Uber isn’t “genuinely disruptive”, and there is a general misunderstanding of disruption says Clay Christensen, the man who conceptualised “disruptive innovation” twenty years ago.
It’s important we get the concept right so we don’t overreact to innovation, learn from the wrong companies, and can fully realise the benefits of disruption Christensen writes in an upcoming Harvard Business Review article.
“…many people who speak of ‘disruption’ have not read a serious book or article on the subject. Too frequently, they use the term loosely to invoke the concept of innovation in support of whatever it is they wish to do,” Christensen wrote.
“‘Disruption’ describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.”
In Christensen’s definition, incumbent’s focus on profit maximisation results in a mismatch – they exceed the needs of some customers and ignore those of others. This leaves room for a newer, nimbler company to gain a foothold and leverage that position into more valuable areas.
In short, disruptors start at the bottom and work their way up.
Using this narrow definition of disruption, a disruptive company needs to have started from the low-end of a market, or tried to serve people who aren’t currently served. Targeting a niche the incumbents have, for whatever reason, overlooked.
But this is not the story of Uber. It didn’t start in an obscure niche, nor has it created an entirely new market. Instead, Christensen points out, Uber has expanded the total market. It has first targeted the mainstream and is now moving down the ladder, targeting niches with services like Uber Pool and Uber Select.
“It is difficult to claim that the company found a low-end opportunity: That would have meant taxi service providers had overshot the needs of a material number of customers by making cabs too plentiful, too easy to use, and too clean,” explains Christensen.
“Neither did Uber primarily target non-consumers — people who found the existing alternatives so expensive or inconvenient.”
There is a lot in Christensen’s update to his twenty-year-old theory. He points out that disruption is a process, rather than a product, company or binary state. He also points out that disruptors often have new and interesting business models, which are as innovative if not more than their headline product.
And that an incumbent tackling a disruptive entrant has options – such as setting up specialised divisions within incumbents rather than tearing the company apart to find value.
It’s that last point that deserves the biggest takeaway. While Uber is waging a war with the taxi industry it is important to understand exactly what is disruptive about the company, and concentrate on that. According to Christensen Uber itself isn’t genuinely disruptive, but there are parts of it that are.
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