Most new businesses have old business models

Terms like "disruptive" and "tech business" just distract from the essential similarity between many companies.

Slate's Matt Yglesias decries the over-use of the word "disruptive":

This is a shame, because while all innovation is great, the idea of disruptive innovation as a distinctive kind of innovation has real value. And while disruptive innovation is generally a good thing, nothing inherent to the idea implies it’s the only good thing or the best thing. Entrepreneurs should not be ashamed to admit that their ideas aren’t particularly disruptive.

Disruptive innovation is important because of what it's not: "sustaining innovation". The two terms come from Clayton Christensen's 1997 book The Innovator’s Dilemma. The latter describes the innovation of building a better mousetrap, so to speak: a company looks at their products, looks at their clients, and tries to improve their products to better fit their clients needs. Christensen uses the example of IBM building mainframes in the 1960s and 1970s, but it's just as easy to turn to Nintendo progressing from the Game Boy to 3DS, or Kodak making ever better point-and-shoot cameras.

In each case, the company focused on winning an ever greater share of the market by being the best at what they do, without noticing that there's another way they could lose out: from companies doing a much worse job. So IBM, focusing all its attention on the mainframe market, failed to account for the rise of personal computers, which were far worse at the sort of jobs that businesses used mainframes for, but cheap enough that individuals could buy them; Nintendo didn't realise that the market for mobile games would be content playing simpler, cheaper games on their smartphones, rather than paying £40 for a fully-fledged port of Ocarina of Time; and Kodak didn't account for the desire of people to take truly awful quality pictures on their cameraphones.

That's disruption: competing, not by making something better than the incumbent, but by making something which, despite being worse, is so much more accessible that it eats market share from the bottom-end up.

(Incidentally, are you seeing the pattern here? Smartphones have been astonishingly disruptive in a nearly every area they've touched. As well as point-and-shoot photography and handheld gaming, they can probably be blamed for the demise of MP3 players, PDAs, most GPS navigation devices, and, if you've ever sat on the back of a bus on the school run, 1980's style boomboxes. In nearly every case – and certainly the last – they're considerably worse than a purpose-build device at doing the same thing, but you can't beat the price, nor the portability.)

In a way, it's a more specific example of the point repeatedly made: there's no such thing as a tech company. Here's Quartz's David Yanofsky on that topic:

Perhaps a tech company employs software engineers to improve product offerings and user experiences. AT&T has employed developers for years, programming the infrastructure of telecommunications to route phone calls around the world. It’s not called a tech company though. Skype is.

Perhaps a tech company uses technology to change the way we behave. Amazon.com’s business of selling countless items at any hour to anyone, then shipping them anywhere, surely fits into this category. Yet, in practice, it is no different than a Sears Roebuck mail-order catalog.

Hiving businesses off into their own little sector because they use the internet might have made sense 20 years ago, but not anymore. Amazon and Waterstones both have retail stores and online sales; Google and the Guardian both have business models focused around selling ads to firms trying to market to people using their websites.

As with "tech business" before it, "disruption" nowadays seems to just mean "doing things better than the old way because computers are involved". Which is important, but obscures the fact that disruption's a useful term which has a meaning of its own. And it also hides the fact that there's a lot more similarity between seemingly disparate fields than there seems to be at first glance.

A trophy on stage at TechCrunch Disrupt. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.