#002: Why Uber is Not Disruptive

Show Notes

Episode Contents

 

In this episode we explain:

  • Why almost everyone around you is misusing the term “disruption” and has been misapplying it for years.
  • Go through the different innovation types, along with some prominent examples for each of them.
  • What actual disruption looks like and how it takes place, by citing an example from the steel industry and showing you how integrated steel mills, dominating the steel industry for decades, were blindsided and overrun by an initially inconspicuous technology.
  • How you determine if an idea or startup has any disruptive potential at all.
  • Why Uber is not a disrupting the cab industry, despite what the majority believes.
  • What you should focus on instead, so that your idea or company will increase its chances to become a disruptor itself.

 

Summary

 

Why Technology matter a lot Less than you Think

  • Don’t rely on technology to solve your fundamental or essential problems or to compensate your inadequate competencies in your company.
  • Technology is only an ENABLER that will amplify the skills or core competencies of your company.
  • Learn the fundamentals first and get the essentials out of the way first before you even THINK about technology.
  • Simply having access to technology doesn’t make you a better artist. Having a paint brush doesn’t make you Picasso. Just because you buy the most advanced camera doesn’t make you a pro photographer or simply buying a formula 1 race car doesn’t make you Michael Schumacher.
  • Just because a certain technology makes skills more accessible, doesn’t make it any easier and can even disadvantage beginners that are still learning the fundamentals skills to reach a pro level. Restricting access to features and fancy tech would be a much better option.
  • But the increased accessibility to technology creates an even bigger problem. Now that technologies such as videography are much more accessible, it has also created a lot more competition. Now, everyone is creating high-quality 4K content.
  • Having constraints or putting them in place helps people become more creative - especially in innovation. There’s a German proverb that illustrates this point very well: “Not macht erfinderisch.” (Necessity begets ingenuity.)

 

Defining “Disruptive Innovation” and Why Almost Everyone around You Is Misusing the Term

  • The basic concept of disruption theory has been widely misunderstood and its principles misapplied, losing much of the power of the innovator’s dilemma.
  • Innovation generally comes in three flavors: sustaining, breakthrough and disruptive.
The Three Flavors-of Innovation
  • Disruption has little to do with technology per se.
  • Disruption is a process. It doesn’t refer to a product or service at one fixed point, instead it’s an evolution of that product or service over time, which, in some cases can take decades.
  • Disruption is relative to the industry. An innovation can be sustaining in one industry, but disruptive in another.
  • Disruption originates from two types of markets - low-end or new-market. Low-end disruptors start with a “good enough” product at the low-end of the market. New-market disruptors create a market where none existed before.
  • If we get sloppy with our definitions or fail to apply the concept correctly, we may end up using the wrong tools and strategies for a given context, reducing our chances of success or miscategorizing companies as disruptive.

 

How Disruption Finds Its Next Lunch by using the Mini Mills as an Example

  • Because companies do not fully embrace the powerful principles of the Innovator’s Dilemma, incumbents regularly get disrupted in a predictable fashion - simply for doing everything right.
  • Ironically, the companies respond in a very rational manner.
  • Customers essentially hold companies hostage for being successful, demanding further improvements to its products and services for which they are willing to pay higher prices.
  • Mainstream customers tend to reject disruptive technology.
  • As companies retreat into more lucrative markets, it leads incumbents into a dead end with no escape.
Disruption Theory vs Reality

 

How To Determine If An Idea or Startup Has Disruptive Potential

  • To determine if your idea or a startup has disruptive potential ask yourself these three questions:
    1. Does it have low-end disruption potential?
    2. Does it have new-market disruption potential?
    3. Does it disrupt at all?

 

Why Uber is Not Disrupting the Cab Industry

  • Uber is clearly transforming the cab industry, but it is not disrupting it.
  • Disruption can either originate from the low-end or new-market.
  • Low-end disruption takes place when incumbents over-serves their most profitable and demanding customers leaving a foothold for disruptors in the less-demanding segment.
  • New-market disruption creates markets where none have previously existed, turning non-consumers into consumers.
  • Uber did not start off from either a low-end or a new-market, but instead had the opposite trajectory: Starting off from the mainstream market and then moving to under-served markets.
  • Overall, Uber’s strategy is one of sustaining innovation.

 

Recommendations

  • When you’re the incumbent, it’s of utmost importance to decide carefully what you view as disruptive or not. Using a vague definition or calling everything disruptive will certainly not help and could be your last move!
  • Disruption has paralyzing effects on industry leaders, when attacked from below. It’s such an effective strategy, because it is much easier to beat incumbents when they are motivated to flee rather than fight. That’s why you should never target an incumbent with a sustaining solution, because they have the resources, the customer base and the motivation to fight any threat coming from a new competitor.
  • Consequently, you should segment your customers based on the jobs they are trying to get done, by understanding the circumstances and the context of these customers.

 

Links & Resources Mentioned

 

Articles from the Episode

 

Books from the Episode


Videos from the Episode

 

People Mentioned

 

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David C. Luna:  LinkedIn | XING |


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#002: Why Uber is Not Disruptive

This podcast looks at innovators and companies that are changing the game and how they took their initial idea and created a game-changing product or service, while giving you unique perspectives and insights you’ve probably haven’t heard elsewhere.

David and his guests discuss real-world practical advice on how to best harness the creativity of your employees and go from idea to product or service that has the potential to radically transform your business.

They also share lessons they’ve learned along the way to effectively accelerate, incubate and scale innovations within small, medium and large enterprises, all while separating hype from reality and replacing bullshit bingo with common sense.

The show is hosted by David C. Luna, author, keynote speaker and founder of GAMMA Digital & Beyond.

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