Traditional disruption theory and predictions

51T8ggfkBtL._UX250_Regular readers will know that I have been focussed on disruption as a phenomenon where successful firms fail precisely because they pursue the good strategies that made them successful in the first place. My forthcoming book deals exclusively with that issue.

But there is a group of people — mostly outside of academia — who consider themselves disruption theorists. They too think that the term ‘disruption’ got out of hand but they argue that disruption theory is more than a tool for dealing with the research question posed in Clay Christensen’s Innovator’s Dilemma. Indeed, they argue that disruption theory can predict when a disruptor will be successful.

One of my goals is to ensure that people don’t end up arguing when they are actually somewhat at cross-purposes. So an acceptable view of my book is to argue that it is too limiting in what it considers disruption. The broader view is that companies can actually pursue disruption as an innovative or commercialisation path. What does that mean? Again, different people will have different views but I thought that Michael Raynor put forward a coherent perspective. I am not sure I agree with it but I thought it was worthwhile to promote it as being worth your attention if you are interested in these things. Here is Raynor on the a16z podcast:

I am not sure about the predictive power of the theory Raynor puts forward but that is a topic for another time. For the moment, I want to highlight it as a theory capable of empirical analysis and certainly a theory that is influential.

Raynor wrote The Innovator’s Solution with Christensen in 2003 and more recently The Innovator’s Manifesto.

5 thoughts on “Traditional disruption theory and predictions

  1. I think Michael gives a good explanation of disruption theory but I think he is wrong about Uber, Tesla, and even the iPhone. The problem isn’t so much the theory it is that he chooses simplistic targets as what is being disrupted. The targets he describes are really the niche markets that are targeted before the disruption happens.

    Uber is better than Taxi’s but the potential target for Uber’s disruption is the car companies. When people become comfortable with Uber many will choose not to own a car or families will choose to go with only one car. This would never have happened with Taxi’s because their numbers are capped with licenses and without surge pricing you can’t reliably get one. Autonomous driving might be the technology that really accelerates this but i’m sure there will be lots of evidence of the disruption before autonomous cars arrive. New York is definitely not the place to look since they are unique in taxi use and car ownership.

    Tesla’s goal is not to win the luxury car market, that was the means to the end. The goal is to disrupt gas stations and oil companies. Free fuel on the Supercharger network and cheap fuel at home. The technology accelerator is the ability to make the cars cheaper. Elon Musk isn’t secretive about any of this.

    The iPhone was not a better phone when it came out. It ran on the 2G networks and it was a bad phone, bad battery, and bad at messaging. It was a computer that you had with you that worked okay for things like Maps and Browser when you had a WiFi connection. As the technology improved and when it became disruptive it was a great computer that you always had with you that worked anywhere.

    I think part of the difference is we can see the technology enablers coming on a shorter horizon and some companies are using that to create clever strategies to disrupt. Many times those clever strategies aren’t directly targetted at the industry that they plan on disrupting.

  2. Jason,

    Thanks for your comment. In keeping with Joshua’s observation that one should avoid arguments that are in fact misunderstandings, let me offer the following.

    Re: Uber. I tried to be careful to restrict my observations on Uber to its positive versus the taxi business…and Uber is not disruptive to taxis. Could it be disruptive to something else, viz., car companies (specifically, the current model of private car ownership)? Absolutely, and for precisely the reasons you state. And I agree that the key enabling technology for that potential disruption is the autonomous vehicle. In this scenario, Uber starts out taking on a market of relatively little interest to the personal car ownership model (taxis with human drivers) and then rides improvements in a key enabling technology (autonomous cars) into the mainstream of car ownership. Classic disruption.

    Now we can go upstream and ask how might autonomous vehicles find mainstream adoption? Developing solutions that target replacing drivers in cars on highways and city streets is a high bar…that would be a sustaining approach. Alternatively, autonomous solutions could (and have) targeted far less demanding applications in agriculture (e.g., self-driving combines). If solutions in that foothold were to improve and become dominant, they would have followed a disruptive path. Understanding the rate of technological change and the ecosystem changes required for solutions following each path to be successful provides a way for companies to shape their solutions in ways that increase their odds of success.

    Re: Apple. The key is to remember that disruption is a theory of customer dependence above all else. The iPhone targeted — and won over — the very customers that Nokia, Blackberry, Sony, et al. coveted most. Very few of those customers carried two devices, suggesting that the first iPhone was a head-on competitor and very close substitute for the phones people had in 2007. By the lights of disruption theory, that’s really all we need to know. And it’s worth pointing out that the features you point to that you seem to imply were a big part of Apple’s success (and I’d endorse this view) — wifi connection, mapping and browser functionality, and so on — were all part of the Blackberry and other phones at the same time. Those weren’t new features to the smart phone market in 2007. Apple’s success suggests they provided superior versions of these services, at least to a material slice of the market…but then, that’s the definition of a sustaining innovation. Apple’s subsequent growth, however, was a consequence of a more effective disruption of the personal computer as the primary on-ramp to the Internet.

  3. Hi Michael,

    Thanks for responding, here is my very long response. In the podcast you were very clear to say that Uber, Tesla, and the iPhone were not disruptive. You then invoked the comparisons to taxis, luxury automobiles and smartphones. I understand that this is a reaction to how many people misuse the term disruption but I think it does a disservice to you and the work you have done on disruption theory. Why wouldn’t you approach it by saying Uber is (or will be) disruptive but maybe not how many people might think. This would speak to the predictive powers of the theory, yet instead I think you cause confusion in what looks to be 3 incredible case studies of disruption theory.

    Uber has been very clear that their target is car ownership, it’s not a secretive strategy. I’m pretty confident that they aren’t really concerned with the Taxi industry, there concern would be Tesla, Google and maybe Apple. Strategically Uber can’t just wait around until autonomous cars show up. They need to keep moving forward on the vision of replacing car ownership before autonomous cars show up. This is why surge pricing is important and they are trying out things like UberEATS and UberFRESH. I think it is easy to predict that we will see clear signs of Uber disrupting car ownership before autonomous cars arrive. A good strategy would be to poll young people in cities (with a strong Uber presence) who have never owned a car and see what percentage aspire to own one. This is at a time when generally car sales are going strong.

    In this case the Taxi industry is the adjacent industry that Uber needs to replace to get to the network size they need. In many ways the network size is the enabler they need to build and improve on. It is very common to use an adjacent market to target what your real strategy is about and I think it would be a mistake to view the targeting of an adjacent market as a limitation to disruption theory. BlackBerry originally used the paging market and then the PDA market as adjacent markets before the Smartphone market existed. Companies do this to help the customer understand them and pay attention; sort of a bait and switch strategy.

    I do agree with your views on the disruption that comes from autonomous vehicles and I talked about it in this blog post
    View story at Medium.com
    I focused on the opportunity of non-people based transportation and a way to start development using smaller wheelchair sized autonomous vehicles in places like work or university campuses.

    If we look at the iPhone you need to not be superficial on the features as a limitation of disruption theory. The iPhone was not a better mouse trap when it came out. The operating system, hardware platform, approach to Wifi and the approach to the browser were completely different to what was evolving in the smartphone world. The iPhone was targeting mobile computing with the smartphone market as its adjacent market until the conditions existed for mobile computing to swallow the pre-iPhone smartphone market. The fact that the term smartphone crossed over to the mobile computing market isn’t a reason to discount the differences. The iOS operating system used the OS X kernel and this was nothing like the OS’s that evolved from Phones and PDA’s. BlackBerry OS, Symbian OS, Windows mobile could not evolve to this world. This looks the same to me as the difference between cables and hydraulics they just happen to all be called OS’s. The smartphone manufacturers designed for the wireless network that existed which meant a small pipe vs. a Wifi network that represented a big pipe. Even though BlackBerry and Nokia phones had Wifi they were treated as network extenders not a different size of pipe. These smartphones couldn’t actually handle a full internet browser. They used mobile sites, WAP, or proxy servers to reduce the data down to something manageable that they could process and the mobile networks could actually manage. The iPhone and iPhone experience was designed for the big pipe of WiFi and at the time the mobile networks couldn’t handle that amount of data. It’s hard to remember back then but browsing (on the full internet) and Google Maps were basically unusable outside of WiFi. The original iPhone was not in any ways a good Smartphone but it was the start of the consumer mobile computing market. Remember that the iPad was conceived before the iPhone, it just wasn’t possible to make it at that time with the right type of touchscreen and the processing power needed. It was actually very common for people to carry both an iPhone and a BlackBerry or other phone until the iPhone technology advanced to make it a good smartphone as well as a mobile computer. It wasn’t until the end of 2010 when the share of iOS overtook the BlackBerry OS and this is because 3G networks were mature and offered the iOS WiFi style mobile computing experience over the wireless networks.

    I would love to understand your view on Tesla more. The current Tesla’s are not at a price point to be disruptive to internal combustion engines and gas stations but there is every indication that Tesla will be disruptive as a company and the current vehicles are the niche market that is part of their path to create the enablers that they need. Like Uber, Tesla is very clear with their strategy and the goal is to get the price down and increase ownership of electric cars and reduce internal combustion engines and gas consumption. The current car ecosystem is over served and has been for a very long time, but there just hasn’t been a disruptive force to change the ecosystem. Most people don’t think or plan ahead in terms of getting gas for their vehicle. When the light comes on they pull into a convenient gas station and refill quickly. Tesla is moving towards being a car supplier that can offer similar car experience but with cheaper fuel that may be a little less accessible on the go, may require a longer period of time at a refuelling station, and may require you to plan ahead a bit. I think Elon Musk would be happy if the car companies would follow his lead to this ecosystem disruption but they don’t seem equipped or willing to do it. I predict Tesla will be successful in what is clearly a disruption, I’m fine if you argue that you don’t think they will succeed and are therefore not disruptive but you should say that then.

  4. Jason,

    This might be unnecessary repetition on my part, but I’ll risk that because the comments above seem to me to miss a very important point: disruption is about the “path” one takes in seeking mainstream adoption. The only way one is on a disruptive path (whether or not it proves successful) is if one begins with a fringe market (low end or non-consumption) and moves to the mainstream over time thanks to improvements in enabling technologies.

    Everything noted above about Apple’s products can be true, but none of that bears on whether Apple entered the smart phone market disruptively. It didn’t, entirely in virtue of the customers it targeted and the competitors it displaced. That’s really all there is to say on the matter. There is an explanation for Apple’s success in the smart phone market — and quite possible the one you suggest — but it won’t be found in disruption theory. Apple changed the game, refined what counted as “better” and then built a better mousetrap by those lights…take your pick. What it did…it didn’t disrupt Blackberry and Nokia.

    Similarly, Uber isn’t disruptive to the taxi market. Making this point is important, I think, because many many people claim that it is; to believe so is to misunderstand disruption. Is there more to be said about Uber…sure. And some of those things — especially with respect to its growth prospects — require us to invoke disruption theory. But one thing at a time.

    As for Tesla, they’re not on a disruptive path either, and for the same reasons: the Model S competes for customers who routinely purchase high-end Mercedes and BMW, segments that are of keen interest to many mainstream automakers.

    Your last sentence is perhaps the most revealing of the nature of our disagreement: “I’m fine if you argue that you don’t think they will succeed and are therefore not disruptive but you should say that then.” In saying “therefore” you imply that I believe that if Tesla does not succeed (however one defines this), then it is not disruptive. Whether or not Tesla Whether or not Tesla succeeds in the future in no way bears on one’s assessment of the path it is following today. Disruption is not a description of outcomes, or of the features of a product upon introduction. Disruption theory describes a path, or a process — a characterization of a company’s starting point and the mechanisms by which it migrates to its eventual destination. I will not express an opinion on whether or not Tesla will succeed, and certainly no one knows for sure what Tesla’s future holds. In contrast, I know for sure that Tesla is not on a disruptive path to whatever future awaits it.

    I’ll leave it at that on this thread…the HBR piece will be out in two weeks; the argument is presented in fuller form there.

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