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Jakarta Post

Insight: The disruptive side of disruptive innovation

  • Adwin Wibisono

    The Jakarta Post

Jakarta   /   Thu, March 24, 2016   /  06:37 am

Clayton M. Christensen wrote back in 1995 about disruptive technology, defining it as an innovation that brings new value propositions that had not been available previously; digital media is such a technology.

Chris Anderson later in 2009 showed how digital technology enabled consumers and producers to be independent from the established market structure; for example, musicians can now produce and distribute their music themselves (through digital networks) without having to rely on recording companies (labels) and music stores.

Being disruptive, this technology can thus become a double-edged sword '€” as it liberates consumers and producers from a rigid market structure, it challenges and threatens to disrupt that structure itself. This forces the market to change and adapt; as sales at brick and mortar music stores decline, digital stores thrive and there is a surge in ticket sales for live performances. For a market to absorb a disruptive innovation depends on how it can adapt its current model and its players'€™ ability to cope with such a drastic change.

The emergence of app-based transportation services such as Go-Jek, GrabCar and Uber provide an interesting case study. Go-Jek'€™s disruptive innovation was not only that it enabled connection and communication between consumers (passengers) and service providers (motorcycle taxi drivers), it also provided a centralized delivery service for a wide range of foods and goods (which used to be fragmented as each outlet had its own delivery service).

The obvious beneficiary of this service is of course the consumer, but a much bigger positive impact of Go-Jek was that it enabled the motorcycle taxi driver access to a wider market compared to the local neighborhood in which he usually operates. Thus Go-Jek has a positive impact on all players in the market. Of course there are those who object (even violently) to this service: mainly those drivers of ojek (traditional motorcycle taxis) who cannot adapt to the single most important item in the system '€” the smartphone.

But as time goes by the market would eventually stabilize; those not affiliated with Go-Jek and the like would still have their captive markets (i.e. clientele from their neighborhoods), smartphones would become more affordable and they could either join the system or collect their own clientele outside of it.

GrabTaxi'€™s innovation was that it facilitates consumers in getting a taxi easier. It can show how far the designated cab is from the pick-up location and enables pick-ups away from fixed-line addresses (with the apps one can call and get a cab for a pick-up from the side of a street rather than only from a home or office). Again this technology has a positive effect on the consumer and the service provider.

Uber is different; while providing alternative comfort to the consumer and evident economic benefits for the drivers, it is in head-on competition with the long established taxi companies in Jakarta (and other cities in Indonesia for that matter). The main difference between Uber'€™s situation and Go-Jek and GrabTaxi is the existence of the current transportation regulations.

Go-Jek appeared in a market that was without any existing regulation on two-wheel passenger transportation. With Go-Jek (and others that followed, i.e. GrabBike, BlueJek, etc.) two-wheel passenger transportation and delivery services actually seem more orderly as drivers are uniformed and services and rates are regulated by standardized systems. GrabTaxi enables both passenger and metered taxis to get more out of the service.

From a mere legal point of view, Uber can be seen as breaking the (current) law. The transportation laws and regulations were made to protect people when using public transportation; thus the compulsory permits, standards and markings. But laws should not prevent innovation that brings value to consumers. To ban Uber (with all its benefits) for mere legal reasons would result in losing the opportunity to embrace those exact benefits.

Nothing can stop innovation and as long as this technology brings value then it is here to stay. Traditional ojek may eventually have to become app-based or at least adapt to using their cellphones to get customers rather than wait passively at their posts for passengers. Long-time drivers of established meter taxi companies are not that easy to adapt, with their livelihoods having been tied to a regulated system for so long. The democratized application of Uber is actually unfair competition for them, so it is easy to understand their '€” and especially the companies'€™ owners'€™ '€” resistance to this innovation.

In the end, it would be a new government regulation that decides the fate of Uber and that of public transportation as a whole. The draft so far has made the playing field clear and given all respective parties ample room for differentiation and coexistence. The law should ensure that players in the market, whether metered or apps-based, abide by safety regulations.

The airline industry, the low-cost carriers did not drastically affect the full-service airlines '€” they exist well and the consumer has more choice; the laws involved are related to flight safety. The government should be the regulator of fair play and the market, especially the consumer, would be the final judge.

However we may be against Uber, it may be because we have been used to an established system too long '€” the players in the market and the laws regulating them were just not ready for disruptive innovation. But this does not mean we should abandon the technology itself. We should not blame innovators just because they are smart.

The writer is the head of strategies at Karsa Ide Karya and teaches advertising and marketing at the University of Indonesia.

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