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

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The goal of this presentation is to investigate how the digital revolution is impacting the way in which disruptive innovation unfolds. The main theoretical traits of disruptive innovation are presented; then, the key dynamics ignited by the pervasive effects of digitalization are introduced and described. Furthermore, a case-study on the Transportation Network Company UBER as the taxicab industry disruptor is presented, highlighting the key elements that are characterizing the company as a digital-enabled disruptor.

Published in: Leadership & Management

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

  1. 1. Andrea Paraboschi, Ph.D. www.paraboschi.it Disrupting in the digital era key traits of an evolution of disruptive innovation image credit: scorp84 (Flickr)
  2. 2. 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
  3. 3. < 0,2% of population analog voice single purpose source: ITU 1990 50% of population digital data multipurpose 2015 the digital revolution Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  4. 4. 3 billion people on the Internet (2015) towards an instrumented world More than 1 trillion connected devices in the world Source: IBM 1 : 333 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  5. 5. 1. tangible 2. easy to value 3. difficult to operate and scale 4. slow to market 5. vulnerable cost structures 1. intangible 2. hard to value 3. easier to operate 4. highly scalable 5. nimble to market physical and digital 01101001010 01010010101 10110110101 01101100100 thanks to Ricardo Alvarez, MIT Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  6. 6. physical and digital + 01101001010 01010010101 10110110101 01101100100 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  7. 7. how is innovation changing (concept/process)? Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  8. 8. Disruptive innovation Original theory Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  9. 9. • From technological perspective to a focus on the business model component • Low-end / New market Disruptive innovation Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  10. 10. High-end disruption Govindarajan and Kopalle (2006) Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  11. 11. Total vs Partial Disruption Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  12. 12. Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  13. 13. Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  14. 14. 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  15. 15. Technological breakthrough Business model innovation Socio/economic zeitgeist DISRUPTIVE INNOVATION value generation, appropriation and distribution demand traction and durability HW/SW combination lackof value lack of demand lackof tools 1.Disruption happens at the intersection between the economic, the social and the technological domain Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  16. 16. 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) Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  17. 17. 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) Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  18. 18. 2. Frequency and velocity of disruption increases exponentially with incremental technological advancements (combinatorial effects, feedback loops) image credits: Senseable City Laboratory - MIT Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  19. 19. 3. Low-end, High-end and Market disruptions now can happen at the same time Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation A case study
  20. 20. impact 1600 1400 1200 1000 800 600 400 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  21. 21. Key features easy to use Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  22. 22. Key features secure possibility to rate the driver no unpaid rides no cash in car Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  23. 23. Key features smart know where the driver is know where customers are Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  24. 24. Key features efficient there’s (almost) always a driver available compensate drivers who decide to ride during critical situations Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  25. 25. Started as on-demand limo service “everyone’s private driver” Strategy Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  26. 26. TODAY: “transportation as reliable as running water, everywhere for everyone.” Anyone with a (decent) car can become a driver Strategic shift Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  27. 27. source: J. Hall, A. Krueger - An Analysis of the Labor Market for Uber’s Driver-Partners in the United States (2015) Drivership Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  28. 28. 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  29. 29. 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. Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  30. 30. : = : Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  31. 31. 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… Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  32. 32. Existing market Extended market low-end disruption high-end disruption ext. market disruption a b c d new market disruption new market disruption new market disruption 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  33. 33. 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation
  34. 34. 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 Andrea Paraboschi - Disrupting in the digital era - key traits of an evolution of disruptive innovation

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