Technology startups are disruptive because they are driven by a desire to solve an unsolved problem in a unique way and create new value.
Most large and established companies, in contrast, are driven by a desire to defeat competition and protect their market turf.
The accommodation problem
Consider the problem of traveller accommodation. A regular hotel chain would go around studying its competition. It would create a set of features that differentiate it from competition. Finally, it would try to find ways of drawing customers away from competition leveraging these features.
Problem: You are traveling to city X and need to find some accommodation.
The “stuff” approach: Create more stuff. Build more hotels, set up more Bed and Breakfast. If there are fewer rooms than tourists, buy some land, put up a hotel and create more rooms.
The “optimization” approach: There are a lot of hotels out there but travelers do not necessarily have all the information to make the choice they want to. Let’s aggregate this inventory and create a reliable search engine. Let’s build review sites to help make the right decision.
The “platform” approach: How can we redefine travelers’ accommodation? How about enabling anyone with a spare room and mattress to run their own Bed and Breakfast?
The peer-to-peer accommodation companies didn’t compete on features. Instead, they created a platform that allowed anyone with a spare room, apartment or island to start running a Bed and Breakfast with access to a global market of travelers.
Compete with traditional industry without appearing to do so
The peer-to-peer accommodation companies serves as an example of how today’s tech startups compete with traditional industry without appearing to do so, in the first place.
When a peer-to-peer accommodation platform comes in, the established companies tend to dismiss it on the basis of inferior quality. Someone with a mattress in a living room clearly isn’t competing with a motel with room service.
Danish daily Politiken has obtained figures from two of the most popular brokerage services, Airbnb and Homeexchange.com. According to Politiken, these two services will be responsible for 452,000 overnight stays in 2013, equal to eight percent of overnight stays by foreigners at hotels in 2012.
The figures are higher than we expected. This represents a new and exciting way to travel to and visit Denmark. Private rentals have certainly been underestimated until now, said Flemming Bruhn, director of the tourism organisation VisitDenmark, to Politiken.
This is precisely the reason these startups succeed in operating without competition. They solve a problem that larger companies are trying to solve. However, their solution is often not considered credible by these larger companies.
The operational success can be traced to a three-pronged strategy, which forms the basis of competition on most platforms:
Creation of new sources of supply: For the first time, anyone with a spare mattress or room could run their own Bed and Breakfast. No one previously imagined an inventory of travel accommodations composed of urban households with spare rooms.
Creation of new user behaviors on the demand side: Travelers would rarely stay at strangers‘ apartments in a new city. The peer-to-peer accommodation companies brought in a new behavior.
Architecting a strong curation system: To create an environment of trust between travelers and hosts, they invested in a strong curation mechanism. Other platforms may use curation to confer authority or a quality rating.
Corporate business plans and market control are being challenged
Corporate business plans and market control are being challenged by the expansion of the sharing economy and its “collaborative consumption”. Some corporations are ignoring the challenge. Some are fighting it. Some are creatively joining it. All these responses add up to a complex and rapidly evolving economic landscape.
Short URL & title:
The sharing economy – Transform to avoid business disruption — http://www.torbenrick.eu/t/r/syb
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