“The common reason that successful companies fail is disruption. It’s more of business model disruption rather than technology disruption.” Dr. Clayton Christensen
I had the honor of being a student in the last class that professor Clayton taught in Harvard Business School before he passed away last year. What a loss! He was a brilliant teacher. The above phrase was one of the golden statements he made as an introduction to one of the lectures. Let’s pause for a moment to go through it again.
Disruptive innovation is the buzz word in the startup ecosystem nowadays. There are so many different definitions for disruptive innovations. Traditionally, disruptive innovation was defined as overnight success. Investopedia defines disruptive innovation as a technology whose application significantly affects the way a market or industry functions. In the same article that was published in 2019, Alexandra Twin refers to professor Clayton’s definition of disruptive innovation and relate it back to technology. But wait… I was there in his class and I took notes when Dr. Clayton stated and restated: “Disruptiveness is not related to technology but how you deploy it into the market.”
Harvard Business Review published an article, “what is disruptive innovation”, in 2015 by Dr. Clayton where he stated that: disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent business”. So, clearly, the reference by Investopedia 4 years later is not very accurate.
Ryan Moore published an article called “11 disruptive innovation examples and why Uber and Tesla don’t make the cut” in 2019, and stated that according to Dr. Clayton, innovations are happening constantly across all the industries. To be truly disruptive, an innovation has to transform a product or a service that is so complicated that only few people with lots of money and skills had access to it. I agree with this definition. As I recall, Dr. Clayton called this type of disruptive innovations a low-end disruption. In fact, he believed that entering from the bottom of the market can kill the leading companies. Low-end disrupters often enter from the bottom of the market and do NOT offer a better product/service, they offer a good enough performance to customers at the bottom of the market. This is exactly why no organization can disrupt itself! There is always a need for a separate core business.
Existing companies, however, can use sustaining innovation to make better products and target customers at the high-end of the market. These customers are often profitable customers because they are willing to pay higher for better products. But remember to succeed in any market and in any industry, it is vital to target causality not correlation. What causes customers to buy a product/service? And for that, please do not rely on your computer data. As Dr. Clayton used to say: “Data is not real; data is just a proxy for the real world”. The growth and better understanding of causality for disruptive innovation comes from field work and observations! Go out and get your hands dirty!