What are the most effective methods for identifying industry disruptors?

“Disruption” was first used in The Innovator’s Dilemma in 1997. Since then, it’s become almost meaningless from overuse. For me, it’s much more about “empathic evolution” than disruption. Evolution is a (relatively)slower, more subtle process but more powerful. Industry and market dynamics evolve based on customer needs, company & worker needs evolve based on top down strategies &business processes. Technology solutions, in turn, evolve based on the pain points revealed by workers who implement strategy & process. The best way to evolve a disruptive product is to empathize with problems & gaps in a given market by doing/knowing the work of your customer. Customer discovery is literally all about watching and learning (and then coding).

Understand what pains your audience what are some things that they desperately want to get rid of & work towards solving them asap!

Identifying industry disruptors effectively often involves looking for pain points within the industry. In my experience, disruptors typically emerge by addressing these unmet needs or inefficiencies in a novel way. Start by analyzing the current market landscape to identify common frustrations, inefficiencies, or gaps in services. Listen to customer feedback, observe industry trends, and stay informed about emerging technologies. Companies or startups that offer solutions directly addressing these pain points are likely candidates for disruption. They often bring innovative approaches or technologies that significantly improve, simplify, or redefine existing processes or products, challenging the status quo of the industry.

Pinpoint a significant pain point that affects a substantial number of people. This pain point should be severe enough that individuals are prepared to pay for a solution. It is crucial to ensure that the proposed solution effectively addresses the identified pain point. Many issues may merely represent inconveniences and do not necessarily prompt a willingness to pay for their resolution. Such issues might not be suitable for venture-backed startups to address.

Keep an eye on what's buzzing in the market, especially new tech, and what competitors and startups are up to. Listen to customers—what ticks them off or excites them? Partner up, maybe crash a few brainstorming sessions with different industries. Imagine wild scenarios to prep for anything funky coming your industry's way. Stay flexible, and you might just catch those game-changers before they hit.

Analyze how the entire value chain is structured of any given product or service, & make sure you understand where you can add more value!

Identifying industry disruptors effectively can be achieved by analyzing the value chain. In my experience, scrutinizing each step of the industry's value chain helps uncover areas ripe for disruption. Look for stages where inefficiencies, high costs, or poor customer experiences are prevalent. Disruptors often enter the market by innovating in these specific areas, offering more efficient, cost-effective, or user-friendly alternatives. They may employ new technologies, business models, or processes that significantly alter how value is created and delivered. By understanding where the value chain is most vulnerable to innovation, you can spot potential disruptors poised to transform the industry.

In the age of AI, simple SWOT analyses of a given value chain can lead to insights on where and how a market can be disrupted. Eg, any SWOT that reveals a market player’s weaknesses in timing or customization may delineate a market gap for an AI powered app or platform. I witnessed this first hand with one of our fund’s portfolio companies. Their AI powered platform for payment integrity in healthcare and medical billing evolved from just such an analysis by the founders where they saw a need for enterprise payers to perform internally a billing function that previously was outsourced to managed services providers. With the 1.0 platform built, the startup was able to scale rapidly because they were exploiting weaknesses of a legacy player.

To spot industry disruptors, keep an eye on founders and entrepreneurs. These individuals are often at the forefront of shaping the future, driving innovation and change in their industries.