Andy Pemberton, director at Furthr
Andy Pemberton, director at Furthr
A view from Andy Pemberton

Why disruption innovation is not all it's cracked up to be

Disruption innovation is not all it cracked up to be, so brands should move on, writes Andy Pemberton, director at Furthr.

There was a time when people expected to be congratulated by society for promising disruptive innovations. It’s my belief that this time is now over.

Disruption innovation, as defined by Clay Christensen, author of the disruption bible The Innovator’s Dilemma, is the process by which mature companies are destroyed by upstarts who offer cheap, often inferior, alternatives, first attracting low-value customers and steadily moving upmarket to steal high-value customers before snatching the whole market.

The disruption innovation theory goes that, if firms were smart and reacted fast, they could stay in the game; if not, they would perish.

This summer, celebrated Harvard history professor Jill Lepore caused a stir when she trashed the central text of the disruption innovation manifesto, saying: "Disruptive innovation is a theory about why businesses fail. It’s not more than that. It’s not a law of nature. Transfixed by change, it’s blind to continuity. It makes a very poor prophet."

She argued the examples that support the theory are "often dubious", while the logic it is founded on is "questionable". Trumpeted by the modern management class of Silicon Valley, disruption innovation, she argued, is not all it is cracked up to be.

She pointed to the part played by financial-industry disruption in the Great Recession of 2008. In the cases where disruption had occurred, the companies doing the disrupting didn’t always profit.

Christensen fired back that his case studies were robust – refined over the 17 years since his theory was first published. The academic bickering became explosive, a reflection of just how influential Christensen’s theory has been in tech and business circles.

Not such a good deal

But the real problem with disruption innovation now is this: people are starting to realise it’s not such a good deal for you, me and the world we live in.

Take iTunes, for example, was once hailed as a brilliant new way to persuade music fans to pay for digital downloads, but recent data shows that digital albums and singles are in decline, while streaming services such as Spotify – which makes no profit – are surging.

Meanwhile, Tata’s Nano, India’s answer to the Ford Model T, and a clear auto disrupter, has flopped. In December 2013, the super-cheap car – plagued by safety concerns – sold just 544 units.

Budgets are reallocated and jobs are put under threat – yet the promised upside never quite seems to arrive. Sound familiar?

Disruptions in the music, publishing, retail and banking sectors have led to the destruction of income streams and the jobs they provide, without really replacing those jobs with new ones. In politics, disruptive technologies such as social media have helped facilitate the Arab Spring, but are now being exploited by the Islamic State.

In marketing, the disruption of traditional advertising such as TV and print, caused by digital, search and now social-media advertising has not really created the level playing field promised.

In a study last year, research company Nielsen discovered that global consumers trusted TV, print and radio ads, billboards and movie trailers more than social-media ads. More recently, changes in how Facebook manages its users’ news feeds have hindered brands’ ability to reach their fans. And according to a recent Gallup report, 62% of respondents said social-media ads had no influence on them at all, leading the researchers to conclude that social media had not turned out to be "the powerful and persuasive marketing force" brands had hoped it would be.

Nevertheless, budgets are reallocated and jobs are put under threat – yet the promised upside never quite seems to arrive. Sound familiar?

So if there is a slide in your presentation labelled "Disruption innovation", now might be a good time to throw it out, or face a room full of groans and eye-rolling. Or, worse still, open revolt.

According to Nobel Prize-winning economist Paul Krugman, we might do better to take a cue from Germany. An export powerhouse with relatively high wages, it has focused on delivering high-quality products and charging a premium for them.

And it’s worked out pretty well for Germany. So far.