Why do enterprises not build disruptive products?

Enterprises definitely are stable to spend or invest in experiments but they never choose to but on the other hand we always see the startups bringing something new to the market, either they keep on building the products on their own (Staying bootstrapped or getting funds) or they get acquired strategically by big names.

Big ideas, great ideas and profitable ideas are all different terms. We are living in the era where marketing is so easier than ever and agnostic. People can find products for pretty much all of their problems on the internet but what about the problems that they have not yet faced?

When I say big ideas, these are the ideas that can bring change into our society or may be change the way we live, forever! On the other hand, great ideas are those that are sufficient to fulfill the needs of humankind today. But when I talk about profitable ideas, these are the ideas which people choose to believe in. They are consuming these products and will continue to for years. We refer to these products as sustaining (the opposite of disruptive), I will rather discuss the difference in detail on a seperate blog.

Enterprises definitely are stable to spend or invest in experiments but they never choose to but on the other hand we always see the startups bringing something new to the market, either they keep on building the products on their own (Staying bootstrapped or getting funds) or they get acquired strategically by big names.

For the same reasons, and the behavior of the market, enterprises will never invest on big ideas or may I say the disruptive ones. 

Top 5 reasons why enterprises are not able to invest into the disruptive ideas:

  • The market : The enterprises sell a product or services which are chosen by a lot of customers. Customers are willing to pay the required price to avail the product or services provided by the enterprises, making the enterprises establish their presence in the mainstream market. This market is helping the enterprises earn well, and so they continuously use the feedback from this market to enhance their product or services. In such conditions, enterprises really don’t want to invest in the product or services for which their target market is not ready, or may be not ready today as they might end up solving a problem which was not really a problem for their market.
  • The humans: In any enterprise, there are loads and loads of employees, enough to put a war against others, right? But usually the wars are done between each other within an enterprise. When the management plans to invest in a disruptive idea they start to look for people who are aligned to the vision of this new initiative and can work on it with full energy. But the people with skills always tend to measure the opportunity wrt their own skills and hence will not choose to work on a product which is not going to make an instant impact for the enterprise and also can be a loss making project. In such situations it becomes really hard for the enterprises to create a team which works on disruptive product ideas.
  • The organization: The enterprise has a complex structure of organization that involves tons of processes and hierarchies. Applying the same procedures of ideation or brainstorming that worked for their mainstream market will not necessarily work successfully for the disruptive initiatives as well. In order to achieve success for disruptives ones, they might need to establish a separate child organization which should work in isolation to other child companies of the enterprise or they may acquire a small startup to build it for them.
  • The reputation: Enterprises invest in opportunities which aligns to their own vision and can give them benefit in the longer run. If they are investing in disruptive ideas for which they don’t really have any data about sales or success metrics then they might end up putting their current reputation on stake. They definitely don’t want to come in the limelight with a failure as it can affect their clientele for a very long time and it can also have an impact on their other products or initiatives.
  • The profits: Enterprises keep on playing in the mainstream market with low margin and high margin products and services with a strong partner support as well. Their sales cycles are usually standardized with time. Enterprises know how much they need to stay profitable, or profitable and beat the competition or just beat the competition too. They might invest in low margin products just to break the competition and strategically acquire the market share but they will not invest into the products or services which sounds good but cannot help the enterprises to sustain, or if their sales team cannot sell it into the market.

The battle of new ideas vs profitable ideas is not new, happening for ever. Lets see how the choices of enterprises evolve with time. Till then we can continue to stock Salesforce, Tesla, Apple and many other giants. 

I will be writing more about the giants too. Keep reading!


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