Leadership

Four Keys to Disruptive Innovation in the $3 Trillion Market for Enterprise Technology

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Russell RothsteinVisit the IT Central Station website and you’ll see something happening beyond the obvious presentation of user reviews of software and hardware products. You’ll see disruptive innovation. It’s the dream of software startups and even established companies, but efforts to upend market leaders don’t always pan out. So why is it succeeding here? I spoke with CEO Russell Rothstein about the essential components of his company’s DNA for disruptive innovation.

1. Take a leap.

Rothstein, who is a fan of Clayton Christensen’s renowned writings about disruption and innovation, says “To really disrupt, you have to take a leap and completely rethink an entire business process.”

He does not deny that his company presents a clear disruption to the Gartner Magic Quadrant — the graphical competitive positioning of technology providers based on Gartner’s market research. But this goal wasn’t the fuel for launching IT Central Station.

“I’m a firm believer in starting a business based on helping customers solve a business problem,” he states. “If you do that, in many cases you’ll actually disrupt an existing way of doing business, either an existing business model or an existing business process.” He and his team started IT Central Station from the angle of how to help technology buyers make better buying decisions.

The business problem that fueled his company (his third startup in 20 years) was threefold: 1) Gartner’s significant control and disproportionate influence in the market, 2) the need for greater transparency and 3) better access to information and opinions of real users and peers.

Issue #1. “The number-one thing technology buyers want when they’re in the buying position is the impressions and experiences of peers who have gone through the same buying process. But instead today they get information from analysts, which is second-level information based on surveys and the analysts’ opinions from conversations with customers,” says Rothstein.

He relates the perspective of a CIO who expressed his frustration about this situation. The CIO’s top issue was that his staff had to spend too much time Googling and sifting through the Internet trying to find tidbits of information about a vendor or product they were considering and yet often they could not find the information they needed.

Issue #2. The CIO’s second issue was that he read Gartner’s Magic Quadrant when doing due diligence for a technology purchase, but he lacked confidence in the placement of the vendors in the quadrant.

“This CIO is not alone in this pay-to-play perception,” says Rothstein. “There even was a book published in 2012 (“UP and to the RIGHT: Strategy and Tactics of Analyst Influence”) about how a company can change its position in the Magic Quadrant irrespective of product and company quality.”

As Rothstein points out, before the days of the Internet and the TripAdvisor website, travelers often made hotel choices based on reading a travel book (Fodor’s, Michelin, Lonely Planet, etc.) or reading reviews in newspapers. But the opinions of an expert reviewer were not a good match for many travelers who had their own criteria for what makes a good hotel.

Then the Internet and the crowdsourced information revolution happened. Travelers today can go to TripAdvisor and read hundreds of reviews about hotels and filter the reviews according to a reviewer who has the same kind of needs as the traveler researching the reviews.

The same need exists for business technology buyers. They are more interested in the opinions of professional peers that are in the same vertical industry, or the same size company or the same use cases. And they want transparency.

Rothstein says his company could have addressed the business need by using less expensive analysts and a more efficient kind of magic quadrant concept. “Instead, we turned it on its head. We decided not to take that expert or top-down approach. We decided to take the bottom-up user approach. That was a leap and a radical rethinking of the business process.”

Using crowdsourcing, the tech reviews about which technology products are best comes from genuine professional peers. This bottom-up approach has shifted the power to the masses and also has built-in transparency.

Issue #3. The third problem the CIO discussed with Rothstein was that it wasn’t good enough to just read about which product is best. Connecting with peers and talking with them about their experiences with the technology would be even better.

“People in the software and hardware industries are starved for opportunities to network with one another,” says Rothstein. There are far fewer trade shows and conferences than in the past and travel budgets have been slashed, which has cut out a lot of opportunities to meet peers and discuss user experiences over coffee or lunch.

Overuse of social media channels such as LinkedIn and Facebook also adds to the problem, he says. “It creates the impression that you don’t need to meet people and have coffee or lunch with them and see them. Those kinds of personal connections are important, especially when making strategic technology buying decisions.”

IT Central Station functions as a community and enables users to connect with one another in a private, secure manner and share their impressions of different products even beyond the reviews they write. Many continue the conversation by phone or over coffee if they’re located in a geographically close area to one another.

“IT Central Station isn’t disruptive because it’s great technology,” Rothstein says. “It’s disruptive because we’re fulfilling a strong business need.”

2. Watch the sign posts along the way. 

When Rothstein took a leap and turned the business model on its head to a bottom-up approach, Yelp, Yammer and Jive were already big and the market had already adopted three disruptive innovations: crowdsourcing, B2B use of social media networks, and review sites. Would IT Central Station have been as successful if it had been an early entrant in any of these three disruptive spaces? “Probably not,” he says. “People needed time to adjust to these other disruptions.”

He points out the importance of monitoring trends and noting other disruptions in business models and business processes. Innovations usually start in the consumer world and then move to the business world, which tends to be more conservative in adoption. Examples: Yammer and Jive are the enterprise leap from Facebook. Twitter was initially used in consumers’ personal lives; now B2B organizations recognize its huge potential. The huge revolution in consumers’ use of mobile devices has led to BYOD issues in enterprises and thus to tech innovations for better security and managing devices.

Ensuring that a disruptive innovation is quickly scalable is crucial to success. So it’s critical to enter the market at the right time, when the potential customers will actually accept the innovation.

3. Know your market.

They took a leap, their timing was right, and their product is quickly scalable. But IT Central Station’s CEO knew that success in disruptive innovation in the business world also requires business savviness. In order to build the right kind of company and product or service, he says one must understand the differences between the consumer world and the business world.

“Crowdsourcing sounds great for businesses because it’s cost-effective, quickly scalable, and it’s what’s happening in the consumer world. But business crowdsourcing is different,” Rothstein says. The market is a professional crowd, so the reviewers must be professional too.

Digging deeper reveals IT Central Station is not simply “TripAdvisor for IT” or “Yelp for CIOs.” Although TripAdvisor and Yelp present reviews, in the B2C world it’s about quantity. In the B2B world, the quality of the reviews is more important than the quantity.

IT Central Station validates each reviewer with their LinkedIn profile before approving the reviews for publishing. They check the profiles to make sure that the reviewer is indeed someone who should write a review of a particular product. As an example, if someone works for IBM, that individual wouldn’t be allowed to write reviews of IBM products or even about products of IBM’s competitors. Similarly, if someone writes a review of a marketing automation product and the reviewer’s job is not in marketing, the system flags the review and IT Central Station validates whether that person is a real user of the product. Or if someone writes a review of a networking firewall but the LinkedIn profile doesn’t indicate any networking experience, the system flags the review.

There is a critical difference in the quality required for an enterprise/business review compared to a consumer-oriented review. Rothstein points out consumers recognize that 10 out of 100 reviews might be fake, but they still can get a good sense of a product from the other 90. In the business world, buying decisions have very serious consequences, and the person doing product due diligence needs to know that the reviewers have been validated and the information is authentic.

4. Execution 

In the end, disruptive innovation requires more than taking a leap, knowing the market and coming up with a great product. Rothstein says it all comes down to actually delivering on the details. So it requires company leadership that can recruit and retain a great team for execution on the promise to customers.

He warns that delivering on little details — such as the LinkedIn profile validation of reviewers at IT Central Station, or understanding how needs differ between enterprises and SMBs — are critical in whether or not an innovation actually will become disruptive.

Russell Rothstein is co-founder and CEO of IT Central Station. Before founding IT Central Station, he worked in senior product marketing and product management roles at tech vendors OpTier and OPNET (acquired by Riverbed for $1B). He was co-founder and CEO of Zettapoint (acquired by EMC) and was co-founder of Open Sesame (acquired by Bowne/RR Donnelley). Russell began his career at Oracle, deploying Oracle Applications for Fortune 1000 companies. Follow him on twitter at @RussRothsteinIT.

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