Wednesday, June 18, 2014

Silicon Valley, the New Yorker, and Disruption

A nice piece by Jill Lepore on "Disruption"; key paragraph:
A pack of attacking startups sounds something like a pack of ravenous hyenas, but, generally, the rhetoric of disruption—a language of panic, fear, asymmetry, and disorder—calls on the rhetoric of another kind of conflict, in which an upstart refuses to play by the established rules of engagement, and blows things up. Don’t think of Toyota taking on Detroit. Startups are ruthless and leaderless and unrestrained, and they seem so tiny and powerless, until you realize, but only after it’s too late, that they’re devastatingly dangerous: Bang! Ka-boom! Think of it this way: the Times is a nation-state; BuzzFeed is stateless. Disruptive innovation is competitive strategy for an age seized by terror.
I think that Clay Christensen, in the Innovator's Dilemma, was tackling a very particular business puzzle which was why incumbents don't necessarily continue their dominance when their industry undergoes a technological platform shift. After all, they begin with all the advantages in resources, talent, channels, etc. Why can't they adapt?

Clay's answer to this was very interesting, and actually quite specific. For example, I don't think Uber is "disrupting" the taxi business with their app in the CC sense. I think Uber is engaging in regulatory arbitrage by using technology to take advantage of a loop hole in the law. The law may be wrong, Uber may be right to want to replace the system with something more consumer friendly, but this is not "disruption" in the CC sense. Also, it will predictably hurt both the medallion cartels (yay!) and the drivers (boo!) who end up being price takers in a market with easy barriers to entry and exit. Micro 101 would have predicted this, but you can also do the math yourself. This is not any sort of judgement on Uber, or its critics and champions, but merely an observation that "disruption" in the CC sense is quite narrow, and the term is being used very broadly in Silicon Valley today, and it is being used in a way which connotes "refusing to play by the rules and blowing things up."

Set aside the problems one may anticipate from such a tin ear, or a lack of appreciation of the interconnectedness of a society, and look at how the overly broad use of the term dumbs down the discussion itself. A nice comment on the article from a friend of mine who is in this field and currently a professor at a well known B-school:
Okay, I had a seminar on innovation with Clay during my PhD, and studied a related field with lots of the other key academics who research innovation. I think this article is totally fair to Silicon Valley and totally unfair to Clay and the concept of "disruptive innovation" as used in academia. (I do not research the topic anymore, so I have no particular dog in this fight)

Yes, "disruptive innovation" is based on case studies, but Leporte is completely off base when she says that "The handpicked case study, which is Christensen’s method, is a notoriously weak foundation on which to build a theory." In fact, handpicked case studies are a terrific way to build initial theory. In fact, one of the most cited articles is recent social science discusses exactly this point. Case studies are terrible at proving theory, but they serve as a great way to think through a problem.

The reason they are bad at proving theory is exactly the issues that Leporte raises: establishing clear historical facts is hard, and sometimes slippery. I think she has some valid points on the history, but does miss the fact that there is a difference between firms and individuals, and that fact that Shugart had to start multiple firms to compete in hard discs was the point - the organizations couldn't always deal with technological change.

However, she makes it seem like academics (and Clay) basically stopped working on the topic in 1999. One need only look at the Google Scholar cites to see that this is wrong. Since Clay's initial book, a huge amount of empirical evidence has been amassed on this topic, and discussion has become a lot more nuanced. We talk about modular, sustaining, incremental, and discontinuous innovation, and about how to manage the issues that cause firms to fail to innovate: absorptive capacity, ambidexterity, and problemistic search on rugged landscapes. I throw out this jargon not to be overwhelming, but because these are, by and large, ideas that have followed on the work of Clay (and other scholars working on the topic at the same time). It is incredibly unfair to point at one concept, as introduced in one book, by an academic with a long career and yell "the emperor has no clothes!"

Now, the criticism of the popular view of disruption strikes me as right on target, but I think it is like a lot of academic topics that become part of the pop intellectual landscape. They quickly become cultural shorthand with little to do with the original ideas. For what it is worth, Clay is a humble guy who has never seemed to claim that he has it all figured out, and, quite frankly, no one in academia feels like "disruptive innovation" as he introduced it is still at the cutting edge of theory.

That being said, it is still a powerful way of thinking about a really, really important question: "Why don't incumbent firms always win?" Clay was one of the first people to ask why firms with the best people and most resources don't innovate over and over again: why did Kodak fail to create digital cameras? Why did DEC not come up with the PC? Disruptive innovation is one piece of the answer to this puzzle, and to attack it in isolation, or to blame Clay for annoying startup guys, seems disingenuous.
Bizarrely enough, there seems to be some noise around this in the case for the iPhone, namely, why is android not disrupting the iPhone? The real question is, why is it important to someone that Android is, or is not, "disrupting" the iPhone? Why is disruption important here, instead of more prosaic measures such as stealing market share, or mind share, or developer support, or whatever is actually important? To the degree that these two are imperfect substitutes, how much are they even in the same market? Most importantly, why is this the framing at all? When it comes to mobile and the changes it is bringing, surely there are more important questions than "Apple vs Google".

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