A colleague recently introduced me to Clay Christensen and his concept of “disruptive innovation.” The phrase is a bit of a buzzword these days, appearing in Forbes, The Seattle Times, The Economist and even leading to events like a “festival of disruption.”
For those of you who don’t know him, just as I didn’t, Christensen is known in the business world primarily for his book “The Innovator’s Dilemma,” which is a business school staple.
Christensen has said that disruption “transforms complicated expensive products into things that are so affordable and accessible that many more people can own them and use them.” He added that he believes that disruptive innovations have accounted for nearly 100 percent of all of the jobs that have been created in America in the last 100 years.
Examples of disruptive innovation that Christensen uses are personal computers, which uprooted the market for mainframe and mini computers (I know millennials are asking ‘What the heck are those?’). Other examples are cellular phones, community colleges, discount retailers and retail medical clinics.
According to Christensen, disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then moves up market, eventually displacing established competitors.
This is what makes innovation so difficult and what brings companies to the idea of the “innovator’s dilemma.” The dilemma is the choice companies have to make between holding onto an existing market by doing the same thing a bit better or capturing new markets by embracing new technologies and adopting new business models.
New business models? Hold the (cellular) phone.
Why throw out a business model that has been your bread and butter for decades? That just isn’t rational, especially when you’re talking about trading it for a model with lower profit margins.
And that’s why businesses don’t do it and, Christensen argues, new technologies cause great firms to fail.
The biggest piece of all of this, as in most business ventures, is risk. Do you bet your bread and butter on the untried, untested and what may turn out to be the unworthy?
I’m not finished with Christensen’s book quite yet (though it is keeping me up at nights and causing book hangovers). My colleague mentioned that the book can leave some readers feeling rather pessimistic. What’s a business to do when faced with such a dilemma? Is all hope lost? Are all big, established businesses doomed?
Well, my colleague said Christensen didn’t really answer that in “The Innovator’s Dilemma.” But, he has since published a book called “The Innovator’s Solution,” which I’ve been told isn’t nearly as convincing.
Maybe it is naive, or maybe it is innovative (wink wink), but I think such disruptions bring about enormous opportunities — both for consumers and businesses alike.
As I walked down Main Street on Friday on my way to grab a cup of coffee, it was hard not to think about how this concept might apply to small-town businesses as much as the Kodaks and IBMs of old. How many local businesses are struggling with the “innovator’s dilemma” right now? I would bet many, especially as the Internet continues to compete with local business.
After all, I’m not sure where I would be in my life without things like Twitter, Facebook, Netflix, iTunes and Google.