Since reading the article, I have been giving this notion a lot of thought. Google, in my opinion, is an example of innovation that was done properly. To say it has been effective is an understatement. Yet, Google was not a disruptive innovation in that, although it changed the way we look for information, it did not disrupt the previous processes of doing it. Disruptive innovation is the application of a technique or a technology that fundamentally disrupts the established processes forcing them to be better.
A new technology can be innovative but not necessarily disruptive as evidenced by Google. Disruptive innovation is the streaming of television across the Internet. The demise of the music albums delivered on media like CD is also disruptive in that it has fundamentally changed the business model of the music industry. Before, you were forced to buy an album for one good song. You paid for music you didn’t particularly like just to get the song you wanted. Now, you just pay for the song you want.
Likewise, the video delivery industry has been disrupted in how they deliver their videos to you. Both of these examples were forced upon the industry by disruptive innovators who did and asked for permission after the fact.
Music and video streamers violated laws and rules bypassing copyright to innovate the way music and video is used today. Youtube, for example, was built entirely by violating copyright law. Today, it is owned by Google and the innovators are rich. One of the unintended consequences of the Youtube generation is that they believe everything on the Internet is free. They have eradicated the notion that intellectual property has value.
We may applaud their innovations and we certainly enjoy the fruits of it today. However, is it fair to ignore the fact that they broke the laws to do it? Many will argue, and certainly, the innovators argue, that doing and asking permission later is the only way towards innovation. It makes me wonder how the people being forced to pay extravagant fines today for copyright infringement feel when they realize that Youtube not only got away with it but also made millions for many people by doing so.
I have been wrestling with this issue for many years and I can tell you from experience that trying to be ethical and follow the rules is many times a fool’s errand. Whenever I look at implementing a new business idea, the arguments about the consequences of it immediately follow the excitement of the idea. In many ways, the doubts about the legalities of it stifles my ideas on innovation.
The latest example of this is Newsies. For many years, I have wanted to incubate and promote citizen journalists because I believe the future of news delivery is in unfiltered and on demand news delivered by everyday individuals reporting the news as it happens. News, fifteen minutes after it happens delivered to you after it has been filtered by corporate and legal interests isn’t news – it is a historical record of a past event.
I have tried different models, from printed newspapers to online news to blogging platforms. Each time I allowed myself to be hampered by the considerations of the legalities and ramifications of the consequences of unfiltered news. I was afraid to put myself out there always conscious of the consequences of lawsuits, scammers and spammers alike. Each time, I attempted to control the delivery through editors and each time I failed. My latest attempt is to remove the editors and allow a chaotic situation still knowing that the scammers and spammers and those intent on damaging innovation will be out there a thousand to the one individual that truly wants to innovate the news.
In Newsies, I am going out further by removing the editor feature but I clearly understand that I haven’t really gone full disruptive because there are still rules in place. Youtube didn’t care about intellectual property and thus it truly disrupted the way we see movies and videos. I just can’t take the Youtube risk and thus I am again stifling my idea of innovation.
The question remains though, is it possible to be innovative and disruptive by following the rules.
Taxies are an example of the disruptive innovation intruding on the business model. Uber has been on the news lately as more communities start to argue over the benefits of unregulated public transportation. As a frequent traveler, I have many stories to share with you about how the taxi industry can be abusive. The signage you see on taxies today in many cities is the result of informing the riders about their rights. These “rights” are normally regulated by local ordinances and are supposed to protect the riders. As with everything, the regulations are the result of complaints about abuses but those doing the abusing found loopholes leading to greater oversight that eventually led to further abuses.
For example, it was the fare box with the timers that was supposed to give the riders some measure of assurance they wouldn’t be abused by the taxi driver. The fare box comes on at the start of the trip and ends when you are delivered to the final destination. It accounts for mileage and time mechanically. As you get in the taxi, the rates are clearly marked. Therefore, everything should be pretty straightforward. Except, that if you weren’t familiar with the city, the driver could take you via the long way to drive up the price of the ride.
As more and more regulations were added, the taxi industry become a cabal in many communities, owned and operated by a selected few who could grease the political wheels. This eliminated competition and closed the industry to newcomers who couldn’t get the coveted “medallion” to operate a taxi franchise.
Today, Uber has entered numerous markets and adds new ones on a regular base. Many hail the disruptive nature of the transportation service as the future of the taxi service. It not only gives riders more accessibility to transportation but it also opens up the door to those trying to become a taxi service via their personal vehicles. On the surface, it is the perfect answer to the dismal taxi services offered in many communities. It also enhances public transportation in many communities.
The problem, though, is that Uber may be disruptive but with disruption, there are unintended consequences. For example, the driver that picks you up may be dangerous to you because the reality is that a for-profit focused company like Uber is focused on profit and not necessarily your safety and security. We have already seen examples of the dangers of Uber by the recent violence perpetuated upon riders. We have also seen examples of abusive pricing by their “surge” pricing model. On the public side of the equation is that local communities regulate local services not only for the safety and security factor but also as a revenue source for their operations.
Bypassing the local licensing requirements may seem like a good thing on the onset but the taxi companies going out of business because they are unable to compete shifts the burden of municipal operations away from outside monies to the local economy forcing taxes to increase for the locals. In other words, the locals pay more in taxes because local operations loose the income generated from the visitors to the city.
Unfortunately, the rising taxes aren’t the only pressure upon the communities as the taxi companies that are unable to compete begin to shut down. This leads to higher unemployment and a diminishing tax base. Established taxi companies may not be the best service possible and in many ways, Uber has forced the companies to innovate but the fact remains that Uber is unfairly competing with the established companies that have had to meet local regulations and pay taxes that Uber is not.
This gives Uber an unfair advantage over the taxi companies.
Local municipalities need to address the solution to the problem without stifling innovation but keeping in mind that the unintended consequences need to be addressed.
It is not an easy issue to address because frankly the innovators lead anything they target out of stagnation making the overall service better for everyone. But at what cost?
Frankly, I do not have a solution to address the problem. I love that innovators make my life easier but I am not blind to the consequences of them. Yes, I understand that innovation has historically forced certain segments of society to either adopt or be taken out of existence. The most obvious example of this is the innovations in farming that is a constant battle in many countries. We enjoy larger chickens at lower prices today because of disruptive innovation. We get fresh vegetables year-round now because of innovation. However, many ranchers and farmers have lost their land because of innovation.
Can there be innovation that is largely fair?
I believe Tesla is an example of disruptive innovation that plays in a level field.
As you know, Tesla has forced the auto industry to adopt electric motors sooner than later. Tesla has proven that electric cars can be sexy. Have you ever wondered why Tesla cars, although sexy, still have the general layout of a traditional car? Think about the fact that electric cars do not need radiators for cooling or exhaust systems to dump the byproduct of combustion into the atmosphere. Yet, the Tesla cars still have a place that could fit a radiator on the front and places where exhaust pipes can be run in the undercarriage. Why hasn’t the design been radical enough to eliminate the traditional look of the vehicle?
The answer lies in that the automotive industry has many national requirements that must be met in order to be allowed on the roads. This is true for most countries. It is very expensive to redesign an entire auto frame, auto body and other components to meet the stringent requirements before they can be sold to everyday consumers. The problem is not only the cost to design and manufacture the part but the time it would take to have it approved by all of the regulatory agencies to allow the car to be sold. To get to market, Tesla needed to use many components that have already been approved for automobiles so that they could get to market faster. Those components are designed for combustion engines.
I realize some will argue, yes but Tesla is backed by the super-rich, not everyone has that benefit. I agree but innovation is innovative because someone took a significant risk to disrupt the market place. As you applaud, as I do, the innovations it is important to remember that many innovations came about because someone took a shortcut, bypassed the rules and forced the world to change. Others, like Tesla are following the rules yet forcing changes in the industry. Unfortunately, for every Tesla there are many more Youtube’s bypassing the rules.
I’m still wondering if I should do and ask for permission after the fact. I guess that is why I’m not an innovator.