The “Disruptive Innovation Theory” is the name given to the theoretical framework proposed by Professor Clayton M. Christensen from Harvard University to study business innovation and identify successes and failures in search of formulas for success
The Disruptive Innovation theory is presented as a response to a question −dilemma−repeatedly posed by various authors, from Schumpeter (1911) onwards: How is it possible that small companies, new entrants in a given market, quite often manage to outperform and displace the established industry leaders?
According to Professor Christensen: “Managers can be extraordinarily effective in managing even the most difficult innovations if they work to understand and harness the principles of disruptive innovation”
The appeal of the promised prize has turned the books published by Professor Christensen into bestsellers. In a very short time his theory has become widespread and is notably influencing academic circles and, in particular, the corporate environment.
In 2001, when I was a director in Deloitte’s Business Consulting Practice, I learned that Michael Raynor, director at Deloitte Research, had co-authored with Professor Christensen the book “The Innovator’s Solution”. This prompted me to undertake a study of the proposed “solution” in order to determine if it was suitable to be applied to our business consulting work.
In my initial review of Professor Christensen’s PhD dissertation−the theory’s Seminal document− serious weaknesses were identified. This led me to an extensive and detailed analysis of the Disruptive Innovation Theory that included books and other research work published by Professor Christensen as well as working papers available at Harvard in the summer of 2005 (Professor Christensen’s Group) and at MIT (Professor Utterback’s Group). Having finished the analysis of the theory, I then went on to study 104 success case studies presented by the various authors to back-up the theory.
My conclusion is clear: the attempt to develop a Disruptive Innovation Theory has totally failed. Subsequent posts will expose in detail the reasons for this strong statement.
It is relevant to notice the intellectual legacy in which Christensen’s ideas are based. Particularly relevant in this regard is the work developed by Professor James Utterback’s, who in 1979 described the same phenomenon using the “disruptive” adjective in a very similar way as Professor Christensen.
I will now quote Utterback’s words:
“The new technology may be viewed as expensive and relatively crude at first, leading to the belief that it will find only limited applications. But even though it may be crude, the new technology may have great performance advantages in certain submarkets and may gain ground by first competing in these more limited markets. Use of the new technology expands by means of its capture of a series of submarkets. As the market expands the new technology may also have much greater potential for improvement and cost reduction than does the existing technology. Thus, price cutting by established units as a defense may be ineffective.
The new technology often opens new applications and captures most of the resulting expansion of the market. During an invasion, the defensive efforts of established firms may cause the old technology to reach much higher levels of performance and sophistication than those previously attained. But this usually ultimately probes to be a futile response, resulting in loss of market share and exit from the business“.
Some examples proposed by Utterback are the following: Eastman Kodak with roll film, Polaroid with instant photography, Xerox with plain paper coping, Digital Equipment with mini-computers, Ford with Model-T, Transitors versus vacuum tubes. All of them constitute cases of successful innovations which, 20 years later, have been presented by Christensen as evidence for his theory.
In subsequent posts I will present a detailed critique of Christensen’s theory, dissecting the success stories used by the author and showing that the Theory of Disruptive Innovation lacks the empirical support that is needed to validate it. I will then synthesize a number of proposals which provide useful methods and knowledge critical to improve the chances of success of innovation-based entrepreneurial projects.
Schumpeter, Joseph A. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Harvard University Press. (1911). Theorie der wirtschaftlichen Entwicklung.
Christensen, Clayton M.The Innovator’s Dilemma. Harvard Business School. (1997). ISBN 0875845851
Utterback, James M. The Dynamics of Product and Process Innovation in Industry. Pergamon Policy Studies. (1979). ISBN 0080251048