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In recent weeks Office Depot and Google announced credit programs aimed at small businesses. Office Depot is partnering with Superior Financial Group, a non-bank SBA lending company, to offer small business loans up to $25,000.

Google is offering small businesses a credit card that can only be used to pay for AdWords, Google’s keyword advertising program. Google’s credit card offers a very competitive interest rate and no annual fees.

These companies join another corporate giant – Wal-Mart – in providing credit services to small businesses. Wal-Mart, also in partnership with Superior Financial Group, started offering small business loans last year.

These firms illustrate a broader trend of nontraditional competitors targeting the financial services industry. These new competitors include some the world’s largest corporations and best-funded, venture-backed startups. They are hoping to use disruptive innovation based on both new technology and the shift to online banking to attract customers and gain share in the financial services industry.

Disruptive innovation is a term coined by Harvard Business School professor Clayton Christensen. It describes a process by which a product or service creates a new market or reshapes an existing market by delivering simple, low-cost innovations to a set of customers who are ignored or underserved by industry leaders.

Industry leaders ignore these customers because they aren’t viewed as important enough, or profitable enough, to pursue. After a disruptive competitor establishes themselves with this group, these firms often move up-market, eventually challenging traditional competitors for their best and most profitable customers.

The classic example of disruptive innovation is Southwest Airlines. Southwest initially targeted price sensitive vacation travelers, a segment considered unattractive by the airline industry. Ignored by larger rivals, Southwest moved up-market and over time firmly established itself with business travelers, the airline industry’s most coveted customers.

We think something similar may be happening in the small business credit space.

The customers targeted by Wal-Mart, Office Depot, Google and others are very small businesses, most with less than $1 million in revenue –  a segment seen as unattractive by many financial institutions. But by ignoring this segment, financial institutions are providing an entry point for new competitors who may leverage this beachhead to become significant players in the financial services industry.


About Steve King:  Steve is a Partner at Emergent Research. His current research and consulting is focused on economic decentralization, the growth of small business and the future of work and workplaces. Steve has extensive consulting, marketing and general management experience with both large and small companies.  Steve is a senior fellow and board member at the Society For New Communications Research, a research affiliate at the Future of Work and an advisory board member at Pond Ventures.

About Carolyn Ockels:  Carolyn is the Managing Partner at Emergent Research.  Her current research and consulting is focused on economic decentralization, the growth of small business and Gen Y.  Carolyn has extensive consulting experience, and prior to Emergent Research managed Cambridge Energy Research’s Asian energy consulting business, led market research in Japan for RCM Capital Managment, and held a variety of domestic and international consulting positions with the economic forecasting and planning consulting firm Data Resources, Inc.


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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

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