Business, Law, and Innovation

Class Exercise:

Creative Destruction

Lecture 2Spring 2014

Professor Adam Dell

The University of Texas School of Law

2

Recall What Creative Destruction Is..

2

3

Types of Creative Destruction

3

There are numerous types of innovation-generating creative destruction in an industry:

New markets or products

New equipment

New sources of labor and raw materials

New methods of organization or management

New methods of inventory management

New methods of transportation

New methods of communication

New methods of advertising and marketing

New financial instruments

4

That are getting destroyed / re-invented

Personal transportation

Delivery Services

Point of Sale

Food Systems

4

Let’s look at some industries

Personal Transportation

Uber

How many of you are customers?

Prefer the experience to typical car service?

Would recommend it to a friend?

Found it price competitive?

Uber – Value Proposition

Value Proposition:

To the consumer?

To the driver?

To the dispatch companies?

Uber - Economics

Black car is a $11b market in the US. Uber is already in India.

Uber takes 20% of the total.Pays drivers immediately.Less expensive than a traditional car service.Spends $0.00 on marketing. Doesn’t have one of these:

Uber - Economics

Instead it has this:

Uber - Economics

They have this:

Instead of this:

Uber – Competition

Lyft

SideCar

Hailo

RelayRides

?

Uber: Regulation

Willie Brown, former mayor of SF, got a condo at the St. Regis from the taxi commission…

And Uber:

Regulations Prompt New Fight Between D.C. Taxicab Commission ...wamu.org/.../new_regulations_prompt_new_fight_between_dc_taxicab_...Aug 21, 2013 - But the D.C. Taxicab Commission has passed regulations ... Linton insists the commission is not picking another fight with Uber, which fought ...D.C. Has Already Outlawed Uber's New Taxi Service - WNYCwww.wnyc.org/story/313837-dc-outlaws-ubers-new-taxi-service/Aug 21, 2013 - Linton insists the commission is not picking another fight with Uber, which ... "The D.C. Taxicab Commission does not fight with the people it ...Stakes in Uber vs. taxi fight are higher than most people realize ...www.dallasnews.com › Opinion › Sunday PointsAug 30, 2013 - In Washington, D.C., the Taxicab Commission is trying to stop Uber from offering cheap rides in small cars. In New York City, it took a massive ...Taxi Commission Passes New Regulations To Block UberX, Uber ...dcist.com/2013/08/dctc_passes_new_regulations_to_bloc.phpAug 20, 2013 - Yesterday, the D.C. Taxicab Commission passed new regulations that will ... it work: "Consumers want Uber in D.C. We're going to fight for that.FTC sides with Uber in DC taxi fight | TheHillthehill.com/blogs/hillicon.../305161-ftc-sides-with-uber-in-dc-taxi-fight

Uber – Expanded and Expanding to

Taxis, Rental Cars, Delivery, Helicopters, Planes.

What’s next?

If you were the head of product?

Point of Sale

Square / Shop Keep / Bread Crumb

How many of you are customers?

Prefer the experience to typical point of sale system?

Would recommend it to a friend?

Found it price competitive?

Square – Value Proposition

Value Proposition:

To the consumer?

To the merchant?

To the credit card companies?

Square – POS Market

Global POS hardware market to reach $31 billion globally, 2014.

Square – Unit Economics

Global POS hardware market to reach $31 billion globally, 2014.

VS

VS+

Point of Sale – Economics / Competitors

Delivery Services

Task Rabbit

How many of you are customers?

Prefer the experience to typical messenger service?

Would recommend it to a friend?

Found it price competitive?

Task Rabbit – Value Proposition

Value Proposition:

To the consumer?

To the rabbit?

To the messenger companies?

Task Rabbit- Economics

Delivery Industry is a $15b market in the US. Task Rabbit takes 15% - 20% of the total. Pays rabbits immediately.Less expensive than a traditional messenger service.Spends $0.00 on traditional marketing. Doesn’t have one of these:

Task Rabbit - Economics

Instead it has this:

Task Rabbit- Regulation

Doesn’t seem to be a problem…yet.

What could go wrong?

Task Rabbit– Expanded and Expanding to

Delivery, Cleaning, Odd Jobs, Handy Man, Virtual Tasks,

What’s next?

If you were the head of product?

Task Rabbit– Competition

Favor (here in Austin)

HomeJoy (just raised $38mm)

Zeel (massage)

GetMaid (cleaning)

Cherry (car wash)

Food Systems

Good Eggs

How many of you are customers?

Prefer the experience to typical grocery store?

Would recommend it to a friend?

Found it price competitive?

Good Eggs– Value Proposition

Value Proposition:

To the consumer?

To the farmer?

Good Eggs- Economics

Grocery industry is a $650b market in the US. Traditional operaters live on tiny margins, 3-4% points.

A few outliers: Whole Foods.

Good Eggs –Expanding to:

Brooklyn, SF, LA, NOLA

Task Rabbit– Competition

Amazon Fresh

Fresh Direct

Whole Foods Delivery

Class Exercise: What’s Next

Can you envision creative destruction in an existing market?

How would you do it?

You can deliver cheaper?

Without advertising?

Without people?