Uber is not an example of Disruption
Apparently not according to Harvard Professor Clayton Christensen in the December, 2015 edition of HBR.
The good professor is best remembered for coining the term disruption and developing a ground-breaking theory on how established industries were disrupted.
His theory was laid out in his 1997 book, The Innovator’s Dilemma and other articles around that time.
Professor Christensen argued that the established companies not surprisingly, concentrate their efforts on their existing profitable customers in an approach he called Sustaining Innovation.
However this left an opportunity open for new market entrants to attack (typically) the lower end of the market by offering lower prices.
Then over time the new entrants would add new features and benefits and go upscale and knock off the established players.
This is why the established players did not see the disruptors coming.
They were concentrating on the upscale, existing customers and missed the treat at the lower end.
This is why Professor Christensen suggests that Uber is not genuinely disruptive because it did not start at the lower end of the market with a limited range of features.
But is this right?
I cannot think of a better example of disruption than Uber.
It has created a completely new ecosystem and consumer experience that has the taxi industry wondering what hit them.
So we have a dilemma.
Is the Disruption theory developed by Christensen et al still valid?
Has reality overtaken the theory?
My view is that Clayton Christensen has made a major contribution to the management field.
His disruption theory and even the word itself has become part of the vernacular.
But I suspect his theory which may have been useful 20 years ago no longer fits the world we live in today.
Here’s why the theory has its limitations:
– According to recent article by Andrew King and Baljir Baatartogtokh, in a Sloan Management Review article, only 7 of the 77 business case studies highlighted by Christensen as evidence of disruption actually fit his theory.
– The theory is not predictive. This is a key point made by fellow Harvard Professor, Jill Lepore. A rigorous theory should be helpful to managers to enable them to predict who, when, where and why a company might be a potential disruptor.
– The theory seems to work only in retrospect. In other-words after a disruptor has made a successful entrant then we say that is was the result of disruption.
– Another issue is that Christensen suggests that the disruptor is usually a small, unknown market entrant. But lately Apple is trying to disrupt the watch industry and Google (Alphabet) the Car Industry. These are hardly small players.
– In fact, Christensen famously predicted that the iPhone when it came out would not work in the long run because it was a sustaining not a disruptive technology.
– I believe that he placed too much emphasis on technology rather than the customer experience as the major (only) focus of disruption. To be sure, technology can be disruptive but disruption for its own sake is just annoying if there is no customer benefit.
– And lastly the Disruption Theory takes time. But the reality today is that disruption is lightning fast. Once the customer experiences something that is 100% better than there is no going back.
So there it is.
Professor Clayton Christensen developed a theory which explained events at the time it was developed.
But the world has moved on and we should no longer be trying to defend a theory that does not reflect today’s marketplace.
Rather we should be developing a new disruptive theory and practice.