Why don’t we have an integrated mechanism of entrepreneurship to consistently make new companies successful? Turns out that the Disruption experienced in the 20th century (cars, planes…) was fundamentally different from today’s Disruption (Airbnb, etc.). This article explains how the three types of Disruption help create predictable successful startups.
How High-End Disruption Completes the Disruptive Innovation Model
Let’s face it, innovation is hard. A recent Nielsen study pointed out that between 2012 and 2016, out of 20,000 new products evaluated, only 92 (0.46%) had sales of more than $50 million in year one and sustained sales in year two.1 Launching new companies is even more challenging, most startups cease operations after five years and most of the ones that are left standing find themselves stuck and have to make great efforts to make ends meet.2
At the same time, we need an explanation for companies such as Tesla, Airbnb, Infosys, Samsung, Sony, Dell, Apple, and many others that are so successful. And we need more than an explanation, we need a prescription, a recipe for creating successful companies.
Pundits might think that this is all very new, that this is why there is no prescription yet. But in reality, entrepreneurship is an old phenomenon and it turns out that it’s precisely when and how it was conceived that makes it so challenging – and surprisingly, this is the main reason that is confounding so many business school professors.
Let me put it this way; the people that were born in the late 1890s and onwards witnessed the greatest technological revolution ever – much more impactful than today’s. Hundreds of radical innovations revolutionised entire industries, think about cars, penicillin, electricity, airplanes, mechanised factories, chemical synthesis, radial tires and a very long etcetera. We take these innovations for granted today but there was a time where these radical technologies disrupted entire industries. For example, when Michelin introduced the radial tire in the US they took over all other the other tire manufacturers but Goodyear – who had to undergo a near death experience and needed decades to recover.
About the Author
Dr. Juan Pablo Vazquez Sampere is Professor of Business Administration at IE Business School in Madrid. He is specialised in Disruptive Innovation and Entrepreneurship.
1. C. M. Christensen, T. Hall, K. Dillon, and D. S. Duncan, “Know Your Customers’ ‘Jobs to Be Done,’” Harv. Bus. Rev., vol. 94, no. 9, pp. 54–62, 2016.
2. S. A. Shane, The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, 1st Ed. New Haven: Yale University Press, 2010.
3. J. A. Schumpeter and R. Opie, The Theory of Economic Development; An Inquiry Into Profits, Capital, Credit, Interest, and the Business Cycle. Cambridge, Mass.,: Harvard University Press, 1934.
4. J. A. Schumpeter, Capitalism, Socialism, and Democracy. New York: Harper & Brothers, 1942.
5. K. B. Clark, “Knowledge, Problem Solving, and Innovation in the Evolutionary Firm,” Unpublished working paper. Harvard Business School., 1989.
6. C. M. Christensen, “The Innovator’s Challenge: Understanding the Influence of Market Environment on Processes of Technology Development in the Rigid Disk Drive Industry,” Thesis, Unpublished Ph.D. dissertation. Harvard University., 1992.
7. E. Danneels, “Dialogue on the Effects of Disruptive Technology on Firms and Industries,” J. Prod. Innov. Manag., vol. 23, no. 1, pp. 2–4, 2006.
8. C. M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Boston, Mass.: Harvard Business School Press, 1997.
9. A. A. King and B. Baatartogtokh, “How Useful is the Theory of Disruptive Innovation?,” MIT Sloan Manag. Rev., vol. 57, no. 1, pp. 77–90, 2015.
10. C. M. Christensen and M. E. Raynor, The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, Mass.: Harvard Business School Press, 2003.
11. S. D. Anthony, “When Can You Sustain and Win?,” Strateg. Innov., vol. 4, no. January-February, pp. 6–9, 2006.
12. J. P. Vazquez Sampere, “Uncovering the High End Disruption Mechanism: When the Traditional Start Up Wins,” in Global Perspectives on Technological Innovation, Management and Policy, 1st. Ed., R. Bing, Ed. Volume 1. Pennsylvania State University at Harrisburg: Information Age Publishing, 2012, p. 516 pages.