The Startup Buzzword Almost Everyone Uses Incorrectly
Harvard professor and author Clayton Christensen wants to set the record straight on the real meaning of the term he coined back in the '90s.
Clayton Christensen. IMAGE: Getty Images
You probably use the verb disrupt to
describe something surprising or innovative--whether it's your business
model, your product itself, or even a feature of one of your products.
And you're probably using the word incorrectly. It's not entirely
your fault. Ever since Harvard Business School professor Clayton
Christensen first proposed his theory of disruptive innovation
in 1995, the term has been widely co-opted and misappropriated by the
business community. The result is what often happens when words get
misused by the masses: The word assumes the misused meaning. Aggravate used to mean "worsen." Now it also means "annoy."
Likewise, disrupt, in entrepreneurial parlance, now commonly means "innovate in a new or surprising way." But this week, in the Harvard Business Review,
Christensen himself added clarity to the term, along with
co-authors Michael E. Raynor (a director at Deloitte Consulting) and
Rory MacDonald (a professor at HBS). Too many people, they write, "use
the term loosely to invoke the concept of innovation in support of
whatever it is they wish to do."
Here are five takeaways from their clarification:
1. "Disruptive innovation" does not necessarily apply to every industry in which newcomers make the incumbents stumble.
In other words, just because your startup has won customers with a
high-tech breakthrough, that doesn't mean--by the book--that you've
"disrupted" the old guard.
2. "Disruption" specifically refers to what happens when the
incumbents are so focused on pleasing their most profitable
customers that they neglect or misjudge the needs of their other
segments.
If your startup comes along and wins over those overlooked
segments--with better pricing or functionality--then your innovation is
potentially disruptive. But the reason is not necessarily because what
you're doing is so novel or high tech. It's because the
titans--hyperfocused on the high-profit segments--have not adequately
responded to your entry.
3. The disruption happens when the newcomer--having already
conquered the customers the incumbents are neglecting--begins to conquer
the high-margin customers, too.
The key for the newcomers is delivering the performance that
incumbents' customers require, while preserving the advantages that
drove their early success.
4. Strictly speaking, Uber is not disrupting the taxi business.
For two reasons. The first is that, according to Christensen's
theory, disruptive innovations originate in low-end or new-market
footholds. He and his co-authors assert that Uber did not originate in
either:
It is difficult to claim that the company found a low-end opportunity: That would have meant taxi service providers had overshot the needs of a material number of customers by making cabs too plentiful, too easy to use, and too clean. Neither did Uber primarily target nonconsumers--people who found the existing alternatives so expensive or inconvenient that they took public transit or drove themselves instead: Uber was launched in San Francisco (a well-served taxi market), and Uber's customers were generally people already in the habit of hiring rides.
None of that takes away from what Uber has accomplished. Nor does it
signal, from Christensen and his co-authors, a disrespect for Uber's
impact. "Uber has quite arguably been increasing total demand--that's
what happens when you develop a better, less-expensive solution to a
widespread customer need," they write.
"But disrupters start by appealing to low-end or unserved consumers
and then migrate to the mainstream market," they continue. "Uber has
gone in exactly the opposite direction: building a position in the
mainstream market first and subsequently appealing to historically
overlooked segments."
5. Disruption is a process, not a single moment or an isolated product introduction.
The process can take decades. Nor does it necessarily result in a
wipeout of the incumbent. "More than 50 years after the first discount
department store was opened, mainstream retail companies still operate
their traditional department-store formats," note the authors.
Netflix is one example of a gradual disrupter who did
conquer the incumbent (Blockbuster). "If Netflix (like Uber) had begun
by launching a service targeted at a larger competitor's core market,
Blockbuster's response would very likely have been a vigorous and
perhaps successful counterattack," they write. Instead, Netflix began at
the fringe. "The service appealed to only a few customer groups--movie
buffs who didn't care about new releases, early adopters of DVD players,
and online shoppers," they add.
Toward the end of the essay, the authors address why the proper definition of disruption
still matters--especially when it comes to Uber. "The company has
certainly thrown the taxi industry into disarray: Isn't that
'disruptive' enough?" they ask.
Their answer is a firm no. And the reason is for your own benefit. Of
all the small competitors poaching your low-end customers, how do you
know which ones to ignore and which ones to pay attention to? Likewise,
if you yourself are the newcomer, how can you sneak up on a giant (as
Netflix did), without luring too much of its attention?
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