What is Disruptive Innovation?

Twenty years after its introduction, Harvard Business School Professor Clay Christensen revisits the theory of disruptive innovation and what the theory does – and doesn’t – explain in a powerful article featured in the December 2015 issue of Harvard Business Review.

First introduced in 1995 by Harvard Business School Professor Clayton Christensen, disruptive innovation theory is a zeitgeist of modern management thinking. It has inarguably and fundamentally changed how the world does business. Many leaders of small, entrepreneurial companies praise it as their guiding star. Likewise, executives at large, well established organizations – from Amazon’s Jeff Bezos and Intel’s Andy Grove to Apple’s Steve Jobs – have acknowledged it as a major influence.

But today, the popular theory is in danger of becoming a victim of its own success – its core concepts widely misunderstood and its basic tenets frequently misapplied. Twenty years after its introduction, Christensen and his coauthors, fellow disruptive innovation experts Michael Raynor (Deloitte Consulting) and Rory McDonald (Harvard Business School), revisit what the theory does – and doesn’t – explain in a powerful article featured in the December 2015 issue of Harvard Business Review.

“Different types of innovation require different strategic approaches,” explains Christensen, recently named the second most influential management thinker in the world by Thinkers50. “To put it another way, the lessons we’ve learned about succeeding as a disruptive innovator, or defending against a disruptive challenger, will not apply to every company in a shifting market. If we get sloppy with our labels or fail to integrate insights from subsequent research and experience into the original theory, then managers may end up using the wrong tools for their context, reducing their chances of success.”

Core to the problem is that the terms “disruption” and “disruptive innovation” are loosely used to describe any situation in which an industry is shaken up and previously successful incumbents stumble. That’s much too broad, and more often than not, inaccurate. As part of an effort to capture the state of the art, “What is Disruptive Innovation?” delves deep into four important points often overlooked or misunderstood, and expounds on why getting it right matters:

  1. Disruption is a process. Innovations are disruptive by virtue of a path they follow from the fringe (the low end of the market or a new market) to the mainstream. The fact that disruption can take time helps explain why incumbents frequently overlook disrupters. Take Blockbuster and Netflix.
  2. Disrupters often build business models that are very different from those of incumbents. Apple’s first iPhone that debuted in 2007 was a sustaining innovation in the smartphone market; the product’s subsequent growth is better explained by disruption. It created a new market for internet access and eventually challenged laptops as users’ device of choice for going online.
  3. Some disruptive innovations succeed; some don’t. Success is not built into the definition of disruption. Not every disruptive path leads to a triumph, and not every triumphant newcomer follows a disruptive path.
  4. The mantra “disrupt or be disrupted” can misguide us. Incumbent companies do need to respond to disruption if it’s occurring, but they should not overreact by dismantling a still-profitable business. Don’t try to solve this problem before it is a problem.

Over the last 20 years, the theory of disruptive innovation has been tested and validated through studies of myriad industries: retailing, computers, printing, cars, management education and financial services, among many others. And at times, it has been confronted by cases it could not explain; those anomalies have been used to refine and improve the theory. But the result is a much more elegant and predictive body of understanding, believes Christensen. In fact, empirical tests show that using the theory makes us measurably and significantly more accurate in predicting which fledgling businesses will succeed.

As an ever-growing community of researchers and practitioners continues to build on the disruptive innovation theory, we will come to an ever greater understanding of what helps firms thrive. And therein lays the true value of any business theory: continuous testing, refinement, clarification and growth.

Stern Strategy Group: