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Disruption guru Christensen: Why Apple, Tesla, VCs, academia may die

This article was originally posted on 9 May 2013.

If you have an interest in technology and its disruptive power then you need to know something about Clayton Christensen and his views on disruption.  This article is a great window into some of his thinking.  There are four things in the article I think are worthy of special note:

  • Christensen specifically makes the point that his theory of disruption allows you to predict whether you (if you’re the challenger) will kill the incumbents or whether they will kill you.  His basic thesis is that if newcomers try to compete at the top end of the market then it’s likely that the incumbents will win.  If, however, challengers come in at the bottom end of the market, history shows that incumbents tend to be dismissive of them until the point where they have a foothold and it’s too late for the incumbent to change.

It would be easy to skim right over this point but it’s worth reflecting on for a moment.  I don’t want to debate the thesis itself – it may or may not need some tweaking.  What’s more interesting in my view is the very idea that that the outcomes – that is, who wins and who loses – in a disrupted market are not entirely random but rather tend to follow a particular, foreseeable pattern.  In a world where disruption is often seen as a black box housing a largely random process, the thought that it’s possible to think what’s happening in an industry through in a structured way and develop a level of foresight about how the industry dynamics might play out is, in my experience, a big deal.  At least it would be if leaders in organisations stopped for long enough to think about it.

  • The second point to make is that Christensen’s commentary on each of Apple, Tesla, VCs and tertiary education are a great resource in terms of illustrating how disruption and industry evolution play themselves out.
  • The third point relates to Christensen’s prediction back in 1999 that higher-education institutions were in line to be disrupted.  The last 24 months have seen that prediction playing itself out at a staggeringly accelerating pace.  I haven’t checked but my guess is that few if any institutes of higher-education paid any real attention to his prediction or bothered to keep an eye on the signposts along the path that he predicted would lead to this disruption.  That would be despite the esteem in which Clayton Christensen has been held for many years now.  While it’s too early to know where the changes in higher-education will end, there’s no doubt that big things are going on and that those things are challenging conventions and norms about higher-education that have been with us for hundreds and hundreds of years.  It amazes me that so few organisations have any real sense for where their world is headed (other than a linear extrapolated view) and what they might mean for them in terms of vulnerability and opportunity.
  • The final point relates to the following quote taken from the article:

“Right now, Harvard Business School is investing millions of dollars in online learning, but it is being developed to be used in our existing business model, and we’ll sell it to other universities to use in their existing business models.”

It seems to me that in this quote Christensen highlights an observation that I’ve also made while working with leadership teams on the challenges posed by technological change.   That observation has two dimensions to it:

  • The first is that smart organisations often fail to distinguish between technological change within the prevailing business model and technological change that is business model transformative.  The recorded music industry, for example, had a great history of adapting to change – from vinyl to eight-track to cassettes to CDs – until the point at which the internet and digital compression technology made it possible for files to be shared over the web.  That change was different to everything that had come before it because it radically transformed key elements of both the value chain and the prevailing business model for music distribution.
  • The second dimension of the observation relates to the failure by smart organisations to see how a technology they nominally understand and are spruiking might actually be the very thing that undermines their own business model.  The Harvard Business School example illustrates the point very well.  I’ve seen exactly the same thing with consulting firms jumping on the “technology change” bandwagon to help clients in a range of industries anticipate what might be in store for them without giving more than a cursory thought to the idea that many of those same technologies might be quietly making the conventional consulting model increasingly vulnerable.

As a business leader or strategist, you should:

  • Incorporate Clay Christensen’s thinking on disruption into your own thinking on the possible evolution of your industry, the potential vulnerabilities and opportunities and who are the winners and losers
  • Ensure you keep an eye on the evolution of companies like Apple and Tesla and industries such as Venture Capital and tertiary education to help refine your thinking about what might play out in your own industry
  • Stay alert to the twin blind spots regarding the potential business model impacts of technological change and the way they might just apply to your business rather than just the business of others

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