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Disruptive Innovation Disrupted?

Interesting article over at the New Yorker this week by Jill Lepore questioning Clayton Christensen‘s theory of Disruptive Innovation.  Disruptive Innovation, as defined in Christensen’s book, The Innovator’s Dilemma,  has become one of the most influential theories on innovation in the Silicon Valley (and beyond) startup world.  Indeed, it’s nearly impossible to have a conversation with a startup founder or find a startup elevator pitch/pitch deck that doesn’t highlight what market/industry/company the startup is “disrupting.”

The beginning of Lepore’s article seems to be building the case that “disruptive” has become an overused buzzword that doesn’t really mean anything anymore.  There is a strong case to be made for this, when everything is “disruptive” is anything really?  Google “disruptive” and the second definition given is “innovative or groundbreaking.”  Based on this definition, “disruptive innovation” is “innovative innovation.”  And, it is exactly this sort of circular definition that most entrepreneurs seem to be using these days.  “Disruptive” just means you think your product is better (and probably mobile, social, sharing, and/or web based) and that’s why you are going to beat the incumbents.

However, this is NOT the meaning of “disruptive innovation” that Christensen put forth in his book.  Disruptive innovation refers to a very specific phenomena that Christensen demonstrates through a detailed analysis of the hard drive industry (which he wrote is doctoral thesis on) and further examples from the steel, discount store, and excavator industries.

In each of these examples, Christensen demonstrates that by “doing the right thing,” the incumbents failed to see a new market developing underneath them that would eventually upend their market.  At each stage in the hard drive industry, customers were asking for faster hard drives with more storage capacity.  When newcomers came out with physically smaller drives with smaller capacities and slower access speeds, customers weren’t interested (and no customers were asking for these in the first place, so why would incumbents try to develop them?).  However, the advent of these smaller drives helped usher in the next generation of smaller computers, a new market that would eventually push out the existing market (so micro-computers replaced mainframes, then PCs replaced micro-computers, each time thanks to smaller hard drives that no one initially “wanted”).

The heart of Lepore’s critique is that many of the companies Christensen says were “disrupted” are still around and thriving today (for example, Seagate in the hard drive industry and US Steel in the steel industry).  However, in a rebuttal interview published by Businessweek, Christensen points out that these companies have been radically changed due to disruptive innovation and no longer offer the same products that were once their cash cows.  Perhaps being disrupted isn’t always a death sentence for a company as long as the company is able to adapt.  Indeed, isn’t this really the point of studying the phenomena?  It’s not just about learning how to disrupt an industry, it’s also about learning how to not be disrupted if you are the incumbent and what to do if you are disrupted.

Lepore also questions the Disruptive Growth Fund which was founded in 2000 to invest in firms identified as disruptors.   As the NASDAQ lost half of its value in the dot com bubble burst, the fund lost 64%.  However, Christensen points out that due to ethical rules at Harvard Business School, he wasn’t really a part of the fund other then some initial consulting on what disruptive innovation is.

Perhaps the most damning example Lepore gives of Christensen and Disruptive Innovation getting things wrong is the fact that Christensen did not believe that Apple would be successful with either the iPod or the iPhone.  This really is quite amazing as these are perhaps two of the greatest current examples of disruptive innovation.  And beyond that, Apple is perhaps the greatest example of a company that hasn’t been afraid to disrupt itself (indeed, the Innovators Dilemma was highly influential on Steve Jobs according to Isaacson’s biography).

The question that then comes to mind is is Disruptive Innovation a framework that can be used to predict future events, or is it simply a useful way to describe events that happened in the past?  Can one consciously try to disrupt an industry, or does disruption only happen when no one is really expecting it?

I will continue to explore this topic in my next few post.