Disruptive Innovation Service Oriented Framework:

A Case Study of Transportation in Indonesia

*Muharman Lubis

, Arif Ridho Lubis

and Etri Ernovianti

Telkom University, Jalan Telekomunikasi No. 1, Bandung, Indonesia

PoliteknikNegeri Medan, JalanAlmamater No. 1, Medan, Indonesia

Universiti Utara Malaysia, Sintok, Kedah, Malaysia

Keywords: Disruptive Innovation, Mobile Service, Framework, Online Transportation.

Abstract: The rapid progress in every related IT field give tremendous impact on the changing pattern life in the social

community. Indonesia as the one of most populated countries have significant influence on technological

progress along with the growing number of start-up that launched and introduce to the market. In addition,

some of them focus on delivering various services in transportation, which have purposes to reduce waiting

time and payment cost. Therefore, some incumbents and certain group of people claim that this start-up do

more harm to the market than to bring benefits. On the other hand, there is also problem in term of the

regulation, which no regulation governing the use of start-up of transport capital, caused by the

government’s current transport regulations. Thus, the need for synergies from all stakeholders associated

with the innovation should be encouraged to allow the healthy competition and atmosphere in the

community. This study will explore the current trends and characteristics of innovation, focused on

disruptive innovation to develop framework to maintain business process run well without creating conflict

that bring disaster to the harmony of the existing community.

1 INTRODUCTION

ICT has evolved exponentially in this following

years especially after dotcom bubble disaster and

multiple cases of starting up rising to multinational

company. Previously, Internet utilization seemed to

be dominated by top business actors who have

strong resources in the field of ICT but through the

high availability and accessibility of information

create shortcut to introduce new innovation to offer

service or product. Therefore, digital gap and digital

divide can be occurred to accept the innovation in

the society due to the lack of human resources, low

infrastructure readiness and small Internet

bandwidth. Historically, several first mover

companies who became the pioneer in utilizing

internet got tremendous benefits such as dominating

the market demand, determine the direction of

innovation, increase the sales quickly and reduce the

production cost compare to the competitor.

However, only small number of them can survive to

face rigorous completion and the quick change of

demand such as Amazon, Apple and Google while

the others have gone bankrupt for example Atari,

Kodak and Geocities. Arguably, these result is

derived from the differences in concern for

attempting to encourage innovation to all division

and unit in order to improve product or service

quality and customer satisfaction in multiple

attributes or aspects. However, it should take a note

that innovation is not sufficient to maintain business

longevity without integrating with the company

strategy, the readiness, employee motivation and

business vision. Therefore, learning from the failure

of incumbents that is failed to control the market,

can provide general insight on how innovation work.

Meanwhile, various studies related to innovation has

been begun in this following year create other focus

field such as social-preneur, techno-preneur, intra-

preneur and entrepreneur.

Indonesia has many respected techno-preneur

such as AchmadZaki (Bukalapak), Ferry Unardi

(Traveloka), Jason Lamuda (Berrybenka),

ShintaBubu (Bubu.com), AlamandaShantika (former

Vice President of Gojek), AuliaHalimatussadiah

(Kutukutubuku.com), Diajeng Lestari (Hijup.com),

496

Lubis, M., Lubis, A. and Ernovianti, E.

Disruptive Innovation Service Oriented Framework: A Case Study of Transportation in Indonesia.

DOI: 10.5220/0008889604960504

In Proceedings of the 7th International Conference on Multidisciplinary Research (ICMR 2018) - , pages 496-504

ISBN: 978-989-758-437-4

Nadine Makarim (gojek) and Cynthia Tenggara

(Berrykitchen.com). Therefore, to protect the

sustainability of economies, disruptive innovation

are supposedly welcome to maintain the equilibrium

and to reduce the gaps of the customer perception

towards the intrinsic value of technological

innovations and the business objective in regard to

transform some component of non-consumers into

consumers oriented (Brad, et. al., 2016). In fact, it

creates complex problem that damage the economic

atmosphere in individual and national level. One

sector that got the spotlight is transportation which is

a major component of the living system of the social

community. On the other hand, population density in

a country greatly affects the ability of transportation

in serving the needs of society. The provisions of

Act No. 22 of 2009 Chapter 5 Paragraph (1) stated

"The State is responsible for Traffic and Road

Transport and its guidance is carried out by the

Government". For the minimum service standards of

road-based mass transport, the minister of

transportation has arranged the framework in the

Constitution No.22 of 2009 paragraph (3).

Therefore, the transportation law is still not in

accordance with the desired expectations to accept

the innovation as there are the disputes between city

transports combined with Taxi Company challenged

the legitimacy of application-based firm.

One development of start-up itself can be seen in

transportation for example is Go-Jek, Grabtaxi,

Uber, Bajaj App and so on. In addition, the use of

startup especially transport has been practiced by

several neighbourhood countries such as Singapore,

Malaysia, Thailand and Australia. In Indonesia, the

citizen appreciate the appearance of this alternative

as it bring more benefits compare to incumbent’s

service. Furthermore, over time, there have been

many disputes with conventional transportation

demanding that start-up based transportation

companies follow the standard of transportation.

These occurred because there are some gaps in

communication, synergy and harmonization between

stakeholders to support the rising case of start-up

based transport, such as commission of Ministry of

Informatics and Ministry of Transportation.

Government also has not established a legislation

policy to regulate start-up based transportation

companies using black plates or private vehicles.

The health competition is where each of the actors is

not trying to find faults against their rival but trying

to correct his own mistake by offering competitive

advantage or added value in their service or product.

Thus, the government should consider the mediating

framework to anticipate the disruptive innovation

which bring unfairness to the market considering its

growth that is very rapid while the economic culture

in Indonesia cannot be left in the hand of liberal

approach.

Figure 1: Categorization of Innovation Type.

In his book, Christensen mentioned that user is

eager to find out those who have capability to

support their objective as fast as possible and

measure its successes based on three criteria, which

are transparency level, delivery convenience and

represents value match cost. Meanwhile,

technological enablers provides routine solutions to

problem and disruptive business model in affordable

way are two necessary conditions to increase the

business scale (Christensen, et. al., 2016).

Technological developments have an enormous

influence on the direction of change and innovation,

with the high demand for efficiency and

effectiveness of causing producers to need to

innovate (Hamid & Maulana, 2017). In short, there

are several characteristics to determine the

classification of innovation that corporation should

consider, such as incremental innovation have low

risk to obtain and it has purposes to expand and offer

the increases in term of productivity and

collaboration by providing competitive advantages,

focus on performance of product system and demand

from customers. By understanding the differences,

the corporation can decide the proper strategies they

Disruptive Innovation Service Oriented Framework: A Case Study of Transportation in Indonesia

497

utilize to sustain their capabilities and capacities in

competing with other corporation and start-up to

develop so called healthy ecosystem, without

necessary breaking the harmony by monopolizing

the industry or maintain the status quo.

2 LITERATURE REVIEW

2.1 Online Transportation Services

With the rapid advancement of technology, the

integral part of smartphones use becomes daily

routines in every aspects. As mobile commerce grow

rapidly, the company need to clearly understand

consumer perception and acceptance by considering

the critical factors that determine the successful

adoption IS project (Wu and Wang, 2005).

Meanwhile, in computing devices and virtual

worlds, individuals need to identify every possible

approach to create new set of boundaries, constraints

and limitations in order to negotiate several interests

and components to obtain benefits in specific spaces

(Lubis, et. al., 2017). As the newest service

innovation in mobile commerce, online

transportation provides several benefits such as

driver and customer can know each other’s location

accurately, customer can see the driver and vehicle

information and customer can easily find

transportation to commute to other place with more

efficient time compare to previous mechanism

(Farin, et. al., 2016). Therefore, there are challenges

in optimizing the characteristic of m-Commerce

such as the development of device for cost effective

placement, maintenance and desirable energy

scavenging. Other challenges is related to verify and

validate the reading consistency and suitable

standardization of a huge number of sensors used

ubiquitously, algorithms and protocols for

processing and investigation of data developed

(Albishi, et. al., 2017). The development of m-

commerce is considered more potential than e-

commerce due to the exponential growth of mobile

device in Indonesia with around 326.3 million SIM-

card registered in 2016, an amount that exceeds the

total population of Indonesia (Septiani, et. al., 2017).

The need for online transport service is

influenced by various factors such as cost, quality of

service, income, psychological factors and

ownership of the mode of transportation used

(Narayanaswami, 2017). If used to be

conventionally managed and sole proprietorship,

new taxi motor business is now emerging as a

commercial enterprise, providing public

transportation services and professionally managed

(Sriyanto, 2017). In Indonesia, several TNC such as

Go-Jek, Uber and Grab find difficulty because their

business process conflicted with certain legal status

and issues. According to Indonesian Ministry of

Transportation, TNC have violated the Regulation

No.22/2009 on Road Transport Traffic. It stipulates

that the transport companies without the required

permit to transport people, no required verification

and validation of vehicle testing, not using vehicle

ID for public transport and the driver does not have

the required driver’s license for public transport are

considered a violation. The Indonesian government

requires all mobile service application to work in

partnership with rental car or the registered taxi

companies. Therefore, TNC have helped set up joint

partnership with the drivers, while mobile serviced

based firm such as Go-Jek, has developed its own

company called PT Panorama MitraSarana in

aligning with the need of their application

(Nurhidayah&Alkarim, 2017).

The policies issued by government will bring

either good or bad situations for all business and is

impossible to be fit and please all interest, but

entrepreneurial should be encouraged to avoid the

accumulated long-term problems (Sari, 2015). On

the other hand, price promotion has an effect on

repurchasing intentions for non-traditional ojek

through perceived value (monetary and non-

monetary) and thus affects transportation mode

preferences consecutively (WollenbergandWaty,

2017). Meanwhile, comparison study between Grab

and Gojek, indicated that positive user experience,

task success and earning in Gojek compare to Grab

although there is no different in term of happiness of

user (Chan, et. al., 2017). With the appearance of

direct tariff when ordering, then the customer will be

easier to know how much cost to be prepared. In

contrast to taxi drivers, where they often set the

tariff is too high and must be bargained for some

time just to come down, which obviously takes time

and cost (Sriyanto, 2017). Changes made are

expected to add value to the product by simplifying

the production process (Hamid, 2017).

2.2 Disruptive Innovation Management

Might still fail in response to new competition

because there is no attempt to re-purpose the

capabilities of technological advantages and

recognize the constraints imposed by legacy

obligation by calculate the value of winning,

consider working collaboratively and achieve new

market expansion (King, 2017). Although a

ICMR 2018 - International Conference on Multidisciplinary Research

498

disruptive technology is the essence of what causes

an incumbent to fail and exit the market but it is not

the origins causes as the existing technology could

not able to compete with the performance to satisfy

the consumers (Tan andHenten, 2006). Interestingly,

the theory of disruptive innovation presents some

intriguing inconsistencies for management scholar

but the core concepts remain widely misunderstood

(Christensen et. al., 2016).

When first introduced, disruptive innovation tend

to be inferior on accepted performance in almost all

dimensions compare to incumbent services or

products, yet offer a novel combination of new

attribute that attract to small portion of group of

customers, which want cheaper prize, more

accessible or more convenient kind of service

(Markman & Waldron, 2014). In addition, current

customers and established business models

depended on the investments of incumbent in new

innovations to improve the capabilities of their

product and service. The attempt to deliver added

value to current business activity felt unattractive to

current incumbent while be attractive for entrants

who find opportunities to satisfy small fragment of

customers because of fewer competitors’ rival.

Consequently, incumbents are typically not

motivated to develop their own disruptive

innovations that promise lower margins, target

smaller markets and introduce inferior products and

services that their existing customers cannot use

(Christensen et. al., 2016). On the other hand, the

disruptors find the chance to improve the

performance of their primary objective is to grow or

build intangible branch and digital assets.

Unfortunately, large and successful corporation are

not capable of breakthrough innovation, which their

internal process are built in such a way that they

always choose the more predictable scenario, losing

the real picture of the future (Vertakova, et. al.,

2016). Therefore, the adoption of innovation will be

influenced by the characteristic of the innovation

and the success of the information system

(Soemantadiredja, et. al., 2015). Therefore, to carry

out progressive IT related research on the topic of

disruptive, it is important to understand different

type of disruptive, which are disruptive technology

innovation (DTI), disruptive business model (DBM)

and disruptive new market (DNM)

(BaiyereandSalmela, 2013). A disruptive technology

is probably the outcome of a substitute product as

the result of radical innovation that has been rejected

or neglected due to high risk or corporate failed to

see its opportunities (Tan andHenten, 2006).

3 RESEARCH METHOD

Researchers investigate disruptive innovation trend

in the context of Indonesia through article report in

newspaper, journal and article paper. To analyse the

trend to balance between demands and expectations,

this study propose analytic review on various aspects

based on design problems and issues using PACT

(people, activities, context and technology). The

qualitative model was used by having four stages,

which are analysis of preferences and assessment

needs. It is really important to start up to back to

earlier IT function as enabler or solver for their daily

life, also develop the system in which customer

satisfy with the collection features to offer. In

addition, identification of barriers and design of

requirement should be conducted to find alternative

solution and provide win-win solution. Commonly,

the disruptive innovation from respected company

have the tendency to transform their business core

into non-bank financial tech corporation to be

survived because they do not have large assets and

high number of employee to be handles.

Unfortunately, it creates economic problems to the

society in the long term because of the high inflation

that is extremely difficult to handle that lead to

currency value or declining purchasing power.

Figure 2: Qualitative Model of Investigation Service

Oriented Framework.

Disruptive Innovation Service Oriented Framework: A Case Study of Transportation in Indonesia

499

After the impacts evaluation, the proper adoption

strategy should be developed in relation to customer

acceptance and community readiness. Indeed, this

four processes should be conducted as equal to the

importance of environmental effect analysis

(AMDAL) to avoid the construction development

bring disaster to ecological lifecycle. Meanwhile, the

model also implies that different set of criteria are

required depending on the client type, which can be

divided into four tiers. The first tier contains

contextual factors that affect the customers.

Particularly, environmental incidents and the

appearance of multiple emerging markets may affect

clients’ needs. The second tier contains the

perspective of clients’ needs and preferences, which

constitutes the basis of the analysis. The third tier

emphasizes the distinct constraints, which mostly the

potential client face several barriers in regard to

consumption mechanism where existing client

possess saturation levels. Consequently, the fourth

tier that focuses on effects, unfold the results of the

constraints such as overexposed, emerging drivers,

preference changes and non-consumption attributes

(Reinhardt and Gurthner, 2011).

4 DESIGN PROBLEMS AND

ISSUES

In short, there are six core principles of value added

that disruptive innovation should take to avoid

conflict to incumbent and increase the longevity to

survive in the era of technological advancement,

which bring many pioneers of innovation goes

bankrupt because cannot deal to the trend changes.

Commonly, organization take advantages on their

inherit skill and experience from their structure and

system to control and manage operational and

technical process comprehensively. Thus, profit

oriented and revenue driven become the primary

priorities in developing competitive advantages to

attract and serve customers, which should be

maintained strictly to balance the competition in the

market, which do not harm others in the large scale

but encourage for the improvement. In this context

of online transportation, the disruptive innovation

can be developed through 6 (six) values design as

follow:

Value Proposition: One of customers’

preferences is the value of service or product offered

by the company, thus proper timing and user

satisfaction is really important to create customer

loyalty and brand recognition.

Value Perception. Every customer might

consider value differently, which depend on several

integrated factors such as culture, religion and norm.

Those values are reflected under their life pattern

involving even the eating or sleep order.

Understanding the user behaviour is one step to

identify user experience.

Value Expansion. In each innovation, there are

several barriers that deter the implementation.

Therefore, the regulation is the critical solution to

bridge gaps between expectation, demand and

request to avoid conflict.

Value Expression. The requirement

specification should consider the platform that allow

flexibility and availability of providing idea,

solution, suggestion and recommendation

ubiquitously by increasing the platform visibility, so

the collaboration discussion can be optimized as the

design thinking need time to be fruitful.

Value Creation. Efficiency is the service-

oriented goals while satisfaction is the outcome-

based that corporation go forward in developing the

application system. Therefore, company should not

focus only on profit but also encourage ethics and

respect to customer to anticipate negative impact.

Value Summation. Adoption strategy should

highlight the customer acceptance and readiness as

the problems depend on the certain event turn points.

Thus, ensuring the user curiosity by establishing the

joint partnership with academician can maintain the

quality of service under radar.

This study utilized 12 criteria in PACT to

analyse preferences while the design problems is

related to the needs assessment, which are risk

mitigation, learnability, exclusivity, manoeuvrability

and flexibility, multiple path, physical movement,

bandwidth, information visualization, good

overview, digital receipt, intimacy and appeal

aspect, and lastly difficulty to access the system.

Meanwhile, The barriers are derived from design

issues namely inoperability, brand avoidance,

limitation of the application, sustainability and

survivability, recovery plan, misconception and

misdirection, product requirement and infrastructure

resources, scheduling issues, conventional

architecture, consumer perception, language barriers

and posture sizes. Thus, through understanding those

preferences, needs and barriers, the company or

developer can develop the design requirement by

make list of priorities involving must, should, could

and would have. Importantly, the organization

should define and develop the domain of service

level, know the ethical dimension and decide firm-

level drivers of customer’s protection and train the

ICMR 2018 - International Conference on Multidisciplinary Research

500

employee to appreciate the value of customers’ data

more than the others (Lanier and Saini, 2008). Any

breaches of security should be treated as a

disciplinary issue that follow appropriate

measurement by organization (Rosmaini, et. al.,

2018).

Table 1: Detail Problem and Issues in Design based on

PACT Criteria.

Criteria

based on

PACT

Design

Problems

(Identify,

Current

Situation,

Solving)

Design Issues

(Predict,

Future

Condition,

Anticipate)

Input-

Output

Channel

Risk mitigation

is conducted

through

increasing the

number of

supplier or

partner and

reduce the

supply chain

network

reduction,

which might

depend

excessively by

customer

satisfaction.

Inoperability

of assets and

employee

work under

disruptor

company have

high risk in

term of

economic

losses as

customer

loyalty based

on solely on

price war.

Mental

Model

As customer

want the

learnability of

application is

improved due to

suggestion and

complaint, the

big data analysis

have difficulty

to distinguish

between

insightful idea

and tricky

statement.

he generation

will have gaps

based on

specific trend

they engage

upon during

their life, so

certain

religious or

cultural value

might give

bad

impression to

the service

provider in

long term lead

to brand

avoidance.

Social

Differences

Value creation

will depend

more on the

exclusivity offer

by company to

provide

proudness and

euphoria in

using the

service and

Innovation

must have

catalyst and

trigger, as

disruptor goes

high to the

top, they

should

maintain

status quo,

product, as well

as classify

certain status or

category in the

society, which

create friction

and conflict.

which often

fail to fully

deliver on

their promise

to improve

due to

limitation of

the

application.

Safety-

Critical

Difficult to do

maneuverability

and flexibility as

the business

process depend

mutually to

application

performance

and quality,

which easily got

distracted by

customer

complaints.

The company

can increase

the growth of

the company

through

expanding the

coverage of

service by do

partnership,

but the debt

will haunt the

sustainability

and

survivability

of company.

Cooperative

-Complex

Possibility of

numerous paths

in service

delivery, open

the high risk of

loss in term of

partner

investment

while high

traffic can

reduce the

customer

expectation of

required time to

arrive in

destination on

time.

The recovery

plan cannot be

conducted

based on

feasibility as

employee and

partner

commitment

cannot be

trusted and

often lacks of

reactivity and

decision-

makers based

on context-

specified.

Temporal

Aspect

It is crucial to

proactively

control the

operation of

physical

movement on

service delivery

to handle

disruption and

priorities to

comply with

promise and

satisfaction of

users.

The

evaluation of

application

performance

solely based

upon the

service quality

deliver to the

customer

through

partner, which

have high

tendency to

acquire

misconception

and

misdirection.

Physical

Circumstanc

There is no

other choice to

Single

isolation

Disruptive Innovation Service Oriented Framework: A Case Study of Transportation in Indonesia

501

es access the

application

except mobile

device to detect

the signal or

transmission

over a wide

bandwidth and

limited to the

available quota

of service

providers and

customers.

system that

avoid

integrated

functional

elements and

technology

feature can

disrupt flow

and process to

meet product

requirements

and

infrastructure

resource in

meeting

consumer

satisfaction.

Organizatio

nal Context

Information

visualization on

specifying the

quality nature of

problem from

statistical data

without

considering

much on data

quality in regard

to magnitude

and structure of

data such as

driver

background or

request.

The

scheduling

issues is

decomposed

in several sub-

problem on

how to

maintain the

coherence of

local solution

of each sub-

problem while

dealing with

their

dependencies

coordination

with every

components

or interacting

agents.

Social

Context

The result of

delivery service

should provide

good overview

over the current

condition or

situation, which

accommodate

customer

satisfaction and

driver

expectation to

facilitate the

improvement.

practitioners

conventional

architecture

that has a long

established

tradition or

design pattern

have been

reluctance to

learn new

system due to

differences in

pattern and

direction.

Data &

Media

Characterist

Digital receipt

can be accessed

through email

only while

intangibility

problem

As the digital

became

relevant in

delivering the

service to

customer, the

remains as

possible

viewpoint are

normally

limited to

specific

recognized

place.

perception on

the scale

might not

reflected in

practical way

accurately.

Communica

tion

Channel

Face to face

discussion or

conversation

has been

replaced by

computer

mechanism,

which reduce

several human

aspects in

interacting each

other like appeal

and intimacy

that can lead to

the consumer

trust and

loyalty.

Language

barriers can

make huge

differences

even though

only small

details as

consumer and

service

provider are

very sensitive

to slightly

different in

selecting

words.

Physical

Differences

There is certain

deterrents from

disability people

to have access

over the

application, at

certain point the

color blind or

people with

eyesight issues

have also

difficult to

differentiate

icon, label and

color.

The different

posture size in

relate to

weight and

height could

problematic in

near future as

the customers

are limited to

use certain

type of

product

continuously.

5 CONCLUSION

This research focuses on the role of customer

analysis in the process of creating disruptive

innovations that bridging gaps between incumbent

and current regulation. In addition, when company

investigate customer’s behaviour, further parameters

have to be considered in terms of determining the

disruptive potential of an innovation, which provide

solution to specific problem in certain customer

segments. The determination of market parameters,

the information collection and analysis about new

technologies, the assessment of distribution channels

and a competition analysis are other important steps

that are required for the success of disruptive

innovations adoption strategy. Moreover, the weight

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502

requirements that were proposed in the assessment

model could be added with other component in

PACT because it is very unlikely that all of these

factors are equally important. Accordingly, the

research was limited on six aspects of disruptive

innovation based on initiative and characteristic

from literature reviews, such as preference analysis,

need assessment, barrier identification, design

requirement, impact evaluation and strategy

adoption. Further analysis on disruptive should

accommodate the result of logical initiation of stage

analysis with case study in comparing several

disruptor in specific context.

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