Nasty Debate– Disruptive Innovation: Flawed or Misunderstood? Process or Formula for Success?

‘Disruptive innovation’ is a theory which took the world by storm, seemingly explaining the evolution of companies and providing evidence to pro-innovation advocates that all companies must change or die… It also went fairly unchallenged over the past decades, until Jill Lepore and other pundits.. declared that the theory had no solid foundation and was built on shaky evidence…

According to Jill Lepore; it’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence… Irrespective of this commentary– it’s always good to remember that– not all that disrupts is good and not all that is good disrupts… The term is now the rallying cry of every entrepreneur, venture capitalist, executive, consultant, government agency… promising to change things; disrupt or be disrupted…

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In fact disruptive innovation has become so embedded in the national psyche, such as; business, politics, social causes– as to be counter-productive… The concept of disruption has lost all meaning… This label gets slapped-on pretty much anything– new technology, new venture, new business model– that has revolutionary aspirations… But the real problem is more insidious; that’s because disruptiveness is not an inherent quality of a technology, or business model, or idea… it’s an outcome. It’s an observable and significant change to an industry’s; technological, organization, economic structure…

Moreover, some critics of the theory debunks the very idea of disruptive innovation– it’s become a buzzword taking on so many meanings that it’s essentially meaningless… According to Clayton Christensen, who originated theory of disruption innovation; the word has become ‘almost random’… used to justify whatever anybody wants to do. According to Kevin Roose; we all should just stop using the word– when everything is disruptive, then nothing is…

In the article What Is Disruptive Innovation? by Clayton M. Christensen, Michael E. Raynor, Rory McDonald write: For over 20 years, the theory of ‘disruptive innovation’ has been enormously influential in business. But unfortunately the theory is widely misunderstood and its basic tenets frequently misapplied, with a ‘disruptive’ label applied too liberally. Common mistakes include; failure to view disruption as a gradual process, which can lead market incumbents to ignore significant threats, or blindly accepting the mantra– ‘disrupt or be disrupted’… and incumbents can jeopardize their core business by making radical changes, in order to defend against a presumed disruptive challenger…

Admittedly the theory does have limitations, but it also has proven to be a powerful way of thinking about innovation-driven growth… Since inception of the core concept there have been many refinements made to in the theory, but for the most part these have been overshadowed due to the popularity of the initial formulation. As a result the theory is sometimes criticized for shortcomings that have already been addressed…

Further, many researchers, writers, consultants invoke concept of ‘disruptive innovation’ in support of whatever it is they wish to do– its become an important buzzword to attract attention. Also a key point of misunderstanding is that the theory does not apply– to every company, in every industry, in every shifting market… and whether it’s incremental improvement or sustaining innovation or disruptive innovation… all depends on dynamics of the market…

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In the article How Useful Is Theory Of Disruptive Innovation? by Steve Denning writes: Few academic management theories have had as much influence in the business world as theory of disruptive innovation… Disruption is real; it’s a perfect storm of technological innovation, e.g.; combining smartphones and other mobile devices, ubiquitous cameras and sensors, social media, cloud, ‘big data’ analytical tools… It means that more than $36 trillion of stock-market value is up for what some venture capitalists are calling– ‘re-imagination’ in the near future…

Many industries are vulnerable to change over the next few years, e.g.; financials, consumer staples, information technology, energy, consumer goods, health care, industrials, materials, telecom, utilities… Incumbent companies will either do the– re-imagining and lay claim to the markets of the future, or they’ll be re-imagined out of existence…

There are many factors at play– shifting economies of scale, first-mover advantage, legacy costs, and so on… According to some pundits; main usefulness of the disruptive theory is to serve as ‘warning’– it’s a useful warning about managerial ‘myopia’, e.g.; managers who might overlook or misunderstood the importance of an emerging threat… it’s a useful reminder of the importance of– testing assumptions, seeking outside information, and other means of reducing myopic thinking…

Disruption theory is not a replacement for careful analysis and difficult choices… It’s not a replacement for asking the tough questions, such as: Should a company stay in a market and fight for market share, or should it exit the market and see revenues elsewhere? Should a company invest in profitable but declining business, or should it turn away? Is the best course to maximize returns by letting the business slowly die? These and many others issues, are heart-wrenching choices… but, they do not include a commitment to boldly innovate to establish a better, or different competitiveness…

A less heart-wrenching and more effective, choice is to stop running the company with defensive, inwardly-focused, hierarchical bureaucracy and commit to relevant customer-focused innovation… Once customer-focused innovation becomes the ‘raison d’etre’ of the organization, then ‘deciding to die’ becomes a less-obvious option. Disruption is real, whether or not it plays out exactly according to Christensen’s theory may be problematic. But surviving, thriving does not come by chance; it only comes by heeding ‘warnings’ or embracing ‘opportunities’… and engaging a different kind of strategy…

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In the article Disruption Debate– What’s Missing? by John Hagel writes: I’m mystified by the attacks on the theory of disruptive innovation… Not only does it have a meanness that isn’t warranted, but it leaves the reader with an unanswered question; if the theory is not helpful, how do you explain the cascading disruptions that are playing out in markets and industries around the world? Let’s step back and use this controversy to underscore some key points… First, while there might be issues with the concept of disruptive innovation, there is also an unwilling to acknowledge one basic fact of life; ‘disruption’ is occurring with increasing frequency in the business world…

As Joseph Schumpeter observed; markets are a powerful engine for ‘creative destruction’ they invite competitors with a better/different idea or approach to challenge incumbents. It happens all the time, and the trend towards increasing disruption that are playing out on a global scale is a result of the convergence of two powerful forces:

First, the advent of digital technology as a disruptive force… Yes, there are major technology disruptions in the past– think of the steam engine, electricity, telephone… But digital technology is different, it’s one of the few technologies that has demonstrated sustained exponential improvement in price/performance over an extended period of time… But there’s more; this exponentially improving digital technology is spilling over into adjacent technologies, catalyzing similar waves of disruption in diverse arenas, such as; 3D printing of physical objects, biosynthesis of living tissue, robotics, health care, the environment, transportation… just to name a few…

Second, at work is a long-term shift in public policy on global basis towards freedom movement of– people, goods, money, ideas… across geographic, industry boundaries… These two forces– exponentially improving technology and economic liberalization— are combining to create environments that are increasingly vulnerable to disruption. In economic terms, they are doing two things: First, they are systematically and substantially reducing barriers to entry and barriers to movement on a global scale… Second, they are offering untapped capabilities that can be catalyst to fundamentally re-think business models, institutional arrangements…

These forces provide more opportunities for players to adopt new/different approaches that can be highly disruptive… Hence leadership must plan beyond the next quarter or next year and challenge, on a sustained basis, their key assumptions, which are often unstated– but the foundation for their business growth, sustainability… And perhaps most basic of all, leadership must acknowledge that ‘disruption’ is a growing force and resist the temptation to dismiss or deny that it exists…

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Executives around the world are redesigning processes, restructuring their firms to meet the challenges of operating in a more dynamic, hyper-competitive world, but many are ill-equipped to make the necessary changes… Successful business take new ideas (even old ideas) and turn them into opportunity by creating sustainable economic value for all stakeholders…

Successful business search for opportunities that ‘unfreeze’ a stable industry that have grown stale and inject different value propositions. They recognize that they must listen to customers but also educate the marketplace to– different solutions…

And as for the debate: There is no debate– Yes, ‘disruptive innovation’ is a very useful concept for thinking about change… Yes, ‘disruptive innovation’ has become buzzword that can mean just about anything…