Anyone who studies business — and especially those who follow tech — knows Clayton Christensen is the business school professor who developed the theory of disruption. This week, in an article in the New Yorker, Jill Lepore took that theory — and Clay Christensen — to task. Will Oremus, of Slate, sums up part of Lepore’s critique:
Disruptive innovation is simply a theory about why businesses fail. “It’s not more than that,” Lepore says. “It doesn’t explain change. It’s not a law of nature.” As for the future, it’s “unreadable.”
Where Lepore Got It Right
[pullquote]When a subject becomes totally obsolete we make it a required course. ~ Peter Drucker[/pullquote]
Lepore is right to criticize those who blindly worship “the gospel of innovation.” The word “disruption” is misused and abused. It has come to mean almost anything and it can be used in almost any circumstance. I’m told, for example, babies in Silicon Valley, no longer soil their diapers, they “disrupt” them.
People who have no connection to Christensen, many of whom don’t seem to even understand his theory, have declared everyone and everything to be disruptive. The problem has become so bad that that many intelligent people have begun writing it off as a meaningless buzzword. ~ Timothy B. Lee
Where Lepore Got It Wrong
All intellectual movements start with trenchant ways of understanding the world. But as these ideas gain currency they are used to explain more and more disparate phenomena, until the explanation loses its predictive power. ~ Dan Drezner ((Excerpt From: Robert Cottrell. “The Browser Book of Quotations.”))
I love the above quote because it was not written about Disruption Theory, yet it perfectly describes what has happened to Disruption Theory. Lepore’s criticisms are not aimed at Disruption Theory itself, they’re aimed at the diluted version of Disruption Theory currently in vogue. Lepore is wrong to dismiss Christensen’s theory out of hand because she’s dismissing the counterfeit theory rather than the original.
Not Everything Is Disruption Theory
I think the overuse of disruption theory can best be explained by a joke:
Paul Pundit and Andy Analyst like to put together jigsaw puzzles. One day, Andy gets a call from Paul. ‘I’ve got a problem,’ says Paul, ‘I’ve bought this jigsaw puzzle, but it’s too hard. None of the pieces fit together and I can’t find any edges.’
‘What’s the picture of?’ asks Andy. ‘It’s of a big rooster,’ replies Paul. ‘ All right,’ says Andy, ‘I’ll come over and have a look.’ So Andy goes over to Paul’s house. Paul takes him into the kitchen where the jigsaw is strewn all over the kitchen table. Andy takes one look at the kitchen table and turns to Paul and says:
‘For Heaven’s sake — put the cornflakes back in the box.’
Humans look for patterns everywhere and generally find them, whether they are there or not. But not everything has a pattern. And not everything is a jigsaw puzzle. And not everything is Disruption Theory. If we want to examine the validity of Disruption Theory, we first have to define what Disruption Theory is — and what it isn’t.
What Disruption Theory Isn’t
Professor Joshua Gans provides us with his definition of Disruption Theory:
At the heart of the theory is a type of technology — a disruptive technology. In my mind, this is a technology that satisfies two criteria.
Nitpick #1: I don’t think Disruption Theory is necessarily limited to technology. But let us continue.
First, it initially performs worse than existing technologies on precisely the dimensions that set the leading, for want of a better word, ‘metrics’ of the industry. So for disk drives, it might be capacity or performance even as new entrants promoted lower energy drives that were useful for laptops.
Nitpick #2: I think a better way to put this is to say the new product doesn’t appeal to one’s best customers. Whatever.
To distinguish a disruptive technology from a mere bad idea or dead-end, you need a second criteria…
…the technology has a fast path of improvement on precisely those metrics the industry currently values.
Humungous Gigantic Mega-Disagreement #3: Okay, stop the presses ’cause that’s flat out wrong. ((I want to make something very, very clear. Professor Joshua Gans is probably ten times smarter than I am. And if he were to respond to this article, he would probably say I am about to misinterpret what he is actually saying. But the misinterpretation I’m about to describe is so common and so insidious, I feel the need to use Professor Gan’s actual words — if not his actual meaning — to illustrate my point.)) The disruptive technology surely does improve quickly but not necessarily on the metrics the incumbent industry necessarily values.
Take, for example, the iPad. Most tech industry observers now agree the tablet is disrupting the PC. ((For the purposes of this article, the term “PC” includes both notebook and desktop computers, including the Mac.)) The tablet fulfills Mr. Gans’ first criteria for being disruptive: “it initially performs worse than existing technologies on precisely the dimensions that set the leading, for want of a better word, ‘metrics’ of the industry.” Or, as I put it, the new product doesn’t appeal to the PC manufacturer’s best customers.
Now here’s where the confusion arises. Professor Gans goes on to say: “the technology has a fast path of improvement on precisely those metrics the industry currently values.” That may be true but it may also be entirely incidental. And it leads to the mistaken belief that the disruptive product wants to BECOME the disrupted product. In fact, the disruptive product is far more ambitious than that.
When the iPad was introduced, there were vicious debates over whether or not the iPad was even a computer. And no, I am not making this up. These debates were taken very seriously. The neck-beards in the an-iPad-is-not-a computer crowd would look at their existing (usually high-end) PCs, make a checklist of their PC’s features (neck-beards LOVE features), compare that checklist to the iPad and find the iPad seriously wanting. ((If you think this debate is ancient history, just last week a commentator on this site argued an iPad wasn’t truly worthy because it couldn’t write programs for itself. Sheesh.))
Effect And Cause
In their quest to insure the iPad was forever banned from the ranks of computers everywhere, the neck-beards had made an egregious logical error. They had essentially reversed cause and effect.
You should first look a definition and then determine whether the object under consideration does or does not fit within that definition’s criteria. You don’t do it the other way around — you don’t look at the object under consideration and use its characteristics to construct a definition. Allow me to illustrate.
Cows Don’t Give Milk
Looking at your PC and using that as the criteria for defining a computer is akin to a foolish farmer looking at his goat and using it as the criteria for defining what a milk producing mammal is. Let’s follow his foolish train of thought:
— A goat gives milk.
— A cow is not a goat. (Lousy climber, no horns, lots of other crucial “features” missing.)
— Therefore, a cow does not give milk.
— A PC is a computer.
— An iPad is not a PC.
— Therefore, an iPad is not a computer.
When you put it that way, it is easy to see both the foolish farmer and the pedantically-inspired neck-beard have gotten the use of definitions exactly backwards.
Arcane Mistakes Are Actually The Norm
I bring up the seemingly arcane “the-iPad-is-not-a-computer” debate because this kind of thinking is actually not arcane at all. On the contrary, it is the norm. Industry incumbents — just like our well meaning, but slightly delusional neck-beards and foolish farmer — routinely make the identical mistake.
In the same way the neck-beard uses his PC to define what a computer is, in the same way the foolish farmer uses his goat to define what a milk producing mammal is, that is the same way industry incumbents use their existing products to define what their product categories are. ((Why do we do this? it is a combination of myopia and hubris and we can mock it all we want, but to do so is to mock ourselves, because it is clearly deeply embedded within our nature.)) But computers and mammals and categories are only so constrained in the minds of neck-beards, foolish farmers and industry insiders. Consumers know better.
- Consumers know they don’t want better PCs, they want better computing experiences.
- Consumers know they don’t want better goat milk, they want better milk.
- Consumers know they don’t want better products, they want a better life or, at least, they want an experience that makes life better.
The disrupting product is NOT on “a fast path of improvement on precisely those metrics the industry currently values.” In fact, just the opposite. Yes, the product is on a “fast path of improvement.” However that improvement is NOT based on existing metrics and it is NOT based on the current industry values. Instead, the improvement is based on PREVIOUSLY UNKNOWN OR UNEXPLORED metrics and it is based on CONSUMER tastes the current industry does NOT value and may even abhor.
And that makes all the difference.
What Disruption Theory Is
In my opinion, Ben Thompson of Stretechery fame, has a much better explanation for what Disruption Theory is. To start with, he contends Clayton Christensen actually has TWO theories of disruption: New Market Disruption and Low-End Disruption.
New Market Disruption
(T)he theory of New Market Disruption describes how incumbent companies ignore new technologies that don’t serve the needs of their customers or fit within their existing business models. However, as the new technology, which excels on completely different attributes than the incumbent’s product, continues to mature, it eventually takes over the market.
This remains an incredibly elegant and powerful theory, and I fully subscribe to it. We are, in fact, seeing it in action with Windows – the incumbent – and the iPad and other tablets; new technology that is inferior on attributes that matter to Windows’ best customers, but superior on other attributes that matter to many others.
Spot on. Using our iPad example to illustrate, the new product (iPad) is a lousy PC, so PC makers treat it with disdain. But — and here’s the key — for most, the iPad is a better COMPUTING EXPERIENCE than the PC, in just the same way that, for most, a cow provides a better milk experience than does a goat. The incumbent PC manufacturer is trying to make things better for the consumer by making a better PC. The incumbent farmer is trying to make things better for the consumer by producing better goat milk. But the consumer doesn’t give a damn about remaining within artificially constructed industry categories. They want a better experience, whatever the source.
Ben Thompson goes on to describe — and then critique — Clayton Christensen’s second theory: Low-End Disruption.
It is Christensen’s second theory of disruption – low-end disruption – that I believe is flawed.
Briefly, an integrated approach wins at the beginning of a new market, because it produces a superior product that customers are willing to pay for. However, as a product category matures, even modular products become “good enough” – customers may know that the integrated product has superior features or specs, but they aren’t willing to pay more, and thus the low-priced providers, who build a product from parts with prices ground down by competition, come to own the market. Christensen was sure this would happen with the iPod, and he – and his many adherents – are sure it will happen to the iPhone.
In other words, it’s not enough to say the iPhone has saturated the high end market and that growth will slow; rather, the iPhone will soon overshoot customers completely, and will in fact plummet in total sales in the face of good-enough Androids available for hundreds of dollars less than the overpriced iPhone 5C.
Ben Thompson’s Take
According to Ben Thompson, Low-End Disruption Theory is flawed because it focuses on the behavior of BUSINESSES, not consumers. His full explanation can be found HERE and I highly recommend it to you. If you’re at all interested in Disruption Theory — and if you’ve read this far, you must be — it’s an excellent read.
Business buyers tend to overvalue low priced products because business buyers are normally judged by how much of the company’s money they spend. And business buyers tend to devalue the end user’s experiences with those low cost products because those self-same business buyers are typically not themselves the end user.
All of this fits in beautifully with the Theory of Low-End Disruption. However, the theory’s blind spot is consumers.
Consumers — like business buyers — appreciate a bargain too. However, consumers — unlike business buyers — are also the end user so they tend to HIGHLY value the end user experience. And that experience often evokes an emotional response that is difficult to quantify and measure. None of this works well within the framework of Low-End Disruption Theory.
Business consultant Peter Drucker famously said: “What gets measured gets managed.” I have never heard of a consumer corollary to that rule, but if such a corollary did exist it would have to closely conform to Francois De La Rochefoucauld’s observation that:
We never desire strongly, what we desire rationally.
In other words, to create a business theory that has predictive value — and if you think about it, every business in the world attempts to do just that — you have to understand not just the mind of the consumer, but their heart as well.
Tomorrow, in “Disrupting Apple’s Tao“, I’ll explore whether Apple is subject to Disruption Theory…or whether Apple is the exception to Disruption Theory…or whether Apple is the exception that proves the rule…or whether Apple is the originator of a rule that has proven to be exceptional…or whatever.
Normally my Insider article requires a subscription but I’m basing much of tomorrow’s article on a previously written article — “The Tao Of Apple” — so I’m going to make it open to all.
Please join me then.