Why Uber isn't a Disruptive Innovator (2024)

Disruptive innovation has become a popular buzzword in recent years, and it’s a term that’s often used by people who don’t understand it. True disruptive innovation is a little different than its popular understanding.

TL;DR - Here are the key takeaways:

• Disruptive innovators begin in low-end niches, and move upmarket slowly as quality improves to mainstream standards.
• Mainstream players should not overreact to new entrants downstream, but they should actively monitor their trajectory. (Disruption takes time.)
• Misdiagnosing a new entrant as a disruptive innovator leads to erroneous decisions.

The Details

These days, virtually every buzzy startup is classed as a disruptive innovator. But these characterizations are often a misnomer. Incorrectly classing new competitors as disruptive innovators leads managers to misguided overreactions. Equally, brushing off potential disruptors and focusing solely on profitable upmarket niches can have fatal consequences later on. The key to sustained success lies in accurately defining disruptive innovators and monitoring their competitive trajectory.

So, what is a disruptive innovator? Disruption occurs when a small company with comparatively few resources is able to successfully challenge incumbent players. Successful disruptors begin in, low-end market segments or new market segments. (Uber didn't begin in either of these market segments.)

Over time, they improve product quality and move upmarket. As disruptors improve, they deliver comparable performance to mainstream incumbents, while maintaining the competitive advantages that enabled them to gain an initial foothold in the market. Only when mainstream customers begin to embrace this new offering at scale, has disruptive innovation truly occurred. (Here again, Uber fails to meet the criteria of a disruptive innovator. Any of you who have hailed a cab in NYC will agree with me when I say Uber's service can not be considered an inferior service to that of a taxi.)

Source: Christensen et. al., “What is Disruptive Innovation?”, Harvard Business Review, December 2015.

To continue reading about disruptive innovation, Christensen offered an updated version of his theory in this 2015 Harvard Business Review article, and explained in detail why Uber––potentially the company most commonly referenced as a disruptive innovator––is in fact not a disruptor: What is Disruptive Innovation?