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Is Uber an Example of a Disruptive Innovation?

Is Uber disruptive innovation?

Those who know me know Uber is one of my favorite companies (although I question all the fake Lyft requests as a competitive tactic).  I’ve been a customer since they first launched in San Francisco and it has made getting around the city much easier and more convenient (my wife and I have a place in the Inner Sunset and trying to use cabs from this neighborhood pre-Uber was highly unreliable).

I was very excited when Uber launched a few weeks back in my new hometown, Reno.  So excited, I agreed to be interviewed by the local newspaper in support of Uber.

I often hear it said that Uber is “disrupting” the taxi industry.  However, is Uber really an example of Clayton Christensen‘s disruptive innovation?

As I mentioned in my previous post, the theory of disruptive innovation has been under fire recently.  However, much of the controversy seems to stem more from the overuse of the word “disruptive” than from a real problem with Christensen’s original theory.

So, is Uber disruptive (in a Christensen sense)?

When Uber first launched, it was a way to book black cars “on-demand.”  The cost was typically 50% or more higher than a typical taxi (and that also doesn’t account for “surge pricing,” Uber’s practice of charging more for rides when demand is high in order to encourage more drivers to get on the road).

If anything, Uber was a luxury product, made more accessible to the masses.  Limousines and black cars were nothing new (indeed, the black cars were already in San Francisco, you just had to call a service to book one pre-Uber).

In Christensen’s sense, I don’t believe this really classifies Uber as “disruptive innovation.”  Disruptive innovations “disrupt” specifically because incumbents aren’t worried about “inferior” solutions that none of their customers are asking for.

I can’t see how anyone could say Uber was an inferior solution that Taxi customers weren’t asking for.  Sure, perhaps I hadn’t thought of booking a cab from my smartphone before, but I called for cabs all the time (and on the weekends, they never showed up).

Uber cars were nicer cars, the app was a more convenient way to request a ride, and the cost was more expensive.  As I said before, to me Uber was simply making a luxury product more readily available, not disrupting the Taxi industry.

How about UberX, Uber’s less expensive product where anyone with a late model car can act as a driver?  By opening the driver pool to the masses, was Uber “disrupting” the taxi industry?

Again, I have a hard time making this argument when considering disruption in the Christensen sense.

The cars are no longer limos or black cars, but the Uber cars I’ve experienced are consistently newer and in better mechanical condition than the average taxi I ride in.  The drivers are friendlier, speak better English, and know their way around the city well (it should be noted that I’ve met many former taxi drivers driving for Uber).

The app continues to improve.  Now you can enter your destination to get an idea of how much the ride will cost (and so the driver’s GPS is ready to go), you can split the fare with your fellow passengers, you can even use Uber’s new UberPool service to find others that are heading the same direction as you and split the ride with them.

On every measure that I find important, I’ve been happier using Uber compared to taxis.

  • It’s more convenient to book (I can see the car coming and tell my wife exactly when it will arrive).
  • The cars are newer, in better mechanical condition, and safer (seat belts are always available).
  • The drivers are friendlier and either know their way around the city or use a GPS (and ask if you have a preferred route).
  • The billing process is easy and transparent.  After the ride you get an email with your receipt and a map of the route taken.  Conflict resolution is easy, just email them back.
  • Surge pricing works well.  It’s transparent (the app warns you before you book) and there are always cars available, even at very busy times.
  • It’s usually cheaper (if you use UberX, non-surge pricing).

In my opinion, taxis aren’t being disrupted, they’ve simply shot themselves in the foot.

They’ve hidden for years behind government sponsored monopolies (thanks to the regulations and medallion system) and ignored the customer and customer experience.  Now that they finally have real competition, they’re once again trying to hide behind government regulations.

Unfortunately for them, I don’t believe this strategy is going to work.  Uber is not anti-regulation, they simply are looking for more reasonable regulations that are in the best interest of the public.

Taxis aren’t being disrupted, they are being beaten out by a superior product.