When the New Yorker this week published Harvard historian Jill Lepore’s sharply written dismissal of “disruptive innovation,” it was an attack on one of the most widely cited and celebrated ideas in modern business. As first laid out by its creator, Harvard Business School professor Clayton Christensen, in his 1997 book, The Innovator’s Dilemma, the theory holds that established companies, acting rationally and carefully to stay on top, leave themselves vulnerable to upstarts who find ways to do things more cheaply, often with a new technology. The book became a bestseller in 1999, at the height of the dot-com boom, as it seemed to describe the threat e-commerce posed to established companies. Christensen expanded on it in a series of sequels, including The Innovator’s Solution, The Innovator’s Prescription, about health care, and Disrupting Class, about education.
Disruption, as Lepore notes, has since become an all-purpose rallying cry, not only in Silicon Valley—though especially there—but in boardrooms everywhere. “It’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence,” she writes. In the article, she accuses Christensen of poor scholarship (handpicking case studies that conform to his theory); misreading history (some companies he casts as doomed continued to perform well); and myopia (missing, for example, the role unions played in the collapse of U.S. Steel). Lepore also notes that a fund manager who used Christensen’s theory as an investment strategy lost even more than most in the Nasdaq implosion of 2000.
Christensen hasn’t responded in writing to the essay, but when I reached him by phone on Thursday afternoon, it was clear he’d been thinking about it. Consistently described by those who know him as a generous and thoughtful and upbeat person, he is also capable of fury. “Keep asking me questions,” he said, “it’s helping me.”
Below are excerpts from the hour-long conversation, condensed and lightly edited.
What did you think of the essay?
Well, in the first two or three pages, it seems that her motivation is to try to rein in this almost random use of the word “disruption.” The word is used to justify whatever anybody—an entrepreneur or a college student—wants to do. And as I read that, I was delighted that somebody with her standing would join me in trying to bring discipline and understanding around a very useful theory. I’ve been trying to do it for 20 years.
And then in a stunning reversal, she starts instead to try to discredit Clay Christensen, in a really mean way. And mean is fine, but in order to discredit me, Jill had to break all of the rules of scholarship that she accused me of breaking—in just egregious ways, truly egregious ways. In fact, every one—every one—of those points that she attempted to make [about The Innovator’s Dilemma] has been addressed in a subsequent book or article. Every one! And if she was truly a scholar as she pretends, she would have read [those]. I hope you can understand why I am mad that a woman of her stature could perform such a criminal act of dishonesty—at Harvard, of all places.
One criticism Lepore makes is that some of the firms you describe as failed incumbents—whether it’s in the disk drive industry or the mechanical excavator industry or the steel industry—the companies that are ostensibly being disrupted, don’t disappear but continue to do very well, in some cases continue to dominate their industry.
In 1960 there were 316 department stores in North America—department stores like Macy’s. Then the discount department stores like Korvettes and Kmart and Woolco and Target and Walmart came in, starting in 1962, and they were disruptive because for the department stores to go down-market and compete with discount prices, their profitability would have been decimated, so they had to move upmarket and get out of hard goods where margins were small and get into clothing and cosmetics where margins were higher. Now, how long has it been? Fifty-two years, Jill. Just so you understand, disruption doesn’t happen overnight. There are now six or eight traditional department stores in existence in North America. Let’s just call it less than 10. And Walmart is quite a large company. Target is quite a big company. So has disruption been at work in the retailing industry? It’s a question. Macy’s still exists. So—Jill, tell me, what’s the truth? If you could just be Jill’s answer for me.
I don’t really know what she’d say, though six to eight is a smaller number than 316.
[Disruptive innovation] is not a theory about survivability. I’d ask [Lepore] to go see an integrated steel company operated by U.S. Steel. Seriously. And come back with data on, does U.S. Steel make rebar anymore? No, they’ve been taken out of rebar. Do the integrated steel companies like U.S. Steel make rail for the railroads? No. Do they make rod and angle iron, Jill? No. Do they make structural steel I-beams and H-beams that you use to make the massive skyscrapers downtown, does U.S. Steel make those beams? Come on, Jill, tell me! No!
So what do they make? Steel sheet at the high end of the market. The fact is that they make steel sheet at the high end of the market, but have been driven out everywhere else. This is a process, not an event.
I’m just stunned that any honest scholar would have done what she did to disparage the person and the theory. She [appears to have] only read one book at the beginning in the naive belief that the end comes out at the beginning.
So you find it unfair for Lepore to judge your theory based on Innovator’s Dilemma, where it was first laid out, since you have developed it since?
It wasn’t until a piece that we published in 2002 that we figured out the causal mechanism that is fundamental to the theory of disruption. It was a professor at Tuck, and he built a mathematical model and showed mathematically that I had gotten the causal mechanism wrong. So does it discredit the theory? No, it just keeps improving.
Between the time I wrote The Innovator’s Dilemma and The Innovator’s Solution, I observed that there was a company in the Boston area called Digital Equipment Corporation. They were making minicomputers and they were disrupting computers that made mainframe computers, and then at the very same time this Digital Equipment Corporation was being disrupted from underneath by personal computers. So were they the disruptor or the disrupted?
You’re saying they were both.
Exactly! They were moving into the mainframe market and that was new to them, so they were entrants into the mainframe market even while they were the incumbents when they were competing with Compaq from below. And so are they disruptors or disruptees? Are they entrants or established firms?
Another point Lepore makes is that you leave out relevant factors that would challenge your thesis. In the case of the steel industry, you don’t talk about unionization, which was a major difference between U.S. Steel and upstart minimills.
Yes and no. The world is actually very complicated and big huge books are written about unionization and the impact that it has, and so … other people have addressed that. So that’s number one. Number two: The total cost of unionized labor in a typical traditional plant today accounts for 5 to 7 percent of the total, and so if one plant is unionized and another is not, the impact on total cost actually isn’t a significant explanatory factor.
If she’s interested, there’s a case that I use in my course about U.S. Steel that occurred in 1989. There the union contract in Mon Valley Works [one of U.S. Steel’s plants] was a huge factor. So, again, if she were thorough on this issue and she Googled it and put in my name and U.S. Steel, that would have come up. But because her purpose was to discredit me rather than look for the truth, she didn’t even look. Are you feeling a little bit about how she’s caused me to feel?
Lepore also points out instances where your theory has failed in practice. The Disruptive Growth Fund, a fund based on your ideas, performed badly and then closed. And you predicted that the iPhone would be a flop.
This guy [Neil] Eisner—I’d never known him before—he came to see me and he was a dealer-broker in St. Louis and he wanted to start a mutual fund to invest in disruptive companies, and I thought that would be interesting. I have no money of my own, but he said he and his family have money. So I talked to a guy on our faculty, a finance guy, Dwight Crane, and he said you actually can’t act [as] an adviser in any way—an adviser means you help the portfolio manager decide what companies to invest in. I cannot do that, according to the rules of HBS and the SEC, because I’d create a conflict of interest if we have a case about a company that I advise him to buy or sell. I could just advise him about starting a new business. So that money was put in the market by somebody who is not Clayton Christensen. So what does that tell you about the theory of disruption, or about Clayton Christensen?
So the iPhone: There’s a piece of the puzzle that I did not understand. What I missed is that the smartphone was competing against the laptop disruptively. I framed it not as Apple is disrupting the laptop, but rather [the iPhone] is a sustaining innovation against Nokia. I just missed that. And it really helped me with the theory, because I had to figure out: Who are you disrupting?
If [Lepore] was actually interested in the theory and cared enough about it to walk 15 minutes to talk and let me know she’s doing this, I could have listed 10 or 15 problems with the theory of disruption that truly need to be addressed and understood. I could list all kinds of problems that we still need to resolve, because a theory is developed in a process, not an event. [Disruption] has never happened in the hotel industry, for example. And so if she’s interested and wants to help me—she’s just an extraordinary writer—and if she’s interested in the theory or its impact, I mean, come over! I would love to have you openly invite her to come do this, if she’s interested.
You keep referring to Lepore by her first name. Do you know her?
I’ve never met her in my life.