It's probably not "disruption" , it’s probably a competent imaginative young company challenging long held assumptions from the past.
The iPhone disrupted Nokia, Motorola and Sony Ericsson hard and fast. Working with Nokia we knew what people wanted and launched 72 handsets a year, some with the best phone cameras, the most storage and the thinnest cases ever made. It turns out we were wrong, better phones didn’t have better specs, they were not cheaper, the were not thinner, they were something utterly different. What we thought people wanted was entirely wrong.
Uber disrupted Taxis by not by being cheaper, but by offering real-time information on where the car was, by offering easier payments and by making it easier to "book" one.
Tinder disrupted online dating by offering far more inappropriate partners, but with way less effort.
Dyson changed the very dynamics of the vacuum cleaning industry but with a model that was four times more expensive than typical. It challenged the assumption people don't care about design, or vacuums or at least won't spend much on them.
So why do we insist on using the words "disruption" as being linked to using a new technology which produces a cheaper competitor from below. The iPhone wasn't cheaper, Uber's were not launched on cheapness, but as a private driver on demand, Amazon hasn't won much of eCom by having better unit economics, the list goes on.
Clayton Christensen’s theory of disruption has been required reading for every sort of economist subscribing, HBR reading type. It’s a great book, with some wonderful examples and all sorts of charts and data that makes it hard to refute.
The theory of disruption proposed and coined by Christensen can be summarized as this. “Disruption” is a series of events or methodology in which a smaller company with fewer resources and (likely) less experience is able to challenge and win over an established incumbent businesses, by making products more accessible and/or affordable and thus available to a larger audience.
So far so good. The world around us, from the cliches of Uber to Airbnb, to the lesser discussed Warby Parker, Allbirds, Casper, Away luggage or Dollar Shave Club, can certainly claim to be part of this trend, but the key thing is how Clayton thought this is done.
The theory then goes there are three dynamics:
An Enabling Technology- An invention or innovation that makes a product more affordable and accessible to a wider population.
An Innovative Business Model- A business model that targets non-consumers (new customers who previously did not buy products or services in a given market) or low-end consumers.
A Coherent Value Network- A network in which suppliers, partners, distributors, and customers are each better off when the disruptive technology prospers.
It is assumed that “disruptive” companies are using one or more of these dynamics to gain market share, then these new entrants then slowly move to higher price points and better service levels, delivering the same results and service that incumbents’ mainstream customers require. And that in the process they maintain the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.
I’ve got no interest in going over the book piece by piece and dismantling it. The case studies chosen and the data presented are thorough and compelling. The book (and further books on the same theme) are tight, logically perfect.
The example of mechanical excavators that were undermined by Hydraulics in the mid 1900’s is a great case study, the way that the steel industry was altered by new manufacturing techniques in the 1980’s is profound and interesting. The story that tracks the paradigm leaps made by disk drives and data storage from 1976 to 1993 is interesting and well made. It’s just that none of these cases seem particularly relevant to today.
These are all (due to the publishing date) examples from what we consider now to by a bygone age. They are all about physical products and manufacturing techniques. They don’t really begin to explain the business success stories of today.
The ten largest companies by market capitalization at the time of writing are Apple, Saudi Aramco, Microsoft, Google , Facebook ( Meta) , United Healthcare, Berkshire Hathaway Johnson and Johnson and Tesla.
I don’t think any of these by these measures have been disruptive. Google wasn’t a cheaper way to search the internet, it was the first company to succeed in making search work so well it became the way we navigated the internet, it makes boatload of money not by selling advertising cheaper, but selling entirely different forms of marketing solution that never existed before.
Apple didn’t undermine IBM to make cheaper computers, it didn’t make a cheaper smartphone than Nokia, it made products (expensively) that were so good people were happy to pay more.
Microsoft’s success has been in making the best software in the world or at least the most widely used, certainly never the cheapest. Facebook created a product that didn’t exist and now sells more effective and targeted ads, Tesla is not selling cheaper cars, made in a more efficient way, it’s selling by some measures, much better cars. Amazon is still selling products with less margin and at higher costs that competitors like Costco, not leveraging a technological advantage to be cheaper.
When we widely think of “disruptive” companies, ones that have come from seemingly nowhere to launch products or services that have taken market share at the expense of a company before, we have lists like this.
TikTok, Spotify, Glossier, Rent the Runway, Bird scooters, Stitchfix, Birchbox, Klarna, WeWork, PayPal, Monzo, Juul, Robinhood, Snapchat, Airbnb, Instagram, Deliveroo, Lyft, Dyson, Nest, Canva, Casper, Allbirds, Instacart, Turo, Zenifits, Patreon, Dollar Shave Club, Whatsapp, Venmo, Peloton, Zoom, Smile Direct Club, and the list goes on forever.
While grouped together as disruptors these companies have little in common. They are all highly valued, likely have been fast growing recently, and are celebrated in the tech industry. But none are really disruptive in the way proposed by Clayton Christenssen.
Airbnb doesn’t use some incredible new technology to make hotel rooms available more cheaply, it’s simply a marketplace matching customers to suppliers, that allows hosts to avoid health and safety requirements or the need to collect taxes. It’s not made accommodation cheaper than before, and while it’s taken some market share from hoteliers in top cities, it’s done more to grow the industry and attract new customers than destroy the incumbents. The real skill in Airbnb is becoming a company that can offer up to 3 million rooms, while owning zero and having no responsibility.
Juul isn’t a revolution in tobacco which makes it cheaper to sell cigarettes, it’s a far more expensive, perhaps safer and more modern way to get the buzz of nicotine, while vaping as a whole is massively eating into and destroying the tobacco industry in some markets, and doing so leveraging the power of improved batteries, it’s not taking the industry from the bottom, but the top, much like Tesla.
TikTok, Instagram, Rent the runway, Bird Scooters, Klarna, Waze ,Seamless, OpenTable, Lemonade, Zoom, Sonos, Eventbrite, Curb, Paybyphone, Shakeshack, Chipotle, ZocDoc, HotelTonight, WeWork, Tinder, Sonder, WeChat, Venmo, Cash App, and almost all the others are not cheaper ways to do things that threaten incumbents but totally different businesses and ideas made possible by new tech.
We need to learn from this.
By misattributing this success clumsily to the idea of “disruption” we’ve seen companies focus on the wrong thing, they assume that using technology to save costs, to reduce human involvement , to rely on network effects is somehow the path to success. We see companies sit on the sidelines and think disruption is a threat, rather than seek to spark bold innovative ideas that can drive real change in the world or at least the shopping aisle
What we really have is less of “disruption” and more of the following attributes that we can all learn from.
New Behaviours -we see apps like Tinder or Hotel Tonight or Instagram leverage new ways people behave, consider value and new things people want. We now tend to want things faster, in a simpler way, with less choice and more fun.
Consumer centricity - There has been a huge shift from making people want things with big advertising budgets to using insights in unmet needs and emerging demands to make things people want. WeChat didn’t need to advertise, it just made a better way to communicate for free, Venmo offered an easy way to pay, Seamless or OpenTable a much more frictionless way to get food. Nest was “just” a perfectly designed thermostat that people could actually use and program.
New ideas - not all of these companies offer something that is brand new but many of them are a new twist on the old. WeWork is a much sexier way to think about temporary office rental, Sonos offers connected high-quality sound, Rent the Runway offers something impossible before for most, borrowing trendy clothes.
New combinations of tech - We are fast to celebrate pioneering companies enabled by ground-breaking, complex and novel technology, but forget that often it’s a combination of fairly rudimentary technology in new ways. Ride sharing apps like Lyft or Uber we’re only possible because of boring old technology like GPS and 3G connectivity. Similarly apps like Sonder have leveraged the power of something as boring as an internet-connected Smartlock, to make something at the intersection of hotels and Airbnb a gap in the market that makes commercial sense.
Hack regulations - Many hack regulation and explore some of the grey areas in the law, from taxation to responsibilities to rights, many use legislation and regulations as opportunities to explore while large traditional companies tend to use them as excuses not to do something.
We are far too quick to describe something as disruption when it is actually about something that is far more practical. Casper mattresses are really about a leap in packaging that allows mattresses to be shipped to people cheaply, most DTC brands are really the same as the products that you’d want to see advertised in newspapers or catalogues, but have been liberated by the new economics of advertising where adverts can be targeted better, bought more cheaply and with lower barriers to entry.
BUT above all else, the REAL power and money comes from unlocking growth by challenging assumptions.