ABSTRACT
We are surrounded by many startups in this twenty-fisrt century. In this article, the author will be discussing about the connection between the Unicorn Startups and Disruptive Innovations. These new startups succeeded in the market very quickly with their strengths and some of them was established by disrupting other conventional industries. While moving to the topic ‘disruptive innovation’, the author would like to explain it’s story of success; also the story of failure. This paper highlights the laws and regulations given by the Competition laws which regulates the competition in business sector and the author gives her own suggestions and conclusion.
- STARTUP AND UNICORN STARTUPS: MEANING
A startup is a business structure powered by disruptive innovation[1], created to solve a problem by delivering a new product or service under conditions of extreme uncertainty.[2]Many entrepreneurs and renowned business magnates define startup as a culture and a mentality of building a business upon an innovative idea to solve critical pain points.[3]Unicorn startup is a different term when compared to a startup. A unicorn is a startup company founded after 2003 which has a current valuation of more than $1 billion.[4]The number of unicorn startup started to unfold suddenly in india. Before going to investigate the reason behind the growth of the unicorn startups, we should see whether these kinds of startups disrupted any traditional part of business and Indian economy. There emerged the business techniques which focuses only on the consumers benefits and neglecting the basic needs of a common man. 62% of the unicorns are B2C and their business models are focused on making the things more easier and affordable for the consumers.[5]
For example, Spotify makes it easier to listen to musics without having to download it from the network and provides it in a very convenient way to the users. Delivery of the groceries to our doorstep in a click makes it easier for the consumer, but this makes many conventional sellers jobless and makes their lives miserable.
Some examples for unicorn companies are:
l Uber : This ride-sharing company established a completely new market in transportation.[6]Founded in 2009, Uber currently has operations in 785 metropolitan areas worldwide. [7]
l Xiaomi- China: With over 8,000 employees, Xiaomi is truly one of the world’s most impressive unicorns.[8]
- Pinterest ($12.3 Billion) – USA: Pinterestwas founded in 2009, and with a valuation of just over $12.3 billion, the visual social media platform is used by hobbyists, businesses, and marketers worldwide.[9]
l Airbnb : Founded in 2008, this company has changed the way we think about accommodation by revolutionizing the sharing economy.[10]
l Epic Games (U.S.): video games company. E.g. Fortnite.[11]
- JUUL Labs (U.S.):electronic cigarette company.[12]
- DISRUPTIVE INNOVATION AND UNICORN STARTUPS:-
Disruptive Innovation refers to a technology whose application significantly affects the way a market or industry functions.[13]“Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge an established incumbent businesses.[14]The problem with conflating a disruptive innovation with any breakthrough that changes an industry’s competitive patterns is that different types of innovation require different strategic approaches.[15]An example of modern disruptive innovation is the Internet, which significantly altered the way companies did business and which negatively impacted companies that were unwilling to adapt to it.[16]
- Sustainable innovation:
Sustainable innovation is another type of innovation which is totally different from disruptive innovation. In sustainable innovation, it attempts to bring better products to the consumer within its limit without causing any damage to the existing competitors. This also can be said as a positive way of competition without causing any damage to the traditional competitors. The aim is to achieve higher profits and to avail the best customers.
Disruptive innovations, in contrast, don’t attempt to bring better products to established customers in existing markets.[17] Rather, they disrupt and redefine that trajectory by introducing products and services that are not as good as currently available products.[18]
- COMPETITION LAWS AND DISRUPTIVE INNOVATION:
The competition Act of 2002, prohibits Anti-Competative agreements and abuse of dominant market positions. It acts against the abuse of dominant market positions and restricts any kind of obstacles that denies the market access to the competitors. The authority incharge for this is the Competition Commission of India (CCI).
A. Abuse of dominant position (under Section 4 Competition Act, 2002):
An enterprise in dominant position performs any of the following acts, it directly or indirectly, imposes unfair or discriminatory practices,limits or restricts production of goods or provision of any services in any form indulges in practice or practices resulting in denial of market access makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts; or uses its dominant position in one relevant market to enter into, or protect, other relevant market.[19]
- Predatory price (under Section 4 Competition Act, 2002):
The sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.[20]
- Preventing Disruption through Acquisitions:
Next to exclusionary conduct, established firms may also acquire potential disruptors to avoid that innovation comes to the market and destroys their business. [21]The antitrust agency should prohibit such mergers, which are welfare detrimental. There are however two difficulties.[22] First, the acquisition often makes place when the potential disruptor is still small, hence the merger is not notified to the antitrust agency.[23] For that, the law might need to be amended to provide for an additional threshold for merger notification (section 4.1). Second, it is not easy to determine whether the acquisition of a potential will decrease consumer welfare. For that, a precise test for the theory of harm needs to be applied section 4.2).[24]
- DISRUPTIVE INNOVATIONS AND ITS DARKER SIDE:
Innovation means disrupting or replacing existing processes, roles, institutions, technologies or business models, and this generates winners and losers.[25]Technological innovations, for example, have enhanced productivity and contributed to economic growth while automating and digitizing jobs previously held by a human workforce.[26] This darker side of innovation is now starting to be discussed in the literature, which has identified disruptive objectives, operational failures and unintended consequences as components of “bad innovations”.[27]
If there are more innovations, the amount of creative ideas will be less. Disruptive innovation will obstructs others ideology in making new products or business. It destroys other competitors who are trying to make an achievements by their own creative ideas or skills. Obtaining opportunities also will become less as compared to before due to the upliftment of this kind of innovations. By these innovations the technologies will come into the main picture and the importance of labour power will become less. The emergence of Artificial intelligence (AI) is one of the main example for the above said content. The emergence of the new company will badly effect the already existing companies. Thus these new incumbent companies block the entry of already existing company from entering into the market. Here arises the chance for conflicts and this is one of the reason said to be the need for regulation rules by the government. The government requires large cost for controlling the regulations. Disruptive Innovation can destroy the market structure also by destroying other conventional structures. It causes the increment in the number of unemployment and this amounts to the downturn of job opportunities too. Many employees are facing job retrenchment i.e any time dismissal or reduction in salary in order to increase the profit, this act is done by the employer.
- CONCLUSION:-
The Disruptive innovation is the best way to avoid the existing business method which is deliberate and it is the correct time to start a new one by expecting greater success. Many of the cases explain the failure of company when they face of innovation and development.[28] Despite the disruptive innovation is not a threat, but all parties need to be more vigilant about its presence[29]. It is mainly done by doing this differently or by putting necessary creative ideas to change the general notion of the society and it helps to gain quicker and greater profits within a short duration. It is the new-market disruptions that appeal to most designers at least those that strive to be innovative.[30]These innovations initially address new markets and new customers and gradually invade (and disrupt) the mainstream market.[31]
There is a darker side to the disruptive innovations. Disruptive innovation is necessary and it cannot be prevented or prohibited. On the other hand, the transition period needs to be well mediated so that the conflicts of interest can be minimized and any kind of prohibition of innovation will actually inhibit the creativity too. The various conflicts that have been described are a result of the lack of alertness by the corporations and the public against disruptive innovations.[32] So, it is a necessary role of the government to establish a regulation which can regulate the disruptive innovations.[33] The role of government in regulating and stabilizing the effect of disruptive innovation is almost Important.
[1] Juan campos, What’s a unicorn startup company?, European Innovation Company, (sept 4, 2019), https://www.inacademy.eu/blog/whats-a-unicorn-startup-company/
[2] Aashish Pahwa, What is startup?, Feedenough.com (April 30,2019), https://www.feedough.com/what-is-startup/
[3] Id note 2
[4] Aashish Pahwa, , What is a Unicorn startup Company?, Feedenough.com, (May 24th, 2019), https://www.feedough.com/what-is-a-unicorn-startup-company/
[5] Id note 4
[6] Juan campos, What’s a unicorn startup company?, European Innovation Company, (sept 4, 2019), https://www.inacademy.eu/blog/whats-a-unicorn-startup-company/
[7] Id note 6
[8] Raul,The Most Disruptive Unicorns Around The World, in One Map (20 september 2017), https://howmuch.net/articles/the-worlds-unicorn-companies-2017
[9] Id note 8
[10] Juan campos, What’s a unicorn startup company?, European Innovation Company, (sept 4, 2019), https://www.inacademy.eu/blog/whats-a-unicorn-startup-company/
[11] Do startups dream of unicorns?,What are unicorn companies?, https://www.iberdrola.com/innovation/unicorn-companies-technology-startups
[12] Id note 11
[13] Alexandra Twin, Disruptive Innovation, Investopedia (August 30,2019), https://www.investopedia.com/terms/d/disruptive-innovation.asp
[14] Clayton M. Christensen, Michael E. Raynor, Rory McDonald, what is Disruptive Innovation? (Dec 2015), https://hbr.org/2015/12/what-is-disruptive-innovation
[15] Id note 14
[16] Alexandra Twin, Supra note 12
[17]Clayton M. Christensen ,Disruptive Innovation, The Encyclopedia of the Human-Computer Interaction, 2nd edition , https://www.interaction-design.org/literature/book/the-encyclopedia-of-human-computer-interaction-2nd-ed/disruptive-innovation
[18] Id note 17
[19] S.S.Rana & Advocates, Abuse Of Dominant Position An Anti‐Competitive Practice (29 January,2018), http://www.mondaq.com/india/x/668306/Antitrust+Competition/Abuse+Of+Dominant+Position+An+AntiCompetitive+Practice
[20] S.S.Rana & Advocates, Abuse Of Dominant Position An Anti‐Competitive Practice (29 January,2018), http://www.mondaq.com/india/x/668306/Antitrust+Competition/Abuse+Of+Dominant+Position+An+AntiCompetitive+Practice
[21] Alexandre de steel and Pierre Larouche, Disruptive innovation and Competition Policy Enforcement (Oct20,2015) 7 1-14, https://www.researchgate.net/publication/314459343_Disruptive_Innovation_and_Competition_Law_Enforcement
[22] Id note 21
[23] Alexandre de steel and Pierre Larouche, Supra note 21
[24] Alexandre de steel, Supra note 21
[25] Roman Twerenbold, The Good, the Bad and the Innovative:Understanding the Darker Side of Innovation for Development, United Nations Research Institute for social Development (2 March,2017), http://www.unrisd.org/80256B3C005BE6B5/(httpNews)/9CD705AC73D6E013C12580D7004F285C?OpenDocument&newstype=viewpoint
[26] Id note 25
[27] Roman Twerenbold, Supra note 25
[28] Edy Suandi Hamid and Ilham Hasura Maulana, Advantages and Disadvantages of Disruptive Innovation in the context of Indonesia’s economic development: Need regulations?, International Journal of Economics, Business and Management Research, Volume 1,560 1-560(2017), http://ijebmr.com/uploads/ART_01_84.pdf
[29] Id note 25
[30] Supra note 17
[31] Supra note 17
[32] Edy Suandi Hamid and Ilham Hasura Maulana, Advantages and Disadvantages of Disruptive Innovation in the context of Indonesia’s economic development: Need regulations?, International Journal of Economics, International Journal of Economics, Business and Management Research, Volume 1,560 1-560(2017), http://ijebmr.com/uploads/ART_01_84.pdf
[33] Id note 29
