Sunday, June 17, 2007

Serotek And It's Disruptive Technologies

Harvard Business School professor Clayton M. Christiansen recently wrote an article for Technology Review outlining the Rules for Innovation. Mr. Christiansen contends that bringing innovation to market is far less of a crap-shoot than venture capitalists pretend. In fact, he outlines a handful of conditions which almost guarantee success. His rules are:

  1. Take root in disruption
  2. Have the necessary scope to succeed
  3. Leverage the right capabilities
  4. And disrupt competitors, not customers.

We looked at Serotek’s products in the light of Mr. Christiansen’s rules and by any measure we are on track for success.

I would like to give you a brief tour of Serotek’s products and compare them to the factors Mr. Christiansen has identified in his research as absolute characteristics of innovation success.

Taking Root in Disruption

What does this mean? The premise is relatively simple. Companies that are leaders in their markets are almost never the innovators of the next technological revolution. This happens because they are well managed and listen to their customers who always tell them that they want better and less expensive versions of what they are currently selling. Thus these market leaders will continue to produce the best in their specific market niche but they will miss entirely the next technological wave which will sweep in from an unsuspected direction and overwhelm the old way of approaching the problem. Nowhere is this more evident than in computers with their successive waves of mainframes, minis, and personal computers . Each new wave represented a major degradation in functionality, but brought that functionality to a previously unserved or underserved market. Once it had taken hold, each wave gradually overwhelmed the prior markets in a grassroots revolution.

The attributes of disruptive technologies are:

  1. Simplicity
  2. Convenience
  3. Low cost

They appeal to a market generally considered too small to be of interest to the mainstream players. The two tests for whether a product is disruptive are:

  1. Does it enable less-skilled, less-wealthy customers to do for themselves things that only the wealthy or skilled intermediaries could previously do?

  2. Does it target customers at the low end who don’t necessarily need all of the functionality of current products?

Clearly Serotek’s products pass these two tests with flying colors. Our user interface and intuitive level of interaction allow people with little or no training and no previous computer experience and with significant physical impairments including blindness and other manual dexterity challenges to access computers. Our target market, the blind and the elderly, are most interested in the Internet fundamentals - e-mail, shopping, chat rooms, entertainment, and information. There is enormous new value to these people by having any access at all. And, generally speaking, our market has been ignored by current vendors as not representing an important economic demographic.

Furthermore, our business model allows us to earn very attractive returns serving our chosen market. We have created an extremely successful business focused only on this low-end, relatively ignored market segment and now, tier by tier we are bringing our innovations to other market segments (such as students and professionals) without losing ease of use.

The Scope to Succeed

Christiansen discusses two technological paths to success: the integrated path where companies sell their proprietary components and products across a wide range of product lines and businesses; and the non-integrated strategy where companies outsource as much as possible, promote industry standards, and use modular, open systems and components. He claims that the integrated strategy is essential where product functionality is not yet good enough and enormous advantage is gained by creating architectures that push the state of the art based on proprietary technology. The open architecture strategy fits the marketplace Serotek’s products find themselves in.

Simplicity, convenience, and speed to market dominate. Powerful technologies have been developed by mainstream companies like U3, Microsoft, and other technologies, including open source, used in our products, that can be adapted easily to our niche market. At the same time, our proprietary backbone architecture, with our patentable core technologies, give us a sustainable advantage over others who might enter this market. In essence, we have the best of three worlds. Our proprietary technologies conform to key industry standards and allow us to integrate leading-edge components and bring a highly functional product to market fast.

Leveraging the Right Capabilities

Christiansen claims that innovations fail when managers attempt to implement them in organizations that are incapable of succeeding. Three factors determine an organization’s innovation limits:

  1. Resources to succeed
  2. Processes that facilitate success
  3. Values that allow employees to give this innovation the attention it needs to succeed

The limits are surprising. Resources are management and money, but oddly enough, proven managers and lots of money are not ingredients to drive innovation. Proven managers tend to go with what has worked before, assuming that new markets will behave in the same fashion as stable markets. But that is rarely the case. New or evolving markets need new thinking. Too much money allows ventures to follow a flawed strategy too long. For example, many over-funded companies during the dot-com bubble valued advertisers above users. Having to scrape by forces the venture to adapt to the desires of actual customers. Looking for customer revenue to fund operations and development forces the venture to uncover viable strategies quickly. Too much money encourages impatience for growth and too much patience for profits. Cash-rich companies tend to take huge gambles before the right strategy can be known. A better, surer path to a solid company is to be patient for growth and impatient for profits.

The Serotek team brings together entrepreneurs and technologists who have a passion for serving this market. The leaders are blind and understand the characteristics of serving this market. They have dealt first-hand with the barriers that vision-impaired people face trying to use computers and the Internet and the huge learning investment required to become skilled in conventional assistive technology.

The company was built using a bootstrap economic model. Every possible administrative function is outsourced and automated. The company carries minimal overhead but can bring the resources together to serve demand. It is completely scalable, able to grow as demand grows, yet has been able to survive through the cash-lean start-up period.

Process can be a barrier. Good processes are essential to established companies serving stable markets. They allow continued improvements in quality and efficiency. But processes are inflexible. Innovation demands flexibility. Thus a start-up company like Serotek has an advantage over behemoth companies with rigid Six Sigma rules because it can shape itself to the needs of its market segments.

Values can be the third barrier. Existing companies have existing value networks with rigid expectations and rewards based on the type of business that has traditionally brought success. Values are even more rigid than processes and thus disruptive innovations have little chance of being given the priority they need to develop and flourish. Serotek’s value system is completely focused on the success of Serotek's products.

Disrupt Competitors, Not Customers

The final success parameter is to help customers do things they want or have been trying to do; don’t make them relearn how to do things they can already do. And don’t bother making it easy for them to do things they weren’t doing or had no interest in doing. This is a very important parameter for us.

There are members of our community who are extremely skilled at using computers and accessing the Internet. They have invested many hours in honing those skills and they may have little interest in Serotek’s products for personal use. In fact, they may resent it because it seems to give others the same rewards for little effort that they earned with great effort. Yet we are making these people advocates by positioning Serotek’s products as a supplement, not a replacement for their current technology. Serotek’s products let them use powerful Internet-based features and entertainment without forcing them to be tied to a single location. At the same time, those who have an intrinsic fear of computers and technology but are interested in the ability to use computers, connect to family and friends through e-mail and Skype, to shop, or enjoy the many entertainment features available online, can have it now, without undergoing the grueling training necessary to master traditional assistive technology. It is an easy path to major improvements in quality of life.

Meanwhile, the manufacturers of traditional assistive technology are going to face some serious challenges in the future. Where they have always made the user adapt to products and services designed primarily for people who didn’t need assistive technology but for government purchasing agencies, we have turned that strategy on its head. Serotek adapts its products to its users; it doesn’t force its users to adapt to anything but new possibilities. The analogy we use is the “electronic curb cut” which simply removes the barrier for all.

Disruptive? Heck yeah! Serotek’s products absolutely turn the tables. With Serotek’s products, people rule, not technology. And so-called disabilities are simply user characteristics that we accommodate.

We read Professor Christiansen’s analysis and pump our fists and shout “Right on!”. We may not have set out to follow these rules, but these rules describe the way we organize and execute our business strategy, out of necessity and passion for our market, rather than driven by any “formula for success.” And we have an abiding faith that this approach will carry through to success - success for our customers who, for the first time, can enjoy the full benefits of accessibility anywhere; success for our investors whom we firmly believe will be richly rewarded for their faith in us; and ultimately success for ourselves as well. We are convinced that we have just scratched the surface. Our disruptive Serotek has a whole lot more disrupting to do, before it too becomes staid and old hat.

Isn’t this fun?

1 comment:

Anonymous said...

I've been connected with the accessibility industry off and on for over ten years and this may be the single most important philosophical statement that I've ever read with reference to it. Never lose or abandon the humility that clearly underlies the statements and business model set forth here in the way that those who inherited leadership in some other areas of accessibility technology have done and never, never, never allow anyone who doesn't use your products to gain a position of decision-making authority within Serotek, as has happened elsewhere in the industry. The worst decision that Ted Henter ever made; and perhaps the only significant disservice to blind computer users that he ever made; was in failing to secure an ongoing role for himself with respect to veto authority over product decisions that were reached after he surrendered day-to-day control over his company