June 23, 2014

Sony Walkman

A staple of the 1980's - the Sony Walkman. Credit: Ham Hock / Flickr Creative Commons

Seventeen years ago, Clayton Christensen published a theory that has become gospel in the innovation community: the idea of disruption. It's a notion that many startups have capitalized on: by using the latest technology and creating something cheaper and more accessible to the masses, the little guys can take down the big guys. 

We sat down last week to chat with Christensen about his newest piece, "The Capitalist's Dilemma." One of our big takeaways: America could be in serious trouble. 

"If you're interested in where America is headed, just look at Japan," argues Christensen. "There was a time in the 60s, 70s, and 80s, when Japan was growing at unprecedented rates. What was the engine of Japan's transformation from poverty to prosperity? It was market-creating innovations competing against non-consumption."

Japan's biggest companies in that era invested heavily in the products they were developing for a market that didn't yet exist. 

"Toyota didn't attack the world with a Lexus; they came in with a [Corolla] that was so affordable that the low-end of humanity -- we call them college students -- could have a car. Sony had transistor radios that cost two bucks instead of 25 bucks from RCA. Billions of people now could own things and use things that previously were beyond their reach."

These disruptive products had ripple effects in the Japanese economy.

"As more people bought, these companies in Japan had to hire more people to make them and distribute them and sell them and service them."

Then in the 1990's, their big corporations started worrying more about the bottom line, and cutting costs wherever possible.

"Since 1990, Japan has generated only one market-creating innovation, which is the Nintendo Wii. They keep continuing to invest, but they invest to become even more efficient. They've been in this quandary for 20 years. That's where America is headed."

Last week had Christensen in the news. New Yorker writer and Harvard historian Jill Lepore publicly questioned the business guru.

Lepore was highly critical of the concept of disruption, which she believes has become a crutch:

"Ever since “The Innovator’s Dilemma,” everyone is either disrupting or being disrupted. There are disruption consultants, disruption conferences, and disruption seminars…. "Disruptive innovation as a theory of change is meant to serve both as a chronicle of the past (this has happened) and as a model for the future (it will keep happening). The strength of a prediction made from a model depends on the quality of the historical evidence and on the reliability of the methods used to gather and interpret it. Historical analysis proceeds from certain conditions regarding proof. None of these conditions have been met."

Christensen quickly responded in an interview with Bloomberg Businessweek.

"In order to discredit me, Jill had to break all of the rules of scholarship that she accused me of breaking—in just egregious ways, truly egregious ways. In fact, every one—every one—of those points that she attempted to make [about The Innovator’s Dilemma] has been addressed in a subsequent book or article. Every one! And if she was truly a scholar as she pretends, she would have read [those]. I hope you can understand why I am mad that a woman of her stature could perform such a criminal act of dishonesty—at Harvard, of all places."

Other media outlets soon followed with their own take.

"Lepore is right that the concept of disruptive innovation is often overused and even misused. She's also right that Christensen himself, in his role as consultant to business luminaries, has overstated his own theory's explanatory power. Yet Lepore is wrong to dismiss Christensen's theory, and she's especially wrong to suggest that it has little to say about the future of journalism."

Tune in later this week for our full interview with Christensen.

Business, economy, Japan, Clay Christensen

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