3 Steps for Constructive Disruption

Innovative companies (e.g. Uber, Airbnb, PeopleKeep) win by disrupting stale industries (e.g. Transportation, Lodging, Employee Benefits). When a new entrant challenges the existing model with a disruptive innovation, the incumbents respond predictably. Smear campaigns. Anti-disruptor regulation. Frivolous law suits. Whatever will slow down the new entrant and its disruptive innovation.

This has held true for Uber, Airbnb, and PeopleKeep. While at PeopleKeep, we developed a three-step process we called constructive disruption to guide us.

Here’s how it works.

No. 1: Be Truthful and Transparent

When disruptors challenge the status quo, questions regarding the disruptor’s legality or legitimacy often arise. With social media, it is only a matter of time before the public uncovers the truth about a business. The most powerful tool for addressing legal and legitimacy challenges is transparency coupled with authenticity: tell the truth and make it accessible.

Example: Airbnb has caused massive disruption to the hotel industry by significantly undercutting the prices charged by existing providers. While this is not in itself illegal, some rentals may violate local housing laws and regulations. This is an issue the hotel industry incumbents are quick to point out. How has Airbnb handled customer concerns? Transparently and honestly. A Google search for “is Airbnb legal” returns a result from Airbnb itself with links to specific city regulations. This strategy is working. According to The Economist, if Airbnb continues to grow at its current rate, by 2016 it will gain 10% market share from hotels’ existing business.

Strategic transparency and honesty, particularly in response to legal or legitimacy concerns, made PeopleKeep's customers better informed and more trusting as a result.

Here are a few of the steps we took at PeopleKeep:

  1. We posted our approach to compliance publicly and regularly on our blog.

  2. We wrote a book about our solution, published by Wiley (2014).

  3. We maintained an up-to-date set of frequently asked questions on our website.

No. 2: Respond Quickly and Thoughtfully to Attacks

When a disruptive innovation is successful, it undercuts an existing business model and angers the industry incumbents. Unable to successfully compete with the new entrant, the incumbents band together to launch smear campaigns. “If you can’t beat them, smear them,” they say. When competitors attack, it’s critical to provide quick and thoughtful responses.

Example: The cab industry incumbents hated Uber. They couldn’t compete on price, convenience, or quality. In response, cab companies launched an aggressive smear campaign targeting Uber’s potential safety issues. It was called “Who’s Driving You?” sponsored by none other than the Taxicab, Limousine & Paratransit Association. How did Uber respond? Quickly and thoughtfully. That same month, Uber launched its own “I’m Driving You” campaign and released a section of its website dedicated to addressing customer safety concerns. The website described the “rigorous” background checks required for Uber’s drivers and went out of its way to outline the safety advantages of riding with Uber versus the traditional cab driver.

Quick and thoughtful responses to competitive attacks increase customer confidence and provide an opportunity to highlight the disruptive solution’s advantages.

Here are a few of the steps we took at PeopleKeep:

  1. We allowed comments on our blog and social media pages to enable transparent conversation.

  2. We responded thoughtfully to all comments, regardless of the tone of the inquiry.

  3. We responded quickly, ideally within an hour.

No. 3: Focus on the Customer

An industry is open for disruption when its customers are under-served by the incumbents. All successful innovators have one thing in common: an unrelenting focus on the customer.

Example: Google, the search-engine giant that everyone loves to hate. Countless individuals, firms, and political organizations accuse Google of being evil due to the way it profits from users’ information. Has Google wavered? Nope. It continues to “focus on the user” and allows the rest to follow. Is Google collecting info about us for profit? Yes. I’m one of the people giving it to them. What do I get in return? Awesome free services ranging from GMail to YouTube.

Here are a few of the steps we took at PeopleKeep:

  1. We dedicated a customer success manager to all customers.

  2. We developed and maintained online software that is easy to use and always available.

  3. We released new features weekly and improved the software based on customer feedback and ideas.

Successful innovations require constructive disruption. Failure to execute on these three steps could mean an early exit for a new entrant.

(Note: Theories like technology S-curves and The Innovator's Dilemma explain the incumbent response as one of logic, but that’s a discussion for another article.)