the intersection of innovation & investments

© Copyright 2009 Innosight Ventures Pte. Ltd.

Disrupting Investment

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© Copyright 2009 Innosight Ventures Pte. Ltd. 1www.innosightventures.com

Innosight Ventures’ mission

Innosight Ventures uses the principles and patterns of disruptive innovation to foster the creation of booming growth businesses that improve the lives of unserved

and underserved customers around the world.


The theory and practice of disruptive innovation

Grounded in theory … … honed in the field

Disruptive innovation: An innovation that transforms an existing market or creates a new market through simplicity, convenience, accessibility or affordability.

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What the research shows

Higher Chances of Success

“37% of companies with disruptive innovations succeed, while 6% of those with sustaining

innovations succeed”

Exponential Revenue Growth

“The businesses grew explosively … reaching an average of $250 million in their fourth year

and $750 million by the sixth year “

Disproportionate ReturnsDisruptors$220K, 41% CAGR

Incumbents$47K, 19% CAGRS&P 500$18K, 6% CAGR

“Our research shows the financial upside to disruptive innovation is real, significant—and

most importantly up for grabs”

$10K invested

Greater Resiliency

“Where stock markets sagged and market leaders stumbled, these companies grew on average by more than 30 percent a year. “

Presenter

Presentation Notes

Sources: ERG: Updated version of TSL analysis; portfolio of (Silver Lining Exhibits) GR: Tim Huse / Scott Anthony Forbes.com article http://www.forbes.com/2008/12/18/intel-cisco-amazon_leadership_clayton_in_sa_1218claytonchristensen_inl.html DR: Feinzaig May/June 08 S&I article; 8 paired investments http://www.forbes.com/2008/08/12/google-digitalequipment-disruption_leadership_clayton_in_lz_0813claytonchristensen_inl.html HCOS: Page 126 TID


From theory to action: Four guiding questions

1. Is there an important “job” the customer can’t get done because existing solutions are too expensive, complicated to use or difficult to access?

2. Do we have a disruptive way to delight the customer by getting the job done in a simpler, cheaper, or more accessible way?

3. Can we make early profitability a choice?

4. Can we tell multiple stories that end with a $10 million business in 5 years and a $100 million business in 10 years?


Look for nonconsumers with an important job they are struggling to get done

10% Penetration

100%+ Penetration

40%+ Penetration#


Make it simple, accessible, and affordable


Make early profitability a choice


Why the possibility of early profits and multiple paths to success matter

More than 90% of successful new ventures start off following the wrong strategy

Flawed Strategy

Successful Strategy

Point of Learning and Adjustment


Doing good by doing well: Shankar’s story

Presenter

Presentation Notes

Shankar, joined us in February and comes from a small village near Mysore (about 100 KM from Bangalore), where his father is a farmer. He had chosen to come to Bangalore rather than work on the family farm, and has this desire to prove to his family that he can do better in the city compared to working the fields. When he came to Bangalore, he was a worker in the logistics department in a retail chain and was responsible for receiving and dispatching goods from the distribution centers. In India the distribution centers aren’t mechanized, so his job would entail manually picking up bags of fruits & vegetables whole day; and getting paid only Rs. 3500 per month (~US$70/ month) – which was lower than what he could have made, had he worked in the fields. Then he joined VLS, to begin with as an operator at our rigs. Right from the start, he was one of the hardest working operators with a knack for building relationships with the customers; very quickly the location became the highest revenue generating location. He was instrumental in getting it to this level - for example, he had such good rapport some households would only give their clothes if Shankar came to their doorstep, because they trusted him to not lose or damage their clothes. As VLS expanded, it became important for us to have managers who can teach other new operators on customer handling, and other operational best practices. Shankar, was the obvious choice for this job; we promoted him to become a ‘Area Manager’ to oversee 5 locations in Bangalore. And doubled his salary to Rs. 9000 per month (~US$180/ month). So from an operator, he has now become a manager, who handles and teaches other people on how to run the business, and is now the example for other operators on the rewards of working with VLS. Becoming a manager is a significant change in his social standing, so much so that the day after he received his new title and higher salary, he immediately went to his father in the village, to announce the news and that he can finally demonstrate that he can do better on his own!


Summary messages

• Transformation almost always takes root away from the mainstream; look to the nonconsumers and overshot customers, the nontraditional providers, and the non-obvious geographies

• Simplicity, accessibility, and affordability are underappreciated innovation levers

• Features and functions are nice, but business models are the real driver of transformation

• When you don’t know, place a lot of focused bets and make quick decisions about what to accelerate, shut down, or re-vector


For more information

[email protected]

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the intersection of innovation & investments

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