I call bullshit on Clayton Christensen and his view on Steve Jobs

[Update: already receiving great comments and emails, mostly telling me I'm wrong. In case you don't read comments, at the bottom of this post I'm publishing one that I think deserves at least equal placement.]

It's not so much that I'm smarter than everyone, though that's a part of it, I'm sure. Just ask my mother. Rather, it's that I state the obvious while, apparently, everybody else is dicking around and refusing to accept where they just might possibly be wrong. Not much shame in being wrong, boys and girls.

Near as I can tell.

Yet so many refuse to accept when they get it wrong. When that square peg refuses to slide into their round hole. Latest example: Well-compensated speaker-writer-analyst guy at Harvard, Clayton Christensen, and his bullshit analysis of why Apple is different. It's because Steve Jobs is different.

So very different, in fact, that even though Jobs' career has been one giant *actual* counter to the very popular *theoretical* notion of disruptive innovation that Christensen proposed in The Innovator's Dilemma, Christensen says we can't count it. Because Apple doesn't operate like a for-profit, public corporation is supposed to.

No shit. I'm not making this up.

But first, the backstory. Clayton Christensen makes about as much per speaking engagement as you do in a year of labor because of this (per Wikipedia):

Professor Christensen is the bestselling author of five books, including his seminal work The Innovator's Dilemma (1997) which received the Global Business Book Award for the best business book of the year.  

Essentially, Christensen has long argued that businesses seek profits, duh, and this leads them up the proverbial food chain -- more profits, bigger margins. This creates an opening at the bottom. These bottom feeders make very little profit but do learn the business, the needs of the industry, get better at making their products, understand how to keep costs low and, ultimately, come to offer an innovative alternative to those profit-gouging companies at the top. Ultimately, the bottom feeder offers a far better value proposition and steals the customers from the fat, rich market incumbent.

Disruption complete. 

Follow? Good.

Yesterday, after reading the recent MondayNote, this led me to wonder if Christensen and his followers got it all wrong. To wit:

Jobs may have also taught us that as markets go downstream, people go upstream (or, like salmon, die trying). There's a lesson there. What if "disruption rising from below" is completely wrong? What if the disruptive technology, when we start to take a longer view, goes from the top down, not the bottom up?

Clever, no?

And, I think, a better fit to explaining Jobs and Apple then Christensen. Jobs and Apple build products, innovative ones, for people (what Google calls "users"). Invariably, these innovative products are superior to everything that's out there. And command a huge profit. That does not go away just because one or a dozen or thousands of bottom feeders build 'like' products at little profit. Not if none of them are able to create something better. 

Except, if Christensen is right, then the bottom feeders, say those cheap Lenovo laptops, would actually soon out-innovate and disrupt and overwhelm MacBooks. ZTE Android phones, for example, and others, will soon take down iPhone -- and all Apple's profits with it. Similarly, $99 tablets from Asus and Acer and the like will gut the profitable, lucrative business that iPad currently enjoys.That's just how it works. Clayton says so.

Only, this doesn't seem to be happening. Not to Apple. As many have noted, Macs have *grown* their sales share for years, while the industry stagnates. Google and their allies have thrown everything they can at iPhone, yet it continues to suck up all the profits.

Why? How?

As I said yesterday, when you are talking about products for people, forget notions about "markets" moving downstream. People are not markets. People want the best. They just need to know what the best is and then be able to afford it. That giant low-end "disruptive" class isnt taking down Apple because they can't match Apple where it matters. Creating the best. Instead, they're merely creating the cheapest. People want the best and will pay for the best whenever they can.  

Agree?

No! Fine. I still say it's better than what Christensen says. In an article publised *today*, after my post, he does his mental acrobatic best to defend his thesis and reveal how it doesn't apply to Jobs and therefore is not wrong.

But it hasn’t affected Apple because that’s not how the company sees the world. Profitability isn’t at the center of every decision. Apple’s focus is on making truly great products — products so great that its own employees want to use them. That philosophy has made Apple one of the most innovative companies in the world.

Steve Jobs’ legacy isn’t the Mac. It’s not the iPhone. Or the iPad. His legacy is in the creation of Apple itself, reminding us that profit is not the ultimate goal, but rather a consequence of something greater.

In other words, only Apple, apparently, makes great products that even its employees want. Meaning...Christensen is right. About everything, pretty much. Sure, his "disruptive innovation" thesis doesn't work for Apple but that's only because Apple isn't playing by the rules. Because Apple, thanks to Jobs, is pursuing something "greater" than profits.

Apparently, near as I can follow his twists and turns, Christensen is so wedded to his innovator's dilemma construct that he is now saying that the only way to make profits, lots and lots of them, the way Apple does, is to not care about them. I wonder if this should apply to every government agency and non-profit?

In short, disruption describes how the incumbents move upmarket, and leave the bottom of the market completely open for scrappy upstarts to enter. It explains the rise and fall of many great companies.

But there has always been one company that doesn’t follow that pattern. Apple. 

I have come to the conclusion that what has made Apple so different is that instead of having a profit motive at its core, it has something else entirely. 

Christensen has come to the conclusion that he is right about innovation and disruption. And when he is not, it's because the company isn't concerned about profit.  

And if you believe that, you have never been on the other end of a sourcing agreement with Apple. 

Nor understand how they operate.

Time for Christensen to put the big speaking fees on hold and go back to the drawing board.

----

A different take, via James Allworth:

Brian, interesting take. Thanks for posting on it.

I've had the good fortunate to study under Clay, write the article with him, and also work at Apple.

In a certain sense, you're right - this post is about something that the theory of disruption can't explain, and we started off by asking the question: why? What has Apple done differently that all these other companies have not?One thing that might help - perhaps we did not explain how disruption works very well. I'll apologize if our language wasn't clear, but your assertion that markets go downstream, people go upstream is incorrect. Clay has never said that. It's the other way around. Incumbent firms go upstream, but most people actually go downstream (except for the very best customers of the incumbent firms). It is usually scrappy upstarts that meet the demand for these low-end customers. Rarely do you see big, successful companies jump down. That's why PCs replaced minicomputers, and tablets are going to replace PCs. The example we use is of the auto industry. Think about it from the perspective of a new entrant, like Toyota coming to the US all those decades ago: you're never going to be able compete head on against GM or Ford, so you start with the cheap small cars that they don't really care that much about. And you get better and better at that. From the perspective of GM or Ford, you don't really care about those small cars - they're not profitable - so by and large, you get out. And so the process continues. Eventually you're a US auto manufacturer and all you're left with is SUVs and trucks.

It happens in lots of places. It's happening to Intel right now, for example. They couldn't see how producing the chips powering cell phones could be profitable, and ARM ended up taking the market. Intel, if they don't do something about it, are going to be disrupted as the PC fades in importance.

And yes, the cell phone example is a good one, because not even Apple - who we don't think are driven by profit - could keep up with the downward price pressure that the Android manufactures exerted. And right now, they're sitting on a greater market share than Apple has, despite an inferior user experience and Apple having a big head start. At this point, it's not about technical innovation so much as business model innovation. That's what the ZTEs bring to the table; and the Dells in the previous generation of PCs. They had the ability to deliver the product that Apple effectively pioneered but at a much cheaper price. Apple over-delivers for a large number of people.

What is totally unique about Apple is that although they haven't always pushed their products down in price at the same rate as the market (and where they have, they've been successful in holding share for a long time - e.g. the iPod), what they have done is continued to create entirely new products that sit under their existing products. In other words, their success has a downward trend: they've gone from the Mac down, rather than a small car up to an SUV, and it's highly unusual for a big company.

I'll reiterate, the starting point was understanding the anomaly of Apple and why disruption has not occurred to them. They have moved downmarket multiple times under Jobs. That they're willing to come along and develop a device like the iPad - one that will eat up their entire Mac product base over time - is amazing. Very few companies can bring themselves to do that.This isn't about saying we're always right. I'm definitely not, and I have no doubt Clay would say the same. I don't want to put words in Clay's mouth, but he loves it when people poke holes in things - that's how understanding can be improved, and that's why we wrote the article. It's a special company, led by a special CEO and it's defied a law that governs most others. We were just trying to figure out why. As best we can tell, what makes them so different is that they care about products and the quality of the user experience way more than profit - and that's unusual.Cheers-- james