High-end products can’t be “disruptive.” Here’s why (Part 1)

There are 5 attributes of Disruptive Innovations

Nearly every exciting new product is called “disruptive,” but almost none of them are. Well, let me be clear, they aren’t disruptive as defined by Clay Christensen’s Theory of Disruptive Innovation. Sure, many of them may fit the dictionary definition in that they “destroy, usually temporarily, the continuance or unity of” a market. But when businesspeople use the term, they’re using it because of Clay’s definition.

Clay’s definition of Disruption has taken over the world because he demonstrated that there is a way for entrants, like startups, to enter a market that is currently dominated by big incumbents and topple them. It’s a really powerful concept if you want to build a business, raise funds from a venture capitalist or invest in a promising new product. So people have begun using the term in all sorts of situations where it doesn’t apply. Many people have begun shaking their heads when they hear about silly concepts like “disruptive cuckoo clocks” but there’s one area where the term is still bandied about with reckless abandon: high-end products that portend to revolutionize an industry.

This is a problem because it causes people who are just familiar with the theory enough to know about its predictive power, but not familiar enough to be able to truly evaluate a product for its disruptiveness to invest good money in, potentially, bad businesses. One of the most prevalent cases of this today: electric vehicles (EVs). EVs are one of the hottest trends in tech. Premium companies like Tesla and the newly-promotional Faraday Future garner massive amounts of attention from technology pundits and regular folks alike but they aren’t “disruptive” and that has big implications for the path they will have to take to success. I’ve published three pieces in the Harvard Business review that cover Tesla in detail here, here and here and I recommend you read them if you’re interested in the EV market specifically or want to see real-world examples of this.

These companies aren’t disruptive because they target the incumbents’ premium customers with products that promise better performance along the existing definitions with the potential for greater profitability. So, if those are some attributes that make companies not disruptive. What are the markers of disruption?

Disruptive Innovation

There are 5 key elements that make a strategy disruptive.

1. It targets “overserved” customers or creates a new market. Overserved are the customers that require less capability than the lowest-performance option from incumbents offers. New markets are just that, markets that don’t yet exist because customers can’t afford or don’t have the skills to use the incumbent’s products, but are created through the development of the disruptive innovation.
2. It creates the phenomenon of asymmetric motivation. Because disruptive strategies target the incumbents’ least attractive customers or no customer at all, they aren’t motivated to fight the entrant. Instead they either flee or ignore the entrant.
3. It possesses an enabling technology that allows it to increase performance at a rate faster than customers demand. Everyone has a level of performance they can utilize from a product; over time that level increases. Disruptive products have a technological ability to increase their performance at a rate faster than customers can utilize which allows them to grow into ever-higher performance tiers.
4. It creates new value networks. Value networks are the chain of suppliers and customers that make up the end-to-end stream of activities that convert raw materials to a finished product the consumer uses. Disruptive products create new value networks because existing value networks are motivated to remain loyal to incumbents.
5. It is disruptive to all incumbents. If the strategy is not disruptive to an incumbent, that incumbent will be motivated and better positioned to capture the opportunity.

It’s clear that high-end products don’t fit every one of these. They typically fall short on the first two attributes. Because they target premium customers, they motivate incumbents to respond to them. So where does the confusion that leads people to call them disruptive come from? The first obvious answer is the dictionary definition versus the term of art for the word Disruption. But for our purposes, the more interesting area of confusion stems from the difference between “disruptive” innovation and the concepts of “architectural” and “radical” innovation.

Part 2 to this post will explain the 4 types of innovations that companies can pursue and provide insights for entrepreneurs trying to understand how to position their products. Check back soon and leave comments and questions!

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