Gans on Lepore on Christensen

17 June 2014 at 11:13 am Peter G. Klein 5 comments

| Peter Klein |

Josh Gans has some useful remarks on Jill Lepore’s New Yorker essay on Clayton Christensen.

Lepore only deals with the easy marks in her take down of Christensen and one suspects Christensen and his supporters can easily fend those off. It is the fundamental contradiction in taking a positive theory towards prediction that is where this entire ‘disruption industry’ falls down. I’d like to see journalists engaging more on that level so that we can be done with those bridges too far for good.

What Josh means by “fundamental contradiction” is that a disruptive technology, in Christensen’s definition, must not only be behind the cutting edge in some technical dimension, but also satisfy unmet consumer demands. The latter must be uncertain ex ante, otherwise the market leaders would also be developing the disruptive technology. Christensen advises incumbents to “disrupt themselves,” but this assumes they know which technologies will eventually be disruptive. Because they don’t, they must choose among several alternatives, including “do nothing” (i.e., try to exploit late-mover advantage).

The incumbent’s decision, contrary to Christensen’s reasoning, reflects entrepreneurial judgment, which may or may not be correct. There is no formula for managing disruptive technologies.

5 Comments Add your own

1. Bart Doorneweert | 17 June 2014 at 3:11 pm

Indeed there is no formula. The decision is about the market experiments you need to conduct to figure out what you can do with a technology. And it is experimentation that is increasingly becoming the correct way forward, a direction where incumbents usually fall short.
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3. Randy | 19 June 2014 at 7:01 am

Luckily, experiments are costless and always supply perfect information on the markets.
4. Stephen Karlson | 21 June 2014 at 9:23 am

It’s the cost of conducting experiments that creates the controversy! Do you free-ride on someone else’s experiment, or do you take the lead yourself? In the theoretical world, is your perspective that of hysteresis (wait for information) or cascades (don’t risk getting left behind)? In practice, just one anecdote, from Doug Preston’s American Steel: Bethlehem’s engineering department analyzed Nucor’s thin slab caster, producing a thick report (with executive summary and bullet points, no doubt; it was before presentation software) detailing all the reasons the project wouldn’t work. The rest is history.
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