INNOBLOG

Last week I attended a lecture by Boston Globe innovation columnist Scott Kirsner entitled "New Englands Innovation Economy: Understanding the Strengths and Challenges. Among the many recent innovative ventures mentioned throughout the lecture, Kirsner highlighted the enormous potential of Zipcar, the Cambridge, MA-based pioneer that is re-defining the concept of car rental. Drawing from disruptive innovation theories, he posed a question in passing:

Why have large car-rental companies not moved to replicate or acquire Zipcar?

The question was left unanswered, and has lingered on my mind ever since. Could it be that car-rental companies dont recognize Zipcar as a competitor? After all, Zipcar targets a different customer: someone who could benefit from the convenience of a car in their day-to-day lives but not so much that theyd be willing to own one, rather than the travelers who typically rent from traditional shops. The job-to-be-done is different, too: Zipcar customers need a car for a couple of hours to avoid carrying heavy grocery bags on a bus or subway, whereas Avis customers need a car for a couple of days while they are out of town on business.

I felt it unlikely that car-rental companies could fail to see that they are in the same business as Zipcar: the business of lending out cars. A quick web search confirmed this suspicion: Enterprise Rent-A-Car recently partnered with Metro-North railroad to place cars in train stations outside of New York City. Travelers can take the train out of the city and pick up a car for a few hours to complete their journey. The same service, in the same location, was previously offered by Zipcar.

But this is the only recent instance I could find in which car-rentals and car-shares are swimming in the same waters, although the Boston Globe suggests that other competitors are piloting Zipcar-style programs. While Zipcar is building scale (recently acquiring competitor Flexcar), it is business as usual for Avis, National, Hertz and Budget. Why are these incumbents seemingly slow to move?

The answer has to do with a key feature of the disruptive innovation model asymmetry of motivation. Zipcars car-sharing concept has true disruptive potential not just because it addresses key barriers to consumption (cost, access and time), but also because it addresses customers and jobs that appear unattractive to its competitors. While incumbents invest in gas-pumps at their brick-and-mortar stores, Zipcar invests in modifying its fleet to fit a remote-management information system. Incumbents buy and lease large plots of plants near airports, while Zipcar rents parking spots in congested city streets. Incumbents differentiate with car seats, GPS systems and at-home pick-up, while Zipcar differentiates with convenience at a low price.

Asking established rent-a-car companies to operate a business like Zipcars is like asking Starwood and Hilton to operate New York Citys new street toilets. Im not saying it cant be done but can you blame them for not wanting to?