“Disruptive” is another one of those word that get thrown around and gets applied to everything.
Disruption theory as described originally by Clay Christensen has 3 parts:
- Customer dependence – low end, niche market, incumbents don’t care about or don’t see. The existing solutions are overkill and too expensive for the customer.
- Fundamentally different business model – allows you to serve the niche market profitably.
- There is a technological accelerator (enabling technology) – allows you to serve the mainstream with the new business model.
Disruption theory describes a pathway of how a small startup can succeed against dominant incumbents. It doesn’t describe the impact to the market. Building a better mousetrap is not disruptive.
Let’s take a look at Uber.
- Is Uber selling to a low end market that the taxi companies were unwilling to serve? Nope, the number of rides in New York has been constant before and after Uber showed up.
- Does Uber have a fundamentally different business model? Maybe, using privately owned vehicles, but still charging per mile.
- Is there an enabling technology? Doesn’t matter since they are not moving from an underserved niche to the mainstream.
How about Tesla?
- Is Tesla selling to a low end market that other car makers don’t care about? Nope, this is the primary market for Mercedes, Lexus and BMW.
- Does Tesla have a fundamentally different business model? Nope.
- Is there an enabling technology? Doesn’t matter since they are not moving from an underserved niche to the mainstream.
A lot of this content was spurred by an interview with Michael Raynor on the A16z podcast.