Square Vs. NCR: Disruptive Innovation In Action

Last week, we wrote about NCR, the retail and self-service tech giant that aims to disrupt Square's business by introducing its own competing iPad platform. But in reality, it's Square that's been disrupting NCR's business.

The Jack Dorsey-helmed startup has grown to process about $4 billion in annualized payments, causing major players in the point-of-sale (POS) space like Verifone and NCR to race to launch their own alternatives. Call it a strategic inflection point for these companies, a common trend in the Valley, where scrappy startups are always a threat to stagnant corporations—not so much because of some new piece of technology but because of the disruptive idea behind it.

Not since the peak of the disk drive industry have we had such an opportunity to see the themes of The Innovator's Dilemma—the paradox of user demands and technology, for one—play out so clearly. During a recent visit to NCR's offices, we had a chance to speak directly to these issues with NCR CEO William Nuti and VP of specialty retail Christian Nahas.

FAST COMPANY: Square has been in the market for some time now. Why has NCR waited so long to put out a solution?

NAHAS: Well, if all we wanted to do was put out a payment device, we could've put that out four years ago.

NUTI: That's easy.

NAHAS: We're a quiet company. Everyone would like to tout how big Square is—and they've done a good job making themselves relevant—but we processed more than $7 billion in transactions last year in [the POS] space. We think Square is a great solution if you're a hobbyist.

We wanted to create the best solution that we can offer a small business, to help them connect with customers and sell anywhere in a secure way.

And that took four years to create?

NAHAS: No, not four years. I mean, we've been at it for a year.

That's what I mean, though: Why didn't NCR start that process years ago?

NUTI: NCR did not.

NAHAS: Well, [POS startup] Radiant has been at it for a while. The best thing that's happened to Radiant was NCR purchasing it. Now we have this heft behind it: Where Radiant was satisfied with thousands of customers, NCR won't be satisfied until we get to a million customers.

Yes, it took us a while to take something that's incredibly powerful at Target, and make it so it's incredibly intuitive for somebody who doesn't have time to think about technology. But all that same power that Nordstrom and Target and Walmart are harnessing—that's what's in this solution.

NUTI: We at NCR were not doing this; we were not targeting SMBs initially.

I'm not talking about just SMBs, but the technology of accepting payments by mobile device. It seems that the iPhone and iPad are becoming central to how one accepts payments and analyzes data. Is this an inflection point for your business?

NAHAS: Radiant has been at this for a couple of years.

But why didn't NCR do it?

NUTI: Because we were largely in the tier-1 retail space for retail-purpose built platforms. So you don't see this technology at Walmart or Target or Sansbury or Tesco.

Well, not yet, right?

NUTI: Now, we do have this technology today. And we are selling it to those retailers. It's quite simple. So mobile point-of-sale and self-checkout: All of that technology and software is available today. So it's not that difficult.

But again, we were optimizing our strategy around tier-1 retailers, and tier-1's were telling us for the last several years, "We're not going there yet. Don't bother." But because the innovation period for something like this is quite short—and because we have thousands of engineers—to get there from here for our tier-1 customers would take us months, and not years.

So are tier-1 customers now saying they want this solution?

NUTI: Yes and no.

Well, will there be any large-scale orders of this solution [in the near future]?

NUTI: No, not from tier-1 retailers around the world. Not as of yet. Because there is a ton of software work that needs to be done at tier-1 retail. It's not that we're not ready. We'd love to sell them tons of mobile point-of-sale capabilties. But they have a lot of work to do in terms of software integration in their own shops. So they're encumbered a bit by legacy infrastructure.

We've been in the business for a long time. It depends on our customers' appetite, and then our ability to get time to market right, which we haven't been able to do.

When did you acquire Radiant?

NUTI: We acquired Radiant last September.

Did you consider buying Square before that?

NUTI: No, because we think we have a better solution than Square does [with Radiant]. And we bought Radiant for a lot less.

[Image: Peter Close via Shutterstock]

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