The Self-Disruption Phenomenon in the Technology Industry
On Monday, the New York Times reported about Amazon “disrupting” itself, not referring to Clay Christensen or his disruptive innovation theory by name, but using it in that sense. (Coincidentally, VC Marc Andreessen had a 17-part tweetstorm on the disruption concept and its misconceptions yesterday, which DisCo has covered before.) One aspect of this theory is that companies may have to radically shift directions when faced with competition from disruptive entrants — or cannibalize their own existing revenue stream when they realize that a disruptive innovation is what consumers will want and need, not an incremental innovation on their existing product. As DisCo has explained, Christensen’s work notes that executives at dominant companies are often hesitant to change business models to adopt lower profit margins:
One of the reasons why successful incumbents are so vulnerable to disruptive technologies — as Clayton Christensen pointed out in his seminal work — is that they have a hard time adopting a lower margin business model that would mean sacrificing their current hefty profit margins. This initial hesitance is often their death, as they are quickly forced out by new, more efficient competitors.
The New York Times discusses how, although Amazon’s revenues went down this quarter, it’s because they are in the process of shifting from a focus on physical books to digital media consumption, including television, movies, and music. Apple similarly disrupted itself when it released the iPhone, which made the iPod irrelevant, and shifted its focus from personal computers to consumer devices. Companies like Autodesk have also disrupted themselves with apps. Many other technology companies face these challenges, as Vivek Wadhwa wrote in a great Washington Post piece earlier this year about the technology industry and disruption, and challenges in leadership.
Self-disruption is likely to occur even more now that technology companies provide so much more than just technology products and services, and compete in industries like entertainment, media, and communication.