In a recent blog post, titled “The Fallacy of ‘Disruptive Innovation’” on The Wall Street Journal’s website, Karl Ulrich, vice dean of innovation at Wharton, decried the improper use of the term ‘disruptive innovation’ as a buzzword for entrepreneurs.
He’s absolutely right: disruptive innovation is rare, but everyone claims they are in the midst of making it happen. Why the disconnect? Are entrepreneurs simply spouting buzzwords to attract investors, or do they have a fundamental misunderstanding of disruption? We think the latter, and here’s why . . .
Disruptive innovators attack an existing market, often destroying incumbent competitors. But—and this is the first of three characteristics that make disruptive innovation so interesting, all of which are counterintuitive—the disruptive product generally launches into unexplored areas at the bottom of an established market, creating a new population of customers who were unable to afford or make use of the mature products at the top of the market. The second characteristic of disruptive innovations is that they usually launch in a crude form that is no threat at all to the incumbents. Finally, in most instances disruptive innovations do not employ new technologies, but rather novel applications of existing technologies.
Think about digital cameras of the early 1990s with their 640×480 pixel density cobbled together with mostly off-the-shelf parts originally designed for other functions. They were expensive, took crummy pictures and presented no threat at all to traditional camera and film manufacturers. Over time, the price came down, more and more people began to own computers where the photos could be edited, and the segment began to grab more and more consumers who wanted a quick, easy way to capture and preserve everyday images. Today—after decades of software and hardware innovation—Kodak has only recently emerged from bankruptcy and the flagship cameras of all the major manufacturers are digital.
Put these characteristics together, and you begin to see why truly disruptive innovation is so rare: you can’t predict when it is going to happen, so you can’t create a plan to make it happen. Which means the excited entrepreneurs talking about disruption all the time should probably pipe-down and get to the work of entrepreneurs. Mr. Ulrich describes this work quite concisely: “find an underserved market, deliver a great product, garner some share, and achieve positive cash flow.” That’s not bad for a day’s work, and if—in the end—your product turns out to be disruptive, all the better. But you can’t engineer disruption.