I think the time has come for us to stop using Uber as the “ultimate” benchmark example for a disruptive business strategy.
Time and time again, both in the classroom teaching Business Acumen skills and in the boardroom facilitating strategic planning sessions, we’ve all developed this belief that Uber has become the go-to example of a company that has designed and executed the blueprint for a disruptive business strategy.
The conversation always follows the same archetype:
“Ok, so here’s the plan…
Let’s become more innovative and let’s disrupt our market by figuring out how to become the ‘Uber’ of our industry/market.”
The implicit implications of that statement include setting and executing a new business strategy that:
- Creates great scale
- Is easy for customers/consumers to buy your product/service on an app
- Breaks the mold like being a transportation company that owns no transportation assets
- Puts the existing market leaders out of business
- Makes big investments in infrastructure and tools
- Won’t be profitable for a significant length of time
But here’s the thing. While I personal love Uber as a company and it has changed my life as a traveler, how can they still be the dream example of disruption if they are still so troubled in terms of making a sustainable profit?
And what’s more worrisome is that things are going to get more competitive and harder for them and other ride share apps as they become more popular around the world. Take the new system at Los Angeles International Airport (LAX). Within the past month, LAX has instituted a completely new system for ride sharing because the traffic flow of ride share cars has made the airport unmanageable. This is the third time they’ve changed the ride share app system in the past three years. In the new system, passengers must get on a shuttle, order their Uber, and then go to a remote lot to meet the driver. The new system adds 20-30 minutes onto the trip. With all due respect, the scene is as mismanaged and chaotic as the airport in Bangalore, India at 2 am every Friday night when many people are leaving for the weekend.
A look at the last five quarters of Uber’s financials are shocking. Income is consistently negative, income growth is negative, and the cumulative earnings before interest, taxes, depreciation, and amortization (EBITDA) is $1 billion despite the fact that revenues are growing and were up 30% in the last quarter.
So, if my suggestion is to stop using Uber as the disruption example that companies admire and use as a blueprint, then who should we use? Are there examples of companies that have disrupted their markets that we can learn from and how are they different from Uber?
Here are five examples including how they are different than Uber:
Company |
Description |
Brilliant Disruption Different than Uber |
Netflix |
Innovator of streaming entertainment |
Expanded from other people’s content to their own content. |
Square |
Innovator of Point of Service payment equipment and services |
Designed and implemented their own world-class hardware and software. |
Peloton |
In-home workout systems complete with personal and group coaches |
Created scalability that makes a profit through subscription model. |
Merck |
Established big Pharma company reinvented itself by focusing R&D on Oncology and other key therapeutic areas |
Makes big bold bets on innovation and is able to make strong profit at launch. |
Oatly |
Innovated crushed oatmeal into a oat milk products |
Innovated in a saturated market and is able to drive demand and profit through branding and marketing. |
When I look at this list, I have 3 take-aways that can be applied to any business trying to innovate and disrupt:
- Continued innovation must continue. In each of these examples the companies continued to spend money and learn from their mistakes with a relentless ability to succeed and make a profit quickly
- They own a significant amount of their supply chain; Netflix now does content (not just distributes other content), Square has the hardware, software, and data to provide a complete solution, Peloton has the equipment and the instructors, Merck spends the most on R&D in the entire industry and has the best R&D talent in the industry, and Oatly created a new category that didn’t exist and is building it with continuous and new innovative products.
- They all have an eye on profits and not promises. Their leaders set reasonable expectations for return and investment and a culture that makes the right decisions to make sure there is future cash flow and shareholder value.
