Thursday, November 20, 2014

Disruptive Innovation; how to deal with it

"Disrupt is perhaps the most misused term in entrepreneurship.
Successful new companies can indeed disrupt an industry. Amazon disrupted book retailing. Its ascent caused the failure of the incumbent Borders.
Two conditions are required for disruption.
First, a substantial fraction of the market must prefer the product or service of the new company.
Second, the incumbents must be unable to respond and replicate. When those conditions are met, a new entrant can gain sufficient market share that existing firms fade into irrelevance.
But disruption is rare, and it’s not required for entrepreneurial success."

On the other hand...

"Cabbies in Montreal and Toronto want their cities to put the brakes on Uber, the popular car service app that taxi firms say is disrupting the industry.
The online car-hailing service allows users to summon a ride simply by pushing a button on their smartphones. Uber has been a hit among clients in about 70 major cities worldwide since its 2012 launch, but the taxi industries in the only two Canadian cities with functioning Uber programs worry the app is driving business away.
Uber prices vary city to city, and users have in the past complained about price hikes at times of peak demand such as rush hour or during severe weather. The app introduced a "surge drop" feature earlier this year that lets users know when rides will get cheaper.
Unlike taxi or limo companies, Uber Technologies Inc. isn't licensed as a private car hire business and reasons it doesn't need the same kind of authorization, because it's a tech company rather than a dispatcher.
But that doesn't sit right with Canadian transportation regulators and taxi companies."

Cabbies have to go through training, and pay an annual license fee.  Uber drivers don't.  This is not fair.  So in this case, the innovation is disrupting the city's desire to make sure paid drivers are well-trained and safe.  Uber only goes by a system whereby riders can rate their driver.  So while the innovation is no doubt great for users, it is devastating to taxi driver's livelihood.
A solution would be for the taxi companies to adopt the innovation, but I'm not sure how easy that would be.  Another solution would be for the city to treat Uber drivers the same as taxi drivers, making the same requirements for both.  As can be seen, the word "disruptive" certainly applies in this case.

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