Immovable furniture: The perils of disrupting an antique industry

Darren Fell, founder of online accountancy software firm Crunch, on the outdated regulations holding disruptive start-ups back

Everyone founding a start-up wants to create the next massive disruption. The next Netflix, the next Amazon. They want to take a stagnant industry, swagger through the saloon doors like the hero in a spaghetti western and eject the incumbents with extreme prejudice – taking their customers in the process.

The problem here is that the biggest targets, the elephants in the room, are incredibly difficult to disrupt. Monolithic industries such as banking, insurance and air travel have many exciting young companies scrambling at the peripheries, trying to create a better experience for the customer; but few have jumped in head-first and tried to change the fundamentals.

There is a good reason for this – it’s bloody difficult. Not simply because any new entrants would be taking on billion-pound multinationals, but because these industries have built up rules and regulations over decades and centuries of existence. Many of these rules are now depressingly outdated, and serve only to stifle innovation, ruin the user experience and perpetuate the status quo.

Ever wondered why you must turn off electronic devices for take-off and landing during air travel? There is no scientific reason – aviation bodies simply thought there might be a risk so banned their use outright. They also introduced ridiculous rules saying that for a gadget to be proven flight-safe it must be tested by the airline, individually, on an empty flight, on every model of plane in that airline’s fleet.

Now research has proven that the vast majority of gadgets are, in fact, completely flight-safe. American Airlines has even begun equipping their pilots with iPads instead of bulky flight manuals. The pilots can use them during take-off and landing, but Joe Airtraveller is still stuck twiddling his thumbs until cruising altitude is reached – all thanks to pointless, decades-old regulations.

We faced similar problems when setting up Crunch, an online accountancy firm that aimed to shake up many of the established norms of small business accounting.

If you dig around a little bit you’ll find Crunch is actually two companies. The main company is E-Crunch Ltd, which is in turn supplied accountancy expertise by Crunch Accounting Ltd. Why, you might ask, would we create such a needlessly complicated corporate structure? The answer is overbearing accountancy regulations, which couldn’t reconcile a small business accountancy firm which also developed its own software.

We ran afoul of more ancient legislation recently when launching a new, free product. Because this product does not include our accountancy service – just our software – if one of our users decides they wish to downgrade, they cannot.

This is not through any strange product decisions on our part: it is literally against the rules of accountancy for them to downgrade. If they wish to leave our accountancy services we have to undertake a process called “disengagement”, which involves informing HMRC and Companies House we are no longer acting for them, and bundle all their financial data up and hand it off to them.

If they wish to move to a free subscription they have to create a new account and re-upload all their data. This is, to put it lightly, a rubbish user experience, but it was one forced on us by ancient rules that serve no legitimate purpose in modern times.

I could go on, but my point is this: disruption is never easy, and if you decide to enter a large, established industry, expect it to be even harder. Massive companies will have it sewn up, and will have created bureaucracy at every level which serves to prevent the established order from being shaken up.

That’s not to say it’s hopeless. Finding ways around established norms will allow you to create a better product, a greater value proposition, and a more engaging service than your rivals – and before long you’ll be nipping at their heels.

If you’re thinking about taking on the industry giants, here are some tips for success:

? Differentiate yourself. Don’t just offer the same service at a slightly lower price – add significant value for the customer. ? Be memorable. You’re up against huge corporations with marketing budgets in the millions, so make sure you can stick in people’s minds. ? Respond to customer feedback. Large corporations take months and years to react to ideas from customers, but you can do so in a few days. Make the most of that. ? Seek advice. Get someone on your team who knows the industry inside-out, and can guide you through the regulatory landscape.

Darren Fell is the founder and managing director of Crunch, an award-winning online accountancy firm combining free cloud accounting software with a dedicated team of accounting experts. Launched in 2009, it is now the UK’s fastest growing small business accountant.

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