We Need to Expand the Definition of Disruptive Innovation18 January, 2016 / Articles
Zipcar counts as a disruptive innovation. Uber doesn’t. The latter is according to Clayton Christensen, Michael Raynor, and Rory McDonald in their recent HBR article “What is Disruptive Innovation?” The authors explain that disruption “describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.” They also write that “disruptive innovations originate in low-end or new-market footholds.”
Zipcar, the company I co-founded, qualifies as a disruptive innovation because it created a whole new market: demand for cars rented by the hour (as well as by the day). For us, applying technology in a totally new way — to reserve and open the cars — was a key enabler of this new market segment. Without the internet and wireless communications, car rental by the hour was an impossibly expensive and tedious transaction for such a small increment of time. Founded back in 2000, Zipcar effectively modeled how technology could be applied to open up entirely new markets, as well as new ways of using existing assets.
Christensen, Raynor, and McDonald argue that Uber is not disruptive because it offers neither a low-end service, nor a new market. Using that lens, I would agree: Uber is basically a taxi service. It provided a well-designed app that took the dispatch function out of the black car and traditional taxi markets. This was not world changing. But what was totally disruptive was when Uber adopted Lyft’s model: enabling people to drive their own cars as taxis, particularly via its UberX service. The breakthrough lay in tapping excess capacity: downtime from your other means of earning income and making use of the car you already owned. This idea of excess capacity is missing from the definition offered by Christensen and his co-authors. Uber offered a way to take advantage of assets that already existed, that had been paid for, but from which new value could be found.
That’s how Uber transformed the economics and nimbleness of taxi services. And that’s how it grew exponentially, operating today in 400 cities in 68 countries.
I see the ability to leverage excess capacity as completely disruptive. Just ask the hotel industry how it feels about Airbnb. Or telcos about WhatsApp. Or TomTom about Waze. Or colleges about MOOCs. Or Western Union about Transferwise. I see all of these efforts as part of a new “Peers, Inc.” collaboration in which platforms (developed by the Inc’s) harness excess capacity and invite the participation of Peers to fulfill a significant part of the service delivery.
Christensen, Raynor, and McDonald go on to say that Apple, with its invention of the iPhone, was disruptive. “This was achieved not merely through product improvements but also through the introduction of a new business model. By building a facilitated network connecting application developers with phone users, Apple changed the game.” I agree! But I would describe it differently: iOS is a platform for participation that harnessed the excess capacity available in customers’ iPhones, as well as in the previously untapped imaginations and life experiences of tens of thousands of developers from around the world, who initially (and now frequently) worked on their own time. It was this harnessing of excess capacity that led to more than 2 million apps being developed in less than seven years, with the most successful of them being adopted at extraordinary rates. WhatsApp’s phenomenal growth — more than 400 million users in its first three years of operation, and over 800 million within five — would have been impossible had customers been required to go out a buy a new device.
I’m still a fan of Christensen’s work and his theories of disruption. I just think they are missing the new disruption in town. These new Peers, Inc. collaborations are already striking fear in the hearts of many legacy companies, and are proving to be promising arenas for creativity and innovation for the smartest of them.