Ever since the 1997 publication of The Innovator’s Dilemma, researchers, management experts, and businesspeople have discussed, dissected, and debated Clayton Christensen’s Theory of Disruptive Innovation. By now, the arc of disruption is well established: We know how disrupters enter the market, and we know how incumbents typically bungle their responses to such seemingly insignificant competition. Numerous books and articles have offered to solve the dilemma of disruption, including Christensen’s own The Innovator’s Solution (a 2003 book coauthored with Michael Raynor), which suggests that leaders who understand how disruption transpires can inoculate themselves against the threats and seize the opportunities.
Yet, despite so much insight and advice, the dilemma persists: 63% of companies are currently experiencing disruption, and 44% are highly susceptible to it, according to research by Accenture. And in a thorough analysis of more than 1,500 publicly listed companies, growth strategy consultancy Innosight found that only 52 of them, about 3% of the sample set, had made material progress in strategically transforming their organizations. The default positions, it seems, are to squeeze extra points from profit margins, search for companies to acquire, or simply pay lip service to innovation by setting up token incubators or having executives wear jeans and the occasional hoodie.
Why are companies still so vulnerable to disruptive threats? Our view is that it isn’t about not having the right playbook. The problem is that well-intentioned leaders often delude themselves by downplaying disruptive threats or overestimating the difficulty of response. In simple terms, leaders lie to themselves. This means that dealing with disruption is not just an innovation challenge; it is a leadership challenge. This article explains these delusions about disruption and offers ways to help leaders avoid self-sabotage.
Cautionary Tales Persist
“Christensen and Raynor have done a superb job of creating a framework for helping to understand industry dynamics and for planning your own growth alternatives.” This quote appeared on the back jacket of The Innovator’s Solution, attributed to Pekka Ala-Pietilä, then president of Nokia. The Finnish company had much to be proud of back then. It was on the brink of taking over the booming cellphone market. Over the next few years, the company would grow into a seemingly unstoppable force. Its stock price surged. Then, in November 2007, Forbes ran a prophetic cover with the headline, “Nokia: One Billion Customers — Can Anyone Catch the Cell Phone King?”
Despite having dominant market share, despite having the resources and capabilities to transition to the smartphone era, and despite having a leader who endorsed and presumably understood Christensen’s groundbreaking theories on disruption (though Ala-Pietilä, admittedly, left the company in 2005), Nokia stumbled. Apple famously entered the market mid-2007. Google formed the Open Handset Alliance, powered by the Android operating system, later that year. Nokia shares began to slide. In 2013, CEO Stephen Elop sold Nokia’s ailing cellphone business to Microsoft for roughly $7 billion. A year later, Microsoft took a roughly $7 billion write-down on the transaction, suggesting the business was worthless.
1. O. Abbosh, M. Moore, B. Moussavi, et al.,“Disruption Need Not Be an Enigma,” Accenture, Feb. 26, 2018, www.accenture.com.
2. S.D. Anthony, A. Trotter, R.D. Bell, et al., “The Transformation 20: The Top Global Companies Leading Strategic Transformations,” Innosight, September 2019, www.innosight.com.