In Defense of Disruption

The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.

— Albert Einstein

In first-century Rome, an innovative glassmaker created vitrum flexile, flexible glass. Proud of his invention, he requested an audience with Emperor Tiberius. The emperor threw the drinking vessel down on the ground, but, much to his surprise, it did not shatter. At the time, all drinking vessels were made of gold and silver, which tainted wine with a metallic taste. Considering the glassmaker's creation, Tiberius realized it would completely disrupt the Roman economy. If goblets were no longer made of gold and silver, the value of the precious metals would diminish immeasurably. Tiberius asked the glassmaker if anyone else knew the secret formula. When the inventor took a solemn oath that he alone knew how to create vitrum flexile, the emperor had the man beheaded.

Today it is not so easy to thwart disruption.

The business headlines will tell you that the world has become a scary place. Advances in 3-D printing that create just-in-time inventory threaten the jobs of 320 million manufacturing workers around the globe. Self-driving cars, trucks, and drones will displace tens of millions more workers. Renewable energy, such as solar photovoltaic cells, which have decreased in cost by more than 85 percent since the year 2000, will shift the geopolitical future of nations whose economies are supported by fossil fuels. According to a recent McKinsey Global Institute study, the automation of knowledge work will have a $5 trillion to $7 trillion impact on white-collar jobs. Ecommerce and productivity gains in delivering retail goods are expected to further reduce the number of retail stores by as much as 15 percent. What is the real estate value of a mall, factory, or office building when its purpose is made obsolete? America's workforce is now dealing with the realization that even though the recession is over, it has been a jobless recovery. This era of endless innovation has resulted in large multinational corporations shedding more than 2.9 million domestic jobs since the recession, and the pace of change is only accelerating. It seems that whenever reporters, news anchors, pundits, and economists discuss this rapid pace of change, they throw around the word disruption — often employing the language of warfare — destruction and disorder. As generations-old companies and once valued brands and businesses are displaced by nimble, efficient new startups, we're led to believe that disruptive new technologies have given the dogs in our dog-eat-dog world a powerful and violent strain of rabies.

The disruption characterizing our current business landscape goes beyond innovation — and there is a difference between the two. Take the mighty sword, for example. Men have been fighting with swords for over five thousand years. Early bronze swords were lethally sharp, but, given the weak tensile strength of bronze, they had to be short in length. The innovation of steel and other alloys allowed the sword to grow in length, broadness, and societal importance. Skilled swordsmen became the defenders of kings and kingdoms, and the sword became the symbol of liberty and strength. Innovation therefore consisted of how each new culture and generation improved upon swords, changing how they were forged and how they were wielded in combat. But one of the great Hollywood adventure movies, Raiders of the Lost Ark, provides the perfect illustration of how disruption works. When Indiana Jones is challenged to a duel by an Arab swordsman flamboyantly waving his massive scimitar, Indy nonchalantly reaches into his holster, pulls out a revolver, and shoots the swordsman dead. With the presence of the pistol, the sword was made obsolete. Disruption is to existing businesses and business models what Indy's Smith & Wesson was to the sword: it instantly changes the way the world functions and the course of history.

Disruption is almost always led by a technological change. But disruption's impact extends far beyond the technology industries. Eli Whitney's invention of the cotton gin in 1793 did more than just make cotton a profitable crop; it led to a quintupled growth in the number of slaves in the South and sparked the industrial revolution in the North. It catapulted a young nation's economy and hastened the onslaught of the Civil War. Every American's life was affected. History was altered by this one technological breakthrough. A technology or product is disruptive when it creates an entirely new market, consumer base, or user and destroys or displaces the market for the technology it replaced. Email disrupted postal mail, for example, and Wikipedia disrupted the traditional multivolume bound encyclopedia.

Early in my career, I saw firsthand the difference between something that is truly disruptive and something that is merely innovative. When I launched my first company, Jasmine Productions, we were a small twelve-person operation doing small-time graphic and special-effects production work for hire. I was eager for an entry into mainstream Hollywood. At the same time, the Japanese electronics manufacturer Pioneer was also looking for an inroad. Pioneer had acquired control of a new home video format — the laser videodisc — from Philips and MCA (Universal Studios). Branded LaserDisc, the twelve-inch vinyl-record-size platters had audio and video quality vastly superior to that of VHS and Betamax videocassettes, which were then popular with consumers for home video entertainment. The laserdisc player was marketed as a "record player that produces beautiful sound and pictures," which could be enjoyed on your television. Laserdiscs were read by lasers and had no moving parts, as fragile videocassettes did, so the picture and sound quality would not deteriorate over time, nor would the discs jam or tear the way videotape did. Additionally, whereas videotape had to spool linearly through the entire tape to get to a different point, the lasers could instantly go from any point in the video to any other point, thus creating the possibility of "interactive video." Stories could have different outcomes depending on which choice a viewer made....