Looking to sell into an industry that’s currently undergoing disruption? At first glance, it sounds like a great idea. After all, companies getting disrupted are experiencing some very real challenges and pain points; they need to adapt quickly and could be looking for that silver bullet to save them.
During my time at AbeBooks, I was working in the book industry when it was undergoing a major disruption from Amazon. And many entrepreneurs thought at that time that they could offer products and services to offline bookstores to compete against Amazon’s growing power.
Likewise, over the past 5 years, I’ve seen dozens of start-ups trying to sell different tools and technologies to help newspaper companies keep up in an online world.
However, selling into a disrupted industry rarely works for three key reasons:
1. Whenever there’s a complete disruption of the business model, it means that the underlying rules for that vertical have dramatically changed. Just adding a website to now offer books for sale will not suddenly make an offline bookstore a serious competitor to Amazon. Likewise, a recommendation engine that tries to keep readers on a specific online media site does not change the fact that most users today now use aggregators like Twitter or Google News to find stories from a wide range of sources.
2. A company that’s being disrupted certainly feels the pain that their business model is under attack. Yet, at the same time, they most likely also have declining revenue and profits. In other words, they don’t always have the money to invest in a new solution, no matter how promising it may be.
3. Companies that get disrupted are often disrupted for a reason: they failed to be proactive enough to changing conditions. In many cases, this means they didn’t invest enough in technology or other solutions in the first place. It’s hard for slow adopters to change their culture, so you’ll need to be prepared for long sales cycles and indecision with these customers.
In short, while selling into a disrupted industry seems like a great opportunity, the reality is much harder to pull off.