Success, then disruption, then failure

Clay Christensen

You can be too good at something, too successful, so that somebody else, an upstart, undercuts and topples you, turning your success into failure. That’s because of a fundamental asymmetry between your view of the world and your upstart’s. And it makes you vulnerable.

It should be immediately obvious how this notion relates to Kipling’s idea that triumph and disaster can be impostors, which is also the idea that my forthcoming book is based on.

But the idea comes not from the worlds of philosophy or psychology, but from the world of business, which I usually consider unbearably boring and banal. (If it surprises you that a correspondent for The Economist, who has written a lot about business, would say such a thing, well, there it is. I said it.)

That said, we have already discovered that conductors can teach us about leadership and that Rembrandt can teach us about good writing. So why shouldn’t a Harvard Business School professor have something to teach us about life?

The professor is Clay Christensen, and IMHO he is the only business writer who has ever written a book that is not painfully obvious and banal but simple and profound. He doesn’t quite make it into my pantheon of great thinkers, but almost.

Disruption

The term he coined in his most important book, The Innovator’s Dilemma, is disruptive innovation. He explains it in this video.

What Christensen observed in one industry after another is, first, an incumbent. That is the most successful company in the industry, the leader. This company improves, year after year, by adding features to its products and listening to its best customers and meeting their demands. At some point, however, this company’s products get so good that they are more than good enough for most people, and too complex or expensive for the least demanding consumers, or people who don’t even use the product at all yet.

Eventually, Christensen observed, a disruptor comes along. This is a scrappy new company, not worth the attention of the incumbent. It makes products that are clearly “inferior” to the incumbent’s products. They are more basic, simpler, cheaper.

For precisely those reasons, the disruptor will have different customers than the incumbent. The demanding customers stay with the incumbent, whereas people who never used the product at all, or who used it very little, will try out the disruptor’s products.

The incumbent will thus not only shrug at the disruptor but enjoy his presence. That is because the incumbent can now shed the low-value customers and serve only the most demanding customers, charging them more and making more profits. Things seem to be going better than ever.

The disruptor is also enjoying himself. He is not, at first, competing with the incumbent at all, but aiming at people the incumbent never served. He sees the world in a different way. A small new market, with tiny revenues, looks fantastic to the disruptor, whereas it would make the incumbent yawn. This is the asymmetry in worldview.

But something else is going on, unnoticed: All the while, the disruptor, too, is making improvements. And at some point the products of the disrupter become good enough for everybody. This is when the impostor drops his guise.

The high-end customers suddenly start wondering why they have been paying for all those strange features they never use anyway. They defect. The incumbent is toppled and falls. The disruptor takes its place. It becomes a new incumbent, until it, too, is disrupted.

An example

Christensen gives great examples from business history in his book, but let’s take one that, in a different context, The Hannibal Blog mentioned just the other day: cloud computing.

  • Incumbents: Microsoft (Windows + Word, Excel, Powerpoint); Apple (fancy, snazzy laptops and such)
  • Disruptor: Google and many smaller companies (WordPress included) that provide free or cheap services over the internet.

For years, Microsoft “improved” Word (to take just that example) by adding features, then made us pay more moolah to install a new version. Microsoft was listening to its most demanding customers–the ones who, say, pretended to need a multi-color, rotating, animated table in their letterhead.

The rest of us hated Word because we just wanted a clean white page that does not disappear every time a laptop breaks. Most of the rest of us (the young and indigent, the poor in Latin America, Asia and Africa) could not afford Word at all, and so we did not use it.

Along comes Cloud Computing. You can now type, save and share simple text documents on the internet, free. This has advantages: several of you, in different places, can work on the same document at the same time. You can access the document from any phone or computer. If your computer breaks, you no longer care.

It also has “disadvantages”: You cannot get that multi-color, rotating, animated table in your letterhead. (More seriously, I could not write my book on Google Docs because it does not support endnotes yet.)

But who cares? Almost nobody, it turns out. So, right now, the poor, the savvy, the un-demanding are the ones using Google Docs most. The suits are still using Word.

Wait a few more years (months?). Then Word as we know it will disappear.

Enough business, back to life!

That is the most I have ever talked about business in my private life, and I feel so yucky that I might have to take a shower. But I was just setting up a different point: Why should Christensen’s insight not apply to … art, science, sports, love and life?

As I write this, I am coming up with examples from all these spheres of life. In due course I will accost you with them. But in the mean time, please feel free to suggest your own in the comments.

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15 thoughts on “Success, then disruption, then failure

  1. I couldn’t agree more about business! And forgive me, but Christensen is a good example of a typical business guru with the latest neologism. What he’s describing is what happened to Swiss watches when the Japanese started making quartz watches. So his idea is a bit of a deja vu.

    Not to be argumentative, but I don’t think that Christensen’s insights apply to other spheres of life. I don’t think they are even that widely applicable across all of business. For example, how does what he says apply to airlines (lowering cost and eliminating service is not innovation) or the automobile industry?

    It is fun to try to come up with scenarios like rap music or reality TV being disruptors but it just doesn’t seem to work. Can’t wait to hear other peoples’ thoughts.

  2. … Master, isn’t this simply the market place? Why not set up a Yoga stall in a market? I have seen some visit for fun, neither spending nor buying.

    • Are you suggesting yoga as a spectator sport? I see yoga enthusiasts slither into Whole Foods from the nearby yoga studio, relaxed and glowing. What do they do in those classes? It seems like it might be more interesting than what I see on public television.

      (Ka-ching. I just earned another $30 for that product placement).

    • As usual, Mr Crotchety, you make me think deeper and laugh harder than I have ever thought or laughed before.

  3. I don’t think Christensen has said anything new. Incumbents, having achieved success, rest on their laurels and no longer work so hard, for they wish to smell the flowers.

    The challengers, by doing what the incumbents once did when they were on the rise, eventually displace the incumbents.

    This dynamic is obvious anywhere we care to look, and applies to all aspects of life, whether involving individuals, corporations, nations, empires, you name it, and applies to any activity.

    So Christensen, by elucidating the obvious, is banal.

    • Aha. In Chistensen’s examples it is NOT the case that the incumbents “…rest on their laurels and no longer work so hard, for they wish to smell the flowers.”

      Instead, he studied companies that were fantastically managed when they were being disrupted, working harder than ever, at the top of their game in ever way.

      And STILL they were disrupted. Because they saw the world differently than the disruptors, and couldn’t help it.

      So it’s not a matter of success leading to sloth. It’s a dynamic unleashed by success.

  4. Good stuff. You see this sort of thing happening outside of the business world as well. It occurs with political parties, non-profit organizations and even sports teams.

    I think your examples of Microsoft and Apple are a bit premature, however. These companies are more competitive than they are given credit for, constantly watching market trends and potential competitors. Microsoft, for instance, watches Google like a hawk and takes even the smallest of Google’s test products seriously.
    For instance, while Google is enjoying the growing success of Google Docs, Microsoft is preparing to release Office Web Apps.

    • Well, it’s true that Microsoft has long been advised be Christensen on how to break the spell. But the power of his observation is that even incumbents who understand the threat of disruption can’t do much about it. Office Web Apps, for example: For Microsoft to make this new thing truly successful, it would have to give it away free or very cheaply and be prepared for its new product to kill Word and Excel. This would lead to organizational tensions (and a shareholder revolt) so that it cannot fully happen. Instead, the new product would be hobbled. A disruptor will provide it instead….

    • Fair enough. I agree that MS will have to offer it for free in order to compete with Google. Even charging $1/year would be a major market disadvantage – at least if the home user is a major part of the target market. However, it doesn’t have to hurt the Office group or lead to organizational tension. For a variety of reasons (including a richer feature set, not requiring network access, and the wish to store data only locally), Office will still sell. Even then, if sales of Office decline, there is still profit potential in free software-as-as-service offerings through advertisements (the main revenue stream for most of Google’s and Microsoft’s online services).

  5. I suggest mediocracy, the rule, by numbers, of mediocrity in a democracy.

    It is a mediocre marketplace in every sphere of life; religion, education, relationships etc.

    We like to hang out with something we command and understand. It is daunting to step into a formula one.

    Someone came up with the catchy reminder: Keep It Simple Stupid…

  6. There is a saying in Spanish: “Rara vez el comedido sale con la bendición de Dios”

    It is a rare occasion when the benefactor is able to leave with a blessing.

  7. I agree that Christensen’s idea applies beyond business. But is it really that original? It is, after all, remarkably similar to evolutionary theory. Take the business example for instance. The incumbent is simply not the best adapted to the environment (in this case the market). Because of this an upstart who is better adapted will steal market share and cause the incumbent to decline in power. And so the cycle continues.

    • I should really read the other comments first, for I now see that my point has already been made. Apologies.

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