The Trouble with Disruption


disruptionToday the business tabloids will tell you how glorious it is to disrupt your industry. Every week there’s a new story about another successful entrepreneur who has disrupted their industry and made a billion. But that’s not even half the story. The tabloids are quick to pander to your desire to see all things new and reward the game changers. It sells magazines!

The fact is that behind every one of those disrupting game changers is a story of pushback from the buyers, tons of missionary work, and years of not being taken seriously.

And, why should they take you seriously? Your ideas have never been tested in the marketplace. No one wants to be the first retailer to take a chance on an unproven idea. Besides, they have their tried and true products that have been regularly producing profits for them. Why should they risk losing their go-to brands, the ones they know, the ones that are already in demand?

Beware of threatened distributors.

Then there are the folks in the distribution system who truly see your potential and are worried about what it means if your new idea does gain traction. They are actually scared that competing distributors might take it and run with it. They are so concerned that they may offer to distribute it just to have control over its growth. They will actually try to kill it in-house!

All the time you are fighting these battles, you are running out of cash. Your overhead and “burn rate” are forcing you to the point of bankruptcy, or worse, trading more equity for more runway financing. You can actually wind up working for your VC if you can’t convince the gatekeepers fast enough that they can make money on your idea. Most game changers will tell you that achieving profitability quickly was their biggest challenge.

Don’t forget category management.

disruption“But where will I put it?” the buyers will say.  If it’s truly disruptive, they may not even have a category for it yet. They will compare it to something you have nothing to do with. You may be surprised to find out you are suddenly competing with other brands you never dreamed you’d be in the same room with.

It’s not a level playing field out there. It’s been shaped over many years by the brands and products that are already attempting to satisfy a demand. The fact that you know how they are lacking and you know a huge market they are overlooking, means little where the rubber meets the road. Once you try to go through established channels to get your product sold in the most efficient way, you discover how intransigent those channels have become.

Our disruption experience

We know because all of these things happened to Barefoot Wine when we started. We thought it would be easy to sell a low-priced, fun label, easy-drinking, consistent-tasting, everyday drinking wine to a 37-yr -old mom with 2.5 kids (the primary shopper in the supermarkets). Sounds obvious today. But back then, forget about it! They wouldn’t take us seriously. They didn’t have a category for a non-vintage wine. They thought we were cheapening wine and feared for their margins. Several large distributors and producers saw it as a threat, and actually tried to kill it!

Oh, and the money? We were technically bankrupt for the first 5 years. Why? Because it took that long to convince the big buyers that they could make money on our brand. But we survived and ultimately did disrupt the industry.

The main reason we survived is that we sold around the naysayers. We sold independents, the military, international buyers, and we sold to this crazy upstart company that actually appreciated what we were doing, called Trader Joes!

The message here is simple.

Start small and make sales a top priority, even if they are not in the direction you ultimately want to go. But sales will keep the lights on long enough for you to convince the gatekeepers to take you seriously. Remember, disrupt all you want, but the Empire strikes back!