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Updated: Disrupting innovation

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Tuesday, July 08, 2014

070814 disputive-innovationBY LINDA BAKER  | OB EDITOR

Updated 3:30 p.m: I caught up with Thurston, to get his take on the Christensen-Lepore kerfuffle.

"I thought it was shockingly vicious for academia," he told me. "But I don’t have a dog in that race, so to speak. Christensen had all these anecdotes, and Lepore said no: I have anecdotes that say something different."

"So they had exchange of anecdotes. But neither of them presented any data."

Thurston, remember, is a data-driven kind of guy: the CEO of Growth Science and the Fund Manager at Ironstone, a San Francisco-based private equity firm that uses algorithms to identify disruptive startups.

If you look at the data, he says, disruption theory works as predictor of company's future success or failure.

Over ten years of conducting research, disruption theory models have produced more than 3,400 predictions of business success or failure, with an accuracy rate of 84%, Thurston says.

"So the debate over disruption isn't a controversy. It's a settled issue. If a drug passes clinical trials and in 78% of cases patients improved, there is no philosophical case to be made."

Thurston outlined his "matter of fact" response to the New Yorker story in a Tech Crunch article posted last week. Comments appended to the article ask Thurston to reveal more details about his methodology and data, information Thurston declined to reveal when I wrote a story about him last year. Christensen, by the way, responded to Lepore's article in a Bloomberg Businessweek interview a couple of weeks ago, but did not cite Thurston's research. "He didn't feel he could use it," Thurston says.

Original post: The New Yorker last month published a sharply worded critique of “disruptive innovation,” one of the trendiest, and widely cited, theories in the business world today. The idea, developed by Harvard Business School professor Clayton Christensen, holds that established companies, acting rationally and carefully to remain competitive, leave themselves vulnerable to brash startups who develop ways of doing things more cheaply.

Written by fellow Harvard professor Jill Lepore, the New Yorker article attacked Christensen’s selective use of examples and interpretation of history and set off a lively debate about the widespread use of the terms disruption and innovation —  whether they are mere buzzwords or actually explain today’s extraordinarily complex and rapidly changing business environment.

Here at Oregon Business, the brouhaha prompted a revisit of two articles we published this past year. The first was a profile of one of Christensen’s disciples, Thomas Thurston, CEO of Portland-based Growth Science and a partner with the Ironstone Group Venture Fund. As Thurston, a consultant and investor, explained, his investment strategy is rooted in the idea of disruptive innovation:

"Thurston pored over Intel case studies, business school innovation theories and obscure German doctoral theses, eventually creating a model based on Harvard Business School guru Clayton Christensen’s theory of 'disruptive innovation': the process by which a product or service enters at the bottom of the market, then gathers momentum and eventually surpasses established competitors.

As Thurston told me, his model has an accuracy rate of 85%. “It’s not perfect, but we’re predicting way better than intuition." In her story, Lepore notes that a fund manager who used Christensen’s theory as an investment strategy lost even more than most in the Nasdaq collapse of 2000.

In the second OB article, The Age of Disruption, I profile technological and environmental changes industry experts predict will "disrupt" the world as we know it. Here's my conclusion:

“Do we really live in an age of disruption? After all, the history of the world is the history of disruption — and disruptive technology: the wheel, the railroad, the telephone. As for end-of-the-world rhetoric around depletion of resources, doesn’t every generation think of itself as the apocalyptic generation? When I was a child, I went to bed every night terrified of nuclear war Imagine living in Japan, or Dresden, during WWII.

But if hyperbolic thinking is part of the human condition, every generation puts its own stamp on the process. And as we adapt to the next disruptive phase, three distinguishing characteristics are worth noting. First, the United States is no longer immune to the unpredictable and often destabilizing economic and environmental forces we are accustomed to observing in other parts of the world. Second, technology has accelerated incidences of disruption. And third, the tech entrepreneur is now considered the driver of both social and business model innovation. Perhaps more than government or the citizen activist, the startup has come to represent the change we want to see in the world."

In her article, Lepore also takes the idea disruption to task, noting “It’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence.” 

Does disruption rank as one of the most overused terms of 2014? Is the word innovator thrown around too freely? Or is there something unique about the disruption driving change today?

 

 

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