Disruption

Yesterday I attended a talk on disruption. Like most such exercises I didn’t find the speaker particularly insightful or even well-informed but it did make me start thinking so I guess that’s something.

IMO “disruption” is one of the most overused words floating around today, so trendy it’s probably already jumped the shark (to coin a cliche). I thought I’d share a few thoughts. Not much I heard in the talk for goodness sake.

Disruption is a form of competition. There are any number of forms of competition. There’s competition on price, something most commonly encountered on good or services that are commodities, i.e. one is very much like another, or perceived to be a commodity.

There’s competition on products. The Toyota Camry is competitive with the Honda Accord or the Chevy Malibu. They don’t just compete based on price but also on features and service.

Then there’s competition between companies. Apple has been competing with Microsoft on that basis for decades, one of the best examples being the Mac vs. PC ad campaign of some years ago, and epitomized by the persons of Steve Jobs and Bill Gates. Don’t you want to do business with the hip, creative Mac company rather than the nebbishy boring PC company?

Disruption is competition but it’s competition of a different kind. It’s a challenge to your competitor’s business model. I wonder how many people have noticed that the prime example of disruption all involve artificial scarcity created by decades of regulation? Take ride-sharing services like Uber or Lyft, for example. Ride-sharing services have disrupted the taxi business, which has been heavily regulated since before World War II. The scarcity is artificial because it involves drivers and automobiles. In case you haven’t noticed, there is no scarcity of either.

The third quality, after regulation and artificial scarcity, characterizing disruption is that it must be something that is worth disrupting but not so lucrative and well-organized that the established businesses are able to mount a coherent defense.

That’s why I think that health care, for example, is not a good candidate for disruption at least not in the United State. Providers would squash any upstart like a bug.