Here is an excerpt from an article written by Maxwell Wessel for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.
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These days, the term disruption is greatly overused. And unfortunately for the strategists and investors seeking to apply the theory’s brilliance, even the pundits seem to get it wrong.
Over the course of the past few weeks, two articles crossed my desk touching on this issue. Both articles espoused slightly new definitions of disruption, expanding the categorization of the world that Clay Christensen introduced us to more than 20 years ago. One of the articles reached millions of readers through one of the Internet’s most respected technology blogs. The other article reached executives around the globe through publication in the HBR‘s print magazine. The similarity between the two: both articles hinted at a sort of “high-end” disruption. Where we’ve traditionally described disruption as the slow climb of scrappy start-ups offering cheaper, lower performing products through models that look unprofitable to the incumbent firms they are attacking, both of these authors argued for a classification of disruption that captured innovative offerings that were superior to existing products.
Simply put, the argument for “high-end” disruption is a bad one. Not only does it create complexity where none is needed, but it also misses the point of disruption itself.
Disruption is an answer to a seemingly paradoxical question: “Why do the best resourced firms, with well trained employees, access to distribution channels, and funds, fail time and time again when combated by scrappy start-ups?” Two decades ago, Professor Christensen realized that more often than not, the innovations that displace these giants were those that offered cheaper, lower performing products and services in ways that incumbents found unprofitable. Incumbents were happy to walk away from these offerings. If integrated steel mills had built mini-mills to compete with their disruptors, their margins would have been compressed as they fought for share at the bottom of the market. If retail pharmacies had immediately embraced 90-day mail programs, they would have expedited the cannibalization of their existing business. If Dell, HP, and Lenovo had pushed netbooks and tablets in the early 2000’s their profitable PC businesses would have suffered.
Disruption is a story of rational responses to a changing environment. It’s the sensible retreat from your low margin business towards your more demanding, more profitable customers. At least, it’s a sensible retreat until you recognize that you’ve given away your business and there is nowhere left to run.
If a start-up launches a better product, at a higher margin, to an incumbent’s best customers — that’s not disruption. That’s just…innovation. Disruption shouldn’t be a term used to describe any successful innovation. If it is, it loses its significance. So the question becomes, why do people get it wrong so often?
Often when pundits suggest the presence of “high-end” disruptions, what they’re really witnessing is a very effective disruption by a better alternative. The case studies offered in both of the articles above are good examples of this — cell phone GPS apps and Uber. Both are fantastic disruptive innovations, but they’re easily explained by Christensen’s initial, simple model — you don’t need to invent “high end disruption” to explain them.
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To read the complete article, please click here.
Maxwell Wessel is a member of the Forum for Growth and Innovation, a Harvard Business School think tank developing and refining theory around disruptive innovation. Follow him on Twitter at @maxwellelliot. To check out his other HBR articles, please click here.
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