microsoft Disk Operating System) for IBM in 1981. But they did not sell the program to IBM. Instead, they chose only to lease it to the computer giant.
The revenues from MS-DOS gave Microsoft the ability to grow and become the software behemoth that it is today.
Microsoft’s ability to constantly reinvent itself while maintaining its focus on its core business has played a major role in its success. Azure, its cloud computing service is doing exceedingly well. In the last quarter of 2016, business volumes grew 94%. Meanwhile, workhorse Office 365, which is the cloud-based successor to the Office suite, grew its commercial revenues by 47% and its consumer revenues by 22%.
Of course, the company has had some setbacks. Its acquisition of Nokia was a non-starter, but it has exited from this business quickly enough.
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If there is one company that comes to mind when talking about video games, it is Nintendo. This firm has been churning out hits for over three decades. Every game is designed and developed in-house. Nintendo’s own engineers work on the hardware and manuals.
However, there is one Nintendo console that did not quite make the cut, the Nintendo 64. The reason for this is quite easy to see – its development was outsourced.
Nintendo has to compete against heavyweights like Microsoft, which produces the XBox, and Sony Corporation’s PlayStation. Despite the clout that its rivals have, Nintendo is managing to hold its own. Its latest product, the Switch, has been a roaring success.
The company estimated that it would sell 2 million units of the Switch, a hybrid game slate that can be used either as a TV console or as an independent unit, in March this year. Instead, the company has reportedly sold 2.74 million units.
Find out more about how you can invest in game-changing disruptors like Nintendo here.
Mark Zuckerberg’s social media company has upended the traditional advertising industry. In the last quarter of 2016, Facebook had revenues of US$8.8 billion, most of which came from advertising. This figure is about 50% more than the amount clocked in the same quarter of last year.
The company’s growth shows no signs of slowing down.
With the company’s Facebook Custom Audience Tool in its arsenal, advertising revenues will most likely maintain their upward trend. This tool allows marketers to upload lists of contacts with email addresses and phone numbers so that they can be specifically targeted.
In the final weeks of Donald Trump’s election campaign, his team uploaded identity profiles of 220 million Americans. The message that was put across? Don’t vote for Hillary Clinton.
Find out how you can turn your social media addiction into an investment opportunity here.
The company promises to make electric vehicles commonplace. These cars will be self-driving for the most part and will ultimately be utilised practically all the time unless they are being recharged at Tesla’s high-speed battery-charging stations.
This utopian vision has given Tesla a valuation that is greater than that of the Ford Motor Co. What’s more, the firm could be set to dominate two other industries in addition to car manufacturing. It has rapidly gained expertise in solar and battery technologies, both of which have tremendous potential.
Tesla’s electric car has captured the imagination of people across the world. Currently, the company has an insignificant 0.15% of the US car market. But Chairman Elon Musk says that 500,000 cars will be produced in 2018. Prospective buyers believe him. Tesla’s Model 3 has received a staggering 400,000 pre-orders.
The company’s ambitions don’t stop at just electric cars and solar energy. It also owns SpaceX, an aerospace company, whose stated mission is to lower the cost of space transportation and ultimately to colonise Mars.
The electric vehicle industry is set for long term growth, with sales projected to hit 41 million by 2040, according to Bloomberg New Energy Finance’s research. To take advantage of its long term growth potential, you may invest in disruptors in the electric vehicle industry through a regular savings plan.
A computer services company, Tencent offers instant messaging through its QQ Instant Messenger, financial services through Tenpay, and a host of other services through WeChat.
In Mandarin Chinese, WeChat is known as Weixin. It has 889 million active monthly users, many of whom find it indispensable in their daily lives. WeChat can be used for sending instant messages, hailing a taxi, buying movie tickets, and even for online shopping and bill payments.
WeChat’s expertise in mobile apps gives it a tremendous advantage. Large volumes of online sales in China take place via mobile internet. Many Chinese consumers have leapfrogged personal computers and moved directly to smartphones. WeChat has positioned itself to benefit from this change.
The dominant position that WeChat enjoys can be gauged from the fact that about a third of the total time that the Chinese people spend on the mobile internet is on WeChat. The average user accesses it 10 times every day.
As a result of its immense popularity, Tencent has been ranked as China’s most valuable brand. According to a report prepared by advertising agency WPP, the company’s brand is worth US$106.2 billion, a 29% rise from the figure last year.
Inspired by disruptors like Tencent? Find out how you can invest in disruptors here.
The e-commerce giant dominates its home market. According to a recent report, the company gets almost half of the amount that Americans spend in making purchases online. Amazon is already the largest US retailer of books and toys. By next year, it is expected to be the market leader in apparel and consumer electronics as well.
It is also venturing into new fields. Its Echo, a Bluetooth speaker with voice-controlled artificial intelligence named Alexa, has already sold millions of units.
Founder Jeff Bezos has built the business on the premise that “Your margin is my opportunity.” Amazon is known as one of the lowest cost options for buyers and this strength has helped the company expand rapidly. Its revenues in the fourth quarter of 2016 were US$43.74 billion, an increase of 22% from the comparable figure last year.
If you believe in the long term growth potential of e-commerce disruptors like Amazon, here’s how you can start investing.
Disruptive innovation continues its growth path
Clayton Christensen, a professor at Harvard Business School, coined the term “disruptive innovation” in his book “The Innovator’s Dilemma.” Several companies around the world have used the principles outlined by him to establish businesses that have been immensely successful.
Remarkably, many of these firms have sustained the pace of growth over the years and continue to do so, while remaining at the forefront of their respective industries.
Lion Global Investors’ LionGlobal Disruptive Innovation Fund allows you to invest in a portfolio of 100 disruptive companies, distilled from a pool of 500 companies that may include the 7 disruptors mentioned earlier.
Find out you can easily invest in disruptors here.