Disruption for Mutual Benefit

The word "disruption" gets tossed around a lot, especially in the Silicon Valley. To many in the Silicon Valley, disruption is what occurs when a small startup introduces an idea or model that shakes up the status quo. To be successful in a market full of established players, many would have you believe that you need to be disruptive to the point of defeating an incumbent by stealing market share from them. Thus, your success comes from doing things so differently than the incumbents that your new model gains success at the expense of the old model.

I am here to tell you that, while there are many success stories based on these principles, successful disruption need not depend wholly on a winner/loser scenario. In fact, I believe our markets today would be far better served by entrepreneurs who focus on disruption for mutual benefit - where all parties in a particular transaction benefit -- not just for the benefit of the disruptor.

Take, for example, the airline industry. For many years, the airlines have been challenged with balancing the cost of airfare offered to travelers with the cost of potentially flying with empty seats. They must charge prices that they think are fair and that help them cover their costs, but they must also be willing to provide discounts to certain travelers who may not fly at all if the price is not right.

As booking flights moved online and passengers were given tools to search the best rates and flights, an entire market was built by discount travel sites that wanted to disrupt the traditional travel booking model. These companies knew that the airlines were flying planes that were not full, and they saw an opportunity to make money on those empty seats. Probably the most popular example of this would be Priceline with their "Name Your Own Price" model. Their premise was that it was better to make some money for an empty seat than no money. The airlines agreed to participate in this model, with the hopes that this model would indeed increase their profits and reduce the need for future customer-facing fare increases to cover rising costs.

Over time, however, this model proved to be unilaterally disruptive -- benefitting the online discount travel sites, but not the airlines. The discount travel sites made the discounts available to all travelers -- even business travelers, which are the airlines' bread and butter -- so even though the airlines were filling more seats, they were losing money.

You see, business travelers need to be in a certain place (I have meetings in New York on Tuesday, and I will pay whatever the going rate is to ensure I get there). Therefore, business travelers do not need to be incentivized with discounts. So when the online travel sites opened up systems that gave discounts to everyone, they cut deeply into a group of people who would have paid full price, thus adversely affecting the airlines' profit margins. And as such, airfare has continued to rise approximately 10 percent a year to cover the rising costs of fuel and operations. The airlines are not seeing an equitable benefit from this model, and airline passengers are faced with ever-increasing airfare. So the primary winner in this disruptive model is the disruptor.

In my own entrepreneurial journey, I saw the new travel landscape that had been created by the last round of disruption (discounts for everyone, followed by reduced margins for airlines, followed by increased airfare for passengers, rinse-and-repeat) and realized a new round of disruption was needed to break this cycle. But I also believed that the next round of disruption would need to create an ecosystem of mutual benefit, as opposed to a system that perpetuates one party's loss so that another party can gain.

And this was the motivation behind my current company, GetGoing.com, which aims to identify pure leisure travelers (thus excluding business travelers or anyone who needs to reach a specific location) and provide them with even greater discounts on travel, while helping the airlines profitably fill seats. The idea is this -- travelers pick the type of trip they want (beach vacation, ski trip, European adventure, etc.) and GetGoing provides a bunch of options. The traveler picks two ideal trips (i.e., Maui AND Cancun, Paris AND Rome, etc.), and they can see every detail of their travel including flights, number of stops, price, etc. Then, once they have two trips - both of which they would be happy to go on - GetGoing picks one of those two trips and books the trip.

This system ensures that the people booking the trip are traveling for leisure, because they are not sure which of the two locations they will end up at. Business travelers cannot take advantage of this system, because they cannot risk that they would be sent to the second location (if they entered their business destination and a random second location). Thus, this ensures the airlines that business travelers will still need to book at normal prices, while the generous discounts (up to 40 percent) that they give to us will only be provided to leisure travelers.

Which leads me to the idea of mutual benefit. With this model, the airlines can rest assured that business travelers will not be using our system - so they get the benefit of not losing money on a trip that might have been booked at regular price. Leisure travelers, most of whom do not have one particular location in mind when planning a vacation (based on a study by travel research company PhoCusWright), benefit from heavy discounts, while still getting to go on a trip that they chose (because they chose two trips they'd be happy with, and we choose from those two selections). And of course, we hope to succeed as well by ushering in a new, mutually beneficial era of discount travel online.

So as you think about models that are due for disruption as you plan your next entrepreneurial undertaking, take a step back and look not only at how you can shake things up and make a profit, but also at who will benefit by your disruption. If the answer is primarily you, at the expense of other members of your particular market's ecosystem, perhaps you should reconsider. While there may be short-term profit to be had in cannibalizing an existing player's model, there is often a much greater long-term success to be had when your disruption can generate a new, profitable cycle for both you and the rest of the ecosystem.