Robert Samuelson: Both sides are wrong in the Harvard debate on ‘disruptive innovation’

06/29/2014 11:00 AM

06/27/2014 11:17 PM

By their nature, many innovations are disruptive. The Internet is, of course, Exhibit One. It has remade the music industry, threatens “brick and mortar” stores, is changing how we talk to each other (Facebook, Twitter) and is transforming the news business.

You might think that this is so obvious that no one could debate it. Wrong. We now have two Harvard professors engaged in an intellectual food fight over “disruptive innovation.”

On the one side is Harvard Business School professor Clayton Christensen, who coined the term “disruptive innovation” in his 1997 book “The Innovator’s Dilemma.” On the other side is historian Jill Lepore, who, in a 6,000-word article for The New Yorker, denounced Christensen’s theory as overblown and based on weak evidence. Christensen responded in an interview with Bloomberg Businessweek.

Let’s start by noting that Christensen’s theory is not especially original. It’s mostly updated Schumpeter. That’s Joseph A. Schumpeter (1883-1950), the Austrian-American economist who described “creative destruction” as the essence of capitalism. Capitalism, he argued, is not fundamentally about the price or quality of similar goods. It concerns the race to discover new technologies and ways of doing business that change daily life and destroy existing industries.

Think air travel (which doomed passenger railroads), fast-food restaurants (which made eating out common) and big-box stores (which eclipsed Sears and Kmart).

Christensen expanded Schumpeter’s insight by classifying innovations as either “sustaining” or “disruptive.” Sustaining innovations improve existing products and technologies; disruptive innovations threaten established firms, products and business models. Among corporate managers, Christensen’s popularity and book sales probably reflect their sense that he understands their plight.

So what’s Lepore’s gripe? In her New Yorker article, she disputes that Christensen’s theory can predict which innovations are disruptive and, therefore, require management attention. Indeed, she argues, disruptive innovations aren’t always fatal to old-line firms, which ultimately adapt. Interestingly, she cites several of Christensen’s case studies in which incumbent companies should have failed, by his logic, but didn’t. As a tool for identifying disruptive innovations, his theory is of little practical value, she suggests.

This may be true. When a technology — or management technique — is new, it’s almost always hard to see the full implications. These innovations defy conventional thinking. Their practical uses emerge only after ceaseless improvements and experiments. We call that process “the market.”

History is littered with examples of blown opportunities to profit from spectacular innovations. After inventing the modern copying machine, Chester Carlson tried to sell it to IBM, General Electric and RCA. All declined. Only one small company decided to buy; it became Xerox. Or consider IBM and Microsoft. If IBM had anticipated the personal computer’s potential, it surely would have insisted that Microsoft sell the rights to its operating system software. Instead, Microsoft collected a licensing fee on every PC sold.

Lepore’s real complaint is that “disruption” has become corporate gospel: disrupt or be disrupted. Worse, faith in the gospel has spread “to arenas whose values and goals are remote from the values and goals of business.” These include “public schools, colleges and universities, churches, museums and many hospitals.” All these institutions are being subjected to self-induced upheavals justified by Christensen’s shaky theory, she says.

Fair enough. Lepore dislikes MBA-think and its spreading influence, though her evidence of its spread is as flimsy as Christensen’s for his theory. As important, her crusade to discredit Christensen makes it seem that she’s downplaying innovation’s capacity to destroy and disrupt. Surely, she could not have intended this. She barely mentions Schumpeter.

So the Harvard Innovation Debate is a dud. No one wins. Innovation is less controllable than Christensen hopes and more upsetting than Lepore implies.

Robert Samuelson writes for The Washington Post.

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