Disruptive Innovations: My Favorite Three

- Vikram Kotak

Dear Investors,

The world is changing faster than our imaginations, with Business Disruptions and Innovations being the key drivers. Disruptive innovations are those that change the way we live and work for the better. They are disruptive because they offer a new and better way of doing things that are often superior to the status quo. Further, it immensely changes the landscape of users through technological advancements.

If I must toggle around a few names who have changed the way of doing business on a global scale; names like Google, FedEx, Robinhood, Walmart, McDonalds, Netflix, Uber, Tesla, Facebook, Amazon, and Apple catch my attention. In India, Amul, Maruti, Jio, Zomato, Oyo, and many more names enchant me.

Let's see what it takes to deliver successful disruptive innovations.

1) Enabling Technology

2) Multiplying the existing market opportunities and creating new markets.

3) Coherent Value Network with upstream and downstream partners.

4) Creation of more jobs directly and indirectly

5) Huge benefits to consumers and society at large through ease, accessibility, and cheaper cost.

To turn a disruptive idea into a successful business one further needs to

1) Develop an Innovative business model.

2) Create a scalable plan.

3) Build inclusive technology support.

Disruptive innovations deal with simplification and make products or services more affordable for overlooked or underserved markets. The finest example that comes to my mind of underserved consumers is the telecom revolution in India over the last two decades.

India ranks second largest in terms of the number of Internet-using customers across the globe and the second largest customer base in terms of the telecommunication market. The telecom sector is the backbone of India's digital economic growth. The launch of Reliance Jio Infocom Ltd paved an important shift from scarcity of data to an era of data abundance. The most obvious indicators of this are Jio's free voice calls, cheap data packages, and the elimination of national roaming charges. This has broken communication barriers which were prevalent 10 years ago and thus giving access to the remotest of the villages.

Data and smartphone availability are the backbone of e-commerce services. After the launch of Jio in late 2016, the tech startup ecosystem flourished. The wide internet penetration, affordable data plans, and increase in smartphone usage boosted the growth of several internet-based startups and unicorns. It was all about contactless commerce when the COVID pandemic hit in 2020 and the tech industry was poised to profit from it. Digital payments and e-commerce increased multi-fold during this period. Further, the internet companies rode the wave of data consumption that Jio brought in. Any unicorn — whether B2B or B2C — that serves the mass market of consumers or merchants has benefitted from Jio's telecom revolution in India. In fact, the rise of OTT platforms in India such as Netflix and Amazon Prime has also been credited to Jio's data revolution and continuous improvement in products and services based on market needs.

However, my favorite three in this space are Apple, Amazon, and Amul.

The Apple Way

If Apple's iPhone had been merely a phone, then the more expensive iPhone would have little chance of succeeding against entrenched firms with cheaper mobile devices like Nokia, Motorola, and Blackberry. As it turned out, the iPhone wasn't just a phone. It became a whole ecosystem, in which the iPhone met the diverse needs of hundreds of millions of individual iPhone users with a technology platform drawing on the talents of hundreds of thousands of developers. It could be adapted to meet the needs, preferences, and passing whims of every single user - a feature for which customers have been willingly paying a substantial premium.

It was a unique kind of disruption - disruption from above, with a better, more expensive product, rather than disruption from below, with an initially inferior cheaper product. Now that Apple has become an entrenched incumbent in the mobile phone market, it is facing stiff competition from cheaper modular products. Apple today has over 165k employees and a market cap of ~$3 trillion. If Apple was a country and not a company, it would be the 7th largest country in terms of market cap. My biggest learning from Apple is their focus on their customer's changing needs.

Founded in 1976, Apple started with the desktop computers, then with the iPod, took it to the next level with the MacBook, stepped up its game again with the iPhone, then came the iPad, the Apple Watch, the AirPods, and so on. Apple has forayed into financial services over the past decade, making Apple the biggest Fintech company of all time. Apple has always strived for innovation which has been reflected in their investment and acquisition strategies.

Amazon

Another outstanding example of disruptive innovation is Amazon. It has a ~$1.4 trillion market cap in less than 30 years of existence with over 1.54 million employees and is among the top seven employers in the world. Furthermore, it is amongst the largest employers in the private sector after Walmart's and McDonald's.

Amazon is one of the companies with no PowerPoint culture. One of every 10 Americans today has an Amazon Prime membership. Amazon owns the patent on the “1-Click” online checkout process.

This reminds me of one of the best quotes from Jeff Bezos. “We see our customers as invited guests to a party, and we are the hosts. It is our everyday job to make every important aspect of the customer experience a little bit better.”

The most happening thing about Amazon is less than a fraction of its customers use customer services/support, while for the rest it works on autopilot. Amazon is the most admired example of the best customer services bundled with logistic excellence, technology, and a coherent value network. It has over 200k mobile robots in its warehousing network. Amazon is one company that qualifies in all six categories as mentioned above about what innovators do right.

Amul

Finally, we have Amul. Why it is dearest to my heart is for the fact that it is not driven by market cap or profitability, but by larger social causes of empowering more people and inclusivity.

It is the brainchild of visionary Dr. Verghes Kurien and was founded by a few farmers as a cooperative society with a social cause to stop exploitation by the middlemen. Today, Amul is the most popular brand in India. Founded in 1965, it spread the white revolution in India, making India among the top milk-producing nations. Amul relates to over 3.6 million farmers across the country. It has products available in over fifty countries with sales of over $9 billion. It's focus on social cause, strong brand, efficient supply chain, and innovation contributes to company's success. Polish proverb rightly states, “If the farmers are poor then so is the whole country”. Amul is not only a brand or company; it is a sheer movement to give economic freedom to farmers. The brand inspires farmers and gives them the courage to dream, to hope, and to thrive.

You will agree, that the next 15 years belong to India. There are many companies out there that would like to join the bandwagon of innovative disruptions. But I believe the most successful one will have (i) the best customer service like Amazon, (ii) eye-to-detail on technology and adapting to changing needs of customers like Apple, (iii) and most importantly social cause and empowerment of society at large like Amul. They will be the most successful ones going into the future. The common thread amongst them is scale and size.