Aereo’s defeat in the U.S. Supreme Court looks to me like part of a trend of legal setbacks for the latest wave of digital disruptors. The company got farther than any of its predecessors in taking on the status quo of broadcast television, but in the end the high court essentially rejected the premise that innovative technology could make its service compatible with the law. It’s not that the tech wasn’t cleaver enough to comply with antiquated statutes – the problem, the court conceded, was that the business was at odds with the law’s inferred intent. This is a hard lesson for disruptive innovators.
The Aereo case was more than just a victory for the incumbent broadcasting business: I believe it marks a turning point where digital disruption suddenly appears more vulnerable to legal reprisals than it’s seemed at any time in the past two years. Consider some other disruptors. Airbnb is in the process of upending the travel industry. The company has grown 750% since 2009 and recently secured $450 million in funding at a staggering $10 billion valuation. But in NYC, it’s under fire for allegedly abetting illegal behavior. The drawn-out conflict is a lawyer’s dream come true, but in a telling recent development, after initially resisting prosecutors, Airbnb agreed to hand over its customer data to the state attorney general. As Airbnb struggles to change NY State’s Multiple Dwelling Law and move other big rocks, landlords, co-op boards, and hotels are bristling at what they see as the service’s indifference to their rights as property owners and regulated taxpayers.
Then there’s Uber. It’s $17 billion valuation is even larger than Airbnb, yet, according to Justin Kintz, Uber’s policy director for the Americas, it faces regulatory issues in the 128 cities where it operates. In one recent sign of friction, it and its chief competitor, Lyft, were banned in the state of Virginia. Cities in general have given them problems: Uber has been targeted by protesters in Boston, Miami, San Francisco, Washington D.C., and Paris, where strikes have turned violent.
Which is not to say that either of these companies face a future nearly as doubtful as Aereo. But potentially disruptive businesses share the common trait that laws and regulations are often obstacles to their existence or success, even when those laws failed to anticipate what the Internet might make possible. This insight often seems lost on those of a technocratic bent who assume that law, like code, is a system to be debugged. When they discover things often don’t work that way, their reaction is often to accuse opponents of adopting, as Ashton Kutcher put it, a “Mafioso mentality.” There’s seldom acknowledgement that disruption has its victims too.
As these legal battles play out, there’s a corresponding debate going on in intellectual circles about the fundamental role of disruption in business strategy. The source of contemporary thinking on the topic is often identified as Clay Christensen’s famous 1997 book, The Innovator’s Dilemma, which spawned an entire business philosophy dedicated to disruption. His Harvard colleague Jill Lepore recently took on Christensen and his philosophy with a bold rebuttal in The New Yorker entitled The Disruption Machine: What the Gospel of innovation gets Wrong in which she rebukes the idea that disruptive innovation “[holds] out the hope of salvation against the very damnation it describes.” Christensen offered a pointed redirect in Bloomberg Businessweek (he calls her piece a “criminal act of dishonesty”), and the story is well covered by Karen Webster in Pymnts.com’s To Disrupt or Not To Disrupt: Is That Really The Question?
What does this have to do with marketing? Here are a few quick take-aways:
- Beware of digital disruption’s all-or-nothing rallying cry. Ideas don’t need to be destructive to be valuable. Review Nielsen’s recent Product Innovation awards and ask, how disruptive were these winning ideas? Most of them simply discovered and satisfied unmet consumer needs.
- If you’re a marketer whose business is being threatened by a disruptive competitor, consider who else is being disrupted. Don’t assume that disruptors are always good at marketing. Disruptors aren’t always perceived as heros.
- And always remember: disruptors themselves are also vulnerable to disruption. You can create your own Aereo with a DVR and an antenna (here’s how) – it’s usually better to find ways to fill consumer needs with services that are legal than to take on the system, whether it’s City Hall, the State House, or the Supreme Court. Unless, of course, you’re a lawyer.