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Misdiagnosing Failure: Why Disruptive Innovation Models Miss on Apple

In a thought-provoking article in The Motley Fool (Predicting Failure: Testing the “Disruptive Innovation” Model ) summarizing recent research in disruptive innovation, the following quote jumped out at me:

Then again, the model is dead wrong 15 percent of the time. Lest you think Thurston won’t admit to failures, he points out several instances where his own predictions are wrong. Take the Apple iPhone, he says — if you apply the model to this specific product, instead of the company as a whole. Apple was a new entrant in mobile phones. The iPhone provided better Internet performance and a better interface at a higher cost — not poorer and cheaper — yet it was very successful from the start. “When it’s wrong, it’s interesting,” Thurston says. “We hope to improve the theory.”

This is of particular interest to me because I’ve always felt that Apple had a disruptive track record that was not recognized by disruption theory practitioners.  I think the reason is that casual observers place Apple’s products in narrow categories rather than seeing the real jobs that the products are hired to do.

The reason iPhone gets misdiagnosed by disruption theory is that it is placed alongside other phones and looks sustaining. That’s what the quote above implies and it’s a common mistake. I first did that myself. However a cursory review of how the product is used (see ComScore and Nielsen surveys on usage) shows that it’s used for browsing and applications more than for mobile telephony.  These jobs it’s hired to do have more in common with personal computing. Therefore, when you put an iPhone next to a computer, its disruptive potential becomes clear. This placement also leads you to think of a trajectory that predicts the iPod touch and the iPad as natural improvements for Apple.

That is why I classify the category the iPhone competes in as Mobile Computing–a category of products that is undoubtedly disruptive (less powerful but more convenient and often cheaper) vis-a-vis traditional personal computing.

Similar analyses for the iPad, the iPod would also reveal a pattern of new market disruption for Apple.

  • M

    But the Iphone does not disrupt computer purchases. It does disrupt "dumb" phone purchases, but so do all "smart" phones, as a category.
    It is possible that Apple missed its chance to completely disrupt by the high price of the iPhone. If it were sold at the same price of a "dumb" phone, it would have been even devastating. It will still cause "dumb" phones to decline, but it gave other OSs the chance to catch up.

  • http://asymco.wordpress.com asymco

    Disruption is not competition. In other words, it's not taking a sale away from a competitor. Disruption is a more subtle non-linear shift in profit capture. A disruptor's success is defined as the absorption of all the profits in an industry–profits which were split among incumbents. Of course, once it runs its course, the incumbent usually loses all sales as well, but it happens in an abrupt way at a very late stage. It's like boiling the frog. The victim does not perceive their own victimization. Conversely, if an incumbent actually *felt* pain they would react, but in a disruption they never do.