Over these recent months, Uberization has clearly emerged as the most prominent buzzword when talking about the new digital economy. We French, would like to believe that Maurice Levy, the Publicis boss, was the first to have coined the expression. Being an advertising professional he must be enjoying the success of his neologism. This phenomenon of uberization is so much in the news that one could well get the impression that the whole economy is being threatened, and in very little time, key parts of our economic landscape will just collapse. Looking at all the changes driven by digital economy from the Internet of Things to Fintechs, one can easily be convinced about the omnipotence of technology. And from there, we are just one step away from seeing Ubers in all sectors.
The issue is that when following this logic, we risk missing one key element, namely Hubert. Hubert stands, in this paper, for the model customer- he represents trends in customer expectations and needs. And Hubert is there to remind us that it’s him, the customer, who makes or breaks the success of any innovation. Behind the success of start-ups and fintechs – behind Uber – we realize that it is Hubert, who has decided to change his habits. Hubert no longer buys records or CDs, but downloads mp3 files or listens to music via streaming. Hubert now books his airline tickets and hotel rooms on the net rather than walking to a travel agent in his neighbourhood. Hubert, of course, does not take cabs anymore, or at the very least, far fewer than before.
The facts are there: the music industry, the travel industry and airline ticket sales have experienced a radical change. But is a similar revolution likely in all other economic sectors?
One can legitimately doubt that we will see an overall uberization. But that is no reason for one to be hiding behind the classic excuse « in my sector it’s different », or like an ostrich whose head is in the sand. What it means is that if one takes a serious interest in Hubert, one will realize that the changes in the clients’ attitudes and their trends also matter.
Our approach is based on an analysis of the innovation aspect coupled with customer usage changes.
Innovation is clearly an essential element. But while we believe that to be valuable, an analysis has also to focus on customer trends. By combining these two, we obtain a more subtle reading grid, and one that is meaningful. On the innovation side, we propose measuring the disruptive potential, and on the other side, the likelihood (or not) of a customer behaviour trend change. Thus, we get four kinds of markets, each different from the others, and each needing a different strategy to succeed.
The bottom-left quadrant is where the scope for disruptive innovation is low, and where there are little or no significant changes anticipated in customer behaviour. In such a market it is possible to offer – through a low disruptive innovation – a service comparable to one’s competitors, but with a lower price. The corollary is that an established firm, offering services that are comparable to its competitors, but at a lower price, wouldn’t have to unduly worry about new competitors bringing in low disruptive innovation. A good example of this would be the French banking industry.
In France, the innovation of offering for free, a bank account, a credit card, and saving plans, without links to a physical support (the branch), has not proved to be disruptive. Traditional banks still conduct their banking business the same way. Boursorama and others have existed for years in France. These online banks have managed only a relatively modest market share. We could say that this innovation has merely created an additional channel without causing radical change. Of course, an innovation such as the compte Nickel is potentially more disruptive, but it is targeted at a specific segment of the market, and it brings disruption in this segment alone.
The bottom-right quadrant represents markets marked by low disruptive innovation, but where one can spot clear trends in customer behaviour: Hubert is ready to change his habits. Here, the key is to identify the new areas of customer needs and to position oneself as providing a better service than the other competitors to answer Hubert’s new expectations. An example of this is SNCF, the French railways, which is anything but a start-up. Using mobile apps (TGV Pro, Voyage SNCF, …) it is now possible to travel paperless across France. The ticket booking process, the discount card, loyalty card … everything is paperless. On top of that, by using these apps, Hubert does not need to queue in front of those old punching machines to get a hole in his ticket. Let’s add to these the benefit that Hubert can change his train tickets a few minutes before the train departure, without having to queue, and what we have is a totally revolutionary user experience. With such innovation, the SNCF is much better positioned to compete against coaches, airplanes or even carpooling sites. To add a personal touch, as I travel frequently by TGV, I can testify that though these innovations do not get the trains to go faster, they make traveling much more enjoyable. Where is the Uberization in this case? Nowhere! What we have here is an existing market player who makes a clever use of innovation to satisfy its customers’ expectations and maintain its position in the market. To be fair, the time factor also plays a key role here as it there is often an advantage to being the first mover.
The top-left quadrant is where there is scope for truly disruptive innovation but with no established customer trend. The danger of such a case is known: it is the French engineer’s syndrome. Convinced that the intrinsic qualities of the product are good enough, our French-entrepreneur-engineer runs the risk of waiting in vain for a “wave” that will not come. The innovation may appear attractive but Hubert just does not want to change his habits. Not all is lost, though. A possible way out can be to forego a B to C approach in favour of a B to B to C strategy. By partnering with an existing & established market player, it is possible to enrich one’s existing offer using the element of innovation. The partnering existing player will be able to earn points in market share by integrating innovation. There is one drawback, though: this requires our French-engineering-contractor to abandon his most cherished dreams. There are strong psychological barriers to make this strategy switch work, but it is possible.
Last but not least, the top-right quadrant combines disruptive innovation with a strong change trend in customer behaviour. Here is the textbook case of uberization. A market will disappear and another one will emerge. In such a market, there is a significant first mover advantage. Often the product brand or company name will spread virally and can become a common name: Bic in its time, Uber today, have both passed into everyday language. For this to happen, not only should the innovation be exceptionally disruptive, our friend Hubert must also be ready to make a change. Obviously such a combination is rare.
In conclusion, this grid should make an entrepreneur think about the nature of the market that he is in, and what strategy would work best for success. It should, consequently, provoke him into analysing the potential impact of technology as well as the habits of his customers. It should also offer him a more measured perspective of the phenomenon of uberization.
Last update 11 Feb 2016.
This paper has been first published on the 4th of february 2016 in French on the blog Le Siècle Digital to access the original paper folow the link: Pas d’Uberisation sans Hubert : l’innovation seule n’est rien.