I discussed Uberization at length in a recent article. But this is just a model of disruption, among many others. To be complete, I should at least also speak about teslaization which I believe to be more dangerous for many companies, and their relation to by-the-book disruption. These are the three states of disruption that will shape the future of your company, whether you’ll be a disruptor or a disrupted.
This quick and dirty roadmap to disruption is not intended to give with a full-fledged mapping of all disruption categories. Uberization and teslaization are interesting in the way they are polarizing risk taken by the disruptors. It’s about a low tech / higher market risk, or the opposite. Eventually, my goal here is only to share with you how to analyze risks, both as a threat and as an opportunity.
How does it develop: Powerful companies invest all their resources maintaining a form of monopoly, and extract revenues of position from a market, this market rapidly get mistreated and hurt. This usually involves a particular form of proprietary asset (or plain laws in some cases), that are used to lock customers in. In such a case, nimble and aggressive ventures have an easy time swooping in, leveraging generic platform technologies, such as mobile, geolocalization, digital payment, Google, Amazon or Facebook… to take on the incumbent and beat him on his key added value.
Cases of uberization: AirBnB vs. hotel resorts, Blablacar and Capitain Train vs. SNCF, Uber vs. Taxi companies, etc.
What is the profile of the disrupted companies: The ones that abuse of position revenues, and that are vocally hated by their own customers.
How to treat: Renounce some of your privileges, and refocus on building again added value for your customers. How to make a hotel go from bearable to pure joy? How would a retail bank provide essential differentiated counseling to families?
Chance of survival: Honestly? Pretty none. Every fiber of your culture will scream against it, and help you build delusions to cope with customers hate (such as “They don’t realize how good they have it, if we weren’t there it would be much worse”).
How risky is it:
It is quite “safe” to go and try uberize an incumbent. To rephrase what I already said:
- His customers hate him and are ready to switch in a blink of an eye;
- He got bad at delivering his own added value;
- Generic platform technologies can be 80% of your back-office if you manage to focus on user experience and bring back delight to the market.
This is why “uberization” gets so much press coverage at the moment. It feels like everyone, and her grandmother could be the next Uber. And that’s the case, to some extent.
How does it develop: Any company leveraging a technological asset, may be faced with a tremendously powerful competitor surging from an entirely different market. This competitor will have a much better technology, initially built for an entirely different purpose. It just happens that it’s a cost-effective pivot of their core business.
Cases of teslaization: Well, Tesla coming from the electrical car business, challenging SNECMA with Space X. But also Tesla challenging energy providers with Powerwall, and public transportation companies with Hyperloop. Before that, Amazon developing the most powerful B2B cloud services, out of their e-commerce backbone.
What is the profile of the disrupted companies: None specifically. Unlike uberization you haven’t slipped, or done wrong on your market. It just happens that someone was building technology for its purpose, which also has killer features in your own market. And they are being smart about it.
How to treat: Take this threat seriously. You may feel they are uneducated on your market, and that they aren’t just going to walk in. You probably overestimate the barrier to entry market-wise. And they have better technology remember? Now, you can take preventive actions, such as exploring for yourself adjacent markets with your core technology. Or, at least invest in startups pushing your technology in new directions. You’ll immediately meet your most powerful potential competitors. The trick is that you have to do that well before any serious threat starts to appear. This is tremendously difficult.
Chance of survival: Excellent if you can foresee the troubles coming from markets that have no connections to yours. Because then, it’s mainly a resource game about technology. And we know how to improve technology. But this is what is usually impossible: it’s difficult for your board to accept that form of danger as a solid possibility; your stock market just won’t get it; and consulting companies that assist you essentially think that your competitors are the ones that are developing the same offer as you are, not invaders from another planet.
How risky is it:
This last one is the “by-the-book” definition of disruption, coined by Clayton Christensen in 1995.
It is, to some extent, the conjunction of uberization and teslization: a new market is formed by a competitor bringing a new technology to your market, leaving you out of customers with outdated solutions. In theory, Wikipedia would have destroyed and replaced modern education. We could argue, that yes, sadly… But business schools for that matter are still striving. As far as I’m concerned, I have no example of “disruption”. Disrupting an incumbent happens whether by the market side or by technology side of the market. Essentially, disruption would be overkill and as such neither really happens. Except in business textbooks that unspecifically keep this word to cover the generic idea of “bad things can and will happen eventually to your business”. On their side, medias have long traded the generic disruption word, for uberization, that in that case doesn’t mean anything precise as well.
The overall picture, in term of risk assessment, would be something like that:
Risk is key
Eventually, you should make peace with risk as a positive asset for your business.
This way of understanding innovation about the quality and the intensity of risks taken is vital for startups. “What kind of risk are you leveraging?” is a top priority to evaluate a startup project. Not many startupers can understand – even less answer – the question. But there you are with a template answer:
- You are actually aiming for ambitious disruption, by reinventing technology and changing the way the market will use it, it’s probably too high a risk. But at least particular investors can connect with you, if you team is a group of seasoned entrepreneurs with tremendous tech / design / business skills.
- You play safe and stay in a safe zone, not pushing the market away from where it is, not bringing technology to the table… Well, this is TOO safe. You’re fighting with incumbents companies doing the very same thing, more or less in the same way. You just don’t have credentials and enough resources. This is crazy. Stop and take MORE risks.
- Or you have a “thermodynamically” efficient level of risk – may it be about uberization or teslaization – that can bring a powerful change to the market (we call that innovation).