Disruptive Innovation: Why Uber Is Not Disruptive But Netflix Is (2024)

FAQs

Disruptive Innovation: Why Uber Is Not Disruptive But Netflix Is? ›

Disruptive innovation theory by Clay Christensen states that every established company will eventually be overtaken by a newcomer. But disruptive technology is often underestimated by larger industry players.

It revolutionized the transportation industry but targeted an existing user base – those already utilizing taxi services. Uber improved upon existing services rather than offering a lower-end alternative that moved upmarket, differentiating its transformative impact from Netflix's disruptive path.

By creating a subscription-based service that allowed customers to rent DVDs without any late fees, Netflix was able to carve out a niche market for itself. Netflix's DVD rental service was a disruptive innovation because it fundamentally changed the way people rented movies.

To prove his point, Christensen uses Uber as an example. He suggests that while Uber is innovative, it's not a disruptive innovation. Instead, it's a sustaining innovation, meaning that Uber represents only an incremental improvement on the existing taxi industry.

In conclusion, Uber Eats has reshaped the food delivery industry with its innovative business model, driven by several key success factors: Convenience: Uber Eats offers unparalleled convenience to consumers, allowing them to order from a diverse range of restaurants with just a few taps on their smartphones.

Meanwhile, industry giants focus on incremental innovation, overcomplicating products and ignoring customers who just want a simple low-cost alternative. Uber, on the other hand, does not fit the criteria for a disruptive business, as it does not create an entirely new market or start with a low-quality product.

Additionally, providing lower cost is what makes Uber's services a disruptive innovation. By aiming to take a large market share from the traditional car service industry and creating a new market of 'on-demand car service', Uber hopes to have a significant impact on today's society.

Classic Christensen theory says Tesla is not disruptive; it's a 'sustaining innovation' because an incumbent could do what Tesla is doing but better, cheaper and quicker and easily overtake the start-up.

Netflix is a prime example of disruptive innovation in the entertainment industry. It revolutionized the way people consume TV shows and movies by introducing the concept of streaming, eliminating the need for physical DVDs or cable subscriptions.

1 By creating compelling original programming, analyzing its user data to serve subscribers better, and above all, letting people consume content in the ways they prefer, Netflix disrupted the television industry and forced cable companies to change the way they do business.

How is Uber considered to be disruptive? ›

Uber redefined the ride-sharing category by introducing innovative features such as cashless payments, upfront pricing, and driver ratings. Dara Khosrowshahi, Uber's current CEO, highlighted the company's impact, stating, “Uber didn't just disrupt the transportation industry; it redefined it.

3. Technological Innovation: Uber is known for its technological innovations, including dynamic pricing (surge pricing) that optimizes fares based on demand, as well as a user-friendly mobile app with features like real-time tracking and seamless payment options. These innovations enhance the overall user experience.

Uber's aggressive tactics served as a catalyst for the taxi industry to mount a defense, eventually compelling Uber's new management led by Dara Khosrowshahi to factor in the multifaceted nature of its operating environment.

Disruption occurs when a small company with comparatively few resources is able to successfully challenge incumbent players. Successful disruptors begin in, low-end market segments or new market segments. (Uber didn't begin in either of these market segments.) Over time, they improve product quality and move upmarket.

Uber offers riders the convenience of an easy-to-use app, safety, and reliable quality. For drivers, it provides flexibility and a range of perks, like immediate payouts, the right to keep 100% of tips, and simple driver requirements.

Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles.

There is no denying that Uber has disrupted an operational model that was hard to crack, and despite all of its problems, it has become a poster child of modern operational innovation.

Disruptive innovation refers to the process of transforming an expensive or highly sophisticated product, offering, or service into one that is simpler, more affordable, and accessible to a broader population.