Disruptive Innovation in Action: Transforming Industries, with Tal Riesenfeld [Episode 1151]

In part two of our podcast, Alastair Woolcock, Howard Brown, and Tal Riesenfeld – co-founder and CRO of Sunbit – delve into Tal’s experiences as a student of Clayton Christensen, the Harvard Business School professor known for his work on disruptive innovation. They explore Christensen’s disruptive innovation theory, illustrating its practical application in Sunbit’s journey. The trio address how inefficiencies in niche markets can pave the way for substantial market disruption, while emphasizing the importance of persistence in entrepreneurship, innovative thinking and practical problem-solving to bring about meaningful change in the business landscape.

Podcast Transcript:

0:08-0:26

Speaker

Welcome back, everybody, to this week’s sales strategy enablement podcast. I’m Alastair Woolcock, CSRO former Gartner analyst, joined by my famous co host, Howard Brown, co founder, CEO of Revenue.io, a pioneer, recognized authority in artificial intelligence and revenue science. Howard, how are you doing today? 

0:26-1:00

Speaker

I’m fabulous. I’m excited. Good to see you again. Good to see you. I’m excited as well because it is not often that I get the pleasure of sitting down with not just one, but two successful co-founders and builders of business. Both Tal and Howard have built and exited a couple companies each, and it is an amazing wealth of experience. Tal Riesenfeld, the Chief Revenue Officer, co-founder of Sunbit. Welcome back for part two of our discussion. 

1:00-2:13

Speaker

Thank you for having me. Tal, we had a really lively conversation around, really, the sales culture impact last time. I’m going to shift our gears a little bit to the academic side, hitting the real world now. You and I had the privilege of connecting previously, and we’re both fans of Clayton Christensen, the famous Harvard Business School professor and creator of what was called disruptive innovation. And while I’m a fan and a student and got to chat with him once, you are actually a student of Clayton, knew him personally and have actually lived and breathed the very disruptive ethos that he brings to bear. And I would love to pick your experiences and brain around what it was like working with Clayton. And how have you taken some of those principles of disruptive innovation at Sunbit, and what should everybody else consider? Let’s make this a reality that is modern, not just the Blockbuster/Netflix story that we all know. 

2:13-3:46

Speaker

Yeah. So I was very impressed by Clay Christensen from the first time I met him, and he had this brilliant theory, and we’ll talk about it a bit about disruptive innovation. And even before I thought about Sunbit and the company, it really resonated. He talks about kind of high level the theory of how new technologies innovate and disrupt existing markets and turn them over. And I felt that was a brilliant theory. And as we started building Sunbit, sometimes I think Clay Christensen looked at companies and then brought to life disruptive, like the theory. We started the company and we talked about disruptive innovation as we were building the company. Right. So we use that. And of course, we hit a lot of the points. And one of the things, and Howard said it in the previous call we had, when you look at the experience of customers going to the dentist or going to brick and mortar and needing credit, needing a credit card, that the experience is horrible. It’s a piece of paper that they fill up, I’m holding in my hand, but a piece of application for a credit card. And there’s brochures. And these big banks have been offering these programs forever, but it stuck in the 1950s, and we felt as we’re building the company, that we can come and disrupt that market with a better product. So as we build the company, we’re thinking about the different points there and built it in a manner where we think we’re disrupting the traditional credit card industry. 

3:46-4:50

Speaker

I think it’s amazing that you’re now actually really applying these principles of disruption. Right. That reminds me of in that research, the incumbents dilemma, right. Just because we always did it a certain way doesn’t mean that’s how it should continue to be done. And Howard, you think of the world of sales now, and, boy, are we sitting there going, is the way we’ve always done it, the way we should continue to do it, right? This idea of incumbency dilemma, right? I’ve made big investments. I’ve always ran my sales organization a certain way. Do I just sustain it or do I disrupt it? Do I just stay or do I move ahead? Artificial intelligence and these technologies are. It’s not just maybe it’s going to disrupt. Sales has been disrupted at this point. How do you think of Clayton Christensen’s studies on disruptive innovation as you’re building a company? 

4:50-5:32

Speaker

Yeah, I think I have a pathology and I have a problem. My problem is that I’m always looking for a better way to do something. I look around my life and I’m always trying to figure out what I can do better. Where it becomes pathology is when it starts looking at everybody else and what they need to be doing better. And I have that same. That’s my MO. I’m constantly looking for ways to improve. I see what’s broken in things, and that’s challenging because I always want to fix it. 

5:32-7:44

Speaker

Right. And so that’s why I think we’re founders and innovators. We’re constantly, for whatever reason, I’m hyper-focused on what the challenge is and how to come up with a better solution for it. Everything can be disrupted because there’s always an opportunity to improve. There’s always an opportunity to use whatever new technologies or innovations to provide better results. Change is uncomfortable. Change management is hard, right. People resist change. But you want to find where the most successful people are. You want to find where the most value is created. It’s where that changes. It’s the change,  that discomfort – what comes out of the discomfort is typically the most valuable and the most exciting. And so for those of us who, I don’t think of myself as a disruptor necessarily. I think of myself as a problem solver and builder, and I’m obsessed with doing that. And I like finding people like yourself, Alastair, people who are really excited about finding better ways to do things. And yeah, if you’re in sales, if you’re in anything and you’re like, hey, I’m going to rest on my laurels, guess what? You’re going to get beaten. You’re going to get left behind. Because the world is moving so fast, technology is moving so fast that if we’re not looking at ways to innovate, to help people out, to help in calls case his reps sell, build relationships, not do manual stuff, you’re gone. So as human beings, we should be constantly thinking about improvement and change. Long winded answer, but I think, look, disruptors, innovators, problem solvers, people who like change, I want more of that. 

7:45-8:49

Speaker

One of the things about the innovators dilemma, kind of the theory says that these incumbents, they’re in trouble. And here’s why. Because in every boardroom, people come and say, hey, I’ve got this disruptive idea. I’ve got this innovation I want to bring to the company, and especially these bigger companies that have been doing the same thing, same time, and they have a high margin. Suddenly this employee comes in with a new technology, which is lower margin, usually is not perfect yet. And that’s where the innovator’s dilemma comes, because you’re looking at the CEO of the company, will I now keep improving the product I have and make it better and higher margin, or will I go and build something that’s lower margin and not for my customers? And I think that’s where it becomes interesting, where that innovation is not clear from the first 2nd that it’s going to win. And that’s how these kind of smaller New York companies have the chance to run under the radar for a long period, because they’re dealing with a small lower margin problem until they climb up and compete with the behemoth. So I think that’s always interesting to look at that economy. 

8:50-9:34

Speaker

I think Alastair, you mentioned Netflix, right? Netflix. They were literally going to sell to blockbuster, right? Blockbuster didn’t want to spend, I don’t remember what the number was, 20 million or something like that. It was a small number because they were like, hey, we already have. We’re successful. We have the cds, we have that whole thing. We don’t need to change. And there’s company after company after company. It’s like, look, we got great retention, we have great recurring revenue. Why should we change anything? Well, guess what? You’re either going to change or change going to happen to you. So you can either be proactive about it or you can be a victim to it. 

9:35-11:39

Speaker

The blockbuster Netflix story, I know it’s dated, but I will give our audience a little bit of an inside tidbit on this one, which is fascinating. Blockbuster actually itself, everybody always wants to point to. They simply missed the mark on consumers wanting things now in their home and digitally available eventually. Remember, we’re in CDs at first to DVDs, sorry, at first via mail. And then we went to the digital platform. Blockbuster actually had a proposal internally developed to actually digitize and stream content before Netflix actually existed. Then Netflix came on the scene and they simply sat there and said, look, we actually see the market going that way. They knew it was headed that way, but because they had, what is the incumbency dilemma? They had so much sunk investment into brick and mortar. The capital structure of the company did not allow them to get into the digital business. And that capital debt and everything else that they had associated with them was what they couldn’t get out from underneath and they simply couldn’t execute against it to get to the streaming service. And now, of course, it’s the analogy used all the time because it’s an easy one for people, but that’s one that didn’t work out. On the positive side, you think of IBM. IBM is an amazing organization that people could not believe it when they went and sold off their PC divisions. Remember that? Back in the day that became Lenovo and then they started jettising their hardware. How can you get out of hardware? Your IBM, like the company that built the mainframe, the company that brought PCs to the home. And they said, when we realized that where things are going is to being a services company and a cloud computing company, and they evolved, right? They saw the trend, they acted on it. 

11:40-12:28

Speaker

One more thing they did, which is interesting. It’s very hard for the incumbent to innovate internally. They built different departments. So instead of saying all this business is going to change, they opened another kind of small subsidiary with lower go, lower margin, less people, probably more innovative. And those are the companies that competed. So ultimately, one of the things, again, back to the theory says, is that if you want to compete with these disruptive innovations, you can’t shift your whole company, you’re making too much money. Here, you’ve got too much inertia there. But in the other way, the way to compete is take ten people, put them in a small office, say, hey, you don’t need to generate revenue for the next twelve months, and you go and we’ll fund you, we’ll give you that salary and you compete. And IBM was brilliant in doing that. But that’s how they did that. They separated into different departments. 

12:29-13:26

Speaker

And I would just say what excites me so much now is the world we’re headed into and we are in with artificial intelligence. Generative artificial intelligence. Right. Like there is not an area in the world now that is not rapidly up for disruption. And Howard, everything of us internally, we did actually exactly what tall said when we saw what’s going on. We skunk worked internally, quickly moved innovative based upon previous R&D that have been worked on with AI application generative. And that fast movement and disruption into a market is exactly the ethos of companies like what you’re building, Hal’s building, we’re all building. But this world of generative, and it’s, it’s the gasoline on the fire for the disruptive innovation models. 

13:27-15:50

Speaker

Sure. But I think a lot of times people are just looking for a technology to solve everything. Right? Why we were able to utilize generative is because we understand and are part of every single part of a salesperson’s workflow. Right. So where do we apply generative to improve performance across that? We’ve been using AI for almost eight years in different areas. It’s just now generative. So where do we apply generative? What I see a lot of is people like generative is going to solve everything and I’ll just create a solution that’s generative. Well, look, my first company I built in 98, everybody built something on the Internet that had no business value whatsoever. It took a while to actually figure out how to use the Internet technology to disrupt things. Technology in of itself is a great igniter of disruption. It’s a great part of disruption, but it needs to be deeply embedded in processes, workflow, knowledge, actual business. So look, there are definitely a handful of companies that are going to build LLMs and be that generative thing, but the rest of us need to think about how to apply technology to solve real world problems and make life better, more convenient, easier, more productive, more efficient with these. You know what we were talking about those small innovative teams. It’s the concept that Amazon has had with the two pizza teams, right? You don’t want to build a team that’s bigger than we’ll eat two pizzas, right? Put those people in a room, let them develop, let them create something without all the baggage. All of know you need to come up with profit now and let them come up with a creative solution to a real problem and then go innovate and exercise that outside of that two pizza team. So I guess, look, technology is incredible. It is the lifeblood of so much. But if it’s not based in real problem solving, real empowering people, it’s probably not going to work as well as you think it’s going to work. 

15:51-16:47

Speaker

I’ll give you a couple more words here on this, on how to select and apply these models as well. Because again, I look at what you did at Sunbit, and you did exactly what Howard just said. It wasn’t just you decided to do something because it was new and there, you didn’t just choose it. There was purpose behind the selection and identification, which is what Howard’s saying. You can’t just use technology for the sake of using it. It needs to be used behind a purpose. You’re disrupting the buy now, pay later BNPL market, and you manage to pick this on site brick and mortar component that no one else was there. How did that happen? Talk us through. How can somebody pick like you picked? 

16:48-19:08

Speaker

So I’ll start with the problem. So co-founder and CEO, he tried to apply for one of these credit cards in Costco, and he went through that now outdated process and he got declined at the end of the application. So he felt that problem. And he said, this is painful for me and for the retailer. So we knew there’s a problem. Those store credit cards, those financing in stores that only works for people that have high FICO scores. And our CEO was new to credit and got declined. So we knew there was a problem. But instead of tackling it head on and going to stores and offering credit there, we started in a smaller market and in the dealership space in car repairs. So we went to this smaller niche. But what happens when your car breaks down and it costs $800? And that’s a lot of money for a lot of Americans. And we started tackling that problem. And in the beginning, our product was fit for people that didn’t have perfect credit. It wasn’t the most attractive. But over time, we improved it and got to the point where any American that goes and has this surprise car repair, they can use Sunbit for that. So we kind of climbed, and today we’re almost at 50% of dealerships in the US. So we took over that market, and then we jumped into the dental market, which is much bigger, requires more amounts of money, requires more, and we’ve developed that type of process in the dental space, and we’re growing very quickly and winning that space. And as we were doing these two problem products, then we launched a credit card where now we’re ready to go and kind of compete head to head with the retailers offering a credit card. So to answer your question, it’s not that we started there. We started in a niche market that might not be very interesting for a lot of the bigger banks, but we climbed up from there, and that’s exactly back to this. That’s how we were disrupting. We’re coming from a smaller market with an audience that might not have perfect credit. Know when Howard goes to his dentist and he’ll see Sunbit, that will have an offer that’s good for all types of customers. That was our path. Started solving a small problem where there wasn’t a lot of competition, where it’s not very interesting for these big banks to offer $400 or $500 in credit. You don’t make a lot of money, but we climbed up from there into kind of the bigger markets. 

19:09-19:46

Speaker

I think it’s extraordinary. Howard, I think the same thing of what you’ve done over the years. It started off with the basic premise of how do I actually just improve a behavior? How do we apply a behavior when nobody else is ever thinking of behavior in sales? Right. How do I just improve? If I can elevate one thing, could I do another? And then the whole disruption and idea of applying behavioral science to sales makes sense to people today when they hear it. But nobody was thinking about that back in the day at all. 

19:47-20:45

Speaker

Yeah. It’s really good to be with you, Tal. It’s exciting, the business you’ve built and you’re building. And I think it’s an important mission, certainly. Look, there are a lot of necessities in life that people can’t pay for in the moment. And the ability to improve their life or get what they need so that they can progress is an important mission. It’s a valuable mission. And look, the mom and pop shops, they need some disruption. It sounds like you’re providing it. So it was great to have you on, and it was great to meet you as well. Thank you so much, guys. It’s great being here and appreciate this conversation. You bet. And, gentlemen, look, we always wrap up with some trivia, but Tyler, today I’m going to actually just make an audible and do it slightly differently. I think Leighton would be, I hope, very proud of what you two both have been able to accomplish. Right. 

20:46-21:28

Speaker

It’s not too often, as I said, I get two multi company entrepreneurs that have been big companies, not just little things on the line together. And you both espouse the very ethos of what he’s tried to teach students around the world for years. So in the spirit of giving, what is the single piece of advice you want to give to your fellow entrepreneur that’s coming out of any business school today? What is one final piece of advice you want to impart onto them? Howard, I’ll let you go first. So Tal has, as our guest, an extra minute. 

21:29-22:12

Speaker

Absolutely. Well, it’s a fairly easy one because I was just talking to a guy earlier this morning that asked me to mentor him, and he literally asked me the same question. And I said, if you truly believe in what you’re doing, persist. Don’t give up. Just keep going because there’s a lot of opportunity to give up. But if you believe in it and you have what it takes to push on, then go. Just keep going. It’s too easy as entrepreneurs to quit. You talk about right before the miracle, right? Don’t quit right before that miracle. I think that’s true for businesses as well. 

22:13-22:43

Speaker

So I’ll build on what you said, and I’ll take it just a step earlier. The hardest thing about starting a company is starting. That’s the hardest thing. So a lot of people are walking around. They have these great ideas, but that’s the hardest thing. And once you understand, once you kind of take the leap of faith, you jump in again, you believe it. You did the research and every reason to believe. So the hardest thing is to start. And then Howard would do that. Once you start, you need to persist and take it to the end. So we’ll combine both answers. 

22:44-23:04

Tall. It’s been a pleasure. CRO and co-founder of Sunbit. Amazing conversation. Really appreciate you joining us here today. Howard, good to see you. As always, for our audience, please remember to like and subscribe. Join us for future episodes. Send your questions in to Howard and I. We’ll do our best to get them in the future.