SPECIAL COLLECTION INNOVATION SERIES Disruption 2020 What it will take to innovate and compete over the next decade. Spring 2020 Brought to you by: CONTENTS SPECIAL COLLECTION Disruption 2020 1 The Original Disrupter By Karen Dillon 2 Disruption 2020: An Interview With Clayton M. Christensen By Clayton M. Christensen, interviewed by Karen Dillon 8 The New Disrupters By Rita Gunther McGrath 14 From Disruption to Collision: The New Competitive Dynamics By Marco Iansiti and Karim R. Lakhani 20 To Disrupt or Not to Disrupt? By Joshua Gans 26 The Future of Platforms By Michael A. Cusumano, David B. Yoffie, and Annabelle Gawer 35 How Leaders Delude Themselves About Disruption By Scott D. Anthony and Michael Putz 43 The 11 Sources of Disruption Every Company Must Monitor By Amy Webb 49 A Crisis of Ethics in Technology Innovation By Max Wessel and Nicole Helmer 55 The Experience Disrupters By Brian Halligan 60 Sponsor's Viewpoint: Ecosystems and the Future of Innovation By Nishita Henry, chief innovation officer, Deloitte Consulting LLP and Bill Briggs, global chief technology officer, Deloitte Consulting LLP FROM THE EDITOR The Original Disrupter the rapid speed of innovation, and easy access to capital will affect how companies compete in the years ahead — all topics we explore in this issue. I started working with the team at MIT SMR well before Clay’s death in January 2020, so I was able to sit down with him for what would be his last inter- view. Clay had continually refined his own theories over the years, but he was still wrestling with many questions, as you’ll see in our Q&A on page 21. He was pleased to learn how the academics and practitioners featured in this special issue were thinking about some of the biggest innovation challenges looming for companies. hen Clayton Christensen Clay was more interested in getting to the right and I first appeared at an answer than in being right. And for him, getting event together to discuss to the right answer started with asking the right a book that he and I had questions. For instance: What does the ascendance coauthored, I wasn’t sur- of a new generation of straight-to-consumer dis- Wprised to see a crowd gathering to talk to him after rupters tell us about how innovation is evolving? we spoke. The opportunity to share an observation What are the sources of disruption that every com- or ask a question of Clay, one of the world’s truly pany must monitor? Is disruption always the right original thinkers, was special. But I had to laugh at strategy — or not? And why have companies not how often that moment turned into a request for a gotten better at solving the innovator’s dilemma selfie with him. Clay had clearly become a rock star two decades after Clay first helped us understand of management thinking. He was patient with how disruption occurs? every photo request, grateful that a new generation We tackle these questions — and many more — was interested in his ideas, and eager to learn how in this issue, dedicated to the memory of the those ideas were being used and advanced. original disrupter, Clayton Christensen. I was honored to be asked by the editors of MIT Sloan Management Review to guest-edit the spring Karen Dillon // @kardillon Guest Editor 2020 issue on the future of innovation. Having MIT Sloan Management Review spent the past decade working closely with Clay, I’d had the chance to explore a wide range of relevant topics with him, including how the coming of AI, EVGENIA ELISEEVA SPRING 2020 MIT SLOAN MANAGEMENT REVIEW 1 IMAGE COURTESY OF EVGENIA ELISEEVA DISRUPTION 2020 • MIT SLOAN MANAGEMENT REVIEW 1 SCOUTING THE HORIZON Disruption 2020: An Interview With Clayton M. Christensen With technology and capital rapidly increasing the pace of innovation, Christensen’s thinking is more relevant today than ever. What do we know now about the power of disruption and where it’s taking us? CLAYTON M. CHRISTENSEN, INTERVIEWED BY KAREN DILLON n the decades since Clayton M. Christensen first shared his Theory of Disruptive Innovation with the world, his thinking has led to the creation of billions of dollars of revenue, hundreds of companies, and an entirely new paradigm for how industry entrants upend established giants. Karen Dillon — Christensen’s longtime collaborator and guest editor of this special issue of MIT Sloan Management Review — had a chance to sit down with him before his death in January to learn how he had refined his thinking, what the future of innova- tion looked like through that lens, and what questions he was still wrestling with. This is an edited version of their conversation. PHOTOGRAPH BY JASON GROW SPRING 2020 MIT SLOAN MANAGEMENT REVIEW 1 PHOTOGRAPH BY JASON GROW I DISRUPTION 2020 • MIT SLOAN MANAGEMENT REVIEW 2 SCOUTING THE HORIZON MIT Sloan Management Review: Over the years, the phrase disruptive innovation has come to mean all manner of things to people. But the broad, sweeping implication that “disruptive” is synonymous with “ambitious upstart” is not correct, is it? How would you like to define disruptive innovation for the record? CLAYTON M. CHRISTENSEN: Disruptive innovation describes a process by which a product or service powered by a technology enabler initially takes root in simple applications at the low end of a market — typically by being less expensive and more accessible — and then relentlessly moves upmarket, eventually displacing established competitors. Disruptive innovations are not breakthrough innovations or “ambi- tious upstarts” that dramatically alter how business is done but, rather, consist of products and services that are simple, accessible, and affordable. These products and services often appear modest at their outset but over time have the potential to transform an industry. Robert Merton talked about the idea of “obliteration by incorporation,” where a concept becomes so popularized that its origins are forgotten. I fear that has happened to the core idea of the theory of disruption, which is important to understand because it is a tool that people can use to predict behavior. That’s its value — not just to predict what your competitor will do but also to predict what your own company might do. It can help you avoid choosing the wrong strategy. You have been a big proponent of the benefits companies quickly rising to prominence and chal- of causal theory. What do you think of the lenging established leaders, it wasn’t until I went out argument that big data obviates the need to to Silicon Valley and spoke with executives in the seek causality? space that I fully grasped how incapable incumbent CHRISTENSEN: Well, it’s important to first recog- leaders are of responding to disruptive entrants. nize that the data are not the phenomena. They are The data alone would have never generated those a representation of the phenomena. Also, we must insights. recognize that God did not create data; any piece of Big data also tends to gloss over or ignore anom- data you or I have ever encountered was created by alies unless it’s crafted carefully to surface these to a human being. Unable to fully capture this won- humans. That is, big data tends to be far more fo- derfully complex world, we human beings use our cused on correlation rather than causation and as bounded rationality to make “decisions” about such ignores examples where something doesn’t what aspects of the phenomena to include, and follow what tends to happen on average. It’s only by which to exclude, in our data. exploring anomalies that we can develop a deeper These decisions become embedded in the tools understanding of causation. If you think about it, we use to create and process data. By definition, following a big data approach is what powered our these decisions reflect our preexisting ways of understanding of the sun, moon, stars, and Earth thinking about the world. These ways of thinking for years, but it was only when Galileo peered are sometimes good and reliable — guided by through a telescope that we could start to under- known causal relationships. But oftentimes they stand more deeply how these celestial bodies are not. No quantity, velocity, or granularity of data moved in relation to one another. can solve this fundamental problem. I believe that in order for our scientific under- You have commented that the inability to create standing of the world to progress, we must continually disruptive growth helps explain Japan’s economic crawl inside companies, communities, and the lives malaise. Do you worry that the series of mergers of individuals to create new data in new categories resulting in bigger and bigger companies that that reveal new insights. seem to primarily focus on stock buybacks is As an example, in my early research on the disk creating the same conditions for the U.S.? drive industry, I catalogued by hand every disk drive CHRISTENSEN: I absolutely worry about this. In that had been bought or sold over the years after the latest book that you and I wrote together, The scouring hundreds of “Disk/Trend” reports. And Prosperity Paradox, we describe three types of inno- while I was starting to see a pattern of the low-end vation, all of which have a different impact on the 2 MIT SLOAN MANAGEMENT REVIEW SPRING 2020 SLOANREVIEW.MIT.EDU SLOANREVIEW.MIT.EDU DISRUPTION 2020 • MIT SLOAN MANAGEMENT REVIEW 3 growth of a firm and — by extension — a nation. which is hard for colleges to declare (for regulatory Sustaining innovation, which most understand, is reasons), what we’ll ultimately see is a lot of college the process of making good products better.