Disrupted Enterprise – how The Economist missed the point

Disruption by Enterprise is not going to happen with cost base management as it is

iDisrupted Commentary

The Economist; Schumpeter (November 28th, page 73) states that, “established companies can use their superior war chests and management skills to invade adjacent industries” Not when they have an inflexible cost base they can’t.
Ford has a $62 billion market value and 224,000 permanent employees it must pay every month. Uber has a market value of $60-$70 billion (not discounting any financial contraptions that may be in play, “rise and fall of Unicorns”, page 67) and around 5,000 permanent employees.
Despite Ford’s strong attempt to eat its own lunch with its excellent owners social rental scheme, Go-Drive, it still has to pay 224,000 people every month. In and age where freemium business models exist because of tiny fixed cost bases the real disruption for enterprises needs to start with a massive reduction in inflexible overhead.
Disrupted Enterprise - how The Economist missed the point
Disrupted Enterprise – how The Economist missed the point

Here’s the article from The Economist: TWENTY years ago a then obscure academic at Harvard Business School published a career-making article in the Harvard Business Review (HBR), warning established companies that they were in grave danger from being disrupted. Today Clay Christensen is an established company in his own right. He is regularly named as the world’s most influential management guru (his Harvard colleagues affectionately call him Mr Disrupter). He has applied his theory to an ever-wider range of subjects with books such as “Disrupting Class” (on education) and “The Innovator’s Prescription” (on health). He even has his own consulting operation to help him stretch his brand. Businesspeople everywhere treat him as a guide on how to cope with change. But the risk is that by paying too much attention to his theory, they will miss other disruptive threats.This thought is provoked by a new HBR article on the subject, written by Mr Christensen along with Michael Raynor and Rory McDonald. Mr Christensen rightly points out that the word “disruption” is now bandied about so much that it is losing all meaning. The number of newspaper and journal articles using the phrases “disruptive innovation” or “disruptive technology” has gone from practically zero when Mr Christensen coined them to more than 2,000 in 2014. However, he goes too far in arguing that Uber, a taxi-hailing service, is not “genuinely disruptive” because it does not fit his theory of how disrupters break into established markets. Mr Christensen does not have a monopoly on the word disruption, nor a patent on his “disruption theory”: Joseph Schumpeter, for example, produced a rather compelling theory of “creative destruction” long before Mr Christensen was born..


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