Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward

Why Uber isn’t Disruptive but Netflix Is

November 17, 2015, 3:46 PM UTC
Uber At $40 Billion Valuation Would Eclipse Twitter And Hertz
The Uber Technologies Inc. logo is displayed on the window of a vehicle after dropping off a passenger at Ronald Reagan National Airport (DCA) in Washington, D.C., U.S., on Wednesday, Nov. 26, 2014. Uber Technologies Inc. investors are betting the five-year-old car-booking app is more valuable than Twitter Inc. and Hertz Global Holdings Inc. Photographer: Andrew Harrer/Bloomberg via Getty Images
Photograph by Andrew Harrer — Bloomberg via Getty Images

Uber is not genuinely disruptive. At least, so says Clayton Christensen, the Harvard Business School professor who coined the term disruptive innovation in his 1997 book, The Innovator’s Dilemma.

In an article for the Harvard Business Review, Christensen corrects the record on what he defines as true innovative disruption, using Uber as an example of where many commentators go wrong, applying the term too broadly.

In order for a business to be disruptive, it must gain a foothold in a low-end market that had been ignored by the incumbent in favor of more profitable customers, Christensen writes. Otherwise, the disruptor must create an entirely new market, turning non-customers into customers. Uber doesn’t fit into either of those boxes: it targets people who already use taxi services, and it doesn’t provide a particularly lower-end or cheap experience.

The second quality of a disruptor where Uber falls short, according to Christensen, is that a truly disruptive business begins with low-quality offerings, then eventually captures the mainstream market by improving quality.

In comparison, the author presents Netflix as a “classically” disruptive model: its initial service wasn’t terribly appealing to Blockbuster’s mainstream customers, who wanted instant gratification when choosing movies. As its quality improved, so did its appeal to Blockbuster’s customers, who eventually peeled off in high enough numbers to force the incumbent business into bankruptcy in 2010.

In some ways, the theory of disruptive innovation has fallen victim to its own popularity, Christensen writes: “Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied.”