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From Startup to Empire: How Disruptive Innovation Fuels Netflix, Uber & Nike

“Disruptive innovation” is an increasingly popular idea in the business community, however, many people don’t understand what it truly means. Described as the process by which a product or service starts out in its simplest form at the bottom of the market before moving up to displace established competitors, the term “disruptive innovation” was first used by business professor Clayton Christensen in 1995.

Today, the concept can account for the emergence and meteoric rise of companies like Uber and Netflix, according to Mike Grandinetti, global professor of entrepreneurship, innovation, and digital marketing at Hult International Business School.

Grandinetti is an expert in disruptive innovation and has made a career of pursuing disruption since his introduction to Silicon Valley working as an engineer for Hewlett-Packard Company (HP). He has used his 25 years of entrepreneurial operating experience to guide high-growth startups — mentoring at accelerators such as Techstars and Startup NEXT — and inspire student entrepreneurs throughout his simultaneous 20-year teaching career at the MBA and executive education level.

“I love looking at disruption both from the point of view of the attacker — the startup — and the incumbent who has to defend against the attacker,” Grandinetti says. “I’ve been teaching a course on disruptive business model innovation across many of Hult’s global campuses, while also speaking, publishing, and blogging about it. My interest and passion just continues to grow.”

BostInno sat down with Grandinetti, who shared how early-stage startups can use disruptive innovation to mirror the success of Uber and Netflix, and how corporate empires like Nike use disruption to remain ahead of the competition.

Ingredients for Building a Disruptive Startup: Netflix and Uber

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Mike Grandinetti has been an expert in disruptive innovation since his introduction to Silicon Valley working as an engineer for Hewlett-Packard Company.
“Startups that are disruptive tend to be led by or founded by people who see the world and can’t agree with a principal model,” Grandinetti says. “They believe that the current process or business model is less than optimal and care deeply about delivering a superior experience to users.”

He points to Netflix founder Reed Hastings as an example. Hastings recognized Blockbuster as a predatory company that generated 10 to 20 percent of its profits from late fees. After experiencing the exorbitant fees first-hand, he started Netflix and changed the way we consume on-demand media.

“He did it out of a sense of frustration, in order to deliver a superior at-home movie viewing experience,” Grandinetti says. “Watching movies should be convenient and pleasant. Before Netflix disrupted Blockbuster, that simply was not the case.”

Grandinetti marvels at the fact that Hastings built Netflix at a time when broadband did not exist yet named and branded the company based on his ability to see the future and capitalize on it.

According to Grandinetti, true disruption relies on “a combination of envisioning something that you believe will positively impact the world, but also understanding when the technology will evolve to be delivered at scale.”

He notes Uber’s success: The company aggressively capitalized on the universal pain point of hailing, riding in, and paying for a taxi, and combined it with emerging technology to build a ride-sharing empire.

“They understood that there was huge frustration and inconvenience, and they were ahead of the curve in seeing the convergence between ubiquitous mobile phones, increasingly accurate GPS systems and the fact that mobile apps have now become a very important part of the global ‘always-connected’ economy,” Grandinetti explains.

Staying Disruptive After Enjoying Success: Nike and Intuit

In order to avoid becoming irrelevant, Grandinetti says that great companies constantly challenge themselves and dare to continuously innovate, pointing to Nike and Intuit as examples.

Nike recognized the strength of the Techstars venture accelerator model and chose to infuse the company with similar entrepreneurial energy. Nike invited these startups to work on the company’s campus using Techstars methodology and handpicked entrepreneurial teams to create an in-house accelerator, Nike+ Accelerator, to advance the digital products that the company was already pursuing.

“Startups that are disruptive tend to be led by or founded by people who see the world and can’t agree with a principal model.” – @mikegrand1
Intuit Chairman Scott Cook and CEO Brad Smith also rely on open innovation, a lean startup model, and human-centric design to maintain an 80 percent market share, according to Grandinetti. He notes that Cook refers to his employees as entrepreneurs, understands they are the ones who are going to make the company great, and creates a unique corporate atmosphere that empowers them.

“He runs Intuit like a massive accelerator, and it’s brilliant,” Grandinetti says. “It takes a lot of humility for a billionaire to say, ‘I’m not the boss, I’m a mentor. These entrepreneurial employees come to me with ideas to solve our customers’ financial problems, and I coach them, mentor them, guide them along or I challenge them, but I’m not here to tell them what to do.’”

Developing the Next Generations of Disruptors:

“If we don’t bring the real world into the classroom, we are doing students a disservice,” Grandinetti says.

As an educator, Grandinetti combines classroom-based learning with the opportunity to work directly with startups to expose students to how innovative disruption is realized. During a recent digital and social marketing course, Grandinetti brought in 15 startups that he advises and had 150 marketing students consult for them.

“Over three months, 50 percent of the students’ grade was based on the quality and strength of the recommendations that they made to each of these startups,” Grandinetti says. “Marketing students rolled up their sleeves, and they ran optimized Facebook campaigns, Buzzfeed campaigns, Pinterest campaigns, LinkedIn campaigns and Google AdWords campaigns for a range of B2B, B2C and B2B2C startups.”

Practices such as this have paid dividends for the Hult student body, as alumni are impacting the Boston innovation scene with startups of their own.

Leveraging City-Wide Disruption to Advance Boston:

Grandinetti admits that Silicon Valley has the upper hand when it comes to innovations in the social, mobile and cloud arenas, but Boston’s strength in key technologies such as biotech, life sciences, clean tech and robotics is helping us close the gap.

“We’re the best in the world — and no one can ever dispute this — around biotech, life sciences and anything medical because of the world-class teaching and research hospitals in the region, the presence of research institutions like MIT, Harvard, and BU, and the cluster of startups that have sprung up around them,” Grandinetti says. “We should focus on building on our strengths and not view Silicon Valley as a competitor. These innovation clusters are the envy of the world.”

This article was written by Ethan Buckowicz and originally appeared in BostonInno on 9 June, 2015

Student Entrepreneurship Thriving in Boston

On Thursday, February 26, a well-attended and high-energy event was held on Hult’s Boston campus to celebrate and explore student entrepreneurship in the greater Boston/ Cambridge area. This region has historically been a hotbed for student entrepreneurship, pioneered by MIT.

Many famous student startups were born in the Boston community before achieving iconic status, including Facebook and Microsoft as well as ZipCar, Akamai and Napster. More recently, student –founded startups such as Rent The Runway, Uncharted Play and Plated have vaulted to prominence.

The event was organized and facilitated by Hult Global Professor of Entrepreneurship and Innovation Mike Grandinetti, in his role as Faculty Advisor to both the Hult Startup Platform and Hult Science in Business Student Clubs. As a serial entrepreneur, mentor, angel investor and educator in the Boston area for over 20 years, and currently Managing Director of StartupNext Boston and a Community Impact Fellow with OpenIDEO, Professor Mike tapped into his network to bring in a range of experiences for Hult’s students to benefit from. After starting things off, Professor Mike facilitated a fireside chat with each speaker and then guided a question and answer session with a very engaged audience of students from both Hult and other area universities.

Professor Mike kicked off the event in Hult’s aptly named Fenway Bleachers auditorium, with its great view of the Zakim Bridge. He started by testing students knowledge of well know Boston student – founded startups as well as student familiarity with recent Kickstarter project. He then provided an overview of the current state of student entrepreneurship on a global basis, including enabling factors such as the consumerization of IT, short-term coding academies, affordable subscription cloud-based apps, pre-accelerators, university accelerators and seed capital funds, student entrepreneurship – focused VC funds and crowd-funding.

The event also included two student entrepreneurship–focused venture capitalists, one from the DormRoom Fund, Bruno Faviero, Managing Director, who focuses on managing investments for the 12 major research universities in the Boston area; and Kate Murdock, who focuses specifically on funding Northeastern University bred start-ups. In addition, Kate serves as an analyst at Northeastern’s IDEA accelerator, where over 200 startups have been launched and incubated, including a few that were recently VC funded. Bruno is the Founder of Hacking MIT and other MIT – related startup events. Bruno and Kate discussed the extraordinary range of startups being launched around the greater Boston area by students, with a focus on the 23 companies that DormRoom Fund has invested in directly.

Michael Gaiss, former SVP of Highland Capital Partners and current founder and CEO of BigThink!, which focuses on connecting students interested in entrepreneurial careers with startups, spoke about the stark difference in hiring requirements between large corporation and startups. Unlike corporates, startups focus less on GPA and more on hands-on experience that indicates a passion by the student for the role and the market space. He also discussed his observations as Entrepreneur in Residence at UMass Boston, where the school recently expanded its Venture Development Center.

For the benefit of the Science in Business Club, Professor Vinit Nijiwhan, who runs Boston University’s Office of Technology Development, spoke of the challenges and successes of commercializing university based research. During his tenure, he changed BU’s model from licensing to startups, with great success. With this new startup-driven approach, BU has achieved more success in commercializing its science and technology in the past five years than in the previous 30 years.

At the conclusion of the event, Professor Mike, Bruno and Kate served as mentors for a pitch session. Many Hult students stepped up to pitch their ideas to a crowded room of 100 plus attendees where they received constructive feedback. Many also used the opportunity to get real-time input from their fellow students on the desireabilty of their ideas.

In summary, the event was exceptionally well received by the engaged students who asked many great questions, volunteered to pitch, and engaged in direct discussions with speakers during the networking breaks scheduled through-out the evening. It’s clear that student entrepreneurship is thriving in Boston / Cambridge.

Student Entrepreneurs to benefit from $100M X-Fund

It’s a positive commentary on the state of entrepreneurship that the first Fund – aka the $10M ” Experiment Fund” -was a huge success and that NEA, Breyer Capital and Accel saw the massive demand and remarkable talent and passion of student entrepreneurs, at both the under – grad and grad levels. They made five investments out of Fund 1, in a very diverse group of companies. These include:

-investing services startup Kensho Technologies Inc.,

-law search startup Ravel Law Inc.,

-TV and DVR mobile service Philo Inc.,

-apartment search site Zumper Inc.

-nursery device startup Rest Devices Inc.

Kensho, for example, is interesting on many levels. Co- founder Dan Nadler went to Harvard with Mark Zuckerburg. Kensho, combines natural language search queries, graphical user interfaces, and secure cloud computing to create a new class of analytics tools for investment professionals and has raised over $25M

Ravel Law was co-founded by two Stanford Law School graduates. The company is working to establish an alternative to LexisNexis for lawyers and others researching cases.

The VCs decided to capitalize the second fund at $100M, and to re-brand it the X-Fund. It’s a welcome addition to the DormRoomFund, led by FirstRoundCapital, as well as StartX, the Stanford Accelerator and UCVenture Fund.

I do hope that the number of future applicants will expand well beyond the high (70% of all applicants) MIT/ Harvard concentration of the Experiment Fund. Stanford accounts for another 10%. As there are so many great tech-centric student entrepreneurs working diligently at Northeastern, BU, BC, Babson, Wentworth, WPI, UMass Lowell and Hult, amongst many others institutions of higher learning in the Greater Boston / Cambridge area, they need to be as diligent at raising capital as they are at building great ted based products

The DormRoomFund is a great initiative from FirstRoundCapital, but we need more strongly capitalized funds like it to meet the needs of the many talented young students building tech startups in the greater Boston area and beyond. X -Fund is a welcome addition to the landscape

Best wishes to General Partners Patrick Chung and Hugo Van Vuuren as they expand the fund. Your mission is a noble one.