Thursday, July 03, 2014

This Week In Disruption Theory

There has been much useful online debate and commentary this week, incited by the New Yorker’s cover story: ‘What the Theory of Disruptive Innovation Gets Wrong’. Jill Lepore’s article is both an overview of Clay Christensen’s theory of disruption and a critique of what she sees as its key failings. Despite a lot of flawed analysis, the article is worth reading, even though in my opinion it seriously loses its way towards the end.

Lepore asserts that there is a lack of rigorous analysis and critiques of disruption theory.
“Disruptive innovation as the explanation for how change happens has been subject to little serious criticism, partly because it’s headlong, while critical inquiry is unhurried; partly because disrupters ridicule doubters by charging them with fogyism, as if to criticize a theory of change were identical to decrying change; and partly because, in its modern usage, innovation is the idea of progress jammed into a criticism-proof jack-in-the-box.”
I am a strong believer in always questioning assumptions and in always probing the accepted wisdom within different fields of activity. So any increase in thorough analysis, informed debate, and productive critiques of disruption. I am also unfamiliar with the relevant formal academic literature on the topic. So I can not comment on the amount and rigour of serious criticism. To be transparent, my own readings on disruption theory have all come from (some decidedly non-academic) online technology and business publications and blogs. There is a lot of informative and educational material out there. Although I do need to make the time to read Christensen’s original thinking in his books.

Lepore argues that some supporters of disruption interpret the idea too broadly.
“But among the many differences between disruption and evolution is that the advocates of disruption have an affinity for circular arguments. If an established company doesn’t disrupt, it will fail, and if it fails it must be because it didn’t disrupt… When an established company succeeds, that’s only because it hasn’t yet failed.”
She also critiques disruption theory for its failure to provide accurate predictions.
“This is less because people have used his model to make accurate predictions about things that haven’t happened yet than because disruption has been sold as advice, and because much that happened between 1997 and 2011 looks, in retrospect, disruptive. Disruptive innovation can reliably be seen only after the fact.”
Joshua Gans correctly analyses this flaw as being a result of Christensen’s own dilemma.
“He saw his theory as predictive even though its own internal logic says prediction is impossible… The Innovator’s Dilemma is like Heisenberg’s Uncertainty Principle. You can’t get around it and Christensen’s failing is that he has sold it as something you can get around”
In his role as an academic Christensen needs to be able to position himself as a mentor for future business leaders. So this forces him to need to present some light at the end of the tunnel.

Ben Thompson makes the critical distinction that Christensen has identified two different types of disruption, and that Lepore has conflated the two. The first type is ‘New Market Disruption’, where new technologies with asymmetric business models gradually take the market away from incumbents. The second type is ‘Low End Disruption’ which asserts that, in the long-term, modular products succeed against integrated products. This theory applies to B2B businesses but its criteria and assumptions do not necessarily translate to B2C businesses. As Gans describes:
“You can’t actually ‘disrupt’ an industry with a technology that most consumers don’t like. There are many of those. 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.” 
The most insightful clarifications that I have learned from this recent round of debate are, firstly, that disruption is most useful in retrospect, to explain why a business or an industry has failed. By definition, the theory can not predict which one from a cohort of potential challengers is going to successfully disrupt any industry. Steve Denning observes:
“But the theory sheds insufficient light on the question of how do you tell a dangerous disruption from an illusory one. There is no clear metric of disruption. All disruptions are not equal.”
Secondly that the alternative innovator’s solution – of acquiring the ascendant challenger at the appropriate time – seems more successful than the original 2003 solution of businesses attempting to disrupt themselves by establishing isolated skunk-works within their organisations. Think about Facebook spending US$19 billion to acquire WhatsApp earlier this year, in contrast to their gestures towards self-disruption with their exploratory Paper app. Denning observes that:
“The ‘innovator’s solution’ isn’t a solution to the innovator’s dilemma. It doesn’t neutralise the forces hostile to innovation; it merely postpones the task of finding a solution to a later date.”
One final takeaway from this article is that the idea of disruption has now reached the point where its awareness amongst a broader audience means that many people are using the term indiscriminately and inaccurately.  (Obviously disruption is not a new topic: The Innovator’s Dilemma was published in 1997.) The word disruption is becoming neutered, and is on its way to becoming an empty signifier. So we can no doubt expect a lot more ill-informed commentary and criticism which is not referring to the core idea at all. In fact I would be surprised at this stage if no-one has begun writing the Freakonomics-style mass-market paperback summarising the essence of disruption theory. Although, as an aside, anyone needing a useful primer to share with someone unfamiliar with the topic should start with Dedieu’s excellent and concise ‘Disruption FAQ’.

I have become interested in disruption theory because I am interested in change, and in the effects of change on individuals, on organisations, and on society. While we are in the midst of any process of change it is difficult to be objective about the scale of its impact. That only becomes measurable in retrospect. I concede that when we are undergoing change we can tend to over-estimate the long-term impact. Yet, even with that awareness, I do believe that we are now in a period of fundamental change happening at many different levels. I find that grappling with the ideas at the heart of disruption theory provides perspective on macro-forces of change operating today.

Disruption is one of those ideas which step out from the pages of academic publications and business books into an awareness amongst the broader culture. I think that is because we can all see its effects in the world around us. Some of us see it as a narrative of potential: a mechanism to affect change in the world. Many others still see it as something to be afraid of. Yet the ongoing outcomes of multiple disruptions are going to effect us all today and in the years to come. So for that reason alone it is worth making the effort to understand the theory.

Linked Articles
‘The Disruption Machine: What The Gospel Of Innovation Gets Wrong’ – Jill Lepore, The New Yorker, 2014.
‘Clayton Christensen: Are Investors Bad For Business?’ – Steve Denning, Forbes, 2014.
‘The Easy Target That Is The Theory Of Disruptive Innovation’ – Joshua Gans, Digitopoly.org, 2014.
‘The New Yorker: Battle Of The Strategy Titans’ – Steve Denning, Forbes, 2014.
‘What Clayton Christensen Got Wrong’ – Ben Thompson, Stratechery.com, 2013.
‘The Disruption FAQ’ – Horace Dedieu, Asymco.com, 2014.