Disrupting The Misinterpretation Of Disruptive Innovation

from the the-innovator's-dilemma-dilemma dept

There's a lot of buzz and talk in various communities lately about a new New Yorker story by Jill Lepore, in which she seeks to dismantle Clayton Christensen's famed concept of "the Innovator's Dilemma" and its corresponding concept of disruptive innovation. It's no secret that I'm a big fan of the concepts put forth by Christensen, and five years ago, as part of a sponsored set of videos, I did a quick two-minute white board video explaining the concept.
The concept of the Innovator's Dilemma and disruptive innovation became so big so fast that it has, reasonably, come under some attack of late. Part of this is just the inevitable backlash that comes with a popular idea. An even bigger part of it is that many have jumped onto the bandwagon without really understanding it. And, many of those are selling snake oil: the idea that companies can actually "beat" the innovator's dilemma. However, as we noted last year, the very reason why disruptive innovation is so disruptive is because the incumbents don't see it as innovation. Part of the problem with the concept of disruptive innovation is the idea that, when graphed out simply, it always feels like the incumbent can see what's coming. They just have to recognize the "cheaper, not quite as good" offering, and realize that it can disrupt their business.

But that's wrong on multiple accounts. First, truly disruptive innovation usually is barely even on the radar of the incumbent players. It's not that they don't think it's disruptive, it's that they don't even see it as innovation or being in the same realm. Craigslist disrupted the newspaper business, and many in the newspaper business still don't realize that. Disruptive innovation doesn't always come neatly "up from the bottom" as the graphs show. They often come in orthogonally from a different dimension entirely.

Second, industries that are disrupted often face a whole bunch of potentially disruptive competitors -- and (in part because of the point above), it's very difficult to tell which one(s) will actually be disruptive. Economist Joshua Gans has a fantastic explanation of this, noting that disruptive innovation has to fulfill two criteria: perform "worse" than incumbent technology on certain metrics and also be on a fast path for improvement (though I don't agree with Gans' claim that the improvement has to be on those same metrics -- in many cases, I'd argue it's actually on the metrics the customers truly value, rather than the ones they claim to value, which are not always the same). The issue is that it's easy to pinpoint technologies that meet the first criteria, but nearly impossible to spot the ones that meet the second criteria. Thus, you end up with lots of potentially disruptive technologies, but actually spotting the actually disruptive technologies isn't so easy.

That's why Lepore's complaint about companies that tried to disrupt themselves and failed goes wrong.
Time, Inc., founded in 1922, auto-disrupted, too. In 1994, the company launched Pathfinder, an early new-media venture, an umbrella Web site for its magazines, at a cost estimated to have exceeded a hundred million dollars; the site was abandoned in 1999. Had Pathfinder been successful, it would have been greeted, retrospectively, as evidence of disruptive innovation. Instead, as one of its producers put it, “it’s like it never existed.”
Lepore isn't really attacking the nature of "the innovator's dilemma" or "disruptive innovation" at all. She's really -- rightfully -- attacking the idea that incumbents can successfully recognize and fight it off. In the history of technology innovation, the list of companies that have truly recognized and responded to disruptive innovation is a fairly short list. I can think of Intel flipping from making memory to making microprocessors and possibly IBM flipping from focusing mainly on big hardware to services (though, even that one's a bit fuzzy). There may be a few other stories here and there, but for the most part, big companies miss disruptive innovations by a long shot.

Beyond the reasons listed above, the other big reason why incumbents fail to react properly to disruptive innovation is that they overestimate their own ability to "catch up later," while missing the key reasons why a disruptive innovation is so successful. For years, for example, I've heard execs in the entertainment industry insist that when the internet was really important, then they could really start investing in an internet strategy. But, of course, by then, it's often too late, and they're playing catchup. Not only that, but they're playing catchup in a realm that they don't fully understand, often mimicking the superficial innovations they see, while completely missing the true innovations under the surface.

To be clear, Christensen may be a reasonable target here. As Tim Lee rightfully notes, Christensen himself has built up a pretty big and profitable consulting business trying to "help" big companies successfully navigate disruption. And there are hundreds to thousands of consultants out there pretending they can do the same thing. And, in some cases, those folks may have the right idea, in general. Hell, in the video above, I, too, am guilty of suggesting that companies can sometimes out-innovate disruptors. It's very tempting to believe that understanding this theory is useful in successfully avoiding the disruption wave. But, the combination of it being nearly impossible to figure out which disruptive innovation is really disruptive, combined with general corporate inertia, makes it nearly impossible to predict precisely which disruptive innovation matters.

But that doesn't (and shouldn't) take away from the importance of the underlying concept and trajectory of disruptive innovation as a whole. The fact that you can't precisely predict which innovations will be disruptive doesn't mean that there aren't any disruptive innovations, or that the theory isn't useful in understanding what's happening in the market. It's just not great as a predictor of "this company will beat that company" -- which is where Christensen himself often runs into problems.

But, in terms of understanding wider trends, where incumbent companies are likely to go wrong, and even in pinpointing opportunities for disruption, the concepts behind the Innovator's Dilemma are of massive importance. The lack of exact predictive power of "this technology will disrupt that incumbent in this way" doesn't rid the entire concept of value. Understanding disruptive innovation is a very powerful and very important tool in recognizing and understanding innovation trends. That doesn't mean it's useful in saying Startup A will definitely disrupt Incumbent B. More importantly, it doesn't mean Incumbent C will be able to recognize or prevent disruption to itself. But if that's what you're trying to do with it, you're using the tool wrong.

Bonus reading: Check out disruptor Will Oremus applying the theory of disruptive innovation to dismantling Lepore's article directly.

Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Mason Wheeler (profile), Jun 18th, 2014 @ 11:17am

    Weren't we supposed to have flying cars by now?

    Just think about all the idiot drivers who make trouble for you on your daily commute, all the times you come within a second or two of an accident because someone wasn't paying attention, and ask yourself one question: do you really want those guys moving in three dimensions when they can't handle two?

     

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  2.  
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    Douglas Adams, Jun 18th, 2014 @ 11:43am

    “Over there,” said Ford, again pointing at the sight screens and looking at the pitch.
    “Where?” said Arthur.
    “There!” said Ford.
    “I see,” said Arthur, who didn’t.
    “You do?” said Ford.
    “What?” said Arthur.
    “Can you see,” said Ford patiently, “the S.E.P.?”
    “I thought you said that was someone else’s problem.”
    “That’s right.”
    Arthur nodded slowly, carefully and with an air of immense stupidity.
    “And I want to know,” said Ford, “if you can see it.”
    “You do?”
    “Yes!”
    “What,” said Arthur, “does it look like?”
    “Well, how should I know, you fool,” shouted Ford. “If you can see it, you tell me.”
    Arthur experienced that dull throbbing sensation just behind the temples that was a hallmark of so many of his conversations with Ford. His brain lurked like a frightened puppy in its kennel. Ford took him by the arm.
    “An S.E.P.,” he said, “is something that we can’t see, or don’t see, or our brain doesn’t let us see, because we think that it’s somebody else’s problem. That’s what S.E.P. means. Somebody Else’s Problem. The brain just edits it out; it’s like a blind spot. If you look at it directly you won’t see it unless you know precisely what it is. Your only hope is to catch it by surprise out of the corner of your eye.”

     

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  3.  
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    John Fenderson (profile), Jun 18th, 2014 @ 12:24pm

    The danger of metrics

    in many cases, I'd argue it's actually on the metrics the customers truly value, rather than the ones they claim to value, which are not always the same


    This problem with metrics is incredibly important -- and wider. There's also the problem that we tend to think that because something is easily measured, it is important.

    You see this problem all through the new crop of UIX people. It's wider than this, but let's look at Windows 8 as an example. Microsoft (and many of its supporters) claim that the replacement of the Start Menu with the Start Screen is obviously something that users value because the usage metrics show that people don't have to click as many times to do something with it. In fact, people don't care how many times they have to click per se -- they care about how intuitive and easy the UI is to operate. And you can't measure that very easily at all: click counts don't really enter into it except at the extremes.

    So we end up with UIs that are optimized to make certain metrics better, with the UI engineers believing this actually represents an improvement (since the metrics have improved) when such focus on metrics has misdirected from what is actually important to users.

     

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  4.  
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    Anonymous Coward, Jun 18th, 2014 @ 12:25pm

    Re:

    Just think, unless the building is strong enough to keep them out, you could be involved in a vehicle accident when you thought you were safe in your bed.

     

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  5.  
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    Gwiz (profile), Jun 18th, 2014 @ 12:41pm

    The real question

    What curious minds really want to know, Mike:

    Did you actually draw the horse & buggy and the cars on that whiteboard in the video?

    Every time I try to draw a horse freehand it ends up looking like a cross between a overweight dog and a Three Mile Island fish.

     

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  6.  
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    Anonymous Coward, Jun 18th, 2014 @ 1:00pm

    Re: Re:

    That's still true today. What's not so true (without being near a cliff or other big hill) is the extra bonus potential energy from falling a long distance.

     

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  7.  
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    Mike Masnick (profile), Jun 18th, 2014 @ 1:07pm

    Re: The real question

    Did you actually draw the horse & buggy and the cars on that whiteboard in the video?


    Ha! No. I did not. Believe it or not, the day we filmed that, there was a guy on hand whose entire role was to draw the nice parts of the drawing on the white board -- which he had to do over and over and over again, because we shot about 30 takes of each 2 minute video...

     

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  8.  
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    Richard (profile), Jun 18th, 2014 @ 1:14pm

    Re: The danger of metrics

    With UIs the main point is that anything you are already familiar with is better than something new for that reason alone.

    So the new think has to be a REALLY big step forward to be worth the new learning curve.

    I really wish Microsoft would take that one on board.

     

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    DannyB (profile), Jun 18th, 2014 @ 2:01pm

    Paradigm shifts

    There was a PBS documentary in the 1990's called The Machine that Changed The World. About the rise of the personal computer, of course.

    At one point, there was talk about how the big players never see a paradigm shift coming. (Referring to mainframes and the rise of the "toy" microcomputers.)

    So, they hire someone with enough vision to tell them when a paradigm shift is coming.

    Then, when they tell them it's coming, they never believe it. They just won't believe it.

     

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    Anonymous Coward, Jun 18th, 2014 @ 2:10pm

    What I get out of the discussion is that disruption is hard to recognize before or while it is happening, but easy to see the effects once it has happened.

    Predicting disruption can be a very risky thing (like thinking the iPhone won't pan out.)

     

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  11.  
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    John Fenderson (profile), Jun 18th, 2014 @ 2:12pm

    Re: Paradigm shifts

    "Then, when they tell them it's coming, they never believe it. They just won't believe it."

    That's completely expected. People fail to spot the disrupters not because they don't see them, but because it's inconceivable that the stupid thing they're working on could possible pose a threat. If it weren't inconceivable, then they would be doing the exact thing that the disrupters are doing.

    Having people point at the disruptive technology and scream "it's right there!" at them does no good because they've already seen that tech and already have a handy list of reasons why it's not really a threat at all.

    It's a cognitive blind spot of exactly the same sort that every good software developer has and has to remain acutely aware of: you get used to the system behaving in a particular way and become blind to the flaws in it that are blatantly obvious to everyone else. It's why developers should never be the ones performing QA on their own projects.

     

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  12.  
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    John Fenderson (profile), Jun 18th, 2014 @ 2:16pm

    Re:

    The iPhone is a good example of how tricky seeing the disruption coming really is. What was disruptive about the iPhone was not the tech (all of us who were involved with the Newton say the iPhone coming a million miles away -- and most of us were surprised that it took so long).

    The disruption was in the business deals around the iPhone.

     

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  13.  
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    DannyB (profile), Jun 18th, 2014 @ 3:15pm

    Re: Ability to see innovation is in the eye of the beholder

    Disruption is not hard for everyone to recognize.

    The utility of mp3 files as a format, and the utility of portable solid state mp3 players was apparent to many people in 2000. The RIAA decided to sue one of the first mp3 player device makers (Diamond Rio) very early on. This was stupid in so many ways, I won't go into, but the point is that the RIAA could have recognized this as an opportunity.

    Obviously there was demand for something solid state, and a whole lot smaller than a walkman, or CD player that skips while jogging. But don't try to create a new legally licensed market for new player technology -- instead try to sue the technology out of existence.

    Netflix? I recognized several years ago that the future was that eventually everything ever put onto a frame of video would eventually be streamable on demand. I debated with a friend about this. He's now more convinced now. And it is now more obvious. But that future has not arrived yet. Probably some people still cannot see it.

    It is and has been obvious for years that Microsoft's business model for Windows OS is seriously threatened by ever cheaper hardware. When a computing device becomes $200, or $100, then the cost of an OS license suddenly is a big deal. Here we are with cheap tablets. Some super cheap tablets can be found at Walmart for under $100. Is it any wonder the rise of mobile computing devices? (Not that price and OS license cost is the only driver of that.)

     

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  14.  
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    Mason Wheeler (profile), Jun 18th, 2014 @ 4:20pm

    Re: Re: Ability to see innovation is in the eye of the beholder

    Netflix? I recognized several years ago that the future was that eventually everything ever put onto a frame of video would eventually be streamable on demand. I debated with a friend about this. He's now more convinced now. And it is now more obvious. But that future has not arrived yet. Probably some people still cannot see it.

    I don't see it. I have a good, high-bandwidth Internet connection with essentially perfect reliability, and streaming video (from many different providers, not just Netflix) frequently hangs, skips, buffers, or does that weird pixelly-laggy thing. (You know what I mean.) And if I'm ever without an Internet connection, it's completely unavailable.

    I use streaming video when it's the only thing available, but I hate the basic concept. Having a local copy (either on a DVD or downloaded to your hard drive) to play back is far superior in every way except for one: the amount of up-front time it takes to begin playback the first time.

     

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  15.  
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    Anonymous, Jun 18th, 2014 @ 6:30pm

    Disruption recognition

    It seems as though the electric companies and big oil (I see two lurking brothers in the distance) see a threat in solar electricity, because of all the attempts (and some have been successful) to pass laws that add surcharges to bills for those with solar panels.

     

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  16.  
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    PaulT (profile), Jun 19th, 2014 @ 12:19am

    Re:

    That's always my response. Sure, it's a cool idea, but think of all the stupid crashes that happen on a 2 dimensional plane. Then consider that not only will those same idiots have to think in terms of a 3 dimensional plane, but that all the wreckage now has to fall to the ground somewhere... It's a horrific scenario.

    Maybe once we have self-driving cars, we can get self driving airbourne vehicles, but I don't think it's really something worth considering before that.

     

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  17.  
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    Anonymous Coward, Jun 19th, 2014 @ 12:36am

    Re: Re: Paradigm shifts

    It's why developers should never be the ones performing QA on their own projects.

    And why new joiners on the team are be your best friends, not (just) whiny time-sinks! They are the ones who remind you of all the things you've just come to accept about "how it is".

     

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  18.  
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    Anonymous Coward, Jun 19th, 2014 @ 12:46am

    Re: Re: Ability to see innovation is in the eye of the beholder

    While I agree in general that it was easy to see that MP3 was going to cause large changes (after we accepted that it wasn't a hoax), I think you still overstate how far it would reach.

    Obviously there was demand for something solid state, and a whole lot smaller than a walkman, or CD player that skips while jogging. But don't try to create a new legally licensed market for new player technology -- instead try to sue the technology out of existence.

    Early MP3 encoders resulted in terrible quality files, CDs were vastly superior, so it came down to a trade-off between size or quality for a while. Early decoders were inefficient, so were relegated to general purpose computers or portable devices with low battery times. And the early portable devices used hard drives, so weren't immune to skipping while jogging.

    So while MP3 was going to be very interesting to watch, there was no guarantee at the start that the quality would improve to rival CD and that solid state storage would become as cheap as it has. The only aspects that you could really rely on (as opposed to gamble on) were that decoding would become easier relative to CPU speed and lower power, and that battery capacity would improve.

    Which is all kind of the point of the article - looking back, it's very difficult to remember why anyone could have missed what would be the next big thing.

     

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  19.  
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    Anonymous Coward, Jun 19th, 2014 @ 8:17am

    But I think it is very easy to look back and state "how did they not see that coming?" How many products or technologies failed? How many products that its creator thought would disrupt everything didn't?

    When the Sony came out with the Mini-Disc player, I thought that would rule the world, it didn't, but Sony is still around.

    I think the key is that disruption happens usually not because of one product or invention, but a set of advancements that allows a product to take advantage of the confluence of advancements. There were smartphones before the iPhone (I owned a Nokia Communicator and a Pocket PC) but there were not the applications or the data networks available then as there is now. Right product, wrong time.

     

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  20.  
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    nasch (profile), Jun 19th, 2014 @ 10:12am

    Re: Re: Re:

    That's still true today. What's not so true (without being near a cliff or other big hill) is the extra bonus potential energy from falling a long distance.

    And unless it's a helicopter, it's probably* going to be moving faster regardless of altitude. Airplanes (which essentially a flying car would be) can't fly at 25mph; if one crashes into your house, it will probably be going over 100.

    Wow this is off topic. :-)

    * it could be going slowly if it falls right after takeoff, but that would be the only time

     

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  21.  
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    nasch (profile), Jun 19th, 2014 @ 10:14am

    Re: The danger of metrics

    There's also the problem that we tend to think that because something is easily measured, it is important.

    And vice versa - anything not easily measured is not important.

     

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  22.  
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    nasch (profile), Jun 19th, 2014 @ 10:26am

    Re: Re: Re: Ability to see innovation is in the eye of the beholder

    I have a good, high-bandwidth Internet connection with essentially perfect reliability, and streaming video (from many different providers, not just Netflix) frequently hangs, skips, buffers, or does that weird pixelly-laggy thing.

    Your two claims, of having a good internet connection and poor performance of streaming video, are at odds with one another. I see no reason to doubt your observation of your video performance, so I would conclude that you do not, in fact, have a good internet connection.

     

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  23.  
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    nasch (profile), Jun 19th, 2014 @ 10:30am

    Re: Re: Re: Ability to see innovation is in the eye of the beholder

    So while MP3 was going to be very interesting to watch, there was no guarantee at the start that the quality would improve to rival CD and that solid state storage would become as cheap as it has.

    There was no guarantee of how fast any of that would happen, but really, every electronic technology always gets better, faster, smaller, more efficient, and cheaper.

     

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  24.  
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    nasch (profile), Jun 19th, 2014 @ 10:31am

    Re: Re: Ability to see innovation is in the eye of the beholder

    Disruption is not hard for everyone to recognize.

    The claim is that it's hard for market incumbents to recognize, not everyone.

     

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  25.  
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    Anonymous Coward, Jun 19th, 2014 @ 1:00pm

    Nasch, disruption is hard for anyone to recognize prior to it actually being disruptive. If it was easy, VC's wouldn't be funding many many companies, they could pick the winners. Start-ups wouldn't fail so often, because they would never be started if they were not disruptive.

    Knowing something will be disruptive is easy after the fact, not so much prior.

     

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  26.  
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    nasch (profile), Jun 19th, 2014 @ 1:42pm

    Re:

    Nasch, disruption is hard for anyone to recognize prior to it actually being disruptive. If it was easy, VC's wouldn't be funding many many companies, they could pick the winners.

    It's hard to predict which business will be successful. It's not always hard to predict that there will be disruption. 3D printing, for example. That is going to be very disruptive to numerous industries. I don't know when exactly, and I don't know which companies specifically will be disruptive. But anybody manufacturing small simple items, especially plastic ones, should be doing something about it already or they're at risk.

     

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  27.  
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    Whatever, Jun 19th, 2014 @ 4:10pm

    cult

     

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  28.  
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    John Fenderson (profile), Jun 19th, 2014 @ 4:17pm

    Re: cult

    Wow, that's a truly terrible article. It gets so much wrong that I can't even begin. Even many of the casual asides (such as the etymology of the word "hacker") are incorrect.

    However, it does get one thing right: the suits have taken the term "disruption" and are well into the process of turning it into a meaningless buzzword.

     

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  29.  
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    Anonymous Coward, Jun 20th, 2014 @ 8:10am

    Nasch, that is exactly the point. Disruption happens everywhere. My issue is that a lot of "experts" write or say that the large incumbents failed to recognize that there was disruption going on that would put them out of business and they failed to act. Some do, some don't, but it is easy to look back and state "how did they miss that?"

    We don't know what we know until we know it.

     

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  30.  
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    nasch (profile), Jun 20th, 2014 @ 8:34am

    Re:

    Some do, some don't, but it is easy to look back and state "how did they miss that?"

    Right, and part of the idea of the innovator's dilemma is the answer to that question - why it is that big incumbents can't recognize disruptive forces. I'm just saying that I haven't seen Christenson or others supporting this idea claiming that nobody can see disruption coming. It seems likely that at least the ones starting the disruptive businesses can see it.

     

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  31.  
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    Larry, Jun 20th, 2014 @ 9:49am

    Re:

    No, I want my self-driving car to also fly.

     

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  32.  
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    Kevin Carson, Jul 16th, 2014 @ 10:14pm

    New wine in old bottles

    Hierarchies can't anticipate disruptive innovation because it's a black swan. The only way to deal with it is to be decentralized and agile -- a network. Hierarchies with Weberian rules are only good at dealing with a stable external environment. And attempts by hierarchies to reinvent themselves as networks almost always fail, because doing it successfully would mean the euthanasia of the managerial class, and the policy is implemented by managers who will gut it in order to preserve their positions. So hierarchies that attempt to simulate networks internally -- the Wikified Firm, Enterprise 2.0, military 4GW doctrine, etc. -- are almost always defeated by the real thing.

     

    reply to this | link to this | view in thread ]


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