Disrupters Lurking Nearby

Clay Christensen argues that incumbent companies can fail despite being well run and serving their existing customers as assiduously as possible. Their success can blind them to the realisation that scrappy outsiders are quietly rewriting the rules.

Even if he stretches some examples Mr Christensen has clearly identified something big. The problem is more that the definition of disruption he seeks to impose is too narrow. He rules out Uber because, from the start, it offered a better level of service than existing taxi firms, rather than something cheap but inferior. But ask any cabbie if it threatens to disrupt his business, and you will be left in no doubt of the answer. As Isaiah Berlin, a philosopher, would have put it, Mr Christensen is a hedgehog (someone who knows one big thing) rather than a fox (who knows lots of little things): his hedgehog mind leads him to ignore or belittle companies or market forces that do not fit his template.

In Mr Christensen’s theory, disruptive innovators are generally newcomers. But perhaps the most successful disrupter of recent years is an established firm—Apple—that has applied its mastery of technology and design to ever more areas. Mr Christensen greeted the arrival of the iPhone with a shrug: this was a “sustaining” rather than a disruptive innovation, with “limited” chances of success. He failed to see that Apple was reinventing an entire category of product, by turning the mobile phone into an all-purpose computer, entertainment system and shopping centre.

Mr Christensen argues that “real” disruptive innovators succeed by attacking from the low end of the market. But Apple has invariably succeeded by aiming at the top end. Likewise, Netflix destroyed Blockbuster by attracting its core customers: people who were so enthusiastic about watching films that they would pay a monthly subscription to consume them in bulk. Both Netflix and Uber have prospered by dealing with the “pain points” of core customers: in Netflix’s case, Blockbuster’s limited range and punishing late-return fees; and in Uber’s case, the manifold inefficiencies of the established taxi industry.

Back in 1995 Mr Christensen struck fear into executives by warning them that they could be put out of their jobs by companies they had never heard of. Today the biggest threats may come from people they talk about every day.

Adrian Wooldridge writing in The Economist