Economics, Pethokoukis, U.S. Economy

Why business guru Clayton Christensen has landed on the left’s hit list

Harvard Business Review Press

Harvard Business Review Press

When the West began to accept that creative destruction driven by innovation is something to be embraced rather than extinguished, it started getting rich. Real per capita incomes, basically stagnant for the previous 1000 years or more, went from $2 or $3 dollars a day in the 18th century to $140 today. Innovation made the modern world. Innovation made Marx a false prophet. Innovation is why life, at least in advanced economies, is no longer nasty, brutish, and short.

Yet, there are those who uncomfortable with innovation, and the role it plays in modern economic and business thinking. Here is Jill Lepore, Harvard University history professor and author of a buzzy New Yorker piece — it got an approving blog post from New York Times columnist Paul Krugman — “The Disruption Machine: What the gospel of innovation gets wrong“:

The idea of innovation is the idea of progress stripped of the aspirations of the Enlightenment, scrubbed clean of the horrors of the twentieth century, and relieved of its critics. Disruptive innovation goes further, holding out the hope of salvation against the very damnation it describes: disrupt, and you will be saved.

So what’s Lepore’s beef? Superficially, her piece is a critique of Clayton Christensen, arguably the most important business academic and analyst of the past 25 years, and of “disruptive innovation” theory, presented in his 1997 book, “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail.” Here is how the Clayton Christensen Institute describes disruptive innovation:

The theory explains the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo. Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.

Lepore picks at the the corporate case studies that Christensen uses. And I am sure Team Christensen, not to mention his many supporters — particularly in Silicon Valley — will soon offer a vigorous defense. But what really seems to bug Lepore is that disruptive innovation theory is being applied to higher education. Count Lepore as one of many college professors who doesn’t like the idea of online learning disrupting how brick-and-mortar universities operate — and how profs do their jobs. (More context: There is a big ongoing debate – Christensen on side, Michael Porter on the other — about how Harvard’s business school should deal with online education. Lepore’s piece can been seen as a mission in the campaign against Christensen approach.)

Krugman seems to like the piece for the way it supposedly debunks the “hyping of ‘disruptive innovation’ as the key to success in business and everything else.” This is an understandable opinion from a supporter of bigger and more intrusive government. At its heart, innovation is about change and challenge, things which are anathema to incumbents. Incumbents benefit from the status quo, whether in business or government, not new competition. In fact, incumbent businesses and government will often work together to quash competition and keep things as is. Innovation capitalism then becomes crony capitalism or corporatism where market competition is replaced, as Edmund Phelps writes in “Mass Flourishing,” by the “insidious competition of producers and professionals for a share of government contracts and a place in government-sponsored enterprises.”

Christensen’s theories also help explain what’s been going wrong with the US economy. Too little business innovation and churn and competitive intensity has resulted in too little dynamism and growth. Too much government favor — via regulation and subsidy — has helped Corporate America at the expense of Startup America. Krugman prefers a different explanation, however, one centering on too much inequality and too little government spending and redistribution. Bashing Christensen and disruptive innovation helps reinforce the corporatist argument.

America needs more innovation and entrepreneurship and risk taking and competition in business and government, not less. And you would think this would be an issue above political partisanship or ideology. Why it isn’t is America’s dilemma.

Follow James Pethokoukis on Twitter at @JimPethokoukisand AEIdeas at @AEIdeas.

One thought on “Why business guru Clayton Christensen has landed on the left’s hit list

  1. Now there’s a surprise. Jill Lepore and Paul Krugman think university professors should be insulated from disruptive innovation.

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