Thursday, July 25, 2024

‘Disrupt yourself’ permeates business thinking so much we’ve lost sight of an important fact: Change and improvement are two different things

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Business worships disruption.

Its prophet was the late Clayton Christensen, who in 1997 published The Innovator’s Dilemma, in which he argued that the inevitable fate of large, established organizations is to have their lunch eaten by small, upstart organizations. Because small organizations don’t have to worry about meeting the needs of an established customer base, he said, and because these same organizations aren’t held to the standards of profitability that obtain in a mature industry, they are freer to innovate, to identify new ways to serve new customers, and then to thrash their way upstream until, all of a sudden, they have replaced the incumbents. This process leads to the dilemma of the book’s title: By doing exactly what is expected of them—by paying attention to customers and profitability—the executives of large, established organizations are paving the way for their own demise.                                   

The path to salvation that Christensen offered these executives was to become the instruments of their own upheaval before anyone else could do it for them (or to them). They should create small organizations with license to innovate; wall them off from the rest of the company, thereby freeing them from corporate constraints; and then scale the new products and markets that emerged. They should make the disruptive forces work for them, not against them.                                                             

Christensen, then, observed a pattern in the industries he had studied, and observed what appeared to be a helpful response in a number of cases he had studied. This was perfectly fine; his data could be accepted or challenged, as could his prescription. But it was what happened next that led to trouble, because the pattern and the response became a slogan: Disrupt yourself.

Aided, as is so often the way, by its catchy distillation into two words, this notion proved enormously seductive. Not only could it claim a long intellectual pedigree—as far back as 1942, the economist Joseph Schumpeter had argued that the essential mechanism of capitalism was the death of the old, tired ways at the hands of the new, a process he called “creative destruction,” and before this, Charles Darwin had shown that the essential mechanism of life itself was the extinction of less well‐adapted species at the hands of better‐adapted ones—but it also offered corporate leaders a way to reimagine something that had hitherto been a threat as something that offered a competitive advantage. The best self‐disruptors, it seemed, would be the last ones standing. Before long, what had entered the world as a specific observation about new entrants in established markets became transformed into a one‐size‐fits‐all prescription for great swaths of corporate life, and along the way collected a few related ideas—that, for example, fast is always better, or that the first company to get to scale in a new market will win, and profits can come later—that together constitute a new orthodoxy of business thinking. Change is inevitable; we can be either its instigators or its victims; and if we choose to be its instigators, then we are pretty much automatically on the right track.

Christensen’s prescription has not escaped criticism. Jill Lepore, for example, wrote in The New Yorker as far back as 2014 that disruptive innovation is “an artifact of history, an idea, forged in time…the manufacture of a moment of upsetting and edgy uncertainty [that] makes a very poor prophet,” while describing exactly how widely and deeply the disruption Kool‐Aid was being imbibed. The rare voices of concern, however, seem to have made little difference—and neither have a wealth of social science findings illuminating the toxic effects on human beings of pervasive and continuous instability. Whether or not Christensen was right about the death and life of great corporations, his work continues to spawn a vast tide of disruption, and one that has long since departed the bounds of his original observations and is now proffered as justification for any sort of abrupt change or transformation or reinvention anywhere in a business. This stuff, we are told, is necessary. You can take courses in disruption at the business schools of Stanford, Cornell, Columbia, or Harvard, to name just a few; and you can, in a lovely piece of meta‐irony, read about how these institutions are themselves being disrupted (and are doubtless scrambling to disrupt themselves in retaliation). You can read, on the cover of the Harvard Business Review, “How Good Is Your Company at Change? You Can Improve Your Ability To Adapt,” or about how to “Build a Leadership Team for Transformation: Your Organization’s Future Depends on It.” And if it is the catechism of chaos you’re after, you can buy the inspirational posters and chant the slogans: Fail fast; disrupt or be disrupted; move fast and break things. It is hard to remember a time when there was any other idea about how to manage a company.

Along the way, however, while we were all busily disrupting ourselves hither and yon, we somehow lost sight of the fact that change and improvement are two different things. Before Disruption, the usual line of reasoning was something like this: We need to fix this problem; therefore, we need to change. After Disruption, this has become inverted: We need to change, because then all the problems will be fixed. Before Disruption, the job of leaders was to identify issues and remedy them, and to identify nonissues and leave well enough alone. After Disruption, the job of leaders is to change everything all the time, because if we aren’t changing things, then someone else will and all sorts of unspecified badness will ensue. Before Disruption, the job was to move things up and to the right. After Disruption, the job is just to move things. In this way, the advent of disruption was also the occasion for an insidious bit of meaning creep. Right under our noses, all the change‐y words—innovate, disrupt, change, renew, transform, update, reimagine, reinvent, refresh—came to share a single, unquestionable meaning: better!

In reality, things are not nearly as straightforward. Consider mergers and acquisitions, for example. It’s a long‐established finding that most M&A activity destroys value: One study found that in 60 percent of cases, shareholder value is destroyed; another estimate placed this figure somewhere between 70 percent and 90 percent. Or consider layoffs. The Stanford professor Jeffrey Pfeffer has written extensively and persuasively about their impact and whether they make any sense, not just in human terms (which, he vividly illustrates, is a massively hard case to make) but also in dutiful‐capitalist‐maximizing‐ shareholder‐value terms (which we might presume would be an easy case to make). On this second question of economic value, Pfeffer notes that, “Layoffs often do not cut costs…Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue.”

But even if this is not always the case—even if there are occasions where a well‐executed reorg or organizational transformation yields a true benefit—it’s still evident that a better accounting of the human costs involved would call into question whether and how often change makes an organization better off, and would lead us to a more refined understanding. 

Excerpted with permission from The Problem With Change by Ashley Goodall. Copyright © 2024 by Ashley Goodall. Used with permission from Little, Brown Spark, an imprint of Little, Brown and Co.

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