Friday, June 20th, 2014
Jill Lepore’s attack on “disruption” and on Clayton Christensen’s “innovator’s dilemma” model of industry dynamics in the New Yorker kicked up quite a stir. Called “The Disruption Machine: What the gospel of innovation gets wrong,” Lehore lays out a multifaceted skeptical case against the notion of disruption. Her piece combines several different arguments together without clearly distinguishing them, but I identify four basic questions she attempts to answer:
1. Does disruptive innovation exist, at least as a model for understanding industries?
2. Can incumbents successfully respond to a disruptive innovation?
3. Can disruptive innovations be identified prospectively or only retrospectively?
4. Are disruptive innovations net beneficial to society?
I’ll start by observing that she twice references traditional print journalism incumbents as examples. One is the New York Times innovation strategy, which makes explicit reference to Christensen’s theory. The second is when she talks about the public interest rationale for the separation of business and editorial in the traditional news business, making reference to both the NYT and the New Yorker.
This explicit link to journalism, along with the general tone of offense that pervade the article, betrays something more than a professional interest in the topic. Indeed, she’s hardly a neutral observer as her paycheck in part comes from an industry that’s being disrupted (she’s also a Harvard professor). The impression I get once again is of someone in deep love with the culture and traditions of her trade, something I’ve noticed over and over again in the incredible resistance and even hostility newsrooms have shown over the last decade or so to change and innovation. There’s a reason that people who experience an involuntary rupture can often never get over it. There’s a reason, after all, the Israelites who saw the miracles in Egypt never got to enter the Promised Land.
This points to a legitimate add on to Christensen’s theory. He views the innovator’s dilemma as purely about logical business decisions. But he overlooks the cultural aspects. The culture of firms emerging from traditional business practices are resistant to change because legacy practices are part of the core value set, maybe only implicitly. I lived it. I started out after school doing IT consulting where we operated in an onsite, onshore model in a traditional “mountain moving” operating style. The switch to global delivery in response to upstarts from places like India disrupted that way of doing business. And while I enjoy aspects of global and remote site delivery and successful ran projects using the model, I never had the love for it that I did for the first one. I still have a nostalgia for the “good old days.” So I can relate myself.
In this sense I think we should see the piece as written by someone who is party to the phenomenon in question, and perhaps as an expression of some of her own personal angst on the topic.
With that let me attempt to address her questions.
1. Does disruptive innovation exist, at least as a model for understanding industries? Lepore says No, and that Christensen’s model is based on flawed case studies. I personally have some sympathy for this argument. She correctly notes that “disruptive innovation” is a sort of modern gloss on Schumpeter’s “creative destruction.” Certainly in the real world theoretical abstractions like this are seldom seen in a clean or pure form.
But there’s a long way between critiquing Christensen’s theory as a model of understanding firms and industries, and critiquing the idea of a disruptive innovation itself. All of us can take a look around and see the digital technology has radically disrupted the newspapers, the music industry, fixed line telephony, etc. It’s obvious. Disruptive innovation is trivial to see all around us.
2. Can incumbents successfully respond to disruptive innovations? Lepore says Yes and I agree. Clearly disruptive innovation is not a death sentence for a company. But what we see is that disruption often triggers an industry shakeout, and while often the top players survive and come through stronger, weaker players fail or consolidated away.
Consider the mainframe industry back in the day, with “IBM and the Seven Dwarves.” Minicomputers and PCs disrupted that old business. IBM is still alive and kicking – and even still making money off mainframes. Basically everybody else is out of the business or selling IBM clone stuff. Sperry and Burroughs, for example, merged to form Unisys. Unisys is still around as a company, but they are no longer a mainframe firm. They are now basically an IT services company. That’s a success story as far as it goes. Many of the other players are dead or completely flushed out of the industry.
We’re seeing the same thing in newspapers. The Wall Street Journal seems to be adapting. The New York Times is holding its own as well. It may well be that ten years from now the NYT and Journal are stronger than ever. We already see that the NYT is a national paper in the way that it never used to be, for example. But your local newspaper, now likely owned by a chain like Gannett, is already a zombie that’s probably not even worth reading today.
So just because some firms survive and even become more dominant, doesn’t mean a disruptive innovation doesn’t have profound industry effects.
3. Can disruptive innovations be identified prospectively or only retrospectively? Lepore cities Christensen’s investment fund failure here, and I’d have to agree that predicting the future is hard. Even the best venture capitalists are looking for the minority of grand slam investments and know most of their bets won’t really pan out. Just having a theory doesn’t necessarily mean you can profit from it as we know.
4. Are disruptive innovations net beneficial to society? Here’s where Lepore makes her most explicit defense of the present model of journalism, saying:
It’s readily apparent that, in a democracy, the important business interests of institutions like the press might at times conflict with what became known as the “public interest.” That’s why, a very long time ago, newspapers like the Times and magazines like this one established a wall of separation between the editorial side of affairs and the business side. (The metaphor is to the Jeffersonian wall between church and state.) “The wall dividing the newsroom and business side has served The Times well for decades,” according to the Times’ Innovation Report, “allowing one side to focus on readers and the other to focus on advertisers,” as if this had been, all along, simply a matter of office efficiency. But the notion of a wall should be abandoned, according to the report, because it has “hidden costs” that thwart innovation. Earlier this year, the Times tried to recruit, as its new head of audience development, Michael Wertheim, the former head of promotion at the disruptive media outfit Upworthy. Wertheim turned the Times job down, citing its wall as too big an obstacle to disruptive innovation.
Here I think Lepore mixed disruptive innovation as a theory of industrial change and disruptive innovation as a theory of value. The championing of “disruption” by the tech crowd obviously grates, as well it should. She sees that the thesis of investment for many tech firms is about mutilating existing industries and capturing all the value, heedless of what non-monetary values (or human costs) might result.
I think there’s something to this. I tend to take a Burkean view of institutions in which we have values that are invisibly embedded in them that are in a sense critical to the healthy functioning of our society, and we tamper with them at our peril. When we impose radical change rather than relying on organic evolution, the law of unintended consequences is sure to kick in at some point. Today’s Randian entrepreneurs are hardly the only ones who want radical change, however. Radical social reformers of various stripes have tried to radically remake societies (say Karl Marx or the French Revolutionaries) with similar disregard or even contempt for what would be lost.
Lepore actually makes this point implicitly when she links contemporary business school thinking to the decline of faith, saying, “Faith in disruption is the best illustration, and the worst case, of a larger historical transformation having to do with secularization, and what happens when the invisible hand replaces the hand of God as explanation and justification.”
She in a sense argues that we shouldn’t just equate change with progress. In that regard, I think of disruptive innovation as similar to the “paradigm shift” model from Thomas Kuhn’s The Structure of Scientific Revolutions. A paradigm shift is a move from something like Newtonian to Einsteinian physics. As a practitioner of the history and philosophy of science, Kuhn critiqued the notion that these paradigms shifts represented progress towards knowledge of the ultimate truths. In fact, a paradigm shift could easily result in a decline of explanatory power in some cases, a phenomenon known as “Kuhnian loss.” For Kuhn, scientific change wasn’t necessarily progress towards truth as such.
I think it is similar to evolution, an analog Lepore rejects because she believes disruptive innovation theory engages in circular logic. But evolution proceeds on a similar logic. I think her real critique is that she sees evolution as producing genuine progress while disruptive innovation is fake progress. But evolution, like disruptive innovation or paradigms, has no inherent concept of progress. Mankind is not a the apex of evolution compared to an amoeba simply because we came along later and are more complex. There’s no guarantee we will we not find homo sapiens “disrupted” at some point in favor of the proverbial cockroach or something.
So I agree there can be genuine loss, and self-interested tech advocates aside, I don’t even see disruptive innovation as promising progress on every dimension. It’s a theory of business.
The problem is that not only is there a sort of Kuhnian loss from innovation, as with paradigm shifts you can’t escape it by refusing to participate. A scientists who sticks with the old paradigm when the new is accepted ends up no longer in a sense a scientist, as normal science takes place within a paradigm, or shared set of assumptions and models about how the world works.
Similarly, I may like physical newspapers, but that doesn’t mean I’ll be able to keep reading one forever. The disruption that’s hitting that industry will likely make it impossible some day. The joy I get from print will be lost, even though I may get many benefits from digital, not least of which the potential to have a platform like this one. My firm couldn’t just keep doing IT systems they development the way it used to; it would have gone out of business. We are deprived of the choice to stay the same.
Prior to the 1970s, we used regulation to try to manage the process of destruction by innovation by in a sense outlawing it. Telephony has probably changed more from a consumer perspective since the 1984 AT&T breakup than it did in the entire period previous to that back to Alexander Graham Bell, for example. Are we better off or worse off? As a society, we’ve clearly embedded a deregulating principle into our approach. This prioritizes dynamism and change, and treats the losses as acceptable. One can debate whether this is the right principle or not. But let us not pretend that we don’t have trade-offs to make.