Why everyone is wrong about Disruptive Innovation and what it actually means

Even TechCrunch got it wrong

The TechCrunch article, “Why Clayton Christensen Is Wrong About Uber And Disruptive Innovation” by Alex Moazed and Nicholas L. Johnson embodies the very essence of why the term “disruptive innovation” is so misunderstood, and consequently so widely misused.

To be fair, the authors got it wrong for the exact same reasons that the mainstream media, marketing departments everywhere, and pretty much anyone else who talks about disruptive innovation gets it wrong. It’s a complex, evolving framework that doesn’t universally apply.

A 2016 Harvard Business Review article, What Is Disruptive Innovation? by Clayton Christensen, along with his colleagues Michael E. Raynor and Rory McDonald, clarified a plethora of perplexing points between the published and practiced forms of the theory, and provide some much needed post-tech-unicorn-paradigm industry context. While the title is crystal clear with regards to the authors’ intent, many (including TechCruch) seem to disagree with the clarifications that are made.

The HRB article stresses that “Disruption theory differentiates disruptive innovations from what are called ‘sustaining innovations.’”

They write: “The latter make good products better in the eyes of an incumbent’s existing customers…Disruptive innovations, on the other hand, are initially considered inferior by most of an incumbent’s customers. Typically, customers are not willing to switch to the new offering merely because it is less expensive. Instead, they wait until its quality rises enough to satisfy them. Once that’s happened, they adopt the new product and happily accept its lower price. (This is how disruption drives prices down in a market.)”

If you take nothing else from this post, please let this one excerpt remain intact within the deepest recesses of your mind. Because this is where the arguments made by the authors of the TechCrunch article diverge from what they are trying to argue against.

So, before I get to deep into this, let’s examine (very briefly) why Uber is not disruptive innovation; this is where most people get lost.

• Uber did not start at the low end. They started at the higher end with their black car service.
• UberX didn’t start at the low end either. The UberX service leveraged the same amazing platform that made its higher end black car service so successful.
• From the start, Uber’s product was superior to what people had experienced before. Nicer cars, nicer drivers, transparent ratings, and an app that was so simple, even my toddler could use it. (Fortunately, she has not ordered a car. Yet.)
• Even if wait times were longer at first, as the TechCrunch authors argue, who cares? You knew EXACTLY WHEN YOUR CAR WAS COMING. You knew who was driving it. You knew how highly the driver was rated.
• And it allowed you to change your behavior. You could (for example) sit at a restaurant a little longer, enjoying your meal or cocktail, instead of standing out on the sidewalk trying to fight the rest of humanity for the attention of an apathetic cab driver.
• Then, when the driver arrived, he let you know — so you didn’t even have to pay attention.

This, my friends, is called a “sustaining innovation.” It’s a product that is simply better than what the market could offer before. Did it “disrupt” the the way in which cab companies operated? Of course it did. But that’s what trips people up so much. Disruption is defined as a “disturbance or problems that interrupt an event, activity, or process.”

But this has little to nothing to do with Clayton Christiansen’s 1995 theory of Disruptive Innovation. And therein lies the rub.

But it sounds cool!

Yep, if you really distill the issue down to its essence, you’ll find that this was a case in which a fantastic piece of rigorous research resulted in a theory that worked (at least for the specific cases that it covered) but was ultimately reduced down to a soundbite. The theory became a lens through which executives could see the error in the ways of many who failed to comprehend the disruptive process that was taking place, before the effects were materially felt and ultimately irreversible.

It also has a REALLY COOL NAME. When you said “disruption” or “disruptive innovation,” you sounded like you really knew what you were talking about. And those who heard the term immediately got it, or at least they thought they did. Because the name was so easy to intellectually ingest it caught on like wildfire and took on a meaning of its own.

Here is where the TechCrunch crew might have changed the cornerstone of their argument. “Disruptive Innovation” (as it is being used today) no longer means the same thing as what Clayton Christensen used in his originally definition. Trying to say that Christiansen didn’t understand his own theory (which is what the article is really saying) and shoehorning Uber into his own arguments is ludicrous.

So what is the new definition of Disruptive Innovation?

The TechCrunch article states, as Christiansen did “A disruptive innovation is one that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leaders and alliances.” This is correct, but this single sentence does not encapsulate everything that Disruptive Innovation is and will be.

So here’s a suggestion for the newly-evolving definition which doesn’t resemble the actual definition in any way, shape, or form.

dis·rup·tive in·no·va·tion

disˈrəptiv/ /ˌinəˈvāSH(ə)n/

Any cool new tech company that seems to come out of nowhere with an amazing product or service that freaks out the big established companies that were doing the same thing for years but didn’t come up with this cool new idea on their own, so now they have to play catch up, or they die.

Why TechCrunch got it wrong

Even Christensen admits, “Uber is an outlier, and we do not have a universal way to account for such atypical outcomes” which is something that the TechCrunch authors should have examined more closely before publishing. Christensen even says that his own theory doesn’t apply to Uber — and he says so in no uncertain terms.

Here is what Christiansen outlined in his 2015 article as two reasons why the label doesn’t fit.

1. Disruptive innovations originate in low-end or new-market footholds (Which Uber didn’t)
2. Disruptive innovations don’t catch on with mainstream customers until quality catches up to their standards. (Uber caught on before that happened)

The TechCrunch article rests on two key themes.

1. UberX disrupted the taxi market (It did not)
2. Uber clearly took off from a low-market foothold. (It did not)

Listen to the co-author

The best thing to do is to hear it straight from the horse’s mouth. This is a phenomenal interview done by Sonal Chokshi of a16z with Michael Raynor, co-author of the 2015 HBR article, who explains in detail why the term Disruptive Innovation is so misused.

https://soundcloud.com/a16z/what-disruption-is-and-is-not

And remember…

“It is rare that a technology or product is inherently sustaining or disruptive. And when new technology is developed, disruption theory does not dictate what managers should do…We are eager to keep expanding and refining the theory of disruptive innovation, and much work lies ahead. For example, universally effective responses to disruptive threats remain elusive.” — Clayton Christensen