When asked for examples of disruption, two of the most commonly cited ‘disrupters’ are Airbnb and Uber. After a collective eye-roll, we can pull them apart a bit. While both are examples of the ‘sharing economy’ and often thought to be similar, they have many differences.
While each puts an asset, cars and rooms, respectively, that they don’t own to increased use, Airbnb provides choice and Uber doesn’t. For Uber, you press a button and its booked, not so for Airbnb.
Uber controls all aspects of pricing including a surge pricing mechanism designed to equalise supply and demand. Airbnb leaves pricing to the asset owners. The fact is both these disrupters have very different business models that, if swapped, would lead to two new start-ups.
Why do we instantly think of these two companies as examples of disruption?
The term disruption, like innovation, is being overused but that isn’t the problem; the problem is answering the question ‘How are innovation and disruption different?’
Here is one way to think about the two. Innovation generally brings a better product or service to market for the user. A new car, a new phone, a new food product. Disruption, on the other hand, often adds new demand (via new users and often increased usage) with an initially inferior product or service but one that attracts unserved market segments.
Virgin Blue, like many other global discount airlines, was a disrupter to the Australian air travel market in 2000. It was ‘inferior’ because there were stricter ticket and baggage restrictions, no free meal, only certain routes, etc.
But the redesigned and cheaper offering brought into the market people who used to travel between capital cities by car. It added users and more demand to the air travel market. Thus, innovation drives conversion or switching. Disruption drives addition of market demand. If we see both together we often label that disruption too.
Innovation is often the actual advance in technology that creates a new product – think a new smartphone.
Disruption is often facilitated by someone else’s technology, not yours, and helps facilitate a new business model – think Uber (location-based technology) and Airbnb (the internet). Neither Uber nor Airbnb invented the technology they use so effectively. Nor did Amazon and eBay invent the internet.
In many cases, just like Netflix which originally introduced DVD rental by mail-order in the US, the disruption is just changing the prevailing norms in a market, changing the way things are done. Business models are innovated, not just the products or services.
Disruption isn’t as new or hard as many leaders believe. There are two perspectives getting in the way, though.
Market incumbents often think:
- Disruption is something happening to them or being done to their market by technology
- Disruption requires a new product
Let’s flip this thinking
- Disruption is something you should be doing not something that is happening to you
- Work on changing your business model, not your product
Here are some ways to generate disruption
Identify the prevailing norms in your market and flip them
- It’s cheaper to drive between Melbourne and Sydney than fly
- People go to video stores to get their movies
Find frustration, friction and failure in your market and fix it
- People never know when their taxi will arrive
- Hotel rooms can be impersonal and expensive
- Waiting on the phone for a bank
Identify aspects of your business model and swap them with another industry
- Gyms have unlimited use for a monthly fee – so too does Netflix now
- Clients visit accountants, consultants visit clients – SWAP!
- Manufacturers make widgets, wholesalers import widgets SWAP!
- Trades charge money per job, financial planners use retainers SWAP!
Lastly, to get access to disruption, launch bolt-on experiments with small intrapreneur teams, rather than think you need to change your core business overnight.