From disruptors to incumbents: how did some of today's most influential companies come to market?

A common perception among today’s disruptors and innovators is that large incumbents rarely introduce radical innovations, rather focusing on marginal improvements and protecting their market positions. This phenomena is dubbed The Incumbent’s Curse. As a result, the most radical product and business model innovations come from startups.

One thing that we tend to forget is that the ‘dinosaurs’ of today once were tiny little startups, founders of which had to pull all of their creativity, ambitions and grit to innovate, iterate and finally create the markets and products that are the essential part of our current everyday reality. Many of household names today had the most interesting story of innovations and trajectory of growth:

One of Sony’s initial products was an electric blanket that often caught fire.

Samsung used to export dried Korean fish, vegetables and fruit to Manchuria and Beijing. It then moved into flour mills and confectionery machines, followed by textiles and life insurance

Nestle started with an infant cereal for mothers who couldn’t breast-feed, combined cow’s milk, wheat flour and sugar and In 1938, the company’s factory in Brazil led to the invention of Nescafé, the first commercial product for instant coffee

LG Corp started with plastics business and was associated with bathroom soap, toothpaste and laundry powder

Nintendo was originally a Kyoto-based producer of handmade playing cards, formed in 1889

Virgin was started in 1970 by a 20-year-old Richard Branson who was selling vinyl records by mail-order as a way to undercut high-street record shop prices

Wrigley, the world’s most famous chewing gum brand sold scouring soap and baking powder in 1891

My recent favorite story of market-creating innovations, though, is that of Bank of America. Like many products in the US in the late nineteenth and early twentieth centuries, financial services, such as loans and bank accounts, existed mostly for the wealthy. Until 1904, when the Amadeo Giannini, the son of Italian immigrants who had an outsized personal and a deep believe in the American dream, went on to found the Bank of Italy in San Francisco. He would focus on the ‘little fellows’, whom the other banks wouldn't serve. That’s how Bank of America, the onetime largest commercial bank in the world, was born.

Here are just some of the things that Amadeo did to pull his venture off:

✅ He knocked on doors and buttonholed people on the street. He persuaded "unbanked" immigrants that gold and silver coins were safer in vaults than under mattresses. Moreover, the money would earn interest at his "Bank of Italy."

✅ He extended loans to beleaguered residents "on a handshake" and helped revive the city at the heels of the massive earthquake of April 18, 1906 when other banks struggled to recover

✅ To educate people about the benefits of banking, he set up local advisory committees in his banks, advised hist customers to purchase the bank’s stock and created a national system of branches that catered to the poor and working class. Over 100 years ago, Giannini introduced the model for banking that most of us know today.

✅ Focusing on community development, the bank financed bonds for hundreds of local governments to build housing, libraries, and roads. Soon it moved into other areas of the nation, including Boston, Chicago, and Dallas. The bank also pioneered new methods of financing California's agricultural industries.

✅ Funded other extraordinary projects, including the Golden Gate Bridge, Hollywood production companies, and Disneyland. In the 1950s, after Giannini's death in 1949, it was the first bank to use computers and introduced the first nationwide credit card.

When A.P. Giannini died in 1949, the former single-teller office in North Beach claimed more than 500 branches and $6 billion in assets. It was then the largest bank in the world. Here are other facts that you probably didn’t know about Bank of America.

History of incumbents is full of lessons to be learned by today’s disruptors. I am spending a lot of time digging into some of them and hope that you’ve learned something new from today’s newsletter as well.

Three things for the weekend:

📚Book - The Prosperity Paradox by Clayton M. Christensen

🍿Movie - Air a true story based on Nike salesman Sonny Vaccaro's successful signing of then-rising superstar Michael Jordan

🎧 Podcast - Acquired with Spotify CEO Daniel Ek. Spotify went from ZERO market share in 2018 to being the world’s largest streaming and podcasting platform. The J Curve’s growth is happening on and because of Spotify at large!!!

Happy Friday and thanks for reading,

Olga