Reading some of this week’s discussions on disruptive innovation, I was struck by how frequently and casually the phrase ‘disruptive innovation’ is being used. In many instances it is used in the sense that Christensen originally coined – to describe an innovation that creates widespread change, displacing an incumbent technology while forcing extensive structural change upon an industry. That’s one end of the spectrum. At the other end, the term seems to be used to describe an innovation that allows competition to take place along non-traditional lines. The interview with Wired Vice President and Publisher Howard Mittman discussing disruptive innovation at Wired Bizcon 2014 (here) is a good case in point, as he suggests that disruption is everywhere (at least everywhere enough to organise a conference to discuss it). This might be true, but it’s unlikely.
In this respect, the use of the term simply describes another form of business competition, regardless of whether it’s technologically based or not. For example, the recent Virgin Disruptors panel debate covered a range of issues affecting innovation, but the discussion was premised on the idea that non-traditional companies leveraging digital technology to compete against established firms represented disruption. Now, there’s no doubt that this type of competition can be difficult for incumbent firms to counter, but not impossible. And most incumbent firms can see – and are acting on – the potential of these digital technologies to make their existing business models obsolete. In fact, some of the most established businesses are at the forefront of applying these technologies to cement their incumbency. Companies like Google, Amazon and Apple.
But disruptive innovation doesn’t really work like that. In fact, most academic studies on the topic indicate that this type of innovation is almost impossible to predict ex-ante, or before the fact. By their very nature, disruptive innovations have highly uncertain outcomes and follow a development path that is unpredictable and are often unexpected. This is why they are disruptive and so difficult to stop –because it’s extremely difficult to see them coming. Alternatively, if they can see them coming, incumbent firms find it difficult to credit them as having the competitive power that they eventually develop. It’s kind of like seeing the gifted sportsperson who changes code. You can see the talent, but can’t credit the rapid development that takes place almost overnight until the novice ‘suddenly’ becomes the master.
Even when an innovation is trumpeted as being disruptive, it’s not necessarily clear what is being disrupted, or who will benefit from it. Take the example of Tesla and its electric cars. There is no doubt that Tesla is causing the incumbent auto manufacturers deep concern. But it takes a long time to build capacity and brand in an industry with high capital costs. And in that time, the big auto makers have huge resources to throw at the competitive threat posed by all electric cars. However, those that should be more worried are in the petrol industry supply chain. Cars are still going to need car components, but eventually they won’t need that network of gas stations that you’ll find in every city and town, and everywhere in between. So is Tesla disruptive to incumbent auto makers? A competitive threat, to be sure. Disruptive? Unlikely. Is it a disruptive threat to Shell, Exxon and BP? A much more likely prospect.
Still, the allure of creating a disruptive innovation – either a technology or a business model – is difficult to ignore. The possibility of leveraging technology to bypass established supply chains, with their cozy established relationships, or of creating entirely new markets served by a small, dynamic outfit is an exciting possibility. And whether that’s called disruptive or not won’t change the dynamics of the situation. And it certainly won’t change the importance of passion and drive in bringing new ideas to market and driving them to them succeed.