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Disruption
Emerging Trends
1
What you need to know
about disruption
What impacts for
established players?
Some weak signals within
the construction industry
What you need
to know about
disruption
Disruption today: a buzzword
-
3
Newspapers tell stories of "disruptive presidents", of
startups that "aim to disrupt the shower sector" or
others that want to "disrupt unemployment".
The term is so omnipresent that it becomes hard to
grasp its true meaning.
Along with disruption, a brand new lexicon has
appeared: “uberisation”, “disintermediation”,
“commoditization”, etc.
The word "disruption" and its derivatives are everywhere.
The fear of being disrupted affects all industries. The common
saying about disruption is that “it is only a matter of time before
your industry will be attacked: no one will be spared.”
C-levels try to keep up with the frantic pace of innovation as they
are all afraid to witness a quick and brutal fall of their existing
activities. Uber and Airbnb are two great examples of major
shifts of value that can occur in only a few years, and no
established firm wants to be the next Kodak.
One priority for incumbents : fight back against this “new form of
barbary” and change the perception of them as dinosaurs sitting
there, waiting for a comet to hit.
4
Disruption is generally perceived as an unpredictable, rapid and brutal phenomenon.
Disruption today: industry leaders are all afraid of it
-
In 2015, the French accelerator The Family launched a
conference cycle called “Barbarians are attacking!”. Like
during the “Barbarian Invasions” of the 5th century, the
very survival of the dominant players is threatened by
unknown newcomers that do not play by the established
rules.
The destabilization of established firms has become
permanent. Main reasons are globalization, the frantic pace of
technological progress and the fact that it’s now touching all
activities.
Established business rules are now changing all the time:
today's disruptors may be tomorrow's disrupted.
5
The risk of disruption is accelerating.
As a result, disruption is not a fad nor a trend, but a new permanent risk
-
Lifespans of S&P500 firms
continue to shrink
What does
disruption
exactly mean ?
The genesis of the word
-
The word “disruption” has made part of the French
dictionary since the end of the 19th century. It
means “break” or “fracture”.
7
The Cambridge Dictionary business definition
conveys the idea of completely changing the
way things are done.
The creation of a concept
-
According to Jean-Marie Dru, the disruption methodology has three parts:
8
“Disruption is a dynamic methodology focused on creation”
Jean-Marie Dru, co-founder and chairman since 2008 of TBWA.
Identify cultural
conventions around
a brand on a specific
market.
Find a disruptive
strategy to challenge
existing conventions.
Define a new vision.
“We have to draw a fine line between what
should be changed and what should not be
changed. And this is what Disruption, as a
methodology, is all about.”
The purpose of this methodology is to free the brand from existing
conventions on the market and to help it grow by building a new and
engaging vision.
Successful disruptions do not simply give an additional market share, but
rather an additional market share on tomorrow’s market.
Credits: Icons created by Johannes Hirsekorn, Gregor Cresnar and fauzan akbar from Noun Project
Clayton Christensen put under the spotlight the
word ‘disruption’ with a new definition
-
9
“Disruptive innovation describes a process by which
a product or a service takes root initially in simple
application at the bottom of a market and then
moves up market, eventually displacing established
competitors.”
Christensen’s disruption theory highlights a very specific situation
-
Incumbents focus on their most profitable and demanding customers and pay less
attention to less-demanding customers. The disruptor seizes the opportunity to
provide those low-end customers with a “good enough” product. For new-markets,
disruptors create the demand and turn non-customers into customers.
10
In Christensen’s disruption theory, disruptive innovations always
originate in low-end or new-markets areas.
Mini-mills
disrupted the
steel industry
From the 1970s to the 1990s, innovative mini-mills overtook
much bigger steel companies.
Starting by doing rebar at lower cost, they progressively
moved up the value chain to more profitable segments,
each time with larger incumbents pulling out to concentrate
on their most valuable business lines.
Credits: Icon created by Vectors Market from Noun Project
Don’t be trapped by the ‘Disruption Dogma’
-
Leaders are obsessed with the question : Is it disruptive innovation or
merely a sustaining one? They should ask themselves “Are we
thinking big enough ?”
If we stuck to Clayton Christensen's strict definition, companies like Tesla
or Uber would not be considered as “disruptive”. However, their value
propositions and businesses have indisputably shaken up
consumer habits and established markets.
The rapid pace of technological innovation alongside with globalisation
makes it really hard to keep set-in-stone rules to define disruption. The
nature of the phenomenon is constantly changing over time.
11
When following a too restrictive academic concept leads to strategic mistakes
When the first iPhone was released in 2007, Clayton
Christensen argued that, according to its disruption
theory, the iPhone was “a sustaining technology relative
to Nokia” and “the probability of success [would] be
limited”.
What to remember from the disruption concept?
-
12
A game-changing perturbation
Disruption is a process by which a product, service or solution changes the rules in
an already established market.
In the end, the traditional value chain that is vital to an incumbent firm is cut, re-
engineered or made obsolete.
A “new” word in the wake of an old phenomenon
-
The disruption concept is somehow
based on the substitution of one
economic model by another.
In history, countless phases of
“disruptions” can be identified:
agricultural revolutions of the 17th
and 18th centuries or the industrial
revolution in the 19th century.
Every time, the starting point is a
better answer to people's needs.
13
In the beginning of the 20th century,
Schumpeter invented the concept of
“creative destruction” explaining why
some innovations such as the wheel or
Gutenberg’s printing press were the
triggers of more profound economic
changes.
These innovations are the visible
outcomes of long-term and elusive
mutations.
At the 1968 Mexico City Olympics, Dick
Fosbury changed the sport of high jump
forever. He defied conventions by going
over the bar backwards and set a new
Olympic record.
Fosbury already used this technique in
1963 and other athletes were
experiencing it at the same time, but for
most people there was only the Mexico
jump.
5 important
characteristics of
disruption
Disruptors very often tackle major issues
-
15
Major issues require out-of-the-box answers
For customers, one big problem
is to get rid of waiting time at
supermarket checkout
No waiting line anymore in
Amazon Go supermarkets
Disruptor’s
answer
“Monkey first”
mindest
Credits: Photos from Le Parisien and The Verge
16
All disruptions start with customers: they answer the question of how to better meet their needs whether it is jobs they
want to fulfill or frustrations they want to get rid of.
Disruptors mainly adopt a “jobs-to-be-done” approach
-
Christensen’s
Milkshake example
Clayton Christensen gave the example of a fast
food chain interested in improving the quality of
their milkshakes and boost morning sales.
They discovered that people were buying
milkshakes during their morning commute to get
a tidy and copious breakfast. As a result,
milkshakes can easily be replaced by any
other easily eatable breakfast foods like
bagels or bananas.
Jobs-to-be-done can combine
different attributes
Functional Social Emotional
“I need to commute
from home to work
in the fastest
possible way ”
“I want to connect
with my relatives
during this trip”
“I want to feel safe
and different from
other people during
this trip”
Credits: Icon made by Norbert Kucsera from Noun Project
17
Signs of disruption can be
measured
Companies facing disruption generally have more time to fight back than they
think…
-
Debunking the myth of the comet hitting the dinosaur
Disruption is not a
straight line
An idea is not worth much,
execution is the key to disruption
It took more than a decade for
Amazon to meaningfully disrupt
physical bookshops, and more
generally, traditional retail
Dozens of websites before Airbnb tried
to monetize the same idea. For Airbnb
itself, it took more than 2 years to get
real business traction
Since 2010, SpaceX gradually won
commercial deals to launch satellites. 7
years later, the firm became leader
both in terms of tonnage shipped and
number of launches.
Credits: Icons made by iconcheese, Nithinan Tath and Gregor Cresnar from Noun Project
18
… and they can use a whole range of different strategies
-
Ongoing disruption does not have to be taken for granted
Between 2009 and 2015, the number of
independent booksellers in the US surprisingly
increased by 35 percent.
Harvard Professor Ryan Raffaelli puts forward 3
main reasons :
- Strong connection with local community
- Focus on curation to provide a more personal
customer experience
- Turning into convening intellectual centers and
host reading groups, book signings, game nights or
children’s story times
In order to withstand Airbnb, AccorHotels group
has pursued a very proactive innovation and
digital strategy :
- Multiple acquisitions focus on the luxury
segment : Onefinestay, Travel Keys,
Travelchic, Mövenpick Hotels & Resorts …
- Launch of new innovative concepts :
Flying Nest, a mobile, adaptable and
sustainable livable containers, or Joe&Joe,
the new chain for young travelers
Arianespace is resisting well on the
geostationary orbit satellites segment
(36.000km), the best orbit for large telecom
satellites.
Ariane 5 launched eight satellites into this
orbit in 2018, as many as SpaceX.
If we look at the total mass of satellites placed in
this geostationary orbit: 42.4 tonnes for SpaceX,
compared to 36.9 tonnes for Arianespace, only a
short advance for the US firm.
Credits: Photos from énékia and CNES
19
Well-known “disruptors” are often just the tip of the iceberg
-
Very often, so-called “disruptors” are only the spearhead of a
broader and deeper ongoing revolution.
“The impact that Tesla will have is fairly small in and of itself. It will
change people’s perception perhaps, but it will not in and of itself
change the world. But if large numbers of people are choosing to buy
the Model 3, […] then that’s what will prompt car companies to invest
real money into electric vehicle programs of their own, and indirectly, by
spurring competition, Tesla can be the catalyst for a multi-order of
magnitude shift of the entire industry towards electric.”
Elon Musk, Tesla founder and CEO
Winner or not of the electric car race, Tesla has already changed the
future of car and made firms within an entire ecosystem substantially
reconsider the way they were doing business.
Credits: Icon made by Freepik from www.flaticon.com
What impacts
for established
players?
Let’s start with
a few practical
examples!
22
23
Tesla: a pragmatic mission
-
Context: Our driving style has not changed in a century. We have kept an oil engine and it is only in the 2010’s that the first hybrid engines
appeared. The automotive industry is being singled out as responsible for a large part of the environmental damage and for the depletion of
fossil energy resources.
Tesla is able to bring on board a whole network of actors thanks to its vision:
Share of their vision through multiple communication channels to
maximize reach and create high expectations
Tesla turns customers into believers, which allows reduction of
marketing expenses. It also enables smart crowdfunding strategy to
fund the first car productions.
Tesla invests in its long-term vision rather than immediate margin.
Investors are confident, they value the company as a technological one
rather than an automaker.
This vision attracts the best employees willing to work hard to change
the world.
Tesla first targets rich and early adopter population and proves that
electric vehicles can be both powerful and sexy.
“Tesla’s mission is to accelerate
the world’s transition to
sustainable energy”.
Tesla Mission Statement
With such an ambitious vision, Tesla
clearly demonstrates that they are not only
attacking the automotive market but also
the energy market as a whole.
Credits: Icons made by Loïc Poivet, Oksana Latysheva, Arafat Uddin, Wilson Joseph and Maxim Basinski from Noun Project
24
Tesla’s responses to customers’ needs
-
Tesla activates four different levers to create a better value proposition. Indeed, Elon Musk’s company identified many pain points that
prevented people to switch for an electric car.
Quality Price Access Simplicity
Almost no electric car offer is
appealing or well-designed
Cars are an asset that
depreciate over time.
Having a petrol car is
expensive in terms of
maintenance and fuel.
No efficient infrastructure to
reload electric cars.
Too many different touch
points for the users: brand,
insurance, garage, etc.User Pain
Points
Tesla’s
solutions
Tesla’s Model S performance
gets close to petrol ones
(540km of battery life, 2.3
seconds for 0-100km/h).
Tesla cars get an operating
system that update and
improve their features and
experience over time.
Charging a Tesla is much
cheaper than filling a tank.
The firm allows users to create
their own electric energy
(with Solar Roof and domestic
batteries).
Tesla builds its own
Supercharger network to
allow customers to easily
reload their car wherever they
are.
From car sales to car insurance
and maintenance, Tesla
integrates the entire
customer experience.
A better user
experience
Key takeaways from the Tesla case
-
25
Vertical integration
Capture new value through investments across the value
chain and deliver a better value proposition.
Invest in assets that are highly specialized.
E.g. Tesla’s Gigafactory will be the largest factory in the world to ensure
battery supply.
Lower costs.
E.g. Production’s integration has allowed to reduce costs and sale a
mass market electric car for $35,000 (Model 3).
Ensure quality.
E.g. Tesla has control over its entire production and can craft the best
components.
Gain efficiency.
E.g. Integration has enabled Tesla to accelerate information sharing and
learning cycles.
To better serve customers, an actor can deliver best
services to ensure a more user-centric experience.
Strengthen your customer access path.
E.g. Tesla has a direct sales model through its website and dedicated
stores. It replaced the old car dealership system.
Desintermediation of other actors in the value chain.
E.g. Tesla integrated maintenance and insurance to foster trust with its
customers. While a classic car only deteriorates after leaving the factory,
Tesla cars can be updated thanks to their OS.
Create new assets to make products more
convenient for customers.
E.g. Tesla built its own Supercharger network instead of waiting for
another player to do it.
26
Airbnb’s beginnings tell us a lot about disruption
-
27
In late 2007, Airbnb founders Brian Chesky and Joe Gebbia just
moved to San Francisco. The two roommates were unemployed and
struggled to pay their rent.
They noticed that all hotel rooms were booked owing to a big design
conference held in town. Travelers had hard time finding a place
to stay in a saturated hotel market. In order to “make a few bucks”
they had the idea to buy three air mattress and turn their own flat
into a “AirBed&Breakfast”.
A few months after, the startup launched the same service again for
SXSW and only received 2 bookings.
Broke and in debt, they launched the website again for the
Democratic Convention in Denver. To attract customers they
designed and sold limited edition of cereal boxes depicting
Obama and McCain. They earned $30,000 thanks to this original
marketing strategy and integrated Y Combinator in 2009 where
they first got real traction for their Airbnb service.
San Francisco is one of the most expensive american
city to live in. Housing there is very expensive (poor
user experience).
The housing offer is not big enough to absorb
exceptional demand in SF (market inefficiencies).
Disruptors address a user need that is not met.
A disruption is not a straight line and won’t
happen without foreshadowing. Even after joining
Y Combinator in 2009, Airbnb got rejected by
numerous investors.
Leveraging excess capacities to answer an existing
pain point.
28
Focusing on delivering an amazing user experience for all members of the Airbnb
community
-
Airbnb also activates these four levers in order to provide a convincing answer to multiple issues within the hospitality and tourism sectors.
Quality Price Access Simplicity
Hotels lacks authenticity for
leisure travelers. Brand-name
hotels are near business
centers where locals work, but
rarely sleep or wander around.
Housing offer is expensive,
especially in crowded cities and
for some customer segments
like families.
Pressure on housing offers
(demand>offer)
Difficult to compare offers.
Second homes stay empty
most of the time (unexploited
asset).
Poor UX from travel agencies
and hotel chains
Fragmented value chain and
multiple intermediaries to
organise a trip.
User
Pain Points
Airbnb’s
solutions
Airbnb allows travelers to live
as locals do.
Personalised, original and
secure experiences for
specific users : Experiences,
Plus, Beyond, Airbnb for Work..
Increase of trust with
SuperGuest and SuperHost
program.
Airbnb offers cheap prices in
comparison to an hotel.
Airbnb supports local dweller’
income.
Commissions are low for
small listed hotels (3% Vs 20%
on booking.com).
Airbnb made it possible to find
a cheap accomodation
anywhere in the world. With
4.5m listings it’s more than the
5 top hotel brands combined.
Superior UX : book an end-to-
end trip in a few clicks
Possible to organise all your trip
in one single platform : housing,
experiences, restaurants …
Home insurance included for
hosts
Airbnb helps hosts to build their
own ad.
Who is Airbnb really disrupting ?
-
29
Airbnb is valuated at $31 billion and profitable since 2016. The firm generated $100 million profit and $2.6 billion revenue in 2017. Airbnb expects to reach 500 million
completed bookings by the end of Q1 2019. Undeniably, the company has captured value on the market.
Why traditional hotel chains
continue to thrive ?
→ Supply of hotel rooms is still low whereas
international mobility is booming (situation is very variable
from one city to another).
→ Airbnb and hotels seem to serve different markets :
casual leisure travel and families Vs regular business
travelers.
→ Hotels are concentrated into urban areas whereas
Airbnb’s offer is more scattered among suburbs, so the
spatial distribution is different.
→ Traditional players are quickly adapting their model
and diversifying their activities.
Airbnb is less competing with hotels for travelers than
with locals for space.
“Airbnb has shifted the burden of rising prices in crowded downtown
areas from travelers to residents—pushing down prices for hotel rooms,
while raising rents for city dwellers”.
Derek Thompson
The Atlantic
Numerous countries and cities took strict measures to crack down on Airbnb’s side
effects : number of rental days capped, obligation to register with public authorities,
pay a tourist licence…
Airbnb is not a real substitute for staying in a hotel, it’s more complementary. The
disruption is as much for the industry than for the society itself.
Main takeaways from the Airbnb case
-
30
Incumbents have a large
panel of responses to fight
back Airbnb
Leveraging direct access to final
user to move on adjacent needs
E.g: Airbnb Experience, Airbnb Backyard
Build and sell directly your own
products instead of just
aggregating the offer
E.g: Airbnb will now start designing and
building modular homes through Airbnb
Backyard.
Classic Christensen disruption
example from a low-end market
Airbnb, a new player that was off-the-
radar, democratised a cheaper housing
alternative. The firm is now moving up
the value chain (Plus, Beyond).
Disruptors’ value proposition is
rarely perfectly substitutable
Despite Airbnb’s success, hotel chains
are going well.
Airbnb solved some problems but tend to
create new ones in cities.
E.g: Pressure on long-term rent
- Play on the same ground : Incumbents
like Accor launched their own marketplace
(failure).
- Differentiate: Accor is repositioning on
Luxury and Business travelers (acquisition
of Onefinestay, Travel Keys and
Mövenpick Hotels & Resorts).
- Pressure authorities to get Airbnb on
equal footing as hotels in terms of taxation
and property laws.
- Build an ecosystem of partners: Marriott
launched its Travel Experience Incubator in
2017.
In the same way, Tesla accelerated the switch to electric vehicles, Airbnb
profoundly shook up the hospitality and travel business. In the end, Airbnb only
operated a partial disruption.
31
50 shades of
disruption…
The Boring Company case
-
Because of high labor costs, digging a tunnel in the United States is
extremely expensive, which makes the construction of infrastructure
such as subways or highways very expensive.
E.g. Each mile added to the new subway line in New York has cost an
outstanding $2.73 billion.
32
User pain points
- Alleviate traffic congestion.
- Existing transport infrastructures enhance noise and visual
pollutions.
Technological substitution
Unlock new market-defining features
thanks to technological innovation.
E.g. By making tunnels, The Boring Company aims to bring
infrastructure capabilities back to the US.
Spark a revolution that is likely to redefine
many sectors.
E.g. The Boring Company tunnels will only transport electric
vehicles, and of course mainly Teslas. Such a technology
will also serve Hyperloop projects, easing freight and
transportation
A high-end market disruption to make
technology more affordable.
E.g. Musk’s company is attacking a major issue and is
progressively designing a much cheaper solution, as Tesla
did for electric batteries.
Answer to solve these pain points
Elon Musk’s vision is to figure out how to reduce the
bloated cost of digging a tunnel in the US.
The Boring Company aims to reduce tunnel construction
costs, and then, connect with the entire Tesla ecosystem.
This is the exact type of market inefficiency that investors
and hedge fund operators look for.
User pain points
High costs and long time construction due to a fragmented supply chain.
Answer to solve these pain points?
Katerra has the ambition to modernize the multi-trillion dollar global construction
industry. Its mission is to optimize every aspect of building design, materials supply,
and construction.
Vertical integration
From designing to assembling and interior decoration, the company integrates all
processes to provide faster, cheaper, standardized but customizable buildings:
- Buildings are made of modular components manufactured in Katerra factories,
the company employs its own architects and designers.
- All is linked with a digital platform that allows the establishment of Building
Information Modeling (BIM). The BIM helps to plan and trigger the
manufacture of all elements, as well as the monitoring of the entire value chain
by the project team.
The Katerra case
-
33
Katerra was founded in 2015, and has raised $1.1 billion USD in venture capital
investments of which $835 million USD from Softbank.
Credits: Photos from katerra.com
The Arculus GmgH case
-
34
User pain points
In the era of mass customisation, production lines are not appropriate since they rely
on the old industrial model that promotes standardization.
Creating a customized product takes more time and costs a lot.
Answer to solve these pain points
Arculus was founded with the mission to make production systems more efficient and
flexible in all industries, implementing the most innovative solutions. For the last 100
years, industry has followed Henry Ford's production line system, building and
optimising around it.
New processes
Starting in AUDI factories, the arculus independent stations ease workers in their
daily tasks and increase their productivity.
Modular assembly lines allow cars to be carried to different stations by self-driving
robots rather than a linear conveyor belt. Such assembly methods can increased
productivity up to 30% and reduce error by 20%, with workers working at their own
pace.
Credits: Photos from arculus.de
The G7 case : How to fight back against Uber ?
-
A 6-acts response
#1 Go back to your customer: new offers (airports, young, shared), effort to
propose cheaper fares.
#2 New talents at the management board: focus on IT, customer experience
and new technologies.
#4 Remobilize drivers and engage training programs: trainings on quality
and service, special focus on badly-evaluated drivers.
#5 Repositioning (premiumisation & hybrid vehicles): costumes, new black
cars, new rules for drivers, rebranding (from Taxi G7 to G7), “green mobility”.
#6 Digitalization: new app for booking and payment (G7 Connect) revamped
IT, revamped embarked connectivity tools.
Disruption is not a linear process.
Uber was launched in 2011 in France and progressively attacked G7 core
activity : G7 sales started to plummet in 2014 and net income has been
halved between 2014 and 2016.
In 2018, G7 results were on the same levels than the ones “before Uber”.
35 Credits: Photos from Powertrafic, Capital and g7.fr
How to deal with
disruption?
Dealing with disruption: a three-step approach
-
37
I II III
What are my clients’ jobs-to-be
done ?
What are my clients’ pain points ?
What are the main inefficiencies on
my market or value chain ?
Find breaches a potential
disruptor can take
advantage of.
Who are the players trying to deal with these
inefficiencies ? How efficient are they ?
What innovations and new technologies could
be leveraged to tackle these inefficiencies?
Who are the ones whose skills and strengths
could facilitate their entry on my value chain ?
Understand new competitive environment
and alternative models. Spot the
Innovator's Dilemma.
What kind of assets could we
leverage to increase our value
proposition ?
Where do we want to position our
activities tomorrow ?
Define an ambitious action
plan to fight back.
Diagnose Monitor Respond
How to deliver a better value proposition ?
38
Price Access SimplicityQuality
Lots of different elements can
enhance the quality of a product or
service : personalization, image &
ethic, choice possibility, level of
service …
Customer
experience is
impacted by …
More convenient, more
practical, more intuitive
and pleasant to use.
The new product or
service is more visible,
easier to access for a
wider audience.
Four different levers to activate
The new product is
more affordable than
existing offer.
Diagnose
Credits: Icon made by priyanka from Noun Project
39
INFORMATION
ASYMMETRIES
Information intensive industries
where participants don’t have
equal access to information are
the most likely to see
disruption.
NON-SCALABLE
GATEKEEPERS
Industries where gatekeepers rely
on a non-scalable model (human,
paperwork, low automation) are
the most likely to see disruption.
INTERMEDIATED &
FRAGMENTED VALUE CHAIN
Highly fragmented industries
and industries with lots of
intermediaries are the most
likely to see disruption.
UNEXPLOITED VALUE
Industries with dormant
economic actors or under-
exploited excess capacities are
ripe for disruption.
INEFFICIENT OR NON-
EXISTING CONNECTIONS
These market inefficiencies
are synonymous with either
non-existent connexions
that could be established,
or with inefficient
connexions that could be
optimized (too long, too
expensive, not precise
enough).
Identify the possible frictions on your activities
-
IMAGE DEFICIT
Activities with questionable
ethics or with a strong impact
on the environment. Image
deficit can also be link to an old
fashioned value proposition,
marketing or brand image.
LOW DIFFERENTIATION
Similar value proposition from
the main existing players:
possibly fickle clients.
Diagnose
Credits: Icons made by Arthur Shlain, Danishicon, Creative Stall, Dewi Imaniyah from Noun Project
Four different natures of disruption
-
Disruptors very often combine several natures if not all of them
Technology Business
model
UX &
Design
Processes
AI
VR / AR
New materials
5G
...
Platform model
Freemium
Asset light models
Pay for use
...
Simplicity
Transparence
Services
Emotions
...
Integration
Agility at scale
Modular methodologies
...
40
Monitor
Credits: Icons made by Aiden Icons, Tomas Knopp, Smalllike and Gyorgy Hunor-Arpad from Noun Project
Managing the “Innovator’s dilemma”
-
41
Theorized by Clayton Christensen, the Innovator’s dilemma explains that
incumbents and successful companies must make a choice between
developing a new market, which jeopardizes its present market; and
protecting its existing market, which prevents it from innovating.
Incumbents can lose their market leadership in two different ways:
While incumbents are well established in their market, they mainly
focus on what customers have, give them the product performance
they are looking for, but in the end, are hurt by the very technologies
their customers led them to ignore.
Many incumbents often adopt these new trends but do not modify their
products accordingly... until it is too late.
This S-curve graph shows why incumbents can take the risk to pivot their
business and leverage on new technologies.
This means:
● Betting that these new trends will be more adapted to the needs of
customers
● Investing in it
● Cannibalizing its core business to prevent possible cannibalization
from a new player who would leverage this technology
“If I had asked people what they wanted,
they would have said faster horses.”
Henry Ford
Monitor
Credits: Graph from medium.com
The Kodak case study
-
● 1976: Kodak accounted for 90% of film sales and 85% of camera
sales in the US. The same year, Kodak invented the very first
digital camera.
● In the early 1980s, a study commissioned by Kodak’s experts
insist on the fact that the digital photography would lead to many
changes and developments in their future strategy.
● 1996: Kodak had still a $28 billion market cap and close to
140,000 employees. Kodak concentrated its efforts to film sales
and never decided to produce digital cameras.
● 2012: Kodak was forced to file for bankruptcy.
While the management of Kodak was a pioneer in the development of
technological cornerstones and was also equipped with accurate market
analysis, it made the choice to use it for quality improvements of
film as they were so deeply involved in the photo film.
Unfortunately, it was the wrong choice...
42
Monitor
Adopt a new look on your business & redefine your
playground
There is no market anymore, only customers.
Access path
Alternatives Adjacent
needs
Different possible
moves to strengthen
your value proposition
Adopting a clients
oriented mindset
Putting yourself from the customer's point of view and not from
the product's one allows you to shed a new light on your
business and offers unexpected opportunities for
diversification.
Strengthen your customer access path to secure your
connexion with the customer and avoid reintermediation.
Consider alternatives to your customers jobs-to-done to
expand your competitive environment and prevent
substitutions.
Pay attention to your users’ adjacent needs to enhance your
customer experience and protect yourself from intrusions of
new players on your value chain.
1
2
3
43
1
2 3
Respond
Credits: Icon made by priyanka from Noun Project
Some weak
signals within
the construction
industry
Potential entry point for a disruptor in the highway industry
-
45
One of the major pain points
in this industry is
congestion. For end-users,
travelers & road freight, it’s
unacceptable to pay and be
stuck in traffic jam. It’s a
waste of time and money.
Diagnose
Sanef connected roads
Cameras and bluetooth sensors
on road to measure travel time.
If there is congestion, speed
limit can be adapted and
updated on existing signboards
What already exists to solve the problem?
-
46
Sense by Google
Sensors provide data to know
in real time where each thing
is.
Mapping and analysis to
improve traffic, space use...
Ground Traffic Control
System by Google
Optimization in real-time of
each traffic sign to reduce
congestion and increase
safety, organize traffic and
pricing
Sensors Connected traffic signs
Flowell (2017)
LED pavement to provide
dynamic road markings and
modulate the uses of the
roadway. Roads distribution
can change, new parking
spots can be created...
Monitor
Credits: Icons made by Tomasz Pastemak and Arafat Uddin from Noun Project
What already exists to solve the problem?
-
47
Amazon patented a road network
controlling self-driving cars and
trucks.
What is it?
● A technology allowing to move an autonomous
car from one way to another according to traffic
and destination
A patent that would largely contribute to its
monopolistic position:
● Vehicles would have to integrate Amazon
technology (royalties)
● Tolls would be managed by Amazon
● Data on traffic & real time analysis
● The whole system will contribute to reduce
congestion and delivery time
Monitor
Credits: pictures from Amazon patent
Potential entry point for a disruptor in the highway industry
-
48
In a world where space is a
limited resource, there will
be 25M km of new roads in
2050. But roads are only
used to drive vehicles, it
might be an unexploited
value.
Diagnose
What already exists to solve the problem?
-
49
Power Road, developed by Eurovia, integrates a heat exchanger in the roadway. It allows roads to
capture and store sun’s heat energy. This energy can then be distributed to nearby infrastructures.
25m2 of Power Road allows to
capture the equivalent of the
heating needs of a 70-m2 housing
unit over a year”
“
Monitor
Credits: pictures from Eurovia website
Potential entry point for a disruptor in the highway industry
-
50
Today, great UX is a
prerequisite. Rest areas
aren’t optimized to match
with end-users needs &
new uses.
Diagnose
Credits: pictures from Le Courrier PIcard - McDo et Starbucks vont investir l’aire de Ressons-Est sur l’autoroute A1
What already exists to solve the problem?
-
51
Sombox
A nap box installed in le Mans rest
area allows drivers to take a nap into
a comfy and quiet designed space.
Limours-Janvry rest areas
A designed space with city-like food
court, local groceries and an app,
Ulys, allowing drivers to stop in rest
areas that matches their needs
New services and designs in rest areas
VINCI Autoroutes connected rest
areas
Sensors to get data on parking
spots, water & energy consumption,
amount of trashs… and optimization
Monitor
Credits: pictures from Sombox , VInci Autoroutes website
Potential entry point for a disruptor in the construction industry
-
52
One major pain point for
client in this industry is
price & timing. Property
developers often
experience extra costs
and delays all along the
project.
Diagnose
Factory OS: From designing to building and assembling, the
company integrates all processes to provide faster & cheaper
buildings. Buildings components are made in factory and
assembled on-site, fundations are directly made on-site.
Partnership with Google.
What already exists to solve the problem?
-
53
Modular construction 3D printed construction
Apis Cor: 3D printing machine allowing to build on-site a house in
24 hours ($10 000). The robot can easily be transported in a truck
and can be set in 30 min. Polar 3D printer extrudes concrete on a
132m² printing surface.
New building models exist to reduce prices and delays
Low-end market penetration: As in Christensen’s theory, these two companies plan to spread on the global construction
market but decided to begin with building houses. They answered individual clients who needed cheaper and faster housing
construction.
Monitor
Bone Structure: steel modular structure assembled on-site
to build net-zero homes. This model allows to build on
challenging sites and is focused on green housing.
What already exists to solve the problem?
-
54
KamerMaker: a 3D Printer that can be moved anywhere, can
print temporary house using waste and biodegradable
materials. It aims to build “on-demand architectures that
responds to local needs”. The firm can provide assistance with
rebuilding homes or recovering from natural disasters
Monitor
New building models exist to reduce prices and delays
Modular construction 3D printed construction
Credits: pictures from BoneStructure and KamerMaker websites
Reconstruct: use visual data to measure progress, improve
productivity and reduce risk
● SaaS
● More collaboration and better management to improve timing
and pricing reliability
What already exists to solve the problem?
-
55
BIM software AR/VR collaboration
IrisVR: upload 3D models or panoramas, launch app on
smartphone or desktop and put mobile or desktop CR device
● Easy to integrate
● SaaS
● More collaboration to optimize timing reliability
New softwares to improve efficiency
Monitor
Credits: pictures from Reconstruct and IRIS VR websites
Potential entry point for a disruptor in the construction industry
-
56
A key to find potential
entry point is to focus on
the final user: tenants.
They complain about too
much paperwork and
subscriptions when
moving in.
Diagnose
What already exists to solve the problem?
-
57
● Urban Campus: designs and operates “people centric
campuses”; flexible paperwork-free all-inclusive places to
live, animated around a community.
● Amazon partnered with Lennar property developer: all
new Lennar homes will include built-in Wi-Fi, smart locks,
doorbells, thermostats and lights — all controlled by Alexa,
Amazon’s assistant.
● MINI Living Urban Cabins: temporary homes designed to
feel at home wherever you are or wherever you come from
New models to address
tenants’ needs
Anticipate end-user’s needs
before building
● Habx: allows people to choose and personalize their future
apartment before buying it. Property developers will build and
design flats according to future buyers needs.
● Airbnb Backyard: Airbnb moved on clients adjacent needs
by designing and building modular houses, using consumers
insights to create houses dedicated to sharing.
● Nudge: 130 apartments by the end of 2019, a building based
on inhabitants needs, designed to maximize relationship and
sustainable behaviors
Monitor
Credits: pictures from UrbanCampus, Mini, Habx, Airbnb, Nudge and Lennar websites
Potential entry point for a disruptor in the construction industry
-
58
As fossil resources grow
rarer, finding green
alternative to building is
necessary to anticipate
future business. Around
50% of non-renewable
resources consumed are
used in construction.*
*Willmott Dixon study - The Impacts of Construction and the Built Environment
Diagnose
What already exists to solve the problem?
-
59
New services to optimize energy management
Savings come from:
1. Energy efficiency (adjust setpoints in anticipation of changing conditions to
reduce kWh)
2. Peak shaving (reduce contracted capacity)
3. Grid services (demand-response)
4. Real-time price arbitrage (buy cheaper kWh)
In addition to addressing consumers directly, BeeBryte is also partnering with
utilities companies to help them reduce wholesale electricity purchase costs by
controlling their customers' flexibility.
"By leveraging cloud-based AI, IoT and patented optimization algorithms,
BeeBryte provides automated control of electric equipment in infrastructure to
reduce carbon footprint and deliver up to 40% utility bill savings, without changing
process or affecting users’ comfort."
Frédéric Crampé, CEO of BeeBryte
Sells electricity at discounted
rates
Sells electricity on.off peak rates
-15 to 40% SAVINGS
Buy electricity on spot
market
Monitor
Credits: pictures from BeeBryte website
What already exists to solve the problem?
-
60
Woodoo: launched in 2012, developed an augmented
translucid wood that won 17 worldwide prizes.
● 2x less energy-consuming than concrete, 30x less than
steel
● Could be used in construction, luxe and automotive
industries
Self-Healing concrete: developed by Ghent University, could
largely improve building durability and sustainability
Energy-efficient materialsSee construction as a virtuous circle
Building As Materials Bank: circular building industry, buildings
function as banks of materials that can be easily taken apart and
reused. Materials would be rented during the life of the building and
then reused for others projects. Major changes needed:
● Materials passeport (tracking)
● Reversible building design (easy deconstruction)
● Circular building assessment (BIM management platform)
Net-zero Energy Building: energy-efficient buildings that produce
more green energy than consumed. HVAC systems, lighting, wall &
roof for commercial and residential buildings are designed to reduce
energy waste and maximize production.
Monitor
Credits: pictures from BAMB and Woodoo websites
Thank you!

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Emerging Trend #4 | Disruption

  • 2. 1 What you need to know about disruption What impacts for established players? Some weak signals within the construction industry
  • 3. What you need to know about disruption
  • 4. Disruption today: a buzzword - 3 Newspapers tell stories of "disruptive presidents", of startups that "aim to disrupt the shower sector" or others that want to "disrupt unemployment". The term is so omnipresent that it becomes hard to grasp its true meaning. Along with disruption, a brand new lexicon has appeared: “uberisation”, “disintermediation”, “commoditization”, etc. The word "disruption" and its derivatives are everywhere.
  • 5. The fear of being disrupted affects all industries. The common saying about disruption is that “it is only a matter of time before your industry will be attacked: no one will be spared.” C-levels try to keep up with the frantic pace of innovation as they are all afraid to witness a quick and brutal fall of their existing activities. Uber and Airbnb are two great examples of major shifts of value that can occur in only a few years, and no established firm wants to be the next Kodak. One priority for incumbents : fight back against this “new form of barbary” and change the perception of them as dinosaurs sitting there, waiting for a comet to hit. 4 Disruption is generally perceived as an unpredictable, rapid and brutal phenomenon. Disruption today: industry leaders are all afraid of it - In 2015, the French accelerator The Family launched a conference cycle called “Barbarians are attacking!”. Like during the “Barbarian Invasions” of the 5th century, the very survival of the dominant players is threatened by unknown newcomers that do not play by the established rules.
  • 6. The destabilization of established firms has become permanent. Main reasons are globalization, the frantic pace of technological progress and the fact that it’s now touching all activities. Established business rules are now changing all the time: today's disruptors may be tomorrow's disrupted. 5 The risk of disruption is accelerating. As a result, disruption is not a fad nor a trend, but a new permanent risk - Lifespans of S&P500 firms continue to shrink
  • 8. The genesis of the word - The word “disruption” has made part of the French dictionary since the end of the 19th century. It means “break” or “fracture”. 7 The Cambridge Dictionary business definition conveys the idea of completely changing the way things are done.
  • 9. The creation of a concept - According to Jean-Marie Dru, the disruption methodology has three parts: 8 “Disruption is a dynamic methodology focused on creation” Jean-Marie Dru, co-founder and chairman since 2008 of TBWA. Identify cultural conventions around a brand on a specific market. Find a disruptive strategy to challenge existing conventions. Define a new vision. “We have to draw a fine line between what should be changed and what should not be changed. And this is what Disruption, as a methodology, is all about.” The purpose of this methodology is to free the brand from existing conventions on the market and to help it grow by building a new and engaging vision. Successful disruptions do not simply give an additional market share, but rather an additional market share on tomorrow’s market. Credits: Icons created by Johannes Hirsekorn, Gregor Cresnar and fauzan akbar from Noun Project
  • 10. Clayton Christensen put under the spotlight the word ‘disruption’ with a new definition - 9 “Disruptive innovation describes a process by which a product or a service takes root initially in simple application at the bottom of a market and then moves up market, eventually displacing established competitors.”
  • 11. Christensen’s disruption theory highlights a very specific situation - Incumbents focus on their most profitable and demanding customers and pay less attention to less-demanding customers. The disruptor seizes the opportunity to provide those low-end customers with a “good enough” product. For new-markets, disruptors create the demand and turn non-customers into customers. 10 In Christensen’s disruption theory, disruptive innovations always originate in low-end or new-markets areas. Mini-mills disrupted the steel industry From the 1970s to the 1990s, innovative mini-mills overtook much bigger steel companies. Starting by doing rebar at lower cost, they progressively moved up the value chain to more profitable segments, each time with larger incumbents pulling out to concentrate on their most valuable business lines. Credits: Icon created by Vectors Market from Noun Project
  • 12. Don’t be trapped by the ‘Disruption Dogma’ - Leaders are obsessed with the question : Is it disruptive innovation or merely a sustaining one? They should ask themselves “Are we thinking big enough ?” If we stuck to Clayton Christensen's strict definition, companies like Tesla or Uber would not be considered as “disruptive”. However, their value propositions and businesses have indisputably shaken up consumer habits and established markets. The rapid pace of technological innovation alongside with globalisation makes it really hard to keep set-in-stone rules to define disruption. The nature of the phenomenon is constantly changing over time. 11 When following a too restrictive academic concept leads to strategic mistakes When the first iPhone was released in 2007, Clayton Christensen argued that, according to its disruption theory, the iPhone was “a sustaining technology relative to Nokia” and “the probability of success [would] be limited”.
  • 13. What to remember from the disruption concept? - 12 A game-changing perturbation Disruption is a process by which a product, service or solution changes the rules in an already established market. In the end, the traditional value chain that is vital to an incumbent firm is cut, re- engineered or made obsolete.
  • 14. A “new” word in the wake of an old phenomenon - The disruption concept is somehow based on the substitution of one economic model by another. In history, countless phases of “disruptions” can be identified: agricultural revolutions of the 17th and 18th centuries or the industrial revolution in the 19th century. Every time, the starting point is a better answer to people's needs. 13 In the beginning of the 20th century, Schumpeter invented the concept of “creative destruction” explaining why some innovations such as the wheel or Gutenberg’s printing press were the triggers of more profound economic changes. These innovations are the visible outcomes of long-term and elusive mutations. At the 1968 Mexico City Olympics, Dick Fosbury changed the sport of high jump forever. He defied conventions by going over the bar backwards and set a new Olympic record. Fosbury already used this technique in 1963 and other athletes were experiencing it at the same time, but for most people there was only the Mexico jump.
  • 16. Disruptors very often tackle major issues - 15 Major issues require out-of-the-box answers For customers, one big problem is to get rid of waiting time at supermarket checkout No waiting line anymore in Amazon Go supermarkets Disruptor’s answer “Monkey first” mindest Credits: Photos from Le Parisien and The Verge
  • 17. 16 All disruptions start with customers: they answer the question of how to better meet their needs whether it is jobs they want to fulfill or frustrations they want to get rid of. Disruptors mainly adopt a “jobs-to-be-done” approach - Christensen’s Milkshake example Clayton Christensen gave the example of a fast food chain interested in improving the quality of their milkshakes and boost morning sales. They discovered that people were buying milkshakes during their morning commute to get a tidy and copious breakfast. As a result, milkshakes can easily be replaced by any other easily eatable breakfast foods like bagels or bananas. Jobs-to-be-done can combine different attributes Functional Social Emotional “I need to commute from home to work in the fastest possible way ” “I want to connect with my relatives during this trip” “I want to feel safe and different from other people during this trip” Credits: Icon made by Norbert Kucsera from Noun Project
  • 18. 17 Signs of disruption can be measured Companies facing disruption generally have more time to fight back than they think… - Debunking the myth of the comet hitting the dinosaur Disruption is not a straight line An idea is not worth much, execution is the key to disruption It took more than a decade for Amazon to meaningfully disrupt physical bookshops, and more generally, traditional retail Dozens of websites before Airbnb tried to monetize the same idea. For Airbnb itself, it took more than 2 years to get real business traction Since 2010, SpaceX gradually won commercial deals to launch satellites. 7 years later, the firm became leader both in terms of tonnage shipped and number of launches. Credits: Icons made by iconcheese, Nithinan Tath and Gregor Cresnar from Noun Project
  • 19. 18 … and they can use a whole range of different strategies - Ongoing disruption does not have to be taken for granted Between 2009 and 2015, the number of independent booksellers in the US surprisingly increased by 35 percent. Harvard Professor Ryan Raffaelli puts forward 3 main reasons : - Strong connection with local community - Focus on curation to provide a more personal customer experience - Turning into convening intellectual centers and host reading groups, book signings, game nights or children’s story times In order to withstand Airbnb, AccorHotels group has pursued a very proactive innovation and digital strategy : - Multiple acquisitions focus on the luxury segment : Onefinestay, Travel Keys, Travelchic, Mövenpick Hotels & Resorts … - Launch of new innovative concepts : Flying Nest, a mobile, adaptable and sustainable livable containers, or Joe&Joe, the new chain for young travelers Arianespace is resisting well on the geostationary orbit satellites segment (36.000km), the best orbit for large telecom satellites. Ariane 5 launched eight satellites into this orbit in 2018, as many as SpaceX. If we look at the total mass of satellites placed in this geostationary orbit: 42.4 tonnes for SpaceX, compared to 36.9 tonnes for Arianespace, only a short advance for the US firm. Credits: Photos from énékia and CNES
  • 20. 19 Well-known “disruptors” are often just the tip of the iceberg - Very often, so-called “disruptors” are only the spearhead of a broader and deeper ongoing revolution. “The impact that Tesla will have is fairly small in and of itself. It will change people’s perception perhaps, but it will not in and of itself change the world. But if large numbers of people are choosing to buy the Model 3, […] then that’s what will prompt car companies to invest real money into electric vehicle programs of their own, and indirectly, by spurring competition, Tesla can be the catalyst for a multi-order of magnitude shift of the entire industry towards electric.” Elon Musk, Tesla founder and CEO Winner or not of the electric car race, Tesla has already changed the future of car and made firms within an entire ecosystem substantially reconsider the way they were doing business. Credits: Icon made by Freepik from www.flaticon.com
  • 22. Let’s start with a few practical examples!
  • 23. 22
  • 24. 23 Tesla: a pragmatic mission - Context: Our driving style has not changed in a century. We have kept an oil engine and it is only in the 2010’s that the first hybrid engines appeared. The automotive industry is being singled out as responsible for a large part of the environmental damage and for the depletion of fossil energy resources. Tesla is able to bring on board a whole network of actors thanks to its vision: Share of their vision through multiple communication channels to maximize reach and create high expectations Tesla turns customers into believers, which allows reduction of marketing expenses. It also enables smart crowdfunding strategy to fund the first car productions. Tesla invests in its long-term vision rather than immediate margin. Investors are confident, they value the company as a technological one rather than an automaker. This vision attracts the best employees willing to work hard to change the world. Tesla first targets rich and early adopter population and proves that electric vehicles can be both powerful and sexy. “Tesla’s mission is to accelerate the world’s transition to sustainable energy”. Tesla Mission Statement With such an ambitious vision, Tesla clearly demonstrates that they are not only attacking the automotive market but also the energy market as a whole. Credits: Icons made by Loïc Poivet, Oksana Latysheva, Arafat Uddin, Wilson Joseph and Maxim Basinski from Noun Project
  • 25. 24 Tesla’s responses to customers’ needs - Tesla activates four different levers to create a better value proposition. Indeed, Elon Musk’s company identified many pain points that prevented people to switch for an electric car. Quality Price Access Simplicity Almost no electric car offer is appealing or well-designed Cars are an asset that depreciate over time. Having a petrol car is expensive in terms of maintenance and fuel. No efficient infrastructure to reload electric cars. Too many different touch points for the users: brand, insurance, garage, etc.User Pain Points Tesla’s solutions Tesla’s Model S performance gets close to petrol ones (540km of battery life, 2.3 seconds for 0-100km/h). Tesla cars get an operating system that update and improve their features and experience over time. Charging a Tesla is much cheaper than filling a tank. The firm allows users to create their own electric energy (with Solar Roof and domestic batteries). Tesla builds its own Supercharger network to allow customers to easily reload their car wherever they are. From car sales to car insurance and maintenance, Tesla integrates the entire customer experience.
  • 26. A better user experience Key takeaways from the Tesla case - 25 Vertical integration Capture new value through investments across the value chain and deliver a better value proposition. Invest in assets that are highly specialized. E.g. Tesla’s Gigafactory will be the largest factory in the world to ensure battery supply. Lower costs. E.g. Production’s integration has allowed to reduce costs and sale a mass market electric car for $35,000 (Model 3). Ensure quality. E.g. Tesla has control over its entire production and can craft the best components. Gain efficiency. E.g. Integration has enabled Tesla to accelerate information sharing and learning cycles. To better serve customers, an actor can deliver best services to ensure a more user-centric experience. Strengthen your customer access path. E.g. Tesla has a direct sales model through its website and dedicated stores. It replaced the old car dealership system. Desintermediation of other actors in the value chain. E.g. Tesla integrated maintenance and insurance to foster trust with its customers. While a classic car only deteriorates after leaving the factory, Tesla cars can be updated thanks to their OS. Create new assets to make products more convenient for customers. E.g. Tesla built its own Supercharger network instead of waiting for another player to do it.
  • 27. 26
  • 28. Airbnb’s beginnings tell us a lot about disruption - 27 In late 2007, Airbnb founders Brian Chesky and Joe Gebbia just moved to San Francisco. The two roommates were unemployed and struggled to pay their rent. They noticed that all hotel rooms were booked owing to a big design conference held in town. Travelers had hard time finding a place to stay in a saturated hotel market. In order to “make a few bucks” they had the idea to buy three air mattress and turn their own flat into a “AirBed&Breakfast”. A few months after, the startup launched the same service again for SXSW and only received 2 bookings. Broke and in debt, they launched the website again for the Democratic Convention in Denver. To attract customers they designed and sold limited edition of cereal boxes depicting Obama and McCain. They earned $30,000 thanks to this original marketing strategy and integrated Y Combinator in 2009 where they first got real traction for their Airbnb service. San Francisco is one of the most expensive american city to live in. Housing there is very expensive (poor user experience). The housing offer is not big enough to absorb exceptional demand in SF (market inefficiencies). Disruptors address a user need that is not met. A disruption is not a straight line and won’t happen without foreshadowing. Even after joining Y Combinator in 2009, Airbnb got rejected by numerous investors. Leveraging excess capacities to answer an existing pain point.
  • 29. 28 Focusing on delivering an amazing user experience for all members of the Airbnb community - Airbnb also activates these four levers in order to provide a convincing answer to multiple issues within the hospitality and tourism sectors. Quality Price Access Simplicity Hotels lacks authenticity for leisure travelers. Brand-name hotels are near business centers where locals work, but rarely sleep or wander around. Housing offer is expensive, especially in crowded cities and for some customer segments like families. Pressure on housing offers (demand>offer) Difficult to compare offers. Second homes stay empty most of the time (unexploited asset). Poor UX from travel agencies and hotel chains Fragmented value chain and multiple intermediaries to organise a trip. User Pain Points Airbnb’s solutions Airbnb allows travelers to live as locals do. Personalised, original and secure experiences for specific users : Experiences, Plus, Beyond, Airbnb for Work.. Increase of trust with SuperGuest and SuperHost program. Airbnb offers cheap prices in comparison to an hotel. Airbnb supports local dweller’ income. Commissions are low for small listed hotels (3% Vs 20% on booking.com). Airbnb made it possible to find a cheap accomodation anywhere in the world. With 4.5m listings it’s more than the 5 top hotel brands combined. Superior UX : book an end-to- end trip in a few clicks Possible to organise all your trip in one single platform : housing, experiences, restaurants … Home insurance included for hosts Airbnb helps hosts to build their own ad.
  • 30. Who is Airbnb really disrupting ? - 29 Airbnb is valuated at $31 billion and profitable since 2016. The firm generated $100 million profit and $2.6 billion revenue in 2017. Airbnb expects to reach 500 million completed bookings by the end of Q1 2019. Undeniably, the company has captured value on the market. Why traditional hotel chains continue to thrive ? → Supply of hotel rooms is still low whereas international mobility is booming (situation is very variable from one city to another). → Airbnb and hotels seem to serve different markets : casual leisure travel and families Vs regular business travelers. → Hotels are concentrated into urban areas whereas Airbnb’s offer is more scattered among suburbs, so the spatial distribution is different. → Traditional players are quickly adapting their model and diversifying their activities. Airbnb is less competing with hotels for travelers than with locals for space. “Airbnb has shifted the burden of rising prices in crowded downtown areas from travelers to residents—pushing down prices for hotel rooms, while raising rents for city dwellers”. Derek Thompson The Atlantic Numerous countries and cities took strict measures to crack down on Airbnb’s side effects : number of rental days capped, obligation to register with public authorities, pay a tourist licence… Airbnb is not a real substitute for staying in a hotel, it’s more complementary. The disruption is as much for the industry than for the society itself.
  • 31. Main takeaways from the Airbnb case - 30 Incumbents have a large panel of responses to fight back Airbnb Leveraging direct access to final user to move on adjacent needs E.g: Airbnb Experience, Airbnb Backyard Build and sell directly your own products instead of just aggregating the offer E.g: Airbnb will now start designing and building modular homes through Airbnb Backyard. Classic Christensen disruption example from a low-end market Airbnb, a new player that was off-the- radar, democratised a cheaper housing alternative. The firm is now moving up the value chain (Plus, Beyond). Disruptors’ value proposition is rarely perfectly substitutable Despite Airbnb’s success, hotel chains are going well. Airbnb solved some problems but tend to create new ones in cities. E.g: Pressure on long-term rent - Play on the same ground : Incumbents like Accor launched their own marketplace (failure). - Differentiate: Accor is repositioning on Luxury and Business travelers (acquisition of Onefinestay, Travel Keys and Mövenpick Hotels & Resorts). - Pressure authorities to get Airbnb on equal footing as hotels in terms of taxation and property laws. - Build an ecosystem of partners: Marriott launched its Travel Experience Incubator in 2017. In the same way, Tesla accelerated the switch to electric vehicles, Airbnb profoundly shook up the hospitality and travel business. In the end, Airbnb only operated a partial disruption.
  • 33. The Boring Company case - Because of high labor costs, digging a tunnel in the United States is extremely expensive, which makes the construction of infrastructure such as subways or highways very expensive. E.g. Each mile added to the new subway line in New York has cost an outstanding $2.73 billion. 32 User pain points - Alleviate traffic congestion. - Existing transport infrastructures enhance noise and visual pollutions. Technological substitution Unlock new market-defining features thanks to technological innovation. E.g. By making tunnels, The Boring Company aims to bring infrastructure capabilities back to the US. Spark a revolution that is likely to redefine many sectors. E.g. The Boring Company tunnels will only transport electric vehicles, and of course mainly Teslas. Such a technology will also serve Hyperloop projects, easing freight and transportation A high-end market disruption to make technology more affordable. E.g. Musk’s company is attacking a major issue and is progressively designing a much cheaper solution, as Tesla did for electric batteries. Answer to solve these pain points Elon Musk’s vision is to figure out how to reduce the bloated cost of digging a tunnel in the US. The Boring Company aims to reduce tunnel construction costs, and then, connect with the entire Tesla ecosystem. This is the exact type of market inefficiency that investors and hedge fund operators look for.
  • 34. User pain points High costs and long time construction due to a fragmented supply chain. Answer to solve these pain points? Katerra has the ambition to modernize the multi-trillion dollar global construction industry. Its mission is to optimize every aspect of building design, materials supply, and construction. Vertical integration From designing to assembling and interior decoration, the company integrates all processes to provide faster, cheaper, standardized but customizable buildings: - Buildings are made of modular components manufactured in Katerra factories, the company employs its own architects and designers. - All is linked with a digital platform that allows the establishment of Building Information Modeling (BIM). The BIM helps to plan and trigger the manufacture of all elements, as well as the monitoring of the entire value chain by the project team. The Katerra case - 33 Katerra was founded in 2015, and has raised $1.1 billion USD in venture capital investments of which $835 million USD from Softbank. Credits: Photos from katerra.com
  • 35. The Arculus GmgH case - 34 User pain points In the era of mass customisation, production lines are not appropriate since they rely on the old industrial model that promotes standardization. Creating a customized product takes more time and costs a lot. Answer to solve these pain points Arculus was founded with the mission to make production systems more efficient and flexible in all industries, implementing the most innovative solutions. For the last 100 years, industry has followed Henry Ford's production line system, building and optimising around it. New processes Starting in AUDI factories, the arculus independent stations ease workers in their daily tasks and increase their productivity. Modular assembly lines allow cars to be carried to different stations by self-driving robots rather than a linear conveyor belt. Such assembly methods can increased productivity up to 30% and reduce error by 20%, with workers working at their own pace. Credits: Photos from arculus.de
  • 36. The G7 case : How to fight back against Uber ? - A 6-acts response #1 Go back to your customer: new offers (airports, young, shared), effort to propose cheaper fares. #2 New talents at the management board: focus on IT, customer experience and new technologies. #4 Remobilize drivers and engage training programs: trainings on quality and service, special focus on badly-evaluated drivers. #5 Repositioning (premiumisation & hybrid vehicles): costumes, new black cars, new rules for drivers, rebranding (from Taxi G7 to G7), “green mobility”. #6 Digitalization: new app for booking and payment (G7 Connect) revamped IT, revamped embarked connectivity tools. Disruption is not a linear process. Uber was launched in 2011 in France and progressively attacked G7 core activity : G7 sales started to plummet in 2014 and net income has been halved between 2014 and 2016. In 2018, G7 results were on the same levels than the ones “before Uber”. 35 Credits: Photos from Powertrafic, Capital and g7.fr
  • 37. How to deal with disruption?
  • 38. Dealing with disruption: a three-step approach - 37 I II III What are my clients’ jobs-to-be done ? What are my clients’ pain points ? What are the main inefficiencies on my market or value chain ? Find breaches a potential disruptor can take advantage of. Who are the players trying to deal with these inefficiencies ? How efficient are they ? What innovations and new technologies could be leveraged to tackle these inefficiencies? Who are the ones whose skills and strengths could facilitate their entry on my value chain ? Understand new competitive environment and alternative models. Spot the Innovator's Dilemma. What kind of assets could we leverage to increase our value proposition ? Where do we want to position our activities tomorrow ? Define an ambitious action plan to fight back. Diagnose Monitor Respond
  • 39. How to deliver a better value proposition ? 38 Price Access SimplicityQuality Lots of different elements can enhance the quality of a product or service : personalization, image & ethic, choice possibility, level of service … Customer experience is impacted by … More convenient, more practical, more intuitive and pleasant to use. The new product or service is more visible, easier to access for a wider audience. Four different levers to activate The new product is more affordable than existing offer. Diagnose Credits: Icon made by priyanka from Noun Project
  • 40. 39 INFORMATION ASYMMETRIES Information intensive industries where participants don’t have equal access to information are the most likely to see disruption. NON-SCALABLE GATEKEEPERS Industries where gatekeepers rely on a non-scalable model (human, paperwork, low automation) are the most likely to see disruption. INTERMEDIATED & FRAGMENTED VALUE CHAIN Highly fragmented industries and industries with lots of intermediaries are the most likely to see disruption. UNEXPLOITED VALUE Industries with dormant economic actors or under- exploited excess capacities are ripe for disruption. INEFFICIENT OR NON- EXISTING CONNECTIONS These market inefficiencies are synonymous with either non-existent connexions that could be established, or with inefficient connexions that could be optimized (too long, too expensive, not precise enough). Identify the possible frictions on your activities - IMAGE DEFICIT Activities with questionable ethics or with a strong impact on the environment. Image deficit can also be link to an old fashioned value proposition, marketing or brand image. LOW DIFFERENTIATION Similar value proposition from the main existing players: possibly fickle clients. Diagnose Credits: Icons made by Arthur Shlain, Danishicon, Creative Stall, Dewi Imaniyah from Noun Project
  • 41. Four different natures of disruption - Disruptors very often combine several natures if not all of them Technology Business model UX & Design Processes AI VR / AR New materials 5G ... Platform model Freemium Asset light models Pay for use ... Simplicity Transparence Services Emotions ... Integration Agility at scale Modular methodologies ... 40 Monitor Credits: Icons made by Aiden Icons, Tomas Knopp, Smalllike and Gyorgy Hunor-Arpad from Noun Project
  • 42. Managing the “Innovator’s dilemma” - 41 Theorized by Clayton Christensen, the Innovator’s dilemma explains that incumbents and successful companies must make a choice between developing a new market, which jeopardizes its present market; and protecting its existing market, which prevents it from innovating. Incumbents can lose their market leadership in two different ways: While incumbents are well established in their market, they mainly focus on what customers have, give them the product performance they are looking for, but in the end, are hurt by the very technologies their customers led them to ignore. Many incumbents often adopt these new trends but do not modify their products accordingly... until it is too late. This S-curve graph shows why incumbents can take the risk to pivot their business and leverage on new technologies. This means: ● Betting that these new trends will be more adapted to the needs of customers ● Investing in it ● Cannibalizing its core business to prevent possible cannibalization from a new player who would leverage this technology “If I had asked people what they wanted, they would have said faster horses.” Henry Ford Monitor Credits: Graph from medium.com
  • 43. The Kodak case study - ● 1976: Kodak accounted for 90% of film sales and 85% of camera sales in the US. The same year, Kodak invented the very first digital camera. ● In the early 1980s, a study commissioned by Kodak’s experts insist on the fact that the digital photography would lead to many changes and developments in their future strategy. ● 1996: Kodak had still a $28 billion market cap and close to 140,000 employees. Kodak concentrated its efforts to film sales and never decided to produce digital cameras. ● 2012: Kodak was forced to file for bankruptcy. While the management of Kodak was a pioneer in the development of technological cornerstones and was also equipped with accurate market analysis, it made the choice to use it for quality improvements of film as they were so deeply involved in the photo film. Unfortunately, it was the wrong choice... 42 Monitor
  • 44. Adopt a new look on your business & redefine your playground There is no market anymore, only customers. Access path Alternatives Adjacent needs Different possible moves to strengthen your value proposition Adopting a clients oriented mindset Putting yourself from the customer's point of view and not from the product's one allows you to shed a new light on your business and offers unexpected opportunities for diversification. Strengthen your customer access path to secure your connexion with the customer and avoid reintermediation. Consider alternatives to your customers jobs-to-done to expand your competitive environment and prevent substitutions. Pay attention to your users’ adjacent needs to enhance your customer experience and protect yourself from intrusions of new players on your value chain. 1 2 3 43 1 2 3 Respond Credits: Icon made by priyanka from Noun Project
  • 45. Some weak signals within the construction industry
  • 46. Potential entry point for a disruptor in the highway industry - 45 One of the major pain points in this industry is congestion. For end-users, travelers & road freight, it’s unacceptable to pay and be stuck in traffic jam. It’s a waste of time and money. Diagnose
  • 47. Sanef connected roads Cameras and bluetooth sensors on road to measure travel time. If there is congestion, speed limit can be adapted and updated on existing signboards What already exists to solve the problem? - 46 Sense by Google Sensors provide data to know in real time where each thing is. Mapping and analysis to improve traffic, space use... Ground Traffic Control System by Google Optimization in real-time of each traffic sign to reduce congestion and increase safety, organize traffic and pricing Sensors Connected traffic signs Flowell (2017) LED pavement to provide dynamic road markings and modulate the uses of the roadway. Roads distribution can change, new parking spots can be created... Monitor Credits: Icons made by Tomasz Pastemak and Arafat Uddin from Noun Project
  • 48. What already exists to solve the problem? - 47 Amazon patented a road network controlling self-driving cars and trucks. What is it? ● A technology allowing to move an autonomous car from one way to another according to traffic and destination A patent that would largely contribute to its monopolistic position: ● Vehicles would have to integrate Amazon technology (royalties) ● Tolls would be managed by Amazon ● Data on traffic & real time analysis ● The whole system will contribute to reduce congestion and delivery time Monitor Credits: pictures from Amazon patent
  • 49. Potential entry point for a disruptor in the highway industry - 48 In a world where space is a limited resource, there will be 25M km of new roads in 2050. But roads are only used to drive vehicles, it might be an unexploited value. Diagnose
  • 50. What already exists to solve the problem? - 49 Power Road, developed by Eurovia, integrates a heat exchanger in the roadway. It allows roads to capture and store sun’s heat energy. This energy can then be distributed to nearby infrastructures. 25m2 of Power Road allows to capture the equivalent of the heating needs of a 70-m2 housing unit over a year” “ Monitor Credits: pictures from Eurovia website
  • 51. Potential entry point for a disruptor in the highway industry - 50 Today, great UX is a prerequisite. Rest areas aren’t optimized to match with end-users needs & new uses. Diagnose Credits: pictures from Le Courrier PIcard - McDo et Starbucks vont investir l’aire de Ressons-Est sur l’autoroute A1
  • 52. What already exists to solve the problem? - 51 Sombox A nap box installed in le Mans rest area allows drivers to take a nap into a comfy and quiet designed space. Limours-Janvry rest areas A designed space with city-like food court, local groceries and an app, Ulys, allowing drivers to stop in rest areas that matches their needs New services and designs in rest areas VINCI Autoroutes connected rest areas Sensors to get data on parking spots, water & energy consumption, amount of trashs… and optimization Monitor Credits: pictures from Sombox , VInci Autoroutes website
  • 53. Potential entry point for a disruptor in the construction industry - 52 One major pain point for client in this industry is price & timing. Property developers often experience extra costs and delays all along the project. Diagnose
  • 54. Factory OS: From designing to building and assembling, the company integrates all processes to provide faster & cheaper buildings. Buildings components are made in factory and assembled on-site, fundations are directly made on-site. Partnership with Google. What already exists to solve the problem? - 53 Modular construction 3D printed construction Apis Cor: 3D printing machine allowing to build on-site a house in 24 hours ($10 000). The robot can easily be transported in a truck and can be set in 30 min. Polar 3D printer extrudes concrete on a 132m² printing surface. New building models exist to reduce prices and delays Low-end market penetration: As in Christensen’s theory, these two companies plan to spread on the global construction market but decided to begin with building houses. They answered individual clients who needed cheaper and faster housing construction. Monitor
  • 55. Bone Structure: steel modular structure assembled on-site to build net-zero homes. This model allows to build on challenging sites and is focused on green housing. What already exists to solve the problem? - 54 KamerMaker: a 3D Printer that can be moved anywhere, can print temporary house using waste and biodegradable materials. It aims to build “on-demand architectures that responds to local needs”. The firm can provide assistance with rebuilding homes or recovering from natural disasters Monitor New building models exist to reduce prices and delays Modular construction 3D printed construction Credits: pictures from BoneStructure and KamerMaker websites
  • 56. Reconstruct: use visual data to measure progress, improve productivity and reduce risk ● SaaS ● More collaboration and better management to improve timing and pricing reliability What already exists to solve the problem? - 55 BIM software AR/VR collaboration IrisVR: upload 3D models or panoramas, launch app on smartphone or desktop and put mobile or desktop CR device ● Easy to integrate ● SaaS ● More collaboration to optimize timing reliability New softwares to improve efficiency Monitor Credits: pictures from Reconstruct and IRIS VR websites
  • 57. Potential entry point for a disruptor in the construction industry - 56 A key to find potential entry point is to focus on the final user: tenants. They complain about too much paperwork and subscriptions when moving in. Diagnose
  • 58. What already exists to solve the problem? - 57 ● Urban Campus: designs and operates “people centric campuses”; flexible paperwork-free all-inclusive places to live, animated around a community. ● Amazon partnered with Lennar property developer: all new Lennar homes will include built-in Wi-Fi, smart locks, doorbells, thermostats and lights — all controlled by Alexa, Amazon’s assistant. ● MINI Living Urban Cabins: temporary homes designed to feel at home wherever you are or wherever you come from New models to address tenants’ needs Anticipate end-user’s needs before building ● Habx: allows people to choose and personalize their future apartment before buying it. Property developers will build and design flats according to future buyers needs. ● Airbnb Backyard: Airbnb moved on clients adjacent needs by designing and building modular houses, using consumers insights to create houses dedicated to sharing. ● Nudge: 130 apartments by the end of 2019, a building based on inhabitants needs, designed to maximize relationship and sustainable behaviors Monitor Credits: pictures from UrbanCampus, Mini, Habx, Airbnb, Nudge and Lennar websites
  • 59. Potential entry point for a disruptor in the construction industry - 58 As fossil resources grow rarer, finding green alternative to building is necessary to anticipate future business. Around 50% of non-renewable resources consumed are used in construction.* *Willmott Dixon study - The Impacts of Construction and the Built Environment Diagnose
  • 60. What already exists to solve the problem? - 59 New services to optimize energy management Savings come from: 1. Energy efficiency (adjust setpoints in anticipation of changing conditions to reduce kWh) 2. Peak shaving (reduce contracted capacity) 3. Grid services (demand-response) 4. Real-time price arbitrage (buy cheaper kWh) In addition to addressing consumers directly, BeeBryte is also partnering with utilities companies to help them reduce wholesale electricity purchase costs by controlling their customers' flexibility. "By leveraging cloud-based AI, IoT and patented optimization algorithms, BeeBryte provides automated control of electric equipment in infrastructure to reduce carbon footprint and deliver up to 40% utility bill savings, without changing process or affecting users’ comfort." Frédéric Crampé, CEO of BeeBryte Sells electricity at discounted rates Sells electricity on.off peak rates -15 to 40% SAVINGS Buy electricity on spot market Monitor Credits: pictures from BeeBryte website
  • 61. What already exists to solve the problem? - 60 Woodoo: launched in 2012, developed an augmented translucid wood that won 17 worldwide prizes. ● 2x less energy-consuming than concrete, 30x less than steel ● Could be used in construction, luxe and automotive industries Self-Healing concrete: developed by Ghent University, could largely improve building durability and sustainability Energy-efficient materialsSee construction as a virtuous circle Building As Materials Bank: circular building industry, buildings function as banks of materials that can be easily taken apart and reused. Materials would be rented during the life of the building and then reused for others projects. Major changes needed: ● Materials passeport (tracking) ● Reversible building design (easy deconstruction) ● Circular building assessment (BIM management platform) Net-zero Energy Building: energy-efficient buildings that produce more green energy than consumed. HVAC systems, lighting, wall & roof for commercial and residential buildings are designed to reduce energy waste and maximize production. Monitor Credits: pictures from BAMB and Woodoo websites