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Defining disruptive innovation.

Every profession has a vocabulary, a dictionary of words and phrases peculiar to its own context that defines what practitioners do, how they do it, even how they think about their work. These are terms of art, and they are the base on which a community is built; they are at the heart of our notions of expertise, and they are the foundation of clear thinking and effective discussion. This is no less true for innovation management than it is for any field.

In the hundreds of papers I see every year as RTM's managing editor, and the many more I read in other venues, in print and online, it seems that researchers and practitioners struggle with the shared vocabulary of the field. Business in general is infamous for playing fast and loose with language--appropriating other communities' terms of art inappropriately, verb-ing nouns and noun-ing verbs in ways that make language purists shudder, creating new jargon when existing language will get the job done just fine. (1) But perhaps the worst tendency in the innovation management literature is the tendency of practitioners, thinkers, and researchers to defang their own terms of art, rendering them powerless to define or illustrate, by applying them everywhere and anywhere. When everything is disruptive, and all innovation is open, we're left with no tools to distinguish what may be important about a new tool, a new approach, a new concept.

With the next several installments of this column, I'm going to take on some of these terms, exploring their origins and mapping their limitations. In looking at how the terms of art at the heart of innovation management have emerged and evolved, perhaps we can get a glimpse of where innovation is heading--and maybe we can restore the power of some important ideas.

First up: disruptive innovation.

The term disruptive innovation was introduced by Clayton Christensen, first in a 1995 Harvard Business Review article coauthored with Joseph L. Bower and then in his 1997 book, The Innovator's Dilemma. Christensen himself has modified both the specific terminology and its import; his first work focused on disruptive technology, but in The Innovator's Solution, his 2003 follow-up to The Innovator's Dilemma, coauthored with Michael E. Raynor, he shifts the focus. Technology itself is not inherently disruptive, Christensen now argues. Rather, Christensen has come to believe, what is disruptive is how and to whom value is delivered in the marketplace--it's the business model that makes an innovation disruptive. And often, the disruption is the business model--particularly when the disruption comes from the low end of the market and the technology itself may not be new at all (often, it's even inferior to existing solutions). As Christensen defines them, "disruptive innovations were technologically straightforward," offering "a different package of attributes" from those valued by the mainstream market. Disruptive innovators gain a foothold in the market either by creating a low-end product that appeals to customers for whom existing products are too much--too complex, too expensive, too difficult--or by addressing a set of customers overlooked or ignored by mainstream competitors. Alternately, disruptive innovations may shed sophistication in a domain where incumbents have overdelivered--how much does an incremental improvement in screen resolution matter to consumers?--in order to deliver a new attribute that incumbents aren't offering--for instance, a screen that is less likely to break or crack. An incumbent facing disruption must choose between clinging to its existing markets--likely not a real long-term choice--or risking its advantage on new technologies and new business models. Some companies try to have it both ways, by experimenting with disruptive concepts in separate business units or corporate incubators, or by acquiring upstart disruptors.

Since its introduction, the concept of disruptive innovation has, to put it mildly, taken off. An entire mini-industry has evolved around it, with consultants and publications and conferences, all promising to help companies understand and identify disruptive innovations in their particular industries. Christensen himself has encouraged the application of the idea to other contexts, with books focused on disruption in health care, education, and higher education. And disruption is everywhere, from your neighbor kid's garage-based enterprise to the latest Silicon Valley app with no discernible income stream. Everyone from Apple to Zipcar has been called disruptive. No elevator pitch is complete without a nod to Christensen's theory and a claim to be the next disruptor--of taxi services, of flower delivery, of grocery shopping. We are all, always, either disruptors or on the verge of being disrupted. Disruptive innovation has clearly, as The Economist put it in a 2015 article, "escape[d] from the pages of the Harvard Business Review and become part of the Zeitgeist."

That proliferation has not come without some backlash. The most prominent example is Jill Lepore's 2014 New Yorker article, which both critiqued the cultural implications of disruption as a driving paradigm and--in a less well-developed line of argument--attacked Christensen's work directly. Lenore's carefully constructed, if somewhat overwrought, argument ignited a debate, one we covered in the January-February 2015 edition of Resources. Much of that debate was overly personalized, but almost everyone--including Christensen himself--agreed on one point: the concept of disruptive innovation has been overused and misapplied, to the point that it has become a cliche, approaching meaninglessness. "Disruption is a theory about why businesses fail. It's not more than that," in Lepore's reading. According to Will Oremus's summary of the argument on Slate, even Christensen appreciates this aspect of Lepore's argument, which he sees as an attempt "to try to rein in this almost random use of the word 'disruption.'" Indeed, New York Magazine blogger Kevin Roose suggested we should all stop using the word altogether.

That, perhaps, is an overreaction. The concept of disruptive innovation, as Christensen and coauthors Michael E. Raynor and Rory McDonald point out in a recent Harvard Business Review article intended to redirect and update the conversation around the theory of disruptive innovation, is extraordinarily useful for understanding what may be happening in a market and thinking about how to respond strategically. But accessing that value requires careful thinking about what disruptive innovation really is and what we mean when we use the term.

In my view, a large part of the problem in understanding disruptive innovation arises from a conflation of the industry-specific concept--Christensen's theory--and the broader meaning of the words "disrupt" and "disruptive" in the English language. To disrupt something is to cause disorder or turmoil, often to the point of destruction. You can, in fact, disrupt a market, a value chain, an entire industry in the absence of a disruptive innovation in Christensen's sense, a point Christensen and his coauthors make explicitly in the December 2015 HBR article: "Many researchers, writers, and consultants use 'disruptive innovation' to describe any situation in which an industry is shaken up and previously successful incumbents stumble." Even a radically new business model that forces your competitors to completely rethink the way they capture value may not be disruptive in Christensen's sense, if it doesn't reach out to previously excluded consumers or offer a lower-end alternative to attract those uninterested in or unable to access more sophisticated offerings.

Zipcar cofounder Robin Chase inadvertently supports this line of thinking in an HBR blog post that argues for an expansion of the concept of disruptive innovation. Christensen's theory, Chase says, excludes an emerging source of disruptive innovation: business models that create value by tapping excess capacity. These new businesses, which are upending the hotel industry (Airbnb), taxi services (Uber), navigation (Waze), and education (Coursera and other sources of massively open online courses, or MOOCs), she says, are "completely disruptive." She's right: these companies are disruptive in the broader sense--the travel industry will never be the same. But they're mostly not disruptive innovations in Christensen's sense. They may access new sources of value--the excess capacity Chase identifies--but they don't deliver value to previously unserved markets or new value to previously overserved consumers.

The exception may be MOOCs; sites like Coursera escape some of the pitfalls of previous online education attempts by providing rigorous courses with clear standards for evaluation, often taught by university professors. They keep costs low--many courses are free unless the student is pursuing a particular certification--and that, combined with the flexibility provided by the online program and the lack of barriers to enrollment, attracts learners who might not have access to traditional university or vocational education, or who might not fit into the traditional university model for some other reason. I've seen this process up close; Coursera has allowed my teenage son to earn a certificate in data science--a program he would not even have been allowed to apply for in the traditional model, as it is aimed at postgraduate students--during his gap year between high school and college.

Uber, which Christensen's most recent article specifically cites as a company erroneously classified as a disruptive innovation, is disruptive in the broad sense, but it's not a disruptive innovation. As Christensen points out in his most recent HBR article, while Uber has created upheaval in the taxi business, it has not done so either by creating a new market or by serving new, low-end customers. Uber has thrived primarily in cities where taxis were already a well-established option and has positioned itself as offering an alternative to taxis--but not a good-enough one offered at a radically reduced price or with fewer features. Rather, Uber has created disruption in the taxi industry by combining several sustaining innovations to reduce its own overhead and offer more convenience for customers. Particularly in cities where the service is well established, Uber fares are not vastly cheaper than taxi fares, and they can be quite a bit more expensive.

Whether a particular innovation is disruptive, in Christensen's terms, or not may also depend on context. Uber is not disruptive with respect to the taxi industry, but its premium UberSELECT service may be disruptive with respect to car services or limousine rentals. The cars available through UberSELECT are more luxurious than those offered through its regular service, and fares are higher for UberSELECT cars--but they're still significantly less expensive than the fees charged by traditional car services. The catch is that UberSELECT does not offer advanced reservations. Christensen and his coauthors see that as potentially disruptive: "Consequently, this offering from Uber appeals to the low end of the limousine service market: customers willing to sacrifice a measure of convenience for monetary savings. Should Uber find ways to match or exceed incumbents' performance levels without compromising its cost and price advantage, the company appears to be well positioned to move into the mainstream of the limo business--and it will have done so in classically disruptive fashion."

The problems with the kind of expansive evolution in terminology we see in, for instance, Robin Chase's article, are not merely academic. Terms of art frame how we perceive, analyze, and respond to changes in the competitive environment. Different kinds of innovations and different kinds of competitors require different strategic responses; classifying everything and everyone new as disruptive mutes those differences and makes it impossible to distinguish appropriate responses. The right theory, with its limits carefully defined and fully understood, can be a critical tool in the management repertoire. Carelessly deployed or incorrectly applied, however, it is a gimmick at best and, at worst, a hindrance to clear thinking. To borrow a phrase from Christensen's article, make sure you're using the right tool for the context.

Resources

IN PRINT

Clayton M. Christensen. 1997. The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press.

Clayton M. Christensen and Henry J. Eyring. 2011. The Innovative University: Changing the DNA of Higher Education from the Inside Out. New York: Jossey-Bass.

Clayton M. Christensen, Jerome H. Grossman, and Jason Hwang. 2008. The Innovator's Prescription: A Disruptive Solution for Health Care. New York: McGraw-Hill.

Clayton M. Christensen, Curtis W. Johnson, and Michael B. Horn. 2008. Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. New York: McGraw-Hill.

Clayton M. Christensen and Michael E. Raynor. 2003. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press.

MaryAnne M. Gobble. 2015. The Case Against Disruptive Innovation. Resources. Research-Technology Management 58(1): 59-61.

ONLINE

Joseph L. Bower and Clayton M. Christensen. 1995. Disruptive technologies: Catching the wave. Harvard Business Review 73(1): 43-53.

Robin Chase. 2016. We need to expand the definition of disruptive innovation. Harvard Business Review, January 7. https://hbr.org/2016/01/we-need-to-expand-the-definition-of-disruptive-innovation

Clayton M. Christensen, Michael E. Raynor, and Rory McDonald. 2015. What is disruptive innovation?. Harvard Business Review 93(12): 44-53.

The Economist. 2015. The Economist explains: What disruptive innovation means. The Economist, January 25. http://www.economist.com/blogs/ economist-explains/2015/01/economist-explains-15

Will Oremus. 2014. Even the father of disruption thinks "disruption" has become a cliche. Slate, June 23. http://www.slate.com/blogs/future_tense/2014/06/23/ clayton_christensen_jillJepore_agree_disruptive_innovation_has_become_a.html

Kevin Roose. 2014. Let's all stop saying "disrupt" right this instant. New York Magazine, June 16. http://nymag.com/daily/intelligencer/2014/06/lets-all-stop-saying-disrupt.html

(1) And sometimes even better--for a perhaps too finely tuned disquisition on this subject, ask me sometime about the term derisking and why you won't see it in RTM's pages.

(2) Michael L. Tushman and Charles A. O'Reilly, "The Tyranny of Success," in Winning through Innovation: A Practical Guide to Leading Organizational Change, Rev. ed. (Boston, MA: Harvard Business School Press, 2002), pp. 1-15.

In this space, we offer a series of summaries on key topics, with pointers to important resources, to keep you informed of new developments and help you expand your repertoire of tools and ideas. We welcome your contributions, in the form of suggestions for topics and of column submissions.

DOI: 10.1080/08956308.2016.1185347
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Title Annotation:RESOURCES
Author:Gobble, MaryAnne M.
Publication:Research-Technology Management
Article Type:Column
Geographic Code:1USA
Date:Jul 1, 2016
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