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Is Skymeter really disruptive?

Recently, there has been a fair degree of media coverage on Skymeter (one of the tech companies who now call MaRS home). Just this month, the Toronto Star, Globe & Mail and CBC Radio have profiled the companys ambitious plans to help with a modern problem  which costs a lot of us valuable time - traffic congestion.

A few months ago, an article in Business 2.0 magazine described Skymeter (one of the companies that makes its home at MaRS as one of the Top 11 Disruptive Companies of 2006. But what does this really mean?

Most would agree the term is getting overused as a descriptor for new technologies. How does Skymeter stack up against some of the concepts used by Clay Christensen, the academic who first coined the term 'disruptive innovation'.

Christensen's theory suggests that disruptive innovation starts with the premise that technology "keeps getting better". Skymeter believes the advances in GPS satellite technology coupled with components that can be installed in a vehicle at reasonable cost have come of age in terms of solving some important problems that many of us have. Traffic is choking many major cities, with similar effects in each one: wasted fuel and productivity, polluted air and poorer health, and reduced economic growth. In light of these facts, cities and nations are looking for new solutions. Singapore (in 1998), London (in 2003), and Stockholm (in 2006) have already improved traffic in targeted areas by an average of 30 per cent after installing congestion pricing systems. However, many solutions proposed over the past decade have been based on an approach that relies on the installation of costly systems with land-based towers to monitor vehicle traffic. Skymeter has a very different plan with no ground infrastructure for municipalities to install, relying instead on the Galileo GPS network. Over time, the Skymeter system could profoundly impact everything from how we issue parking tickets to how we pay for parking within a municipality. Disruptive so far.

Christensen argues disruptive innovation is not just about technology - it's about business model. The technology is an enabler. Small, nimble, disruptive firms can succeed with business models that are unattractive to incumbents. For example, perhaps a Skymeter solution could work with a new kind of insurance company - one that uses GPS technology to more closely match driving behaviour to insurance premiums. Already companies such as Norwich Union (UK) have launched pay per mile insurance products. Imagine a new insurance company that only accepts drivers who plug in a Skymeter in their vehicle. The value for the customer is the lowest premium possible in their category as a lot of the actuarial overhead gets taken out of this system.

Business models are particularly disruptive when they address "non-consumption" - a market that has not responded to any traditional product offering. In this case, that market consists of people who don't drive because they can't afford the rates. A pay as you drive model would effectively open up previously untapped markets, much like prepaid phone cards opened up new growth opportunities for international long distance carriers and wireless networks.
Of course, there are other potential ways to deliver value for customers. What about an insurer that used all the meta-data collected from their Skymeter-enabled drivers to pass along "best route" and "where to avoid" tips that saved drive time?

There are many elements to Christensen's theory, but I won't bore you with all the details. When you apply the tests, Skymeter appears quite worthy of the Business 2.0 Magazine award, and might truly be disruptive. So as you sit in heavy traffic today, just remember there are a bunch of "disruptors" on the second floor of MaRS doing their part to ease your pain.

Add comment 2007-01-17 Peter Evans