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Published on January 26th, 2019 | by Guest Contributor

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Tesla vs. Clayton Christensen’s Idea of Tech Disruption

January 26th, 2019 by  



Originally published on EVANNEX.
By Charles Morris

The words “innovation” and “disruption” have been casually tossed around in the press so much that, like “awesome,” they’ve lost most of their meaning for the average reader. However, there’s a whole community of people who study these phenomena in minute detail, and Dr. Clayton Christensen is one of their prophets. Recently, a doctrinal difference between Christensen and Elon Musk has catalyzed a lively theological debate.

Two iconic figures in the realm of business disruption, Elon Musk and Dr. Clayton Christensen (Images: Wired UK / Nieman Reports)

To simplify for the layman, Dr. Christensen is an exponent of “low-end disruption,” whereas Tesla is an object lesson in “high-end disruption,” the concept that innovation can begin at the high end of a market and later trickle down to the mainstream. In December, Elon Musk tweeted, “Clayton is wrong. New tech is always expensive. Tech disruption occurs at *high end*, eg computers & cell phones. It takes many iterations & vast economies of scale to achieve mass market affordability.”

Far from being offended, Dr. Christensen replied, “We’re all rooting for you!” and invited Musk to join him for a chat on innovation.

Jay Gerhart, a practitioner of disruptive innovation theory and “a huge fan of both of these brilliant men,” set out to reconcile their conflicting positions in an article published in Medium.

Apparently the current debate was sparked by an article in TechCrunch in which Chandrasekar Iyer of the Clayton Christensen Institute argued that Tesla’s entry into China represents a “sustaining innovation” (as opposed to a “disruptive innovation”), and that Tesla “will enter an established market to compete along existing measures of performance, like acceleration, style and luxury.”

Elon Musk argues that Christensen has it backwards when it comes to disruption in the tech sector. (Twitter: Elon Musk)

As Gerhart points out, many have written about the phenomenon of high-end disruption, citing Uber, Tesla, Apple, Garmin, and Dyson as examples of transformative technologies and business models that started at the high end of the market and worked their way down. However, Shaye Roseman of the Harvard Business School recently argued that high-end disruption is “unlikely to occur,” because struggles for the high ground favor deep-pocketed incumbents, and it’s difficult to move down-market once you start at the top.

Much of the disagreement among these theologians may have more to do with terminology than with real-world results. As Gerhart puts it, “I find many debates these days to be framed a bit too black and white. Dr. Christensen’s theory has certainly sparked decades of debate since its introduction more than twenty years ago [and] the digital era has introduced new, complex dynamics.” In a 2015 article, Dr. Christensen argued that Tesla should be classified as a “sustaining innovation” rather than a “high-end disruption.” But could it be that the distinction is not so clear-cut? “Is it possible that under specific circumstances, a sustaining innovation could have characteristics that have a transformative impact on incumbents?” Gerhart asks.

Gerhart believes that the uniqueness of Tesla’s business model (and of its CEO) may enable it to have a transformative effect on the automotive industry while still fitting the definition of a sustaining innovation. He points out that Tesla’s highly integrated approach, which has many similarities to that of Apple, gives it a significant near-term advantage over incumbents that are struggling to manage the transition to electrification.

Will the legacy automakers rise to the challenge? Ford, VW and others are currently making the right noises, but it remains to be seen whether the promises in their press releases will lead to volume production of compelling electric vehicles. Gerhart suggests that automakers may need to set up separate divisions to compete effectively with Tesla.

Touching on an experience at BMW, Christensen discusses some of the disruption dilemmas facing companies (YouTube: Implement Consulting Group)

Regardless of which side you take in the sectarian schism in the religion of disruption, there’s one thing everyone can agree on: “This will be a fascinating market to watch over the next few years.”

 
 





 

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