According to the World Economic Forum, a disruptive innovation is a theory that “a smaller company with fewer resources can unseat an established, successful business by targeting segments of the market that have been neglected by the incumbent, typically because it is focusing more on profitable areas.” However, there has been controversial discussion over whether Uber is actually a disruptive innovation or technology that is improving our overall economy.
While in class on Tuesday, our professor asked us to give examples of disruptive innovation. My partner and I believed that Uber was a disruptive innovation because it has had great impacts on the taxi-cab industry. More and more people are paying for Ubers through the simple and efficient app rather than paying for a more expensive taxi. Young adolescents and college students are using Uber to get to places faster, and ultimately, save more money.
An article posted on World Economic Forum caught my eye. According to the site, Uber is not a disruptive innovation and the reasons are as follows:
- Uber has not moved up from the low end of the market – the company targets customers that have already been cab users multiple times
- Uber has been determined as cheaper than taxis, but it’s not considered “inferior” to cab or taxi services
Christensen and co-authors Michael Raynor and Rory McDonald wrote a 2015 article for the Harvard Business Review and explained how Uber is the complete opposite of a disruptive innovation. They said, “Disrupters start by appealing to low-end or unserved customers and then migrate to the mainstream market. Uber has gone exactly in the opposite direction: building a position in the mainstream market first and subsequently appealing to historically overlooked segments.”
Uber has not originated from a low end of the market and did not target nonconsumers. Uber was launched in San Fransisco that already had a powerful and successful taxi transportation service. When Uber was invented in March 2009, daily taxi-cab customers that were already in the habit of using transportation services used Uber as well. Havard Business Review supports the idea that Uber cannot be a disruptive innovation because the company achieves the opposite of disruptive innovations: “Uber has quite arguably been increasing demand – that’s what happens when you develop a better, less expensive solution to a widespread customer need.”
The Harvard Business Business Review points out a key concept: When new technology is developed, disruptive innovations can lead to strategic and highly successful ideas and products.
After reading over both these articles, my perspective on Uber being a disruptive innovation has altered. I see how some individuals can see Uber as disrupting the norms of society, but I can also see how Uber has enhanced the taxi-cab business. Currently, I see Uber as a strategic innovation, not a disruptive innovation. Although more and more people are using Uber for its cheaper prices and its wider availability, it has only highlighted the importance of transportation services throughout the country. It shows how efficient and widespread the use of taxis and cabs are to the daily lives of human beings.
Disruption theories cannot explain all present and future innovations. Innovations coming into play may be disruptive, but also strategic.
Here is a link to a YouTube video on the idea of Uber being a disruptive innovation and its impact on daily society:
Uber is definitely a disruptive technology and therefore disruptive innovation but limiting it with that label would not do it justice. It is a necessary advancement and shows creative destruction at work. Uber has revolutionized the taxi service by essentially opening it up to ride sharing and destroying the monopoly on the ride business worldwide. It brought many improvements to an outdated business through technology. Some may argue that it is taking work from skilled workers but honestly the taxi business has become deskilled once GPS came out since no longer did you really need to know everything about the city.
Uber has made rides better in many ways due to the feedback mechanism in their app which is continuously improved as new parameters had been and are added due to consumer concerns. In general, ubers will be cleaner, newer,and nicer than taxis due to the accountability and reliance on ratings to allow them to continue being drivers. Accountability reduces the chance that the uber will take advantage of you especially in touristic areas where taxis may use your lack of knowledge to charge you more and say their meter is broken or take you on routes that go out of the way to increase the meter. On the note of money, by making it automated you no longer need to carry a bunch of cash around when now all you need is a credit card. Uber even tailors to supply and demand using surge pricing as an incentive to increase the amount of drivers during peak hours. In addition, through GPS they allow you to not have to worry about standing outside trying to hail a ride when you can just request one to wherever you are or will be and tell you how long it will take for your drive to arrive. Finally, if there are any discrepancies or issues you can directly resolve them from the app and get a refund, something that I am pretty sure is near impossible to do or extremely complicated when it comes to taxis. For these reasons I feel that Uber is a necessary evil and very strategic in its innovation.
Yes, Uber is essentially wiping out the taxi-cab industry but in doing so it forces them to either update and compete or integrate. Uber is also a disruptive innovation in the sense that it is opening up new markets with its various forays. They dabble in chopper rides, food delivery, rose delivery, self driving cars, and even yachts to name a few. Their business model of free trails to promote word of mouth recommendations (allowed for minimal marketing spending) and local expansions at least throughout the US allowed them to grow and break the stranglehold taxis had on consumers.
http://managedisruption.com/case-studies/case-study-vectors-of-disruption-the-uber-story/
https://growthhackers.com/growth-studies/uber
I see the benefits of Uber as an added way to get around a city. I definitely see Uber as a disruptive innovation. I have to agree with the statement made that it started off as a high end service. However, Uber has since repositioned itself as a safer and more convenient service. Uber is taking many customers that relied on taxi companies to get them around. With Uber’s ease of service many people are switching over to it. For example they are using their technology to allow customers to order a pick up using their gps location. It also allows customers to not have access to cash, they pay online on the app.
However, Uber does not follow the same rules that taxi’s are required to follow. My friend’s family owns a large bus company that also has about fifty taxi cabs and vans. They service the large city of Pittsburgh, but also the small suburbs and rural towns like our town. Uber is putting a hurt on their business especially in the small suburbs and rural towns. The technology benefits of Uber are responsible for the downturn in their business. With this however, I know they and other large taxi companies have filed lawsuits against Uber. Uber is not required to follow the same strict rules and more importantly their drivers are not paying an income tax on their Uber earnings. Taxi’s require certain licenses and others they require medallions. Many drivers saw the medallion as an investment. According to the Philly mag article a medallion was bought for a half million dollars and by the time they were to retire they expected to increase in value to over a million dollars. However, after the disruptive innovation of Uber the medallions are now selling for around eighty thousand dollars. They owners lost over four hundred and twenty thousand dollars on their investment. The taxi companies know they can’t be the only game player in the market, but they want everyone to play by the same rules. Thus, Uber is disrupting the market place with their technology that lets them slide through the loop holes, for now.
The sources I used was http://www.phillymag.com/news/2016/01/11/uber-lawsuit-philadelphia-cab-company/
After reading your post, I do view Uber in a different light but I find it difficult to believe that Uber has had a positive impact on the taxi-cab industry. The blog mentions about how new technology leads to new products, innovation, and successful innovation, which is all true. That highly successful innovation is Uber and it is hurting the taxi-cab industry. According to an article from Business Insider, Uber has taken over some U.S. cities, such as San Francisco and Dallas, taking more than seventy-one and fifty-six percent of total rides used by business travelers, respectively. Uber was invented over seven years ago and signs are pointing to Uber as the future of ground transportation.
But Uber is not without its flaws. The company is seeing increasing resistance from the taxi industry and state governments, such as the case with Auburn, Tuscaloosa, San Antonio, and Austin where it has been banned in its entirety. Taxi companies fought to make sure they were the only ground transportation service in these cities. A problem that arises out of banning ride sharing services is a type of “black market ride sharing” where people connect through the Facebook and Craigslist to get around the high price of a taxi. Riders and drivers can find each other through these websites and set up fares which is illegal and could be potentially dangerous.
All in all, the development and explosion in popularity of Uber is going to have many side effects, positive and negative. It is only a matter of time until the full scope of what Uber has done to the ground transportation industry makes itself clear.
Sources:
http://www.businessinsider.com/uber-is-taking-business-from-taxis-at-an-unprecedented-rate-2015-4
http://www.businessinsider.com/heres-everywhere-uber-is-banned-around-the-world-2015-4
http://hotair.com/archives/2016/06/22/banning-uber-and-lyft-in-austin-has-led-to-an-explosion-of-black-market-ride-sharing/
Even though I have to say the articles raises a lot of great points I do have to disagree with a them. One of the first points has to do with where Uber started. When Uber was first created it started as a company focused more on the high end cab market such is the black cab and limousine services. All they really did was just try and implement their interface technology with it using the app. So looking at the original state of Uber, the focus wasn’t just the ordinary taxi cab it was something other than that. It was only really at the introduction of UberX services do we see Uber trying to expand its business to take over the cab sector of transportation.
Going off on this, taxi cabs originally had so many certifications, permits, and requirements that it wasn’t easy to become a taxi driver. Uber disrupted that state by allowing anyone with a vehicle to come on through and drive other people around for money. There was no need for certifications or permits. This made Uber the less safe and initially the more expensive option compared to taxi cabs. It took a while for Uber to improve its safety protocols and lower it cost and it ended up being an upstream battle more than anything else. Only till recently do we see cost much cheaper than cabs in most cities. Christensen himself says, “Disruptive innovations don’t catch on with mainstream customers until quality catches up to their standards.” This is exactly what Uber went through.
The main resource I used to counter this argument can be found below. This only one of the few points in the article and if you get a chance I really suggest checking it out.
https://techcrunch.com/2016/02/27/why-clayton-christensen-is-wrong-about-uber-and-disruptive-innovation/