Profting from Disruption

Jeff  Carter
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Posted: Feb 11, 2012 12:01 AM

A lot of times when you listen to entrepreneurs speak, they talk about disruption. When VC’s make speeches, they talk about investing in disruption. Disruption is an overused and misunderstood word in the start up world.

The reason the word is so misunderstood is that it depends on a lot of variables. No industry is the same as the other. What’s disruptive in the steel market might not be disruptive in fast food. Sometimes it just helps to think about the chain of distribution in an industry and see how the potential business changes it. Other times it’s through processes. Examples are probably easier to illustrate.

Here are three companies that I am invested in that are disruptive. They are disruptive in unique ways, all in different industries. One is a process, one is a change in distribution, one is a tech company.

First, let’s look at YCharts. They have a free product and a Pro product. The Pro product isn’t that expensive. If you are trading stocks you should sign up and try it. What’s amazing about Ycharts is that it revolutionizes the research process for stocks and ETFs. You can manipulate differentiated data with your fingertips. It saves you a lot of time. It allows you to pick up a stock and look at it in three dimensions right on your computer. They also have some top financial writers that do research for them, and you get that for free too. Here is a chart of 3M ($MMM) graphed with a specific index.

Is there a correlation?

With more research you can decide.


3M Company Stock Chart

3M Company Stock Chart by YCharts

Ycharts disrupts the research process that is currently standard in stock research. I can’t wait until they add futures.

If you are a parent that needs to pay for college, you know the pain of financing. I have two kids in college, and college costs exploded over their lifetimes. I began saving when they were born, and figured with the rate of inflation etc that it would cost around 100k to send them to school. Boy, was I wrong. Enter Alltuition. If you know anything about the paperwork and forms needed to file for college, you know the frustration. Different files, different folders. Stuff gets lost. Just filling out a FAFSA is a royal pain in the butt. Then there is shopping for a loan. Banks rip you off with hidden fees. It’s tough to comparison shop for loans. Alltuition totally disrupts the college financing market. They put the consumer closer to the provider.

Then there are things like technological disruption. This is when technology makes a great leap forward because of some engineering prowess. We see this in the computer industry with microchips all the time. The iPhone is an example of a technological leap forward that transformed cell phones. A couple of years ago, I invested in UICO. They were so far ahead of the technological curve that some people couldn’t understand what they had created. UICO is revolutionary. Now the market has begun to catch up to them and they are putting their solution everywhere. They make touch screens. But not just run of the mill touch screens. Their technology and manufacturing process is so far ahead of anyone else’s that they can do things with touch that no one else can. Check this out.

That’s technological disruption. Innovative companies are beating a path to UICO’s door to take advantage of it.

The great thing about disruption is that anyone can be disruptive! You just have to think about the pain points in the things you know, and then start to creatively think about how to solve them. Are there customers that aren’t getting their needs met? Can you put the origin of supply closer to the end user? Is there a process you can change to make it more efficient and put another business out or eat up jobs? Can you create something an expand the universe of customers?(Netflix vs Blockbuster) The disruptive spirit knows no boundary.

If you are stuck. Just start writing things down. Exercise your brain. All your ideas will not be good ones. Start bouncing the ideas you have off some people. See if they can either improve on them. Eventually you will hit on something that can be built into a business that can earn you some money. There is a chance that one of your ideas will actually be a business that scales that an investor can invest in. If that happens and you are successful at building a scalable business, you can earn some big money.

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