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Requirement
Technology disruption can change business models overnight. From Uber to Spotify to Netflix, what do you see as the biggest technology disruption over the next 5-10 years?
Solution
TECHNOLOGY DISRUPTION & BUSINESS MODELS
The basic rule of any business model is to create and capture economic value. But today business models are subject to rapid change (Jong & Dijk, 2015).
Disruption refers to a process whereby a smaller company with fewer resources can successfully challenge established businesses. In the world of technology, disruptive innovation is a mode of innovation-driven growth (Christensen, Raynor, & McDonald, 2015).
Figure: The Disruptive Innovation Model:
The red lines represent how products and service improve over time.
The blue lines represent customer willingness to pay for performance.
Over time as the established companies service the high-end of the market, there exist a gap in the low-end of the market. New entrants disrupt the market by entering this low-end segment and gradually improve their offerings to challenge the established players in the high-end segment.
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TECHNOLOGY DISRUPTION& UBER
Uber started its platform service in black cans before introducing UberX, which disrupted the taxi service industry. UberX started off in the low-end segment of the market by providing cab service by aggregating the services of anyone with a car. Over the course of time as Uber’s network grew, ride costs decreased and waited times improved. With an improved offering, UberX now competed directly with the taxi services.
Uber as a platform introduced disruptive innovation in the market by building new networks, communities, and marketplaces (Johnson, 2016).
TECHNOLOGY DISRUPTION& SPOTIFY
Spotify has brought about disruption in the music player industry by providing access to unlimited access to a wide selection of music at a relatively lower cost than its competitors. Spotify was able to deliver music at a lower cost because of its market position as a radio service which allowed its prices to fall far below its competitors.
Spotify’s business model is based on the freemium model. Free users have access to songs but their experience in advertisement interrupted while premium users face an ad-free experience.
(Wessel, 2011).
TECHNOLOGY DISRUPTION& NETFLIX
Netflix was initially launched as a mail-in subscription service to buy movies online. Netflix like any disruptive company targeted the segment of customers not served by its competitors. Netflix caused a technological disruption by introducing its video streaming service. It attracted the entire segment of customers earlier serviced by its competitors by providing access to a wider selection of high-quality content conveniently (Isaacs, 2015 ), (Richardson, 2011).
CONCLUSION
Over the next 5-10 years, I see Uber continue being one of the biggest technological disruptions. Spotify’s advantage of providing relatively low-cost music online may be nullified to a huge extent by Apple if it remodels its iTunes business into a radio service. And with production houses and television service providers looking at the possibility of streaming exclusive content only through their platform, Netflix might be in a spot in the future. But Uber has been known to expand in new markets and disrupt the cab industry there by providing reliable and cheap cab services. Uber can continue consolidation of its existing markets while expanding into new markets in developing nations to continue disrupting the cab service industry wherever it goes in the next 5-10 years.
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1. Christensen, C. M., Raynor, M. E., & McDonald, R. (2015, December). What Is Disruptive Innovation? Harvard Business Review.
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2. Isaacs, R. H. (2015 , November 24). Netflix, Blockbuster, and Disruptive Innovation. Retrieved from The Evans Consulting Group: http://theevansconsultinggroup.com/2015/11/24/netflix-blockbuster-and-disruptive-innovation/
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3. Johnson, N. L. (2016, Feb 27). Why Clayton Christensen Is Wrong About Uber And Disruptive Innovation. Retrieved from TechCrunch: http://techcrunch.com/2016/02/27/why-clayton-christensen-is-wrong-about-uber-and-disruptive-innovation/
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4. Jong, M. d., & Dijk, M. v. (2015, July). Disrupting beliefs: A new approach to business-model innovation. McKinsey Quarterly.
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5. Richardson, A. (2011, September 20). Netflix’s Bold Disruptive Innovation. Harvard Business Review.
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6. Wessel, M. (2011, July 22). Why Spotify Will Kill iTunes. Harvard Business Review.
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