Disrupted Innovation

Its great to see so many people reacting strongly To Jill Lepore’ critique of disruptive innovation in the New Yorker. In spite of the ad hominen fallacy that both Lepore and her critics indulge in, reality is that disruptive innovation has received strong criticism within management academia. My Ph.D. comprehensive exams were on disruptive innovation (long story, will write a long read on it some time) so I am a little familiar with the scholarly literature on disruption. A few points:

  1. Disruptive innovation has repeatedly received high quality criticism from serious scholars, some examples are:

Danneels, E. 2004. Disruptive technology reconsidered: A critique and research agenda. Journal of Product Innovation Management, 21(4): 246-258.

Govindarajan, V. & Kopalle, P. K. 2006. The Usefulness of Measuring Disruptiveness of Innovations Ex Post in Making Ex Ante Predictions. Journal of Product Innovation Management, 23(1): 12-18.

Markides, C. 2006. Disruptive Innovation: In Need of Better Theory. Journal of Product Innovation Management, 23(1): 19-25.

Schmidt, G. M. & Druehl, C. T. 2008. When Is a Disruptive Innovation Disruptive? Journal of Product Innovation Management, 25(4): 347-369.

Yu, D. & Hang, C. C. 2010. A reflective review of Disruptive Innovation Theory. International Journal of Management Reviews.

2. Clayton Christensen has himself acknowledged the significant amount of work that has gone into (& still needs to be done) the evolving theory of disruption:

Christensen, C. M. 2006. The ongoing process of building a theory of disruption. Journal of Product Innovation Management, 23(1): 39-55.

3. The most common critique of disruption – that Prof. Christensen completely misread the emergence of the Apple iPhone ecosystem is true. But that was driven by the original theory of disruption being focused on low-cost disruption, i.e. new technology or business models enabling small/new firms to beat incumbent/large firms by taking away their over-served customers. Subsequent criticism of this low-cost focus (see e.g. Danneels 2004) and development of high-end disruption concept (see Govindarajan & Kopalle 2006) actually show the evolution of the theory. The key problem with disruption seems to be that many of its skeptics and critics are not aware of the vast literature (48 peer-reviewed articles at the time of my comps in 2012, probably higher now) and have obviously not kept up with newer developments in the theory.

I’ll revisit disruptive innovation in much more detail in a future blog post, especially to address some key issues/ misconceptions around it, such as:

  1. Disruption does not imply fatalism: it is not a given that a startup will unseat the incumbent from its throne…provided the larger firms keep catering to shifting customer demands.
  2. Disruption has similarities with real options theory: this is a tricky one since it implies asymmetric payoffs – which makes people skeptical since “on average” most new technologies/startups fail, however the ones that do succeed more than cover for the losses (ask any successful VC). Theoreticians used to evaluating “the average” firm underestimate the power of power law distributions.
  3. Disruption also has similarities with the lean startup movement: the lean startup methodology helps new firms find new sources of customer value (through hypotheses tests) that may not be obvious to larger, more established companies.