- Dominant firms that are “disrupted” by innovators aren’t always doomed. “Victory in the disk-drive industry appears to have gone to the manufacturers that were good at incremental improvements, whether or not they were the first to market the disruptive new format,” she argues. (emphasis mine)
- Many of the “new entrants” selected by Christensen were new incarnations of existing companies in an industry, at least according to Lepore.
- Many of the “disrupted” legacy companies didn’t do as badly as Christensen would have readers’ believe.
- Many legacy companies that disrupt, fail (i.e., the financial services in the early 2000s).
Instead, Lepore argues that success or failure is due to much more traditional internal and external factors:
“Many of the successes that have been labeled disruptive innovation look like something else, and many of the failures that are often seen to have resulted from failing to embrace disruptive innovation look like bad management.”
She also argues that the theory is applied too broadly — to institutions with goals that extend beyond profit alone, such as hospitals.
“Innovation and disruption are ideas that originated in the arena of business but which have since been applied to arenas whose values and goals are remote from the values and goals of business. People aren’t disk drives. Public schools, colleges and universities, churches, museums, and many hospitals, all of which have been subjected to disruptive innovation, have revenues and expenses and infrastructures, but they aren’t industries in the same way that manufacturers of hard-disk drives or truck engines or drygoods are industries.”
Hospitals are in the midst of an era of significant — and perhaps unprecendented — change. We’ll have to innovate, and we’ll have to change our business models to better meet the demands of our payers and patients for higher-value, more transparent care.
But will we have to disrupt to get there? Will we be out of business if we don’t?
Lepore summarizes Christensen’s theory as: “If an established company doesn’t disrupt, it will fail, and if it fails it must be because it didn’t disrupt.”
Yet, there are many reasons organizations fail, and many reasons organizations succeed. They must change, and perhaps doing so incrementally isn’t as bad as Blockbuster or Borders would make it seem.
In fact, one could argue the renting of videos or the sale of books out of a brick and mortar location, and transitioning to the renting of videos or the sale of books online, isn’t all that disruptive. In fact, it sounds pretty incremental. Perhaps the struggle of Blockbuster and Borders is the fact that they didn’t respond with incremental change quickly enough. They were not good at incremental improvements.
Amazon launched in 1994. Netflix was founded in 1997. I can tell you I hadn’t heard of either of these for 5-10 years after they were founded. I was too busy shopping at Borders and stopping by Blockbuster. If either legacy company would have looked ahead, fully grasping the power the Internet would have on consumer behavior, and moved quickly to offer a similar service, it’s unlikely Amazon or Netflix would have experienced the success they have today.
Perhaps, then, legacy healthcare providers can breathe a sign of relief. They don’t have to disrupt, but they must be ready to respond, and respond quickly, when someone else does.
Are you ready?
