Innovation is hard work and can have significant rewards. But it does not guarantee survival.
Being disruptive has become a huge focus since Uber and a handful of other startups came along and shook up their markets. But in a corporate context are people getting true disruption confused with innovation? We went to the poster child for disruption and asked, do they still see themselves as disruptive and if so, how do they plan to keep doing it? And at the same time we thought we’d ask how a big asset owner that must make investment decisions based on a 20-year horizon, views disruption. Is being disruptive even possible when you have such a big ship to turn?
ON TODAY’S PANEL
Paul Gordon Partner and Enterprise Change Strategist, Voco
Richard Menzies General Manager, Uber New Zealand
Nikhil Ravishankar Chief Digital Officer at Vector
I’ve been thinking a lot about disruption, what it really means and the factors critical to its success.
My first observation is that everyone I talk to who is serious about thriving in a disruptive market goes beyond asking, “how do I do this better?”. They look for a broader, more fundamental question that, rather than prompting iterative change, opens up their thinking to new possibilities. I suspect that not being satisfied with incremental improvements on the status quo is what differentiates the disruptive companies.
Which leads me to a related observation which is that disruption is not merely innovation. Disruption changes an existing market or creates a new one. It spawns side industries and becomes the new benchmark. Innovation on the other hand is change within a market – an improvement but the market remains fundamentally the same.
The challenge is that innovation can blind people to the opportunity and threat from disruption. Innovation is hard work and can have significant rewards. But it does not guarantee survival. The impact of innovation can be referenced in percentage terms; the effect of disruption in orders of magnitude. So while everyone likes to talk disruption, true examples are rare.
I think there are four keys to successful disruption:
It’s not just the new start-ups who can play effectively. The existing asset owners have huge potential. While everyone’s looking out for the “new Uber”, incumbents can challenge themselves to think about their assets in new and different ways. My advice:
I’ve never heard anyone at Uber ask, “How can we be disruptive today?,” but I often hear, “What are the biggest problems that need solving?”
In the early days Uber focused on finding a better way to serve an existing need with an untapped resource. We looked at the whole experience of taking a cab and thought about how we could we make it a lot simpler and radically better for customers. We streamlined the experience so you could tap a button, get a ride. That’s what got people talking about the service and gave Uber its start.
Now that we’ve grown to a company that’s in 500 cities around the world, we’re thinking ‘big picture’. Our sense of purpose comes from the desire to get more people taking shared journeys so there’s less congestion on our roads. To achieve that and grow our business, we’re asking questions like, “how does Uber integrate with public transport?” We’ve also created UberPool which is a different experience to Uber in that you’re sharing a ride with someone else. The aim is to build a product that works so well people no longer need to own a car to get around.
Last year we ran a ‘first and last mile’ pilot in Auckland, a city which is facing big congestion issues. ‘Park and Ride’ facilities on the Northern Busway are full by 6.30am. Auckland Transport is faced with spending $50m to build a new ‘Park and Ride’ that fills up just as quickly, or running a new, subsidised feeder bus service to the ‘Park and Rides’. Uber ran a 20% discount on all trips that started or ended at the Northern Busway. We saw a 50% increase in usage.
There are 160,000 people crossing Auckland harbour bridge a day, most by car. The average occupancy in the cars is 1.2 persons. If UberPool could increase the rate to just 1.25, that itself could have an impact towards releasing the pressure on the network. Complementing existing frameworks and finding new pathways to help solve some of the real transport issues we’re facing will unlock growth opportunities for Uber.
A lot of people like to talk about ‘Uber for x’, meaning what could I bring the on-demand Uber model to? There’s also plenty of growth in industries that are ‘x for Uber’, where people have seen opportunities created by Uber, for example companies that help Uber driver partners get on the road. There are always changes and shifts in industries. Those who serve customers better will most of the time come out on top and create new opportunities along the way. . You have to bring the attitude that you’re willing to test and try things. Start small. UberEats was launched in a single city. If it works, you can scale it from there and seize those opportunities.
Rather than wanting to be the next Uber, asset heavy/infrastructure businesses should be asking themselves how they can better invite disruptors like Uber to transform the use of their asset base.
Disruption provides a ticket for infrastructure businesses to think more freely about how we view and use our asset base outside of our industry vertical, or ‘box’, to solve problems. Customers don’t see Vector, for example, as a distributor or a telecommunication company. They see the end solution – whether that’s getting the lights switched on, reducing their electricity bill, accessing convenient services, or reducing their carbon footprint. Here disruption occurs when problems are solved for end users by integrating resources, services and applications that are freely available. It’s more than adjacency.
We still need to invest in infrastructure. The challenge in today’s environment is to find a framework to test asset viability, not through the lens we’ve always used, but by looking at all the other ways that infrastructure could potentially be used. This includes questioning fundamental assumptions – for example, that the asset will always be needed – as we’ve been asking at Vector about our electricity network. Then the task is to get friendly with the eco system to understand where both the threat and the opportunities could come from. The biggest disruption in the asset-heavy end of town will continue to come from outside the sector.
Infrastructure and technology businesses like ours shouldn’t be asking how we can be the next disruptor – although we should absolutely still be innovating. Instead we should be asking how we can attract the disruptors of the world to engage with our assets and add value. “What is the positive ‘disruptability’ of our infrastructure assets?” “What innovation can I invite?” Partnering with disruptors like battery/storage manufacturers, home energy management and peer-to-peer trading platforms, and big data companies has provided new and more efficient ways to use our network, expanding its relevance beyond our industry vertical.
So rather than being the disruptor, I see my task with Vector as making our assets as transformable and as innovation-friendly as they can be. That involves questioning how Auckland’s electricity network can become the world’s greatest host for innovative disruption. New Zealand makes an interesting case study for energy as we are not short on energy supply by any means, and over 80% of our electricity is already generated by renewable sources. That means Kiwis will only adopt new technologies and services that make economic sense and materially improve their lives. If companies like Tesla can make roof tiles and batteries a success in New Zealand, that shows they have a good chance elsewhere on the planet.
To discuss the topic further, please get in touch with the author, Paul Gordon, on 021 718 190.