Disruptive Innovation, GAFAnomics And The Sharing Economy

Disruptive Innovation, GAFAnomics And The Sharing Economy
Disruptive Innovation, GAFAnomics And The Sharing Economy

Disruption is claimed to have been responsible for some of the biggest and most transformational changes in the way that we do things. Some people welcome disruption and all that it brings with open arms, while others are filled with fear at the thought of it. Disruption may sometimes feel unnecessary and pointless. However, as Greg Satell of Digital Tonto (2015) argues:

“Disruption does not only destroy, it can also create.”

According to Satell, disruption also helps to create important mental shifts. Disruption allows us to shift paradigms, and start thinking in a new and more creative way.

Disruption is not a new activity.  Actually, throughout time people have created models to explain the functioning of our planet, and then people use those models to solve complex problems. Many of those models remain in place for a long time. However, after a time we may find that the model is flawed in some way. There is often a case that sets us thinking in that direction, and over time it becomes apparent that there is a flaw. It is at this point that we have to change our way of thinking. However, in creating new models we do often incorporate the existing ones, as argued by Thomas Kuhn.

What is Disruptive Innovation?

Clay Christensen wrote a book named The Innovator’s Dilemma in which he first used the term “disruptive technology” and disruptive innovation. Disruptive innovations mean innovations that create new markets by discovering new categories of customers. This is obtained by the use of new technologies but also by developing new business models and exploiting old technologies in new ways. In his book, Christensen compared disruptive innovation with sustaining innovation, which simply improves existing products.

In the eyes of some, the approach described by Christensen seems somewhat destructive and out of control, intent to destroy the corporate order. However, when looking at the work more closely it can be seen that Christensen was trying to find ways to save the corporate order. His research uncovered that businesses were often working to and holding onto models that were flawed in some way, and consequently were making false assumptions and basing important decisions on these. It was Christensen’s argument that disruption is useful because it helps managers to see what is going on in the business environment and to be able to make better choices in response to this.

The point to take from it is that no business model is valid forever. Eventually change has to be brought about if the organisation is to survive. The savvy business would prepare for this and be ready.

It is further argued that other shifts in society that may not initially seem to have anything to do with business models that are disruptive, actually do mirror similar disruption patterns. The fundamental take away idea from this is that “small groups, loosely connected and united by a shared purpose can challenge even the most powerful among us.” For example, and important example that is provided is that in the past big institutions with lots of bureaucracy were important in coordinating society and getting resources on track and focused to work on a large scale. They controlled resources, and that was what was important at that time. Now however,  access to resources is far more important than controlling them. Today, small players are able to use networks to coordinate their actions.

Disruption can be good or bad because those that drive disruption may aim to destroy stuff, or may be focused on creation and improvement. Those that set out to destroy are intent on changing the balance of power so that they can make sure that they benefit from a new power situation. Those that set out to create have a much more inclusive approach, aiming to develop models that focus on improvement in change. When corporate disruption focuses on creation with values and purpose in mind, great things can be achieved.

Disruptive Innovation and GAFAnomics

Fabernovel, an international innovation agency, has written extensively about the revolutionary business model behind a group of companies that has used disruptive innovation to transform economics over the last two decades. Those companies are Google, Apple, Facebook and Amazon (GAFA). They coined the term GAFAnomics that explains the reasons why economy was revolutionized by these companies that, as we all know, have considerable market value, grew quickly and achieved high-profit margins and excellent financial results.

GAFA companies can be said to have produced a Copernican revolution through the use of three strategies that truly place the customer at the center of their strategy. The three strategies are:

  1. To make smart and meaningful things
  2. To foster value creation, rather than revenue – everyone is a customer
  3. Doing away with core business: GAFA has set out to operate any type of business, as long as they deliver value

Ideally, these companies want to create for the benefit of anyone, rather than to actively destroy what is already in place. They considered everyone a customer, even the ones who will not pay for anything.

These disruptive companies, came up with creative and inclusive ways, that transformed the world of business, developing new models that better suit many people.

Even though these companies grew up to become gigantic corporations, more than anything else, what they brought was was the concept of Network Orchestrators, that coordinate a network of peers within which the participants interact and benefit from sharing in the value of what was created.

Such companies generated and continue to generate completely new markets with massive user bases and are creating tremendous value. They orchestrate “peer to peer production networks” relying on a relatively small staff only, and they innovate.

Disruptive Innovation And The Sharing Economy

After almost two decades of GAFAnomics, we can see how GAFAnomics changed business models, and laid the ground that is letting us now evolve to another type of economy. GAFA companies helped to democratise access to knowledge and visibility, which might as well explain the exponential rise in entrepreneurship and self-employment: It has never been so easy to set up an innovative business as now.

GAFA companies, particularly google and facebook, enabled the rise of  the peer to peer networks which are the fundamental pillars of the sharing economy or the collaborative commons, as Jeremy Rifkin names.

Even if The Sharing economy (or Platform-Kapitalismus as Germans derogatorily call it) has its share of problems ( in the Netherlands Uber has been banned; South Korea is treating it as an illegal taxi service) it is here to stay. It is operating in intimate connection with the robot economy  (driven by automation and algorithms ) and it is serving a rising workforce that is technologically savvy, independent and entrepreneurial.

The irony of the model is that if GAFAnomics considers every customer one customer, even the ones that don’t pay, it will come the day that these companies will not grow.  In a recent article published in The Guardian, Paul Mason (2015)  predicts that moment:

“First, however brilliant these new models are, they cannot produce exponential growth. It is technology in the service of squeezing out the final drops of value from something, rather than infinite expansion. Once the platforms to rent out things, services or time are stable, textbook economics states that the cost of using them should fall. “

Some even venture to speak about a future of abundance, run by automated networks of peer-to peer platforms controlled by society for the benefit of all. Until that day, we will continue to disrupt, improve and design new models, that will design us and our businesses in return.  The future …can be abundant, yes, if we design for abundance, but whether we like it or not, the end of capitalism as the mainstream economic system is becoming a visible fact.

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