Disrupting in the digital era: key traits of an evolution of disruptive innovation

Andrea Paraboschi, Ph.D. www.paraboschi.it

Disrupting in the digital era key traits of an evolution of disruptive innovation

image credit: scorp84 (Flickr)

http://www.paraboschi.it

the digital revolution

one language one channel everywhere

Binary numeric system Internet Wireless

Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation

< 0,2% of population

analog

voice

single purpose

source: ITU

1990

50% of population

digital

data

multipurpose

2015

the digital revolution


3 billion people on the Internet (2015)

towards an instrumented world

More than 1 trillion connected devices in

the world

Source: IBM

1 : 333


1. tangible2. easy to value3. difficult to operate and scale4. slow to market5. vulnerable cost structures

1. intangible2. hard to value3. easier to operate 4. highly scalable5. nimble to market

physical and digital

01101001010010100101011011011010101101100100

thanks to Ricardo Alvarez, MIT


physical and digital

+01101001010010100101011011011010101101100100


how is innovation changing

(concept/process)?


Disruptive innovationOriginal theory


• From technological perspective to a focus on the business model component

• Low-end / New market

Disruptive innovation


High-end disruption

Govindarajan and Kopalle (2006)


Total vs Partial Disruption




Contextualizing Disruptive Innovation in the Third Industrial Revolution

1.Disruption happens at the intersection between the economic, the social and the technological domain

2.Frequency and velocity of disruption increases exponentially with incremental technological advancements (combinatorial effects, feedback loops)

3.Low-end, High-end and Market disruptions now can happen at the same time


Technological breakthrough

Business model innovation

Socio/economic zeitgeist

DISRUPTIVE INNOVATION

value generation, appropriation and

distribution

demand traction and durability

HW/SW combination

lack o

f va

lue

lack of demand

lack of

tools



recombination - combinatorial innovation

“We usually think of innovation as

inventing new things, but we may be

smarter to think of it as recombining old

ones.”

Race Against the Machine (Brynjolfsson-McAfee)

2. Frequency and velocity of disruption increases exponentially with incremental technological advancements (combinatorial effects, feedback loops)



remember this property of technology: architecture and modularity

“the partition of technologies increases with the extent of the market” source: Arthur (2009)



image credits: Senseable City Laboratory - MIT


3. Low-end, High-end and Market disruptions now can happen at the same time


A case study

impact

1600140012001000800600400

Average trips per vehicle

Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jan 14

Average monthly trips per taxicab in SF, trend

Source: SF Examiner

source: SF Examiner


Key features

easy to use


Key features

secure

possibility to rate the driver

no unpaid rides no cash in car


Key features

smart

know where the driver is

know where customers are


Key features

efficient

there’s (almost) always a driver available

compensate drivers who decide to ride

during critical situations


Started as on-demand limo service “everyone’s private driver”

Strategy


TODAY: “transportation as reliable as running water,

everywhere for everyone.”

Anyone with a (decent) car can become a driver

Strategic shift


source: J. Hall, A. Krueger - An Analysis of the Labor Market for Uber’s Driver-Partners in the United States (2015)

Drivership


source: UBER blog

What’s next

“transportation as reliable as running water, everywhere for everyone.”

Price leadership strategy

Lowering fares

Demand increase

More cash-flow

Investing server-side to maximise driver

utilisation


source: UBER blog

Price leadership strategy

In January 2015 Uber cut the prices simultaneously in 48 cities, backing these up with income guarantees for drivers.

The historical database allows Uber to predict how the markets will evolve and to “forward invest” capital to help

these markets achieve lower consumer prices even faster.


: = :


Existing market (red ocean)

New market (blue ocean)

low-end disruption

high-end disruption*

new market disruption

*theory extension proposed by Govindarajan and Kopalle (2006)

back to Christensen…


Existing market

Extended market

low-end disruption

high-end disruption

ext. market disruption

a

b

c

d




e

e

e

New markets

Uber started in 2009 as a premium service with black cars and suited drivers.

a

b With UberX private drivers can join the platform, threatening taxicabs from the bottom

c

d Uber’s perpetual ride goal is achieved, no need to own a car. Uber as cheap as public transportation

Uber progressively lowers the price of UberX rides, attracting at the same time new drivers through subsidies - UberPool introduced (ride sharing)

e Uber’s big data knowledge applied to other markets and sectors (logistics, driverless cars, city analytics)

Uber’s disruption


Contextualizing Disruptive Innovation in the Third Industrial Revolution


2.Frequency and velocity of disruption increases exponentially with incremental technological advancements (combinatorial effects, feedback loops)

3.Low-end, High-end and Market disruptions now can happen at the same time


Suggested readings

• Arthur, W. B. (2009). The nature of technology: What it is and how it evolves. Simon and Schuster. • Charitou, C., & Markides, C. (2012). Responses to Disruptive Strategic Innovation. MIT Sloan Management Review,

…, 44(2). Retrieved from http://sloanreview.mit.edu/article/responses-to-disruptive-strategic-innovation/ • Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard business review,

78(2), 66-77. • Christensen, C. (2013). The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business

Review Press. • Christensen, C., & Raynor, M. (2013). The innovator's solution: Creating and sustaining successful growth. Harvard

Business Review Press. • Danneels, E. (2004). Disruptive Technology Reconsidered: A Crtique and Research Agenda. Journal of Product

Innovation Management, (1), 246–258. • Downes, L., & Nunes, P. F. (2013). Big-bang disruption. Harvard Business Review, 91. • Govindarajan, V., & Kopalle, P. (2006). The Usefulness of Measuring Disruptiveness of Innovations Ex Post in Making

Ex Ante Predictions*. Journal of Product Innovation …, (2004), 12–18. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/j.1540-5885.2005.00176.x/full

• Paraboschi, A. & Alvarez, R., Disrupting in the digital era: key traits of the evolution of disruptive innovation. Andrea Paraboschi’s Ph.D. thesis, October 2015.

• Wessel, M., & Christensen, C. (2012). Surviving disruption. Harvard Business Review, (December). Retrieved from http://www.pdf-archive.com/2012/12/21/survivingmaxwessel/survivingmaxwessel.pdf

www.paraboschi.it


http://sloanreview.mit.edu/article/responses-to-disruptive-strategic-innovation/

http://onlinelibrary.wiley.com/doi/10.1111/j.1540-5885.2005.00176.x/full

http://www.pdf-archive.com/2012/12/21/survivingmaxwessel/survivingmaxwessel.pdf

http://www.paraboschi.it

Leadership & Management

Disrupting in the digital era: key traits of an evolution of disruptive innovation