Big companies get blind spots – which make space for startups

It is often the case that large companies and even whole industries lose touch with what it is that their customers like about them.  When this happens they often develop their own incorrect hypotheses about what it is that their public like (or should like), and then when they see startups beginning to take market share with an offering that misses what they see as a key attribute their reaction is to think that this new competition won’t be successful over the long term, and then they go on to make an inadequate response.

When I see this happening I get excited about the potential for making investments.

I’m writing this today after watching the video below which shows three newspaper guys arguing that blogs can’t be trusted and are therefore somehow different to them.  A) it isn’t as if news papers have an impeccable record for integrity (and I don’t buy that being able to complain to the regulator and have a retraction published at the bottom of a middle page two weeks later makes a difference), and B) good blogs build their brands and take time explaining their standards – Techcrunch does a good job of this.

The result of this misunderstanding about the importance of their own brands and reputation for integrity is that they have been somewhat blindsided by blogs.

Other industries in which this has happened over time include:

  • Open source software – it will never be secure enough/work well enough
  • VOIP – the quality will never be good enough
  • Music – there is something special about owning records/CDs
  • Books – nothing will replace the experience of browsing for books in a bookstore
  • Software – companies will never get comfortable with hosted apps that store key data outside the enterprise

Others which might come in the future (arguably, some might have come already):

  • Music – people will want to own a copy of their music stored on their hard drives
  • Books – people will always want to own (dead tree) books
  • Mobile operators – have sufficient control of their customers to take a cut of their media purchases

You can’t take this stuff too far of course – some of these things will never happen – but this sort of analysis is a good starting point for identifying interesting sectors.

If any of you can think of any more I’m all ears.

  • Some more thoughts…

    Hardware – companies will always want to own the machines that run their software
    Cars – people will always want their own wheels
    Jobs – people will always need professional advisors to help them get a new job
    Loans – people will always turn to banks for loans

    …and a more controversial one…

    Funding – Businesses will always seek funding from VCs

    …discuss 🙂

  • Publishing – people will always want to read professional (paid) writers filtered by the publishing houses
    Tourism – people will always use professionally produced content (video, photography, writing) from official marketing organisations as opposed to local experts/passionate individuals (eg local business owners)

    The latter is ripe for disruption!

    James

  • 🙂 – I think VC is going to change quite a bit over the coming years.

  • Horses – people are always going to get around on horseback (one of my faves)

    Movies – people want to go to a cinema to watch movies (at the time of the cinema's choosing)

    Permanent Employment – people want to be beholden to a single employer at a single office location pursuing the interests of the company.

  • The home entertainment hub: the physcial piece of hardware matters (console, PC, set-top box), giving whoever controls it power vs. a browser-based experience with browsers embedded in every key piece of entertainment technology (TVs, mobiles, computers, etc)

  • Yes, agree.

    Venture Capital – VC firms are the best at predicting future enterprise success.

    Hmmm. Plenty of VC firms invest in startups that are utilising the power of the crowd. How long before the crowd replaces VC's?

  • Good one Nicholas

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  • Horses – people are always going to get around on horseback (one of my faves)

    Movies – people want to go to a cinema to watch movies (at the time of the cinema's choosing)

    Permanent Employment – people want to be beholden to a single employer at a single office location pursuing the interests of the company.

  • The home entertainment hub: the physcial piece of hardware matters (console, PC, set-top box), giving whoever controls it power vs. a browser-based experience with browsers embedded in every key piece of entertainment technology (TVs, mobiles, computers, etc)

  • Yes, agree.

    Venture Capital – VC firms are the best at predicting future enterprise success.

    Hmmm. Plenty of VC firms invest in startups that are utilising the power of the crowd. How long before the crowd replaces VC's?

  • Good one Nicholas