Blog 4: Reflections on the Simulation, my future employer and Uber

The discussion of disruptive innovation from this week’s lecture and articles makes me wonder what type of company could be successful investing in a disruptive innovation. The article on "Discussing New and Emergent Markets" focuses on case studies in which disruptive innovation was pursued successfully within a business but does not feature a standalone company pursuing disruptive technologies. In the articles, large companies like HP and Honda were featured. 

 

An important caveat that was not emphasized enough in the articles is that disruptive innovation seems to only be something that is successful if it is part of a larger company that has other revenue streams.The disruptive innovation that was being pursued was in one area of the business but did not represent the business in its entirety. The simulation reinforced this idea as well. I found that when I focused on the disruptive technology and made significant price changes to the core product, cumulative profit plummeted and did not recover. Only when I maintained the sustainable technology and increased price only when R+D investments were made in the product was I able to grow the disruptive technology segment.  In the cases mentioned, the disruptive innovations being pursued were likely cost centers initially and possibly indefinitely if the technology didn’t show profits eventually due to poor strategic management. Essentially, I left feeling like not all companies can participate in disruptive technologies because financially they can not take on the risk.

 

This fact makes me think of two scenarios: how my future employer is positioned and how Uber is positioned. My future employer has a stable investment in their core business but is focused on growing a new product line. The new product line has some synergies with the existing product offerings but is much more regulated than the current product offerings. The approach being taken is to grow that business by 50% over the next few years yet there has been no discussion our how the existing, sustainable product is being altered. The company has been doing extremely well financially due to a successful acquisition but I also feel my impression of the company has not changed. They remained focused on their core product while expanding offerings. I believe that is key to adding disruptive technologies to one's portfolio while maintaining the core business to support it.

 

Uber was discussed in class lectures but when I think about the business, though it is unclear whether it is a disruptive technology, it has spent a lot of time investing in disruptive technologies with its autonomous vehicle business. Based on the articles read, it doesn’t seem like Uber is well positioned to invest in disruptive technologies as its net income has been negative or close to $0 for at least the last three years (Source: 2019 Uber 10-K). It will be interesting to see when the company can turn a profit and sustain it but for now, it looks like Uber is not positioned to come out financially solvent if the principles of disruptive technologies hold.