Opinion

Entrepreneur Alert: If Uber’s More Disruptive, Why is Airbnb Making All the Money?

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By Allen Adamson and Eitan Muller

By Allen Adamson and Eitan Muller

The private equity business is absolutely enamoured with disruption or, more precisely, “disruptive innovation”. Many entrepreneurs will tell you that you’ve got to swing for the fences if you want to significantly change the behaviour of millions of consumers. Our premise is that, while chasing the next major disruptive innovation might possibly lead to a major rout of competitors, this is not likely to happen. And, more specific to our premise, it is not the most prudent way to approach a startup venture. That is, if you want to make money.

Our premise is that to succeed as a startup today, it is far more realistic to think in terms of evolution, not revolution. Follow the basic, long-held tenet of brand success and identify a way to make something that people already do easier, more enjoyable or more convenient. Don’t set your sights on the fences but, rather, on first or second base. Today’s most profitable startups have found a better way to solve a problem, not to change the world.

To support the argument that disruption may not be the Holy Grail when it comes to sustainable startup success, we’re going to use the divergent tracks of Uber and Airbnb as a proof point. We claim that Uber is absolutely a disruptive innovator. It has significantly changed the behaviour of most stakeholders in the category, inclusive of competitors and consumers. At the same time, we show that although Airbnb did cause behavioural changes with stakeholders in its industry, these changes were not significant enough to be labelled “disruptive”. The current situation is that Uber is bleeding money at an alarming rate, while Airbnb continues to be profitable. Here’s the why and wherefore of the story, and the reason we maintain that our findings can be generalised across disruptive and non-disruptive innovations.

Read the full The Economist article.

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Allen Adamson is an Adjunct Associate Professor.
Eitan Muller is a Professor of Marketing and Research Professor of Marketing.