Disruption of the Disruptors: OpenTable, MindBody, Uber and . . .
September 11, 2017 | Contributed by: Greg Sterling
Disruption of the disruptors: in one sense this is the nature of competition and market capitalism. New companies displace older one as appetites change and new technologies appear that make older ones obsolete or less efficient.
But something else may be happening now. We may be entering a cycle of perpetual “disruption” (a term I dislike) in which company lifecycles are extremely compressed (ten years or less). There’s a much longer and more nuanced analysis of this than I can provide in a quick post. But below are some thoughts triggered by a recent New York Times article, which points out how OpenTable could be displaced by cheaper and newer alternatives:
Two decades on, though, the company faces a number of troubles that threaten that hold. Priceline, which now owns it, has written down the company’s value and said it is reducing investments in the system. A new crop of competitors is challenging OpenTable as never before, picking off the high-profile restaurants that are critical to attracting consumers, by offering better deals and newer technology.
The article is very interesting and is supported by anecdotal information I’m seeing. As OpenTable’s Scott Jampol says in the article, “Competition for our business is not new.” But now that OpenTable has conditioned consumers and businesses to use the internet for reservations it has paved the way for successors who can do it more efficiently or cheaply or without hardware and software requirements.
Uber is another interesting example. It has all but destroyed the taxi industry in major US cities. Yet its valuation has slipped from roughly $70 billion to perhaps $40 billion. Much of this a result of the company’s multiple self-inflicted PR disasters and the culture behind it.
One gets the sense that Uber could collapse and disappear at some point — the Webvan of today. Or, it could be replaced by Lyft or someone else; it feels very fragile to me. Maybe it will survive and even thrive under a new CEO. But its longevity is far from guaranteed.
MindBody is another case, like OpenTable. It appears vulnerable to displacement by cheaper alternatives and there’s some anecdotal evidence that this is happening. Most of these reservations systems, especially as they move into the cloud, become commoditized and vulnerable. This is partly why companies such as MindBody and others are trying to offer more complete platforms that offer multiple services to the business owner.
More broadly, disruption and displacement are obviously also the story of the last 15 years of traditional media and marketing. Craiglist has been blamed, largely unfairly, for the demise of newspaper classified advertising. And others, now including Facebook, Nextdoor and a range of vertical marketplaces, have been seeking to disrupt Craiglist for years.
Print yellow pages revenues have declined dramatically from a high point in the late ’90s/early 2000s. Yellow pages publishers have effectively become digital agencies for their advertisers, selling a range of products mostly aimed at leads and “traffic acquisition.” Now that model is under pressure from CRM-based approaches. DexYP is shifting its suite of products and services to a more CRM-centric platform.
First generation pure-digital agencies and platforms are being disrupted as well.
As you remember, AOL and Yahoo were once dominant and seemingly unassailable. Now it’s Google, Facebook and Amazon. Microsoft has shifted into cloud services as a necessary result of changes in the market amid the decline of the PC. Citysearch was the premier local search site; Yelp killed them. Now Yelp is having to evolve to defend against Google and Facebook and others.
Is there a pattern here or just a bunch of random observations that are vaguely correlated? Obviously I wouldn’t have written this if I didn’t think there was some underlying and changing logic at play — waves or phases of disruption. (And I’m sure we could formulate theories for companies that haven’t been disrupted that involve scale, data and brand affinity.)
A first generation of companies disrupts the existing order and conditions the market. Second and third generations, responding to new technologies or economies seek to supplant the older solutions by being more efficient, easier or cheaper (or value added in some cases). Investor capital supports and encourages the building of better mousetraps. And much of it is akin to real-estate speculation: entrepreneurs and investors seeking returns in the short term rather than creating lasting value.
These competitive dynamics inform LSA’s new Tech Adoption Index, which is tracking SMB adoption of cloud services. We’re trying to examine how “the cloud” and new efficiencies are putting pressure on incumbents in different market segments, such as Finance, HR, Marketing, Sales, Productivity. But it’s also looking at how startups and smaller competitors have to adapt or defend against disruption themselves.
I’m curious to know your thoughts about any of this . . .
Graphic is Scott Brinker’s MarTech Landscape.