Disruptive Innovation — maybe it’s time to expand our theory
Disrupt (v) – to prevent something from continuing as usual or as expected.
– Cambridge Dictionary
The Innovator’s Dilemma
In 1997, Clay Christensen published the now infamous The Innovator’s Dilemma. In it, he coined the term “disruptive innovation”* to explain why successful companies fail even when they’re doing everything right.
He made a distinction between two types of innovation:
- Sustaining Innovation – innovation that improves an existing product.
- Disruptive Innovation – innovation that makes an existing product obsolete.
In the book, he shows that incumbent firms have the advantage over newcomers with sustaining innovation. This makes sense. Incumbents are the leaders in their product and, thus, the ones who know it best.
However, it’s actually newcomers that win at disruptive innovation because they’re not held back by all the baggage of having an existing product, shareholders, and customers to please. They’re free to do something completely new without huge expectations right off the bat, so they have some time and space to play around and get it right in a small market before full-on disrupting the incumbents.
And there, explained Christensen, lies the innovator’s dilemma. In order to survive, incumbents have to support their existing successful product while also employing disruptive innovations that make their business obsolete.
I don’t think that word means what you think it means
In 2015, eighteen years after it’s publication, Christensen wrote a piece for Harvard Business Review entitled “What is Disruptive Innovation?” in which he essentially says “I don’t think that word means what you think it means” and admonishes us all to stop calling EVERYTHING disruptive. Disrupt this. Disrupt that. If you’ve been to a TechCrunch Disrupt, you’ll sympathize. Just because you’re a startup doesn’t mean you’re disrupting anything. Christensen argued that calling every innovation “disruptive” kills the benefits of having a disruption theory.
In particular, Christensen points to Uber as an example of what everyone keeps calling disruptive. What everyone, in fact, seems to hold up as the gold standard for what is meant by “disruption.” And yet, Uber is NOT actually disruptive according to the “true” definition of the term.
And by “true,” of course, Christensen is referring to the definition that he created for the word.
What it takes and Why Uber doesn’t have it
Per Christensen’s definition, in order to be disruptive, you must fall into one of the following two categories:
1. Low-End Disruption – a product that disrupts by providing a lower priced alternative than existing products. Low-end disruptions serve lower paying customers that incumbents don’t care about, which allows these disrupters to get a foothold below the incumbent’s radar and then *BOOM* before they know it, expand up to the higher end market and take away all the incumbent’s customers.
2. New Market Disruption – a product that disrupts by creating an entirely new market that isn’t being served by the existing products. This allows it to get a foothold without catching the attention of the incumbents because — again — it’s serving a set of customers that aren’t on the incumbents’ radar.
Christensen’s point was that since Uber does not meet either of these criteria (a point I would actually argue against, but to follow his logic…), they’re not disruptive.
Similarly, the companies that we tend to most often associate with disruption — like Google and Tesla — are, per Christensen, not disruptive either.
While I can sympathize with the frustration of having people incorrectly apply your theory to situations it wasn’t intended for, I have to question the act of telling people to stop using a word in the way that it’s defined by the English language.
I don’t think anyone would argue against Uber’s complete disruption (in the true definition of the word) of the taxi industry. Or that companies like Google and Tesla are forcing competitors to change how they operate. The so-called “internet companies” are exactly preventing their competitors from “continuing as usual.” Either because the companies change themselves in order to stay competitive, or — by failing to stay competitive — they cease to continue at all.
Disrupting the theory
Christensen’s point is that traditional methods don’t apply when facing disruptive competition. That, in fact, following traditional “tried and true” techniques will actually lead a company to failure in the face of disruption.
I not only agree with this point, I believe it’s even more true today than it was when he wrote it twenty years ago. Technology and globalization and the gig economy and so many other factors have made it easier than ever for new players to enter existing markets. When a bookstore can enter the healthcare industry, a search engine the auto industry, and a tiny little startup can upend a 100+ year old industry, doing things “how we’ve always done them” becomes a less and less likely formula for success.
So maybe rather than critiquing people over terminology, it’s time to expand our theory of disruption to cover the real ways that companies are being made obsolete. And, in doing so, help the new and the established players to push the edge on what is possible.
*. In the book, he initially called it “disruptive technology,” but later updated it to “disruptive innovation.”