Tuesday, March 19, 2019

Cabs vs. Uber: Can Legacy Companies Strike Back At Data-Driven Disrupters?

As a strategy consultant, I've worked with many clients on using data to drive innovation/disruption.

What I have found is that it is very hard for companies to disrupt their own basic underlying business model—they are just too habituated with certain assumptions about business as usual.

However, existing companies are capable of using data to disrupt portions of their operating model, and are willing to do so—especially in the customer-focused parts of their business.  However, this is usually done defensively, after the real disrupter has entered the market.

Thus, in general, existing market participants are capable of enough disruption to survive longer than companies that stick to the status quo, but ultimately they won't be the front-line leaders in the future because it is almost always a new entrant that causes true strategic disruption—someone who can mentally start fresh, with minimal assumptions about business as usual.

For example, Uber disrupted the whole model of the taxi industry, by creating a market place of matching independent drivers and riders.  Uber's model is that they don't have a central dispatching organization, or a large capital investment in taxi medallions or vehicles.

Since then, a taxi company in the Chicago area that I've worked with has competed by using data to disrupt parts of their business.  For example, they now have an app which lets you hail a cab easily, matches a car, sends you the car info, and lets you pay and rate the driver. They also ask if you have TSA Pre-check, and drop you at the closest door. This company, however, could never have disrupted the entire model like Uber did.  They are still dedicated to employing drivers, owning cabs, and having dispatchers.