How Outsiders Can Innovate and Disrupt Stagnant Industries


Earlier this week, we talked about how starting with domain or industry expertise can help reduce the risk of starting up. However, as Martin Ouellet, co-founder of Taleo demonstrated, sometimes not being an industry expert can help bring new innovation to a market.

Taleo → Disruption through not being an expert

As director of engineering for Exfo in the mid 90s, Martin often had to hire developers. At the time, the process was to put advertisements in the newspaper (paper edition) and receive printed resumes by mail to review.

Often too busy at work, Martin would bring the resumes home to analyze and short-list. Although he knew the exact type of information he was looking for, he still had to read dozens of long-winded resumes simply to qualify candidates.

At that time, Martin was actively seeking a way to search through the resumes as he would with a database. The solutions available on the market allowed hiring managers to scan and categorize resumes, allowing them to qualify candidates just a little better.

The industry leader in this solution space was Resumix, a company founded by entrepreneurs that came from a recruiting background. Martin saw an opportunity to build a solution to bring HR professionals to the internet age.

His company took ideas from supply-chain management solutions using web forms to qualify and rank candidates. The solution eventually became Taleo, which allowed HR managers to review candidates directly on the web — no more paper resumes required.

Resumix, the company started by industry experts, faded away as Taleo, a company started by outsiders with industry changing ideas became the leading recruitment platform and still is to this day.

It’s very difficult to disrupt the industry that’s been feeding you.

Consciously or not, we come to think of the way that it operates as normal —we come to accept that things are the way they should be. It becomes normal that a few large corporations dominate the telecommunications industry and that law firms, no matter how small or inexperienced, are able charge some of the highest fees on the market.

However, our outmoded ideas are another startup’s opportunity. They prevent us from addressing the market as it is today, allowing competitors to beat us with fresh innovation.

The reason why outsiders are able to create strategic surprise in stagnant or slow-moving industries is that they’re not shackled by old ideas. They see the industry differently and thus are able to bring in completely new ideas.

The worst is when you’re an “expert” because then you’re even less likely to challenge your assumptions. – Jason Cohen, SmartBear Software Founder and CEO

Experts are going to know a lot about how an industry operates, but the moment you disrupt that industry, they typically don’t know if that disruption is going to work. Ironically, their experience in the field is what clouds their judgment. They actually think that the disruption won’t work because their expertise lies in the way the industry is now, not what it will become.

Changing an industry’s business processes is much more difficult than selling into a well-established need. Deciding to start up in an industry you know or one you don’t know is a risk management decision; when you don’t know the industry, it’s easy to create something bleeding edge while trying to be cutting edge.


Download the First 6 Chapters for Free

This sampler covers the differences between B2B and Business-to-Customer (B2C) product-market validation, shows you how to define your vision for success, find early adopters, select market opportunities and assess a venture's risk. Download The First 6 Chapters Today »