I confess: I’m a Trekkie. Not the Klingon-speaking, convention-going variety. But Mr. Spock was my first crush, and I’ve seen nearly everything released by the franchise. And when, working in small business lending, I had to make up a company name to be embossed on my “management plastic”—a new credit card issued to employees for pre-launch testing—I proudly chose the Prime Directive.
In the world(s) of Star Trek, the Prime Directive prohibits the United Federation of Planets’ starship crews from interfering with the development of civilizations outside the Federation. In practice, that usually means refraining from introducing people they meet to any capabilities or ideas the people haven’t yet discovered or encountered in their own home world. So the Enterprise’s crewmembers are forever hiding their gadgets from less technologically-advanced cultures, biting their tongues about social practices that shock them, and disguising physical features (like pointy Vulcan ears) that might tip alien hosts off to the existence of planets beyond their own.
As these scenarios illustrate, the Prime Directive is conditional; the kind of interaction it permits or prohibits with a civilization depends on the situation. So starship explorers must understand the circumstances in which they are operating in order to interpret and apply the Directive correctly. And the same is true in applying the Theory of Disruptive Innovation.
As I’ve previously written, people often erroneously view innovations in absolute terms—as if they’re intrinsically disruptive, or not. But to apply Disruption Theory correctly, hence more accurately predict possible outcomes of a firm’s innovation strategy, leaders must fully understand the market circumstances surrounding an innovation. The following three questions can help them do so, and thus determine whether an innovation has significant disruptive potential, or not.
- Is there an unmet need in the market that the innovation can address well enough to gain a foothold there? If so, the innovation may be disruptive. If not, it isn’t. That’s because Disruptive Innovations don’t target the needs of consumers who are already well-served by existing offerings in the market. They target those of people who are overserved, or not served at all by existing offerings, and meet the needs with solutions that are affordable, accessible and convenient. An important unmet need in healthcare is for innovations that help people better manage chronic disease, since the system has typically focused on innovations that improve treatment of acute illness or injury.
- Are market leaders ignoring that unmet need? In The Innovator’s Dilemma, Clayton Christensen explains how disruption depends on the perplexing phenomenon whereby market-leading firms often either fail to recognize the unmet need in a market, or grossly underestimate the value to the firm of addressing the need. Their resulting inaction gives would-be disruptors a critical competitive edge. But if the market leaders are alert and on the offensive, would-be disruptors have a tougher (but not impossible) road ahead. Building on the prior example, the strength of America’s chronic disease epidemic, coupled with the mainstream healthcare delivery systems’ continued competition on the basis of acute care delivery, suggest that market leaders have historically overlooked or ignored the need for innovations that help people better manage chronic disease.
- Will an innovation’s distributors benefit as much from disruption of market leaders as its developers will? If so, it may have disruptive potential. If not, it probably doesn’t. That’s because distributors who profit handsomely from selling market leaders’ solutions are predictably loath to support competitive solutions. Why, after all, would they bite the hand that feeds them, especially for opportunities that are often less lucrative for them in the near-term? For this reason innovations that ultimately disrupt markets tend to be distributed through new channels. In terms of healthcare, we see a particular focus on developing and/or utilizing chronic care innovations among start-ups and new entrants, which could be considered new channels.
Circumstances are so important to correct application of Disruption Theory that they don’t just dictate how one applies it, but whether one should apply it at all. The first question I ask myself when I begin analyzing an innovation strategy is, “What is the firm creating this innovation trying to do, and therefore which management theory has something to say about the best way to do it?” If the firm’s objective is to transform the kinds of solutions available in a market, then Disruption Theory informs comprehensive business model innovation toward that end. If a firm seeks new growth opportunities, then the Theory of Jobs to Be Done provides a blueprint to product innovation. Still other management theories that we regularly work with at the Institute speak to different objectives, and sometimes looking at a firm’s strategy through the lens of several theories creates the most useful collection of insights.
Disruption Theory is full of subtleties that one discovers and comprehends through practice applying it over time, and it can be challenging to keep track of them all. If you’re looking for an easy (and dare I say entertaining) way to remember or explain the importance of circumstances in the theory, consider channeling your inner Trekkie and drawing on the lesson of the Prime Directive.