Xero: Taking advantage of the most disruptive technology ever / “you guys are really disrupting Intuit.”

Chris Teeling for Xero writes:  In November I delivered the keynote for the Clayton Christensen seminar at the Business Influentials day. It also provided a great opportunity to chat for a couple of hours with the “world’s number 1 business thinker”.

Themes from that conversation continue to be reported as Xero was called out on Forbes this week as a leading cloud disruptor.

Clayton writes about how industry disruption has historically followed the same pattern: a new business comes to market with a product, based on a new technology, that simply and elegantly solves a customer’s problem, is easily accessible and affordable. The disruptor not only sneaks up on the competition to become the leader, but grows the market by meeting peoples’ needs who found the incumbent’s product too expensive and complex.

A great example are the mainframe companies (Boroughs and the like) as mini computers, PC’s and Microsoft appeared. Rather than sell a handful of expensive mainframes to a few enterprises, computer companies like IBM could sell millions of PCs to millions of consumers – most of whom had never owned a computer before. Today the pure play mainframe companies are gone and only IBM survived to leap to mini, PC and now cloud.

Cloud is supercharging Clayton’s disruption model. You can enter the market, go bigger faster and immediately disrupt incumbents around the world.

Over the course of our chat Clayton recognized that Xero is uniquely positioned. From our CEO Rod’s product insight identifying the cloud opportunity seven years ago, building a company in the cloud, and the fact that Xero has crept up on all the global incumbents at once with a simple, beautiful product that people love.

What disruption means for the small business cloud

In 1987 the capital value of mainframe companies was $146 billion and as mini computers and PC’s appeared, the market value of computer companies grew to over a trillion dollars by 2004. That is almost 10x. I believe this is playing out in cloud today and it’s the dawn of a new era with small business technology being the high growth business segment.

Xero and our already 300+ strong Add-on ecosystem are making solutions available to small businesses that were previously only available to enterprises. They’re easier to use and they’re incredibly affordable in relation to their value. This not only helps small business prosper, it makes the entire technology market value exponentially larger.

How much larger? I can’t guess today, but it’s clear that cloud applications are the future and there are hundreds of millions of small businesses all with jobs they need done by technology in a beautiful and affordable way.

Our chat ended with Clayton and I reflecting on Scott Cook and Intuit’s success disrupting Microsoft in the early north american PC era and the reality that Xero is repeating this phenomenon today but on a global scale. Most memorable was when Clay, who stands at over 6 foot 8 inches, grabbed my shoulder with a planet-sized hand, smiled and told me “you guys are really disrupting Intuit.”

Great to hear from one of the smartest business minds in the world. A truly humbling experience.

How can you take advantage of the cloud disruption?

There are a variety of different ways to take advantage of  the small business cloud revolution. Here are a few we’re seeing:

1. Small business software developers are creating add-ons that leverage the investment in the thriving ecosystem
2. Accountants and bookkeepers are changing their models to value based billing and pricing bundles, and adding business development resources to hunt business. Many are operating out of their region and even country
3. Bookkeepers are creating new virtual services leveraging the wide variety of cloud tools
4. Business owners are becoming exporters by  presenting themselves globally using websites and social media
5. Return to work parents are operating from home and aligning their work hours with their lifestyle

How are you taking advantage of  this market shift in the small business space? Share your stories in the comments.

Dianne Jewell
8 January 2014 #

The cloud environment has enabled me to be an attractive ‘one-man-band proposition’ to the SME market because more is able to be done, quicker and professional software need not be a big investment anymore. I can run many applications on a subscription basis. The big guys in town better watch out and the ABS better get ready for new statistics showing the lower rate of small businesses failing because the cloud signifies a macro-environmental change Its exciting and fun for me and entrepreneurs like me working in the Cloud bookkeeping/accounting/cloudapps space.
One small step for man…one giant step for back office (and front office) efficiencies!

Evielyn Chapman
8 January 2014 #

The Cloud Revolution has provided me with my whole business model. Aligning businesses current systems & procedures with cloud & mobile technology solutions. It’s a fantastic & exciting place to be in at the moment!

Craig
8 January 2014 #

This is so true. In my business we sell salon software to small and medium businesses. Historically this market has been dominated by vendors selling Windows desktop products often for $5-10k. That is a big chunk of change for a small business, especially when starting out. With our cloud software they can now have a full featured product that they can be using in minutes (no sale people to hassle them) with no big cash outlay. Windows desktop software could soon be a thing of the past for small businesses.

robbie dellow
8 January 2014 #

Craig … good comment. Small typo on 2nd last line though … could -> should.

Evielyn Chapman
8 January 2014 #

Nice one Robbie… Totally agree!