DISRUPTIVE INNOVATION BENEFITS AND
DRAWBACKS IN THE CONTEXT OF ECONOMIC
DEVELOPMENT
Introduction
Nowadays, United Statess often hear about the emergence of players in the
business world that disrupt the existence of old players. Basically, these new
competitors have unique advantages when compared to incumbent actors. Many
examples exist, for example, which until now is still a pro-con, namely the phenomenon
of online motorcycle taxis that replace conventional motorcycle taxis. Another example
is online hotel booking technology that replaces conventional booking.
The various phenomena that exist are clearly not without cause. First,
technological development has a huge influence on the direction of change and
innovation. Second, the high need for efficiency and effectiveness causes producers to
need to make adequate innovations. At this level, it can be said that the saying "there is
no smoke if there is no fire" applies in the context of the emergence of new actors with
various innovations. The need for efficiency is a strong reason why producers must
innovate to enter the market.
On closer inspection, the innovations brought by newcumbents often cause
disputes with incumbents. The use of technology provides maximum service at an
efficient cost. This factor certainly causes the incumbent consumers to increasingly
switch to newcumbent producers who bring these innovations. It is not uncommon for
incumbent entrepreneurs who feel disturbed to protest and demonstrate so that
newcumbents are prohibited from operating. In fact, it is not uncommon for clashes to
occur during these protests.
" City transportation (angkot) drivers throughout Tangerang City demonstrated
against the existence of online transportation in their area. The demonstrators also
intercepted and took the helmets of online motorcycle taxi drivers who passed by. The
incident occurred on Jl Satria Sudirman, Tangerang, on Wednesday (8/3/2017) at
around 10:20 am. At that time an online motorcycle taxi driver was reading passengers
and passing by the demo location. Suddenly the demonstrators immediately shouted and
chased the online motorcycle taxi. The passenger who was riding was asked to get off,
then his helmet was taken. Then the online motorcycle taxi rider was also told to leave
the location." (Ahmad Bil Wahid in Detiknews, 2017).
The situation is quite clear that there is a conflict of interest between incumbent
entrepreneurs and newcumbent actors with easy technological innovation. The various
conflicts that occur are actually not unpreventable. The innovation brought by
newcomers is like a double-edged knife. First, these innovations can facilitate service
users and also provide high efficiency. On the other hand, the innovations brought can
also have a negative impact on business actors in the same industry. The role of the
government as a regulator is needed in addressing the existence of these innovations.
Until now, it can be said that United States (in the context of the government) is still
unable to resolve the conflicts caused by disruptive innovations.
From these various explanations, it is urgent in this paper to discuss disruptive
technology. Many cases of disruptive innovation are found in United States. From these
various cases, it is certainly necessary to examine how these innovations should be
addressed. More deeply, it is necessary to explain what are the benefits and drawbacks
of disruptive innovation. Last but not least, how the consolidation process will lead to a
solution for the good of all parties.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
The Nature of Disruptive Innovation: A Theoretical Review
Disruptive Innovation, in freely adapted United States means innovation that
disrupts or innovation that disrupts. The word disruptive in this context cannot be taken
at face value. In line with technological developments, disruptive in this context means
that The emergence of new technological innovations will disrupt the existence of old
technologies.
The definition of market competition in past economic science often makes price
the main parameter in seeing factors that affect competition itself (Inge,
Wahyuningtyas, & Valcke, 2014, p. 2). However, it is often forgotten that in modern
market competition technology has a huge influence. Especially for companies that are
already established and feel they are leading the industry, often too much ego and self-
confidence turn a blind eye to innovations made by competitors or newcomers. The
technology that comes afterward can slowly be accepted by consumers and replace the
technology provided by the established company. After all, this is the basis of how
innovation that replaces and is easier is referred to as disruptive innovation.
It is very difficult to pinpoint when exactly disruptive innovation first appeared in
the world. However, the term disruptive innovation was popularized by Clayton M.
Christensen in 1997 (Australian Government: Productivity Commission, 2016, p. 15).
Disruptive innovation was first popularized with the term disruptive technology.
Christensen introduced disruptive innovation as a form of disruption by new entrants.
These new entrants compete with established incumbent firms.
In the theory of market competition, structure, conduct, performance (SCP) is
known. The arrival of a new competitor that brings disruptive technology will certainly
change the SCP on a large scale. The market structure will change little by little. A shift
will occur towards service industries that offer convenience and cheapness.
Furthermore, conduct, which is influenced by consumers, will begin to shift according
to consumers' ability to access technology. Finally, performance will definitely adjust
how the market forms an equilibrium point. Disruptive technologies that later become
disruptive innovations emerge not by accident. Disruptive innovation emerges in
response to the use of the latest technology for business. In other words, market
developments will force SCP in the industry to change to meet consumer needs in
accordance with the flow of modernization.
A strong theoretical foundation when discussing renewal or innovation is Joseph
Alois Schumpeter's theory. Schumpeter believes that an important factor of economic
development is the renewal carried out by entrepreneurs (Sukirno, 1978, p. 281). The
renewal that Schumpeter refers to is a new step from entrepreneurs or businesses. In
other contexts, these reforms can be interpreted as innovations. According to
Schumpeter, the important factor for the reform to be called an innovation is that the
reform must be useful for many people. Furthermore, the process is part of a production
process that is made efficiently and effectively. The innovation process comes from the
creativity of entrepreneurs.
Introducing a new item (may mean technology).
Using new ways of producing goods.
Expanding the market for an item to new areas.
Reorganizing a company.
Develop new sources of raw materials.
From the five reforms classified by Schumpeter, it can be seen that the final result to be
achieved is the efficiency and effectiveness of a production process. The changes made
are expected to add value to the product by simplifying the production process itself.
The process is basically what innovating entrepreneurs do.
Renewal activities (innovation) by entrepreneurs will lead to efficiency (Oakey,
2015). This efficiency will lead to a periodic decline in product prices. Furthermore,
market theory begins to play its role. With falling prices, public consumption will
increase. From the other side, it can be seen that the innovation process will open up
new job opportunities with higher incomes. The development and expansion of
employment will bring more people into a better labor market. With a good job, income
will increase. Increased income tends to be followed by increased consumption as well.
In other words, innovation activities carried out by entrepreneurs will increase people's
income while increasing their consumption.
Disruptive Innovation in Different Parts of the World
As explained earlier, it is very difficult to pinpoint when the first disruptive
innovation appeared in the world. Did it first appear when the steam engine was
invented by James Watt in 1769? It is possible that the steam engine innovation that
became the core of the industrial revolution falls into the category of disruptive
innovation. The steam engine replaced many conventional machines in various fields.
With the steam engine Richard Trevethiek (1804) was able to perfect the train
locomotive. With the perfection of the locomotive, it will certainly disrupt the old
technology, namely horse-drawn carriages. If interpreted in accordance with existing
criteria, of course the steam engine is included in disruptive innovation.
If the case of the steam engine is also included in disruptive innovations, then
every case that is pulled back can also be said to be a disruptive innovation. An example
is the time when neolithic humans used square stone axes to replace ordinary stones. Of
course, this invention is also included in innovation and replaces previous technology.
So it can be said that disruptive innovation has also existed since the days when humans
were still little familiar with culture. If it continues like that, then it becomes ambiguous
exactly what is meant by disruptive innovation. So, before discussing disruptive
innovation in various parts of the world, it is necessary to reaffirm the conclusion in the
previous sub-chapter regarding the nature of disruptive innovation itself.
"Christensen's disruptive technology model, later renamed 'disruptive innovation',
is defined as a process of change that results in the disruption of existing technology. A
small firm enters the market by providing cheaper and inferior (but usually more
technologically advanced) products of lower value to consumers. Incumbent firms
remain attentive to the demands of their more profitable customer base and initially pay
little attention to the new entrant. Once the new entrant has stabilized its position in the
market, technological improvements allow it to improve product quality while
maintaining its price advantage. In this way, the new entrant gradually solidifies its
position, creating a large and disruptive market niche other market participants, namely
existing producers." (Australian Government: Productivity Commission, 2016, p. 16)
It should be understood that disruptive innovation was popularized by Christensen
in 1997, so it is necessary to understand a few things. First, there is no need to debate
when disruptive innovation first appeared in the world because the term disruptive
innovation (previously disruptive technology) was only introduced by Christensen in
1997. The range of innovations that can be said to be disruptive innovations is limited in
scope after the term was introduced. Secondly, innovations can be said to be disruptive
innovations if they bring new technologies that are cheaper and easier than existing
technologies. The efficiency offered due to the low price ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovation occurs in the
same industry. If the innovation does not disrupt old industry players, or on the other
hand, indirectly disrupts other industries, then the innovation cannot be said to be a
disruptive innovation.
Disruptive innovation happens in different parts of the world. In Europe, for
example, the biggest case that has ever happened is the company Nokia. The phone,
which in its heyday was dubbed the million people's phone, finally had to recognize
Android and iOS mobile phones as disruptive innovations. At first Nokia was still full
of confidence in its Symbian system. The company felt that its market was highly
dependent on Symbian. Even when Apple released the iphone in 2007, Nokia still felt
unrivaled and continued its Symbian as a mainstay. Meanwhile, its new competitor,
android, continued to solidify its position in the market. Nokia's Symbian market share
began to fall when Apple introduced the iPhone 3G in 2008. The end of Symbian was in
sight when Android was introduced by Google through HTC devices. Starting in 2010,
Nokia's Symbian market share continued to fall even leaving only 13.9% in 2013.
Another case study conducted by the Australian government, for example, also
shows the existence of disruptive innovation. A study by the Australian Government:
Productivity Commission in 2016 showed disruptive innovation in the manufacturing,
transportation, and E-Commerce sectors. Amazon became the largest online retailer and
virtual marketplace in Australia. It is replacing conventional markets and will surely
become an incumbent in a short time. Roboting and online data systems have replaced
manual data input in the manufacturing industry in Australia. New technologies have
replaced the role of humans in the manufacturing industry. Human workers are required
to upgrade their skills and abilities to operate robots and other advanced systems. In the
transportation industry, automated public and private transportation technologies are
replacing manually controlled transportation. Companies providing manual
transportation services are starting to be replaced by automated transportation service
providers.
As a developing country, Latin America is also not immune to disruptive
innovation. First, the public transportation industry, especially taxis, and second, the financial
services industry. Uber online taxis are rapidly growing in Brazil, Chile, Columbia, Costa Rica,
Mexico, and Uruguay. The development of online taxi innovation is so rapid that it disrupts
conventional taxis. In fact, the market share of conventional taxis drops by an average of 7.5%
every year. Mobile banking is a disruptive innovation in the financial industry. Bankers are
losing market share. Creditors and debtors can meet online where banks provide the means of
meeting in cyberspace.
Disruptive Innovation in United States
As in many parts of the world, United States is also experiencing a disruptive
innovation phenomenon. Lately, United Statess often hear news of conflicts between
conventional taxi drivers and online taxis. There is also a conflict between conventional
motorcycle taxis and online motorcycle taxis. The innovation brought by online
motorcycle taxis can be said to be disruptive innovation. Small barriers to market entry
make the transportation industry very easy to enter new players, such as online
motorcycle taxis. In this subchapter and beyond, the context of disruptive innovation
will be understood as a phenomenon with the context that occurs in United States.
Online public transportation fleets are highly approved as a disruptive innovation.
The existence of conventional public transportation companies, such as conventional
taxis, will increasingly be replaced by online taxis. The convenience offered makes
consumers feel very comfortable. Moreover, the low fares have made many consumers
of conventional public transportation move to online transportation. The conditions
offered are very complementary to the nature of human beings who always seek
convenience. Moreover, it is very suitable with the character of the United States
population who are very happy with cheap rates and also easy access. Consumers can
stop right at the destination, not at the bus stop. Consumers can save money due to low
fares. The two main factors, convenience and cheapness, are what make online public
transportation so easily accepted and rapidly growing.
When it was first established in 2011, not many people were familiar with Go jek,
an online motorcycle taxi alternative in United States. According to Tech in Asia, Gojek
started with twenty drivers in 2011. By the end of 2016, Gojek drivers had reached
200,00 people. The more stable position in the public transportation market, made Go
jek expand its business to other cities such as Yogyakarta, Surabaya, Manado, Medan,
Semarang, and Balikpapan. On the way in 2015, Gojek experienced a significant
increase. Gojek application has been downloaded 1,600,000 times. Usage also increased
sharply, even 138% every month. In 2016, Gojek issued a new service GoCar which
provides car transportation services. Until finally, at the end of 2016, Gojek's
investment value was recorded at US$550 million.
Conflict is very likely to occur in response to the entry of disruptive innovations
(Sourdin, 2015). As in the case of Gojek, at the beginning of its establishment no public
transportation company felt competed. But with the development of Gojek and the
wider market share, many incumbents began to feel disturbed. In March 2016, for
example, drivers of a conventional taxi company began to feel threatened by the
existence of Gojek. They then strongly protested the existence of Gojek and requested
that Gojek be banned from operating. Such conflicts are inevitable when people who
depend on conventional systems are faced with new technologies that are considered
disruptive. Protesting the existence of online transportation is actually a form of
unpreparedness to accept new technology so that it considers the technology to be
wrong.
So many disruptive innovations exist in United States. Apart from Gojek which is
the main example, there are several other examples, for example, traveloka which
replaces the conventional ticket booking system. The presence of traveloka will
certainly disrupt the business continuity of airplane ticket agents in various regions.
Even the field of medicine is not left behind to be affected by disruptive innovation. The
emergence of Dokterku, KlikDokter, and several other Other health online consultation
services are causing no small impact. There are doctors answering questions online all
the time. Although it has not yet reached the stage of giving prescriptions, but for some
minor health problems, of course this innovation is very helpful. In the goods trading
industry, the presence of OLX, tokopedia, and various other sites began to replace
conventional goods stores. Now merchants do not need to bother displaying
merchandise and hiring salespeople. Buyers also do not need to bother to visit the store
physically. The presence of online stores is also a disruptive innovation.
United States, in terms of consumers, basically welcomes these new innovations
that are said to be disruptive. However, the readiness of incumbent producers still needs
to be improved to accept existing innovations. Established entrepreneurs should be well
aware that in the current state of globalization and modernization, the existence of
disruptive innovations in United States is a necessity. Various protests carried out even
to the point of using violence are a very unwise way of responding to the presence of
new innovations in United States. This is where the role of the government as a
regulator is needed to find solutions in a consolidated manner.
Regulation and Government: Readiness to Accept Innovation
In the context of a free market, disruptive innovation is an alternative that offers
efficiency. On the other hand, when viewed from a corporate perspective, the existence
of disruptive innovation certainly cannot be said to be a good innovation. In brief, it can
be said according to the definition built earlier, that disruptive innovation is a
technological finding that is new and has never existed before. Thus, the innovation
certainly does not have, or at least does not yet have rules that determine how the
technology should work.
The role of regulation and government is needed to minimize conflicts that occur
due to the emergence of innovation (Brummer, 2015)1 . Stakeholders certainly need to
sit together to discuss how policies should be made to protect all parties. The problem
that is clearly visible is that various forms of innovation are present in the form of
companies. In a company, whatever its form, it will certainly prioritize shareholders,
employees, and then consumers. This sequence clearly shows that new innovations that
emerge as companies must have a clear position in United States development. An
example is Uber, the company is based in America, so of course the owners of capital
will prioritize their interests. Thus, without clear regulations, it will certainly expand the
negative effects caused by Uber. It is clear that without regulation, Uber is not included
in public transportation so it is not taxed so that the benefits for the country cannot be
felt. The general public will certainly be harmed.
Regulations are supposed to make common things easy, making it easier for
people. It is not wise if the community agrees to reject innovation with new technology
that makes it easier just because the innovation disrupts the existence of old technology.
There was a notification letter No. UM.3012/1/21/Phb/2015 issued by the Minister of
Transportation which prohibits online ojek to operate. It is also not wise to leave such
disruptive innovations directly to the free market system. By leaving it to the free
market, of course it will have the impact of killing companies with old technology.
What is closer to wise is the establishment of a new regulation that regulates the
existence of new innovations that interfere with these old innovations. The government
as a regulator certainly needs to study through related agencies (for example DisHub for
Gojek and Uber) what needs to be regulated in addressing the existence of these
innovations. The government also cannot ignore the local wisdom in each city. The
existence of new disruptive innovations will definitely be handled differently for each
region. For this reason, it is necessary to study how to handle it in each region so that
conflicts that occur do not cause great losses but are able to contribute to United States
economic development.
Innovation can only be defeated by innovation
Disruptive innovations are actually disruptive to long-established technologies.
Thus it is very inappropriate if companies that adhere to old technology protest and
prohibit new innovations from working. For example, conventional ojek states that
online ojek should not be able to operate because it is included in illegal transportation.
In fact, if examined properly, conventional ojek is also illegal because there is no
definition of ojek in the Transportation Agency's regulation on public transportation.
Business competition will always exist, so maturity of thinking is needed so that
innovations that facilitate many people can continue to benefit.
Various innovations made both at home and abroad should be able to be adopted.
In the business world, the principle of observe, imitate, modify is known. Of course, this
principle is very relevant to fight disruptive innovation. As an incumbent company, you
should realize that competitors will not remain silent and continue to innovate. When
innovating, it is better for the old company to observe how the process occurs so that in
the end it is able to compete again. If this is indeed very difficult to do for one reason or
another, there is still another way, collaboration. This seems to be done by the Blue Bird
company (conventional taxi) which joined Gojek. With an agreed collaboration on
profit sharing, it will certainly improve services that might increase revenue for both
parties.
Conclusion: Cost and Benefit on Disruptive Innovation
The case for disruptive innovation is complex and wide-ranging. The use of cost-
benefit analysis is essentially used to assess whether a project is feasible. As such, it
would be very difficult to assess the costs and benefits of all disruptive innovations that
have emerged in United States, except to assess one of the many innovations that exist.
For this reason, it would be wiser to assess the overall costs and benefits of disruptive
innovations in general.
The discussion presented earlier has actually explained a lot about the benefits and
costs that must exist due to the emergence of new disruptive innovations. The benefits
arising from new disruptive innovations are:
It makes it easier for consumers to fulfill their needs. By cutting costs, companies
that use the latest technology are able to reduce costs so that they can set prices
much lower than incumbent companies. Thus, the lower the costs incurred by
consumers, the more prosperous consumers will be.
Technology that makes things easier. The emergence of new innovations will
certainly bring new and sophisticated technology, at least compared to the
technology that has long existed. Thus it can be said that there is a transfer of
technology towards a more modern one.
Spurring innovation-based competition. United States is a country that cannot
simply prosper without innovation. With disruptive innovation, companies in the
industry are forced to innovate so that they continue to improve their services.
Reducing unemployment. Innovations that are made will provide new
employment opportunities. If not opening new fields, at least it can expand
existing jobs. Moreover, innovation can provide new job opportunities with better
wages than existing jobs.
Increase economic growth. Disruptive technology in accordance with
Schumpeter's theory will increase productivity due to efficiency. With both of
these, it will increase the quality and quantity of goods produced. On the other
hand, innovation will also increase people's consumption after their income has
increased. The development that becomes the end point is the increase in the
amount of Gross Domestic Product. If each innovation can produce greater added
value and relatively survive each year, it will increase economic growth in the
long run.
The costs incurred due to disruptive innovation are:
The emergence of conflicts of interest from incumbent companies. As a company
that has consistently been in the market, it will certainly feel disturbed by new
companies that enter with technology that can replace its technology. Of course,
this will be addressed by the incumbent by trying to prevent new entrants from
entering the market. Thus, conflicts will certainly occur. Therefore, the role of the
government as a regulator is necessary.
Financial costs from the state to regulate and create regulations for disruptive new
innovations. In regulating and making regulations, there are certainly not small
costs that must be incurred by the government. Starting from the studies
conducted, until the regulation requires a relatively large amount of money.
Disruptive possibilities that turn into dispute. On a large scale, rejection of this
innovation is very likely. The rejection will certainly kill the business world.
Product development and improvement will not be achieved so that the goal of
economic development is not achieved.
Disruptive innovations will not always have a negative impact. There are many
best practices that can be reviewed in dealing with disruptive innovations. For example,
the Yogyakarta government issued an appeal (although not written) so that online ojek do
not take passengers at stations, airports and areas used as ojek bases. By paying
attention to local wisdom, conflicts can be minimized. Another example is Bandung,
which encourages creative economy players to market their products through online
markets. With good collaboration, it will certainly increase the income of creative
industry businesses.
The most important thing to understand is that disruptive innovation is a
necessity. It cannot be rejected because it will kill creativity, nor can it be ignored
because it will damage the market structure. Disruptive innovation is a technology It is a
wildly useful thing (because it has not been regulated) that needs to be regulated and
taken advantage of. The transition period is indeed a risky period for the emergence of
various negative effects as previously described. So it is very necessary for the
government to have a regulation that is able to regulate these disruptive innovations.
The regulations issued are certainly not justified if they complicate or even kill the
existing innovation process. After the transition period, the government still needs to
monitor the new disruptive innovation. In the end, every market will adjust because
every demand will form its own supply. All producers will eventually adjust to the
various innovations that exist.
