Thoughts on How to Prevent Disruption

Although I don’t have Clayton Christensen’s publications handy (I lent them to my brother), I’ll try to outline situations where low-end disruption won’t happen. We will then be able to see how the iPhone fits.

Raising the bar

Low-end disruption only occurs when the current product starts to overshoot customer expectations in terms of jobs-to-be-done. Hence one way of preventing low-end disruption is to constantly raise the bar; that is to raise customer expectations.

Apple has done this many times throughout the life of the iPhone.

Initially, they realized that the fluidity of the user interface was more important for touch interfaces compared to mouse interfaces. By raising expectations for a fluid interface, they forced Android to invest in catching up for years (Android has just recently gotten fluid interfaces right).

Touch ID and raising user awareness of privacy and security is another example. Although the effects are still to be felt, they are trying to make this a must-have feature. They want to make it so that anyone going back to Android will feel insecure.

Appealing to non-tech aspects

Low-end disruption happens because technical improvements push the capabilities of the device to the point where it exceeds the jobs-to-be-done. Technical improvements in tech are especially fast thanks to Moore’s law. Conversely, this means that other aspects of a product are less likely to improve so fast and will be less susceptible to low-end disruption.

The areas that Apple focuses on are design, user interface consistency, simplicity, etc. These areas do not usually improve rapidly, and in fact, consistency and simplicity are often compromised as technology improves (too many features are crammed in).

By making a major appeal of their products independent of Moore’s law, Apple makes it less likely that technical improvements will rapidly make their product “good enough”.

This is not to say that design, user interface consistency, simplicity cannot overshoot user expectations. They can. Look at the interface for cars or toothbrushes. The thing is that in tech, these issues are very difficult to solve and furthermore, very few companies other than Apple are seriously attacking these.

The jobs-to-be-done of luxury items

Low-end disruptions often enter the market at significantly cheaper price points (although they have to be still making profits to be truly disruptive). Although this is not the only way to enter the market (they can use simplicity for example to expand the addressable customer base), this is the simplest to understand. However, this low cost strategy is unlikely to be effective against the iPhone because price itself is a positioning statement of the iPhone value proposition. In other words, the iPhone is in a sense a luxury.

The iPhone is, for many people, the only luxury item that they own. Apple has succeeded in making the iPhone one of the most affordable luxuries. The iPhone is the only luxury product that both celebrities and huge numbers of teenagers own. You can get iPhones for free with subsidized contracts, but that product is the exact same device that billionaires lust for.

The iPhone is a mass-market luxury item. In fact, I even hesitate to use the word “luxury”. This is quite unique and you don’t see this kind of thing anywhere else, in any industry.

Luxury items have very different jobs-to-be-done from regular ones. In addition to being comfortable and high-quality, they have a “status” component; they have to show off your well-being and your good taste. On seeing you own one of these items, other people must judge you favorably by it.

Hence to satisfy the jobs-to-be-done of a luxury item, you have to satisfy the following;

  1. It must be well designed in a way that conveys its luxuriousness.
  2. The build quality must be exceptional.
  3. The whole brand and all the customer touch-points must be luxurious.
  4. It must be expensive relative to other products.
  5. It must be associated with some aspiration figures.

Technical progress in the Moore’s law sense will not make these conditions any easier or less costly to satisfy. In particular, luxury products cannot be cheap which means that the most often used low-end disruption strategy, namely making a cheaper product, cannot be applied. In order for any company to satisfy these jobs-to-be-done, they have to invest in a completely different set of activities.

Therefore, luxury items are hard to disrupt. Tech companies in particular don’t usually have the skill set or investments in place to compete.

Different between luxury and fleeing to the high end

In Disruption Theory, incumbents will often flee to the high end in response to a low-end assault. That is, instead of catering to the mass-market, they will focus on serving the high-end niche which requires the very features that overshoot the mass-market expectations.

On the surface, if you look at the prices of the products, this seems to be equivalent to a luxury strategy. This is incorrect. Luxury products are focused on satisfying a completely different jobs-to-be-done. Selling luxury products do not require more features or higher specifications at all. They are more focused on making the customer feel better about themselves through the experience itself and social recognition. Hence the ability to design and produce feature-laden, high-spec products does not give you the capability to enter this market.

What Apple has made the iPhone a luxury experience at a price that is affordable to the mass-market. This has come through a collection of efforts that companies like Samsung or Google have very little experience in. Celebrities like Steve Jobs and Jonny Ive, great design, precision manufacturing techniques, boutique retail stores, investment in and use of quality materials (sapphire glass) are all part of this.

Without this investment, it is very questionable if Samsung will be able to pursue a similar “luxury for the mass-market” approach. Instead, they would have to flee to the high-end and target consumers who prefer top-spec machines. As Christensen describes, if the low-end entrants eventually improve their offering or if the phone specs get defined solely by components (as was the case with PCs), then fleeing to the high-end will be in vain in the long term.

Summary

In understanding how Apple seems to escape disruption, it is very important to truly understand the jobs-to-be-done. Instead of focusing on product features and specifications, you must consider the social and emotional aspects of the jobs-to-be-done. By doing this, you can easily map Apple into Disruption Theory and reach to conclusion that Apple is quite difficult to disrupt from the low-end.

You also have to realize that different aspects of a product have different sensitivities to low-end disruption. Tech-oriented features are very sensitive to disruption whereas others are not. Tech companies are easily disrupted simply because they focus too much on the tech. By focusing on non-tech stuff, you can become less vulnerable to low-end disruption.

Importantly, this is not necessarily the same as fleeing to the high-end of the market. Most luxury brands are difficult to disrupt, but at the same time cater only to the very high-end. This is one way of doing it, but it is also possible to be luxury but also mass-market. Disneyland is a good example where you get great hospitality but at reasonable prices. This is where the iPhone is going.

The problem for many tech-companies is that they tend to have a history of tech and tech only. They do not have the non-tech aspects within the organization and even if they did, their brand would not convey that. This is why many companies create new brands for their luxury offerings (Toyota Lexus for example). Since a luxury brand is in many ways a contract for exceptional product & service, and also a signal of financial well-being, the historical tech-brand often won’t do. It would be interesting to see if Samsung eventually creates a new smartphone brand and an accompanying distribution for their high-end devices.

Apple is escaping disruption using a combination of ideas which can be mapped to Christensen’s Disruption Theory. I sense that they understand that the underlying force driving disruption is Moore’s Law, and that is why they invest so much in the non-tech aspects that Moore’s Law doesn’t directly touch. (even in tech investments, they invest in sapphire glass for example; also unrelated to Moore’s Law thus less quickly imitated)