DISRUPTIVE INNOVATION IN COMPETITION LAW STUDIES
Introduction
Innovation is a characteristic of today's business shapers that signifies the exponential era
where changes can no longer be calculated by the pattern of addition or multiplication but
have followed the pattern of powering, following the mathematical concept of lifting a
number. If in the past the business jargon that emerged was differentiate or die, now it
becomes innovate or die. This shows how important innovation is in the business world.
Innovation in business practice is an important key to the success of the business itself. So
important is innovation, it is not surprising that in carrying out its business activities it carries
the spirit of innovation itself in its slogans. As in the context of the Suzuki company with its
well-known slogan "Suzuki, relentless innovation", as well as the Yamaha company with the
slogan "Yamaha is always in front" and many other examples of slogans with the spirit of
innovation.
Technological innovation in the era of information technology as it is today does not only
stop at the matter of producing new products or new services. However, in this era,
technological innovation has had a negative impact on conventional business development,
where the presence of technological innovation has caused conventional businesses to be
disrupted or go out of business. This kind of condition is called Disruptive Innovation or
interpreted as disruptive innovation.
Nowadays, United States 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-contra, namely the phenomenon of online motorcycle taxis that replace
conventional motorcycle taxis. Another example is online hotel booking technology that
replaces conventional booking.
Edi Suandi Hamid (2017: 3) emphasizes that 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 make innovations that accommodate it. The need for efficiency is a strong
reason for how producers innovate to enter the market.
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. Not infrequently, incumbent entrepreneurs who feel disturbed protests and
demonstrations to ban the newcumbent from operating. In fact, it is not uncommon for
clashes to occur during these protests.
The situation is quite clear that there is a conflict of interest between incumbent entrepreneurs
and newcumbent actors with easy technological innovation. Meanwhile, according to E-
Marketer (2017), the number of Internet users in United States, which has reached the sixth
largest in the world, is a special attraction for all business actors who have "gone digital". It is
estimated that in 2018, Internet users in the country will reach 123 million.
It is true that "disruptive innovation" is a global phenomenon that cannot be stopped. Even
so, as a sovereign state, there is still room for public policy makers to deal with this invasion
so that long-term public interests are still given priority. This long-term public interest can be
seen from at least two sides, but has multidimensional implications.
First, the competition side. This side addresses B2B (business to business) relationships.
From this side, the business world must prioritize the creation and maintenance of a healthy
business competition climate. There should be no barriers for new players to enter (no entry-
barriers) in the United States business world, which in turn results in the concentration of
market control by one or a group of business actors. The market should not be a buyer's
market, but a seller's market. The emergence of disruptive innovation should not be faced
with a negative attitude, i.e. defensively prohibiting it, but rather it should be wisely
accommodated so that conventional business actors (incumbent business actors) can take
advantage of this development as optimally as possible. For those business actors who are not
ready, it is the government's duty to prepare them. That is why a state strategy is needed in
the face of this disruptive innovation.
Second, the consumer protection side. This side focuses more on B2C (business to consumer)
relationships. Disruptive innovation departs from the perspective of concrete consumer needs.
So, from a consumer perspective, this innovation is not considered "disruptive". Instead,
consumers find it helpful as services become more efficient and effective. Consumer support
for the existence of such innovative businesses should not make consumers careless, resulting
in the accumulation of losses to consumers due to fraudulent practices in the business world,
by utilizing information and communication technology as a medium. Therefore, consumer
protection must be a point of attention. It is the duty of the state to continuously educate
consumers because innovation in this field never stops. These two main sides then have
tremendous implications, especially in the intellectual property protection sector and social
issues. Based on the above, how is disruptive innovation in the study ofcompetition law
business?
Discussion
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
Understanding the Meaning of Innovation
Innovation is the key to business success. In fact, some experts argue that innovation is the
key to the success of a business, so innovation is perceived as king or innovation is king.
(Carl Shapiro, 2005: 2)
Christoper M. Kalanje mentioned that, in general, innovation is developing new ideas and
applying them in a practical activity. The word innovation comes from Latin, namely
innovare which means making something new (Trina Fizzanty et al, 2014: 37). Innovation
can be defined as the "process" and or "result" of developing and utilizing or mobilizing
knowledge, skills (including technological skills) and experience to create or improve new
products (goods and/or services), processes, and systems, which provide meaningful or
significant value (especially economic and social). Innovation as an "object" also means a
new product or practice that is available for application, generally in a commercial context.
Meanwhile, innovation as an "activity" is the process of creating innovation, often identified
with the commercialization of an invention.
The definition of innovation according to the Big United States Dictionary (KBBI) is the
inclusion or introduction of new things; renewal or new discoveries that are different from
existing or previously known (ideas, methods, or tools) then the verb is to innovate which is
defined as presenting something new; renew. (Suharso and Ana Retnoningsih, 2009: 184).
According to the Popular Scientific Dictionary written by Pius A Partanto and M. Dahlan Al
Barry (2001: 266) states that innovation is renewal (in the field of social development,
science / science and technology), while the adjective is innovative which means leading to
(improvement and development); renewal in nature, and people who innovate are called
innovators who can do innovation is defined as a reformer; a person who brings things/ideas
of renewal methods; a pioneer of (new) ideas.
Innovation in business, often occurs when ideas are implemented by companies to better meet
customer needs and expectations. The concept of innovation according to Schumpeter who
coined the Theory of Economic Development in 1912 is defined as an effort to create and
implement something into a combination, so that with innovation one can add value to
products, services, work processes, and policies not only for educational institutions but also
stakeholders and society. Schumpeter describes development as a historical process of
structural change that is substantially controlled by innovation (Schumpter, 2015: 90).
Schumpeter (2015: 90) divides innovation into 5 (five) major types: 1) the launch of new
products or new species of familiar products; 2) the application of new methods of production
or sale of products (which have not yet been proven in the industry); 3) the opening of new
markets (markets for which there is no representative branch of the industry); 4) obtaining
new sources of supply of raw materials or semi-finished goods; 5) new industrial structures
such as the creation or destruction of monopoly positions.
Meanwhile, Wina Sanjaya (2008: 293) in his book Curriculum and Learning, innovation is
defined as something new in social situations and used to answer or solve a problem.
Innovation in the social context helps to create new methods for the creation of alliances,
joint ventures, flexible working hours, and the creation of buyer purchasing power.
Innovation can also be said to be a new change towards improvement, which is different or
different from what has existed before, which is done intentionally and planned or not by
chance.
The types of innovation according to Schrumpeter (2015: 91) consist of 4 types, namely:
Invention is the creation of a new product, service or process that has never been
done before. This concept tends to be called revolutionary.
Extension is the development of an existing product, service, or process. Such a
concept becomes a different application of an existing idea.
Duplication is the imitation of an existing product, service, or process. However,
duplication is not merely imitating but adding a creative touch to improve the
concept to be better able to win the competition.
Synthesis is the integration of existing concepts and factors into a new formulation.
This process involves taking a number of ideas or products that have already been
discovered and shaping them into products that can be applied in new ways.
Based on the various definitions of innovation and the types of innovation above, innovation
can be interpreted broadly or narrowly. Innovation with a broad meaning is the introduction
of new and better products and the application of new business methods and production
processes, while innovation with a narrow meaning means new technology in the form of
products and/or processes and their development and/or improvement.
The Essence of Disruptive Innovation
According to Utterback & Acee, disruptive innovation theory takes an extension from the
original formulation to a more general strategy formulation of market expansion strategies.
(Chang Che Hang, 2013: 6)
Disruptive Innovation, in freely adapted United States means innovation that disrupts or
innovation that disrupts. The word disruptive in this context cannot be taken freely. 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 (Wahyuningtias G et al, 2014: 2).
However, it is often forgotten that in modern market competition, technology has a huge
influence. Especially for companies that are well-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 innovations that replace and make things easier are called disruptive
innovations.
The advent of disruptive innovation has brought the world to change faster than ever before.
Globalization, social networks, professional mobility, and worker unrest have flattened and
forced companies to focus on the knowledge of their workers. Today, it is recognized that
many businesses are disrupted by globalization, technological shifts, and new competitors.
They are forced to reinvent their corporate identity. Even in healthy companies, business
model innovation is critical to maintaining their competitive position. Business models are
shifting from the workplace to the streets.
The presence of this disruptive innovation phenomenon has given birth to various kinds of
innovations in the field of technology. Innovation in technology never occurs without
changing the conventional industrial structure. (Jon M. Garon, 2012: 441) This innovation in
technology has changed the conventional business model which leads to a fundamental
paradigm shift. The paradigm of innovation in technology has shifted from sustaining
technology to disruptive technology. In Christensen's view, there is a difference between
sustaining and disruptive technology, he states: "Sustaining technologies improve
performance, increase margins, and build customer relations, disrupting technologies often
start out as unusable innovations that underperform, cost too much, or focus on a different
customer base." (Jon M. Garon, 2012: 442) (Sustaining technologies improve performance,
increase margins, and build customer relationships, disrupting technologies often start out as
unusable innovations that underperform, cost too much, or focus on a different customer
base).
Disruptive innovation was popularized by Christensen in 1997 so it is necessary to
understand several things. First, there is no need to debate when disruptive innovation first
appeared in the world because the term disruptive innovation was only introduced by
Christensen in 1997. Various innovations that can be said to be disruptive innovations are
limited in scope after the term was introduced. Second, innovations can be said to be
disruptive innovations if the innovation brings new technology that is cheaper and easier than
the existing technology. The efficiency offered due to low prices ultimately disrupts the old
technology that is expensive and inefficient. Third, disruptive innovations occur in the same
industry, if the innovation does not disrupt old industry players, or on the other hand directly
disrupt other industries, then the innovation is not said to be a disruptive innovation.
Disruptive innovation happens all over the world. In Europe, for example, the biggest case
that has ever happened is the company Nokia. The cellphone, which in its heyday was
dubbed the million people's cellphone, finally had to recognize Android and Os 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 its Symbian system. Even
when Apple released the iPhone in 2007, Nokia still felt unchallenged 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.
Disruptive Innovation in Competition Law Studies
Online taxis are one of the disruptive innovations. Competition between online taxis and
conventional taxis is inevitable, even though the business pattern is different. It is different
because the company that provides the app does not provide the cars. In general, the cars are
owned by the drivers themselves and the relationship between the drivers and the app
company is a cooperative relationship through a cooperative where the drivers join. The
definition of the relevant market from the perspective of competition law is also an issue.
This is a challenge for the Business Competition Supervisory Commission (hereinafter
referred to as KPPU) to assess the competition between the two, because as mentioned by
Christensen that disruptive innovation businesses are cheaper, easier to obtain and use a
business model with structural cost advantages.
The question is how does the competition agency assess the impact of disruptive innovation
on business competition and how does competition law apply to business actors who use
disruptive innovation, which in reality can divert buyer interest from incumbent business
actors to business actors with disruptive innovation? Therefore, beforehand, it is necessary to
answer what exactly is the purpose of business competition law? It is generally agreed that
the purpose of business competition is to protect business competition itself, not to protect
business actors and to prosper consumers. Meanwhile, the objectives of Law Number 5 Year
1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition are to
improve public welfare (consumers), create a conducive business climate through regulation
of fair business competition, prevent monopolistic practices and/or unfair business
competition, and create effectiveness and efficiency in business activities.
In enforcing Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Business Competition, the basic consideration is to achieve the objectives of the law. Because
of disruptive innovation in the context of online taxis, the business pattern has not yet been
established. In order to recognize the legality of online taxis in United States, the Minister of
Transportation Regulation No. 32/2016 on the Implementation of Non-Transit Transport of
Persons was updated to Minister of Transportation Regulation No. 26/2017 (hereinafter
referred to as Permenhub No. 26/2017). So when issues arise especially regarding the
relationship between innovation and competition policy, the common understanding is that
KPPU should protect the innovation process by leaving the market open for potential
innovators. Therefore, determining the relevant market or clarifying the market structure is
essential to determine whether the actions taken by business actors in the relevant market are
anticompetitive or not.
Market definition is particularly relevant in the context of disruptive innovation, as one of the
distinctive characteristics of disruption is its ability to "disrupt" existing markets and destroy
incumbent firms. Are online taxis and conventional taxis in the same relevant market? From a
simple market perspective, the answer is yes, but from the opposite market perspective
(supply), it needs to be studied further, because the innovation of online taxis is precisely the
application system created that makes it easier for prospective passengers to order them.
Furthermore, the relationship between online taxi drivers and application providers must be
clarified whether it is employment or cooperation, because according to Minister of
Transportation Regulation No. 26/2017, application providers cooperate with public
transportation companies, which are in the form of cooperatives. Therefore, to analyze market
power and dominant position, it is necessary to explain these matters in order to calculate the
production cost, so as to assess whether the price offered by online taxis is reasonable or not.
Based on the discussion above, disruptive innovation has a major impact on competition in
the relevant market, namely on consumers, consumers can be prospered, and on competition,
so conventional business actors must improve to be able to compete. The first step that must
be taken by KPPU in analyzing whether or not the behavior of online taxis is anti-competitive
in the relevant market, KPPU specifically establishes the definition of the market concerned
first. Even when markets are altered or created by disruptive innovators, competition
authorities (KPPU) are faced with the need to segment existing markets or define new ones.
The determination of the relevant market is very important to analyze whether online taxis
are anti-competitive and whether they have market power and a dominant position that they
can abuse.
Conclusions
"Disruptive Innovation" is a global phenomenon over the past decade thanks to the use of
information and communication technology. This innovation has changed many perspectives
on doing business, essentially providing more choices that benefit consumers. Therefore,
such innovations cannot and should not be discouraged, as innovative markets are a
prerequisite for economic growth.
If there is a view that this innovation has a "disruptive" impact on established businesses,
then this impact must be managed properly by the state. Incompetence in management will
only damage the market structure, resulting in economic and social instability. The pattern of
management should not simply be left to the free market mechanism, but must pay close
attention to the philosophical and constitutional foundations of the state, with public welfare
and social justice as the ultimate goal.
