Disruptive technology always forces the following question: will value accrue to startups or incumbents?

You will probably hear someone respond with: can startups win distribution faster than incumbents can innovate? Incumbents have the distribution, startups have the agility.

This isn’t really useful if you’re builder. Because if you are a builder, you are an optimist and believe there is always a way. There is simply no world in which startups cannot win. If the market is large enough and startups execute well, they will find a unique problem to solve and build a successful business.

I love going back to interviews of the most successful companies from many years ago. It’s gives raw insight into what the founder was thinking at the time, before the company grew to become as large as it is today.

Service Now is has a market capitalisation of >$100 billion.

Here’s what the founder of ServiceNow said in 2012 about disrupting markets:

1. Be magnitudes better than competition (most people hate change)

2. If u pick a fight, start with someone who is weak

3. Obsess over product

It’s pretty simple playbook. It’s just very hard to execute. Today’s essay is about where you can start: a wedge. We’ll cover what makes a good wedge and cover 5 examples of how companies that leveraged wedges.

What makes a good wedge?

Software buyers hate change just as other people do.

wedge allows you to start small compete with incumbents and expand over time. It gives you two advantages:

1. Focus product development on a specific area

2. Sell to a very tight customer segment

3. Avoid having to compete with more established platforms and acquire customers

Over time, you leverage the customers you acquire to expand into other areas. Here’s what makes a good wedge:

• Solve a critical pain point: you need to solve something that is really painful for the customer. It needs to be so painful that the buyer looks over all their existing solutions and says: “Okay, I need that”.

• Easy to install: the easier it is to get started, the more likely it is that your buyer will go ahead and purchase.

• Integrates with incumbent: if possible, your wedge should integrate with the incumbent platform. See the top right hand corner of the graphic.

• Path forward: assuming you’re building a wedge to pursue a much larger opportunity, you should have some (even vague) sense of how you expand into the broader market that your incumbent occupies. It might be hard to see this right way so a nice way to solve for it is to: a) make sure you are in a big enough market, and b) have a channel with your customers to iterate on your product development.

The notable examples

Here are a few examples of product that leveraged wedges really well:

Paypal

Back in the day, sellers on Ebay were sending money using cheques. One Ebay user took the Paypal logo and made it a button. They asked the Paypal team if they could use it.

The Paypal team went all in on Ebay. The rest is history:

Figma

When Figma launched, there were two design tools in the market: Photoshop and Sketch. Both of these tools were file based. Only designers had licenses for these tools, which meant that files needed to be sent over email. Designers tend to have a lot of back and forth with product manager and engineers so this process was frustrating.

Figma solved this by providing a cloud-based product where designers shared links. Viewers could leave comments in the files and this meant

Ashby

Ashby provides recruiting software for high-growth companies.

They started at a time when Greenhouse and Lever had distribution and a more developed product. They discovered that analytics for recruiting was an underserved area. To improve your recruiting process, you need to understand the funnel. It can make all the difference between success and failure for a company’s recruitment process.

Ashby launched an analytics suite to win over recruiting teams. They used this to understand workflows within teams and built an applicant tracking system that was superior to Greenhouse and Lever.

Incident.io

Incident.io helps tech teams manage incidents.

PagerDuty was the incumbent in the space. PagerDuty helped notify people about an incident via email, phone and SMS. The founders while working at Monzo that there was a gap after being informed of the incident. Teams always created a channel on Slack to mitigate the incident and to keep people updated of the status for resolution.

This was Incident’s wedge and customers loved it. They restricted their product to a Slackbot that helped teams managed incident. Narrow scope helped accelerate product development and it was a very painful problem that companies were willing to solve.

Intercom

Intercom is a customer service tool that allows businesses to communicate real time with their customers.

When they launched, Zendesk was a leader in the market alongside many other players. Intercom’s wedge was the ability to offer businesses the ability to embed a real time messenger within their apps. At the time, Zendesk didn’t offer the same experience. Intercom leveraged a Web Sockets, a relatively new piece of technology at the time, to enable real time communication.

This was great especially for SaaS businesses who wanted to offer excellent support for their customers.

To close

If you’re considering building a B2B SaaS product, here’s what’s most helpful:

Start by looking at a market that is large and one that you are passionate about. Talk to lots of customers to understand gaps. Test that they are willing to pay to solve a gap in the market — this is your wedge. In addition, develop some intuition for how you want to change the status quo today. The wedge is a bit pointless unless you have a unique insight on how you want to improve software in the sector over a longer period of time.

There is always room for startups to disrupt, you just need the persistence — mentally and financially — to figure out how you’re going to do it.