Stop Chasing Disruptive Innovation

Clayton Christensen’s excellent book, The Innovators Dilemma has become one of the most important books about innovation in the past decade.  This book introduced executives, entrepreneurs, managers and others to the notions of two types of innovation — sustaining and disruptive  Christensen observed that sustaining innovations took an existing process, product or service and incrementally improved it often by making it faster, cheaper or better.  Disruptive innovations were transformational and had the effect of often toppling the existing industry leader and replacing them with the company which created the disruptive innovation.

An unintended consequence of the Innovators Dilemma has been that companies have begun believing that unless they were pursuing a strategy of seeking disruptive innovations, they were somehow losing out.  The disruptive innovation idea has appeared on magazine covers, numerous articles have been written about it and a cadre of innovation gurus have emerged to help you achieve it.  Recently I was at a meeting where the head of Innovation for a large company told us that disruptive innovation must be part of any innovation portfolio and further defined disruptive innovations as those which shocked the competition and awed the customers.  At another innovation seminar, a recognized innovation consultant clearly explained to the assembled executivesthat achieving disruptive innovation was the result of applying a specific strategy to innovation (which was available to any on a consulting basis).  Based on all of this noise, many CEOs are now pressuring their innovation managers to make disruptive innovation a key goal or at the least insure that a portion of their innovation investments are devoted to reaching disruption nirvana.

I believe that devoting efforts to create disruptive innovation is a futile effort.  Virtually all the commonly described examples of disruptive innovations turn out to be either a confluence of unforeseeable events or the result of luck.  Further more, most disruptive innovations are only seen as disruptive in retrospect, long after the original invention.  To use Malcolm Gladwell’s terms, disruptive innovations are outliers, not the result of intentional efforts.  Great ideas, excellent execution, brilliant people, capitalizing on a unique set of circumstances and a lot of luck are almost always the key components of disruptive innovations.  Trying to create a disruptive innovation is as unlikely as being hit by lightening.  By chasing disruptive innovation, organizations are wasting their resources and not capitalizing on valuable innovations within their grasp.

One of the most commonly cited disruptive innovations is the Internet.  With the benefit of hindsight, few would dispute that the Internet is one of the most important innovations of the 20th century.  However, when the ARPAnet  was first created in 1969, its intent was to provide a method for scientists at various universities and government installations to utilize scarce computing resources at geographically distant locations.  It was not until 19 years later in 1988 that the network was even opened to commercial use.  The internet is clearly disruptive, but only disruptive in retrospect.  It was impossible to predict at its inception how disruptive it might become.

Apple is often cited as the poster child of disruptive innovation.  The Macintosh computer was introduced in 1984 with a 60 second commercial shown during the Superbowl.  It has never been aired again although it is available on YouTube (www.youtube.com/watch?v=OYecfV3ubP8).  Although the Macintosh made the graphical user interface and mouse widely available, other products including the Apple Lisa and the Xerox Star had been previously commercially sold.  Even so, the market share of all Apple computers in the US was only 7.4%  in Q1 of 2009 (blogs.zdnet.com/Apple/?p=3709), innovative yes, disruptive no.

If the Macintosh was not disruptive, then certainly the iPod+iTunes juggernaut must be disruptive innovation which turned the music industry upside down.  The iPod was an inspired industrial design and the $0.99 song price from iTunes changed the way many people purchase music.  However the root cause of the music industry disruption is probably the overwhelming attraction of free pirated digital music which could be easily downloaded from a friend or stranger.  The number of downloaded pirated songs dwarfs the number of songs sold on iTunes and other legal music services.  At the recent D7 conference (d7.allthingsd.com) Irving Azoff the CEO of ticketmaster commented that one of his bands, the Eagles, had made their entire catalog available on iTunes.  The sum of all royalties paid to the Eagles since the inception of iTunes was only $400,000.  As one of the band members quipped, “That the same as playing four songs in St. Louis.”

The core technology which underlies digital music (legal or otherwise) is compression software, starting with the MP3 file format.  The MP3 format was created in 1991 by the Motion Picture Experts Group (MPEG) as a method for compressing audio with limited loss.  MP3 software allowed music to be digitally encoded in only 10% of the disk space necessary for an uncompressed copy.  However MP3 compression software alone was not enough to change the way people obtained music.

Shawn Fanning, sitting in his college dorm room in 1999, created Napster.  Napster allowed people to easily share MP3 files with each other, eliminating the need to purchase CDs.  Although the ability to encode music and share it, previously existed, Napster provided the first easy-to-use interface which allowed users to search the disk drives of literally millions of other Napster user for music.

MP3 plus the creation of Napster were not enough to create the disruption.  It took the availability of high speed internet access to allow Napster to succeed.  Yes the music industry has been disrupted, but it took the confluence of the MP3 compression format, high speed internet access, and Napster to do it.

Finally let’s look at one of the disruptive innovations from the Innovator’s Dilemma itself.  Among the case studies in the book was the story of the introduction of the 5.25 inch disk drive.  Christianson describes in detail how the new 5.25 inch drives did not meet any existing market needs:

By 1990, the use of hard drives in desktop computers was an obvious application for magnetic recording. It was not at all clear in 1980, however, when the market was just emerging, that many people could ever afford or use a hard drive on the desktop. The early 5.25-inch drive makers found this application (one might even say that they enabled it) by trial and error, selling drives to whomever would buy them.

It is hard to see how the creators of the 5.25 inch disk drives in 1980 saw themselves as creating a disruptive innovation as they searched for a market for the innovation they had created.

If disruptive innovation is virtually impossible to plan then how should innovation managers evaluate their options?  I propose thinking about innovation along two dimensions: value to intended users,  and probability of success.  Using these as axes in a classic four quadrant graph, you can now plot your proposed innovation projects.

If you are fortunate and find some of your projects in the upper right corner (high value, high probability of success) focus your efforts on those projects.  If you have projects in the lower left (low value, low probability of success) drop them.  The rest of your projects are probably scattered along the diagonal from upper left (high value, low probability) to lower right (low value, high probability) and you should create a portfolio across this spectrum.

By forgetting about disruptive vs. sustaining,  and focusing on value to client and probability of success you will be well on your way to using innovation to create value for your organization and clients.

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5 Responses to Stop Chasing Disruptive Innovation

  1. Thomas Yip says:

    Chasing after disruptive innovations is like swinging a bat in the dark: you either 1) score a homer but won’t find out until much later, or 2) swing it foul when you thought you had a homer

    I thought of the Apple iPod when disruptive innovation was mentioned, but then I quickly realized that it wasn’t the first hard-drive based MP3 player (Eiger Labs from South Korea was the first company to creative a portable MP3 player), and it wasn’t even considered a success until the 3rd generation was introduced. Hence, disruptive innovations are not always successful, and only time will tell if a product is successful.

    I also thought about automatic transmission, which was originally developed by GM. Turns out developing a disruptive innovation does not guarantee a company’s success either!

  2. Sheldon Laube says:

    Thomas, I really like your baseball analogy. Very visual. Thanks…

  3. Paul Turner says:

    Sheldon

    True things well said. I believe that we greatly overestimate the value of the “Eureka” moments. Most innovations pop up in several places at around the same time when the components parts become available. Recognition and exploitation are key. When the transistor was invented it was licensed to all comers at a nominal cost. Non of the giants involved in vacuum tubes made it in the semiconductor world

    Seems to me that a instead of isolated innovation organizations what we need is focus on how to combat the artheroschlerotic tendencies to which all successful organizations are prone. Few Companies live past the 100yr mark. Why?

    Regards,
    pt

  4. Sheldon Laube says:

    Paul,

    You are right the Eureka moment has been the Hollywood version on innovation. Lone half-mad scientist in lab with sudden breakthrough. As you point very often the invention is often simultaneous at multiple places and by multiple teams.

    I will point out the PwC is one of the few firms well past the 100yr mark.

  5. Christopher L Wasden says:

    I add my voice in agreement.

    This is why I have found it better to characterize innovation as falling into three different classes, labled: incremental, next generation, and radical. And, based upon the several examples you provided above, it would appear that radical innovations are not necessarily disruptive, and in fact, many incremental or next generation innovations, when combined together in creating a network effect can lead to disruptive innovation, i.e. the ipod and the itunes store are but one example.

    The vast majority of the innovations we create and leverage every day are incremental in nature. Occassionaly we create the next generation of an innovative solution, and rarely do we create truly radical innovations, and even more rarely do we find the syzygy that enables disruptive innovation.

    What we do tend to see, however, among the most innovative organizations, is an ambidextrous ability to innovate across this spectrum and to have the practices and structures to persist in overcoming failure and increasing the odds of success. The Newton and Rokr failed, but Apple persisted and created the ipod and the iphone.

    This last point is important since most innovative efforts fail most of the time and success is the byproduct of constant interative modifications and adaptations on the origional idea to meet the evolving needs of the marketplace. This makes the recommendation of plotting innovations on the value/success matrix a constant challenge since value changes as do the odds of success with each iteration.

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