After recapping the theory of disruptive innovation, Clay turned his attention to the macroeconomic implications of this theory. Incidentally, if you haven’t heard the famous steel mill example, its a cracking good yarn (the better for being true). You can catch the whole lecture here:
For those too lazy time pressured to watch the whole video I will summarise:
1. Disruptive, Sustaining and Efficiency Innovations work in a ‘virtuous cycle’ all things being well.
2. Inapproporiate financial metrics (ie short term RoI) tends to turn this cycle into a line (ie you ‘stick’ at efficiency innovation, thus reducing costs but with no – or even negative – economic growth and job creation).
3. You can make a case for nations (as well as companies) being disruptive – eg Japan as the disruptor gets disrupted in turn by Taiwan – > which gets disrupted by China -> which gets disrupted by India …
The first assertion I find very plausible, having seen the same logic at work in industry. The second is a also useful but there is a danger into sinking into the familiar ‘there is no innovation any more’ story frequently heard by people of a certain age. (see The Economist on this). All innovative and exciting developments, whether technology, musical, political or cultural, happened during a golden age. That age being somewhere between 16 and 24.
The third notion – disruption of nations – was intended, I think, as a stimulus for thought rather than a rigorous theory of reality.
What is interesting though, is how a simple theory (and disruptive innovation is quite easy to understand, as long as it is explained carefully – see video!) can be so useful as a lens to look at, describe and think about a whole range of phenomena.
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Just like Dr Clayton said in the video, countries are taking a longer period to achieve economic resurgence. One possible reason behind this is that industries in the countries focus on efficiency innovation owing to the short-term ROI. However, during the efficiency innovation, people start to think that no more innovation exists in a certain industry. For example, the Toyota production system minimizes the assembly cycle time while other factories cannot achieve (the perfection).
The iteration of products, involving cultural and technological innovation, is too fast to keep pace with for the young generation.