Think Uber is a “disruptive” company? Think again.
Oh the sweet, sweet word disruption. It’s like candy on the tongue these days. As the cofounders of MotivIndex, an innovative research company that specializes in Digital Ethnography, we hear it a lot. But, if the truth be told, almost all of us have used it incorrectly.
Recently, Clayton M. Christensen, Michael E. Raynor and Rory McDonald (the team who created the Disruptive Innovation Model) published an article called “What is Disruptive Innovation?” to explain how despite the terms popularity, it is widely misunderstood. I highly recommend clicking the link above and reading it, but here is a short synopsis on how the team uses Uber to illustrate that, you know that word we’ve been using? It doesn’t mean what you think it means.
First, disruption refers to products or services that enter the market via low-end or new-markets that the incumbents have overlooked. For Uber to fit this description, it would mean that the Taxi industry had created a better, cleaner, more convenient experience for passengers, and, as a result, increased prices, leaving a segment of people unable or unwilling to pay for the better, cleaner, more convenient service. But we all know that was not the case.
Uber wasn’t a service that started in a low-end or new market. They built their position in the mainstream. And this is not disruption.
Secondly, disruptive innovations primarily start off inferior to the incumbent. They simplify the offering. They bring on a niche consumer base, and as they raise the quality over time, when it hits the point where it is deemed “good enough” the masses migrate over to the product or service, thrilled with the lower price.
Uber is rarely referred to as inferior. The cars are said to be cleaner, they made booking a trip easier, and they created a rating system to improve the customer experience.
The authors go on to reinforce that disruption is not something that should describe a product or service at a specific moment in time — it is a process. It is the evolutionary track a product or service can take over time.
Think of Netflix. Their evolution was disruption. They started of with a small niche group of customers, they were ignored by the Blockbuster crowd, but as the technology improved the product reached a “good enough” moment and we were more than happy to pay 8 dollars a month to watch House of Cards.
Why is this important?
Companies, big or small need to innovate to survive. Understanding this model can help new companies understand how to compete with the big guys. And it can help the big guys understand where they are going to lose out, if they don’t launch their own disruptive initiatives that treat innovation as a separate business unit, understand what is the real Job To Be Done (JBTD), segment based on the belief system and not demographics, and finally, develop low-cost ways to succeed.
For more, I again highly recommend reading: “What is Disruptive Innovation?”