Update: Clay Christensen fires back. I get why Clay is mad, but I stand by my view that his theory is only useful for VCs. We can be certain that eventually *some* innovation will be disruptive, but we cannot know in advance which one it will be.
At first, the idea of challenging Clay Christensen’s Theory of Disruptive Innovation may sound as silly as arguing against the law of gravity.
But Jill Lepore makes some excellent points in this very worthwhile New Yorker article. Among them:
- Christen’s case studies are all handpicked;
- His theory predicted that iPhone would not be disruptive;
- An investment fund based on this theory was a failure.
- Big company efforts at embracing disruptive innovation are often fatal.
Perhaps most damning, Christensen claims incumbents in the disk-drive industry were regularly destroyed by newcomers.
But today, after much consolidation, the divisions that dominate the industry are divisions that led the market in the nineteen-eighties.
Micropolis and MiniScribe were supposed to have toppled Seagate. It was inevitable.
But… it just didn’t work out that way.
My Theory About The Theory of Disruptive Innovation
After thinking about it a bit, here’s my theory about the “Theory of Disruptive Innovation”.
It is a tremendously useful theory for VCs… but not terribly useful anywhere else.
For venture capital firms, funding a lot of potential Disruptors makes a lot of sense. The vast majority of efforts will fail, but all it takes is one big win to make the total bundle of investments yield a large return.
By contrast, a large organization that tries hard to disrupt itself can only choose a tiny number of approaches. They would have to get extraordinarily lucky to choose the correct one.
How Should Incumbents Manage Disruption?
Arguably, a better approach for really big companies would be to continue to focus on their core business while keeping an eye on innovations happening on the periphery.
When the time is right, acquire the challenger but keep your hands off.
The challenge, of course, would be that once you have control of the challenger it would be hard to resist the urge to choke the innovation that disrupts your core business. But I think there could be ways to manage around this. An example would be to not bring the business inside the core company, or make it a division. A better example, perhaps, would be to make the investment through a third party in such a way that you can exert no influence at all.
Still, Disruption Remains Disruptive
The problem, of course, is that none of this guarantees a successful outcome. Good judgement and good luck are still required: you have to buy the right company or companies, and then hope that events conspire in their favor. You could still buy the “right” company that everyone believes will disrupt you, keep your hands off it entirely, and be disrupted by a competitor who had a better product, a better management team, or simply had better timing.
In any case:
1) What do you think of Jill Lepore’s article? and
2) Does my Theory about the Theory make any sense?