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Rentable Electric Scooters: A Disruptive Innovation or Merely a Transformative

Business Model?

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 Rentable Electric Scooters: A
Disruptive Innovation or Merely
a Transformative Business
Model?
By Hamish Sadler

By Hamish Sadler
Introduction
Nowadays, the term “disruptive” is used as a
common adjective to describe the success of a
successful startup or established company with a
product, service or business model. The term
“disruption” can even be seen on strategic
artefacts released by major government agencies
like health and education departments. However,
there are clear theoretical and practical
distinctions on whether or not a product, service
or offering can be disruptive.
Take the rentable electric scooters concept
which was popularized by companies like Bird
and Lime. The latter is startup in San Francisco
which managed to reach a valuation of $1.1b to
$2b only after a few months of establishment
(Robinson, 2018).
The concept in simple terms can be described as
the company distributing GPS-enabled and
network-connected electric scooters in cities to
be found and unlocked using smartphone apps
that also facilitate as-you-go time-based or
usage-based payments by users who can leave
scooters anywhere after their trip by locking them
where a future user may unlock and use them.
The public can contribute to the “scooters
economy” by charging them and receiving
payments, which depend upon the difficulty of
retrieving the scooters or the amount of charging
they need (Li.Me, 2018). The concept is a
considerable advancement in the micro shared
mobility space to solve the first and last mile
problem (Mitchell, 2018).
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There are a lot of references to them as the next
Uber “disrupting” the micro-transportation arena
but is that statement correct?
In this essay, we argue that although the
concept and the business model behind rentable
shared electric scooters are solid, innovative and
transformative but they are “not” disruptive. To
clarify the argument, we provide insights and
foundations from the literature to articulate the
characteristics of each type of business models
and cite how the concept can be transformative
rather than disruptive.
Knowing these subtle differences can help
leaders of incumbent companies identify
disruptions to respond promptly. It can also help
future entrepreneurs repeat the success of
disrupters through knowing how disruption works
in practice.
State of the Art
Multiple definitions have been proposed for
business models. Kavadias et al. define a
business model as a concept that “describes how
a company creates and captures value” (Kavadias
et al., 2016). In another definition, it is referred to
as “a way to articulates the logic, the data and
other evidence that support a value proposition
for the customer, and a viable structure of
revenues and costs for the enterprise delivering
that value” (Teece, 2010). Some define it as “a
reflection of the firm’s realized strategy”
(Casadesus-Masanell and Ricart, 2010), or “a
system of activities that depicts the way a
company does business” (Amit and Zott, 2010).
Four dimensions of customer value proposition
(CVP), profit formula, key resources and key
processes have been cited as the
interlocking elements of business models (Mark
W. Johnson, 2008).
Disruption has been described as a process
whereby established incumbent companies are
challenged by smaller companies with access to
fewer resources while incumbent companies
focus too deeply on improving offerings for the
most profitable markets hence almost ignoring
the lower-end of the market, leaving it to the
“disrupters” (Christensen et al., 2015). In other
instances, disruption has been referred to as
driving innovation for the bottom of the pyramid
in reflection of the low-end to high-end capture
of market in the disruption process (Hart and
Christensen, 2002).
Christensen et al. propose a number
characteristics for disruption all of which should
be true to make it applicable to an innovation
case. These characteristics include the fact that a)
disruption is more of an evolutionary process (e.g.
Netflix’s sidelining of Blockbusters via mail-first
model that was not of high quality for all at first);
b) disrupters often develop different business
models; c) disruptive innovations originate in low-
end or new-market footholds; d)disruptive
innovations don’t catch up with mainstream
consumers until their quality catches up; and e)
that disruptive innovation is usually assessed as
low-quality by incumbent companies (Christensen
et al., 2015).
The definition subtly differentiates between
sustaining innovation, low-end disruption and
new market disruptions in that sustaining
innovation makes great products even better in
the eyes of the established market (e.g. Clearer
main TVs, or iPhone as a product) while disruptive
innovation leads to a gradual take-over and
market creation (e.g. personal copiers which
pushed Xerox aside in the 70’s, or Apple’s
business model in connecting developers to
users) (Christensen et al., 2015, Christensen and
Christensen, 2003). As such, there are arguments
that AirBnB can be categorized as a disruptive
innovation (Yu and Hang, 2010) while Uber is not
(Christensen et al., 2015).
On the other hand, Kavadias et al. argue that for
a business model to transform an industry, it
must own at least three of the six characteristics
of personalization, closed-loop, asset sharing,
usage-based pricing, collaborative ecosystem and
agility (Kavadias et al., 2016). They bring 40
of examples of transformative businesses that fulfill
such criteria, including Uber that fulfills five of
the six features as a transformative business.
Perspective
It can be argued that the business model behind
rentable electric scooters can be transformative
since it carries at least four of the six
characteristics of transformative business
models, as proposed by Kavadias et al..
Firstly, the business model facilitates
personalization since the scooters that are
available in a user’s proximity can be shown and
found by users easily is an example of pivoting
products and their availability to custom user
needs. Secondly, it supports time and usage
based pricing. Thirdly, enabling the public to
contribute to the battery charging process is a
strong example of supporting a collaborative
ecosystem and lastly, the battery charging
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economy and making it possible for chargers to techy casual commuter market first and may or
view scooters that require charging while may not end up looking appealing to the rest of
providing a difficulty-based rewarding scheme the market.
are examples of real-time agile response to It can also be argued that rentable electric
market changes, fulfilling the agility aspect of a scooters are targeting the first and last mile
transformative business model. problem which practically did not have any
On the other hand, adding new activities, linking solutions except for walking, non-electric
activities in novel ways, or changing one or more scooters, bikes or other forms of public transport.
parties that perform any of the activities in a Considering the already low-quality and less-
business model have been cited as ways to expensive options like manual scooters or
innovate a business model (Amit and Zott, 2012). rentable bikes, rentable electric scooters may
As such, it can be argued that the business model well fall into a “sustaining innovation” category
behind rentable electric scooters is indeed than a “disruptive” one since they are indeed an
innovative since it defines new activities like improved version of the old scooter concept or
“charging” and allows the scooters to be left on any existing and inconvenient option like bikes.
their own for the convenience of the users as a In another perspective, the popularity of
novelty aspect. rentable electric scooters has surged in a very
However, Rentable electric scooters cannot be short period of time rather than following a soft
considered of inferior quality to become trajectory, opposing the gradual evolutionary
appealing at later stages when compared to any characteristic of disruption, which has been
of the existing options like manual scooters, bikes depicted in the Netflix vs. Blockbuster case, in
or even public transport. In fact, the opposite can which it took years for Netflix to take over the
be true for them. They can be considered an market through the use of fast Internet
improved sustained version of the old scooter connectivity, which helped them propel from the
concept, disqualifying electric scooters in one of mail-order model to streaming.
the criteria for being disruptive. This would even All these reasons point us to the direction that
oppose the idea that rentable electric scooters rentable electric scooters may not be categorized
disrupted bike ownership or bike hiring market as disruptive despite being innovative and
since in many ways, they are an improvement to transformative.
the perceived quality of bikes that either have to
be used spending calories while “sweating” or be Conclusion
returned to their bay when being rented.
In this paper, theoretical foundations on
Rentable electric scooters have not originated in
disruptive, transformative and innovative
the low-end or new footholds of the market
business models were cited to argue that while
either. Conversely, one can argue that rentable
the business model behind shared rentable
electric scooters have attracted the mainstream
electric scooters like Bird or Lime Scooters can be

Page 4
innovative and transformative, they cannot be
categorized as disruptive. This distinction is
justified despite the desirability of the idea that
such scooters are disrupting shared riding arena
itself by targeting the “low-end” market of “short
trips”, however, some of the distinct
TEECE, D. J. 2010. Business models, business
characteristics of disruptions are still missing for
electric scooters, which justify why they cannot be
YU, D. & HANG, C. C. 2010. A reflective review of
categorized as a case of disruptive innovation.
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