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Can We Please Stop Talking About Disruptive Innovation?

The phrase is now systematically overused

23Feb

First coined by Clayton M. Christensen in his 1995 paper ‘Disruptive Technologies: Catching the Wave’, the eponymous concept has since gripped the world of business and become a more general explanation for how change happens. The Economist went as far as to call it ‘one of the most influential modern business ideas’, but the rife misuse and eulogy surrounding it are not only confused, but dangerous.

In essence, the term describes a business model in which a new competitor creates cheaper, less technologically complex products in order to make affordable products, as an alternative to the big players look to upgrading their products for higher-paying customers and end up ‘over-serving’. These new products are initially ‘valued only in emerging markets remote from, and unimportant to, the mainstream,’ according to Christensen, before developing their product to appeal to a wider demographic. The theory goes that before the incumbent has noticed the growing disruptor, the disruptor has already begun to take over the market.

The iPhone is a good example here, not of disruption in the mobile phone market or even the emerging smartphone market, but in the laptop market. It’s initial popularity can be explained by the superiority of the product, but its subsequent growth can be better explained by disruption; the iPhone grew to become an alternative means of accessing the internet and, as we can see from mobile usage figures, an eventually more popular means. But the term ‘disruptive innovation’ has become so ubiquitous that mislabelling is commonplace. Essentially, it has become a synonym for innovation, or specifically anything that shakes up existing industries and wrests a market share from established, successful incumbents.

In an interview with the Editor-in-chief of the Harvard Business Review, Christensen himself admitted that he ‘never thought… that the word disruption has so many connotations in the English language, that people would then flexibly take an idea, twist it, and use it to justify whatever they wanted to do in the first place.’ Indeed, refinements in the theory have overshadowed its initial popularity, core concepts have been misunderstood and of the host of companies claiming to be innovating disruptively, very few actually fit the bill. But perhaps they shouldn’t have to; Christensen’s model is so deeply flawed that it should not be as wide a basis for business strategies as it is, and true disruptive innovation is rare. In fact, a study by Andrew A. King and Baljir Baatartogotkh found that only nine of out 77 cases that Christensen used for examples of disruptive innovation actually fit the four criteria of his own theory.

Uber is a good example of a misplaced application of the term. Almost always described as a disruptive model, Uber’s industry-changing growth - according to the factors laid out by Christensen - falls short of being a truly ‘disruptive’ business. Firstly and crucially, Uber’s genesis can be found not in low-end or new-market footholds. That is to say, Uber muscled their way into the mainstream with a superior product - the reduced prices came at no cost to service - before appealing to the outskirts. It created no new market, simply harnessed technology and found innovative improvements to an age-old industry. Secondly, truly disruptive innovations are described, initially at least, as inferior to the incumbent. Uber was without such limitations upon its launch; many would describe the service as superior to that of existing companies. Uber may be innovative, but it isn’t disruptive.

Such mislabelling stems from Christensen’s own less-than-perfect application of his theory. He posited that local slaughterhouses were being ‘disrupted’ by butchers, who used advancements in refrigeration and rail to become the dominant providers of meat in local areas. But, as pointed out by King and Baatartogotkh, local butchers weren’t ‘on a path of innovation. To the contrary, they relied on tools and artisanal practices that hadn’t changed for decades.’ The pair found that broader changes contributed far more to the story, namely ’the Union Army’s demand for beef during the American Civil War, the expansion of the railroad, the scale economies provided by the use of a ‘disassembly line,’ and opposition by local communities that wished to noxious slaughter operations closed.’ Sustaining innovation, as suggested by the theory, was not the key factor in the closing of local slaughter operations. Meatpacking is just one industry to which disruptive innovation has been retrospectively, and wrongly, applied.

Disruption theory simply hasn’t the sound historical evidence necessary to support predictions made from a model, as expertly argued by Jill Lepore - a professor of history at Harvard University - in the New Yorker in 2014. ‘Most of the entrant firms celebrated by Christensen as triumphant disrupters… no longer exist, their success having been in some cases brief and in others illusory,’ she argues, after establishing that some of the key incumbents ‘disrupted’ by these firms are still well established businesses. The arbitrary definition of success laid out by Christensen holds back disruption theory greatly. He has since made revisions to his theory, it must be said, but far too many take it at face value, particularly when the term is too liberally applied.

The very mantra of ‘disrupt or be disrupted’ is misleading in that disruption does not guarantee a toppled incumbent. Companies should not overreact by dismantling what is a profitable business in fear of being disrupted - in essence, do not try to solve a problem before it is one. As Lepore concludes: ‘Disruptive innovation is a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.’

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