Sunday, September 22, 2013

What Christensen and Thompson Got Wrong and Right

Ben Thompson, is a blogger who's recently piqued my interest and I've been following his tweets and blog. His last post, WHAT CLAYTON CHRISTENSEN GOT WRONG, is... well....wrong. I found this interesting because he's a very smart guy; however, this last post had some errors. This article will focus one of the two big ones - Christensen's philosophy does not really apply to the iPhone.

What's the iPhone Really About?

First, it's important to remember that Christensen's theory is about technological disruption. So when Christensen called the iPhone: 'a sustaining technology relative to Nokia' - he was, and is, generally right.

Calling the iPhone a sustaining technology is a bit of a grey zone because even though the iPhone didn't really bring the first touch screen phone to market, it did popularize it and thus was disruptive in the sense that touchscreen phones ended up striking quite a chord with consumers. This, in turn, changed smart phones forever.....

One of the big problems with Ben's article, if I follow him correctly, is how he uses the iPhone's continued success to prove that low-end, 'good enough' products will not always usurp the incumbent. He then goes on to talk about Christensen's theory really only applies to B2B markets because customers are not rational and will make decisions on things other than features - thus also defuncting Christensen's performance oversupply theory.

Interestingly, Ben actually comes close to realizing the mismatch between the iPhone and Christensen's theory, but instead took a wrong turn and ended up calling the theory wrong.

So! I finally come to what Ben got wrong, what the iPhone is really about and why Christensen's theory does not apply to it.

It's because.....

The iPhone Is About Luxury NOT Functionality

Ben came close to realizing this when he touched on how customers were not rational, but you can't mix in Christensen's theory with it because Christensen is talking about how technology enables customers in new ways and thus simultaneously creates and destroys markets.

A better way to explain why the iPhone continues to be successful is to explain why LVMH continues to both make a tremendous amount of money and exist for so many years. Sure I can buy a pair of Levi's jeans for 30 bucks that are just as good as a 600 pair of Dior jeans....or how a bottle of Wild Turkey will get me just as drunk as a bottle of Hennessy...but it will not be the same because LVMH, like Apple, makes luxury products. When you pay for luxury it's not about the functionality.

Admittedly, Christensen Did Make A Mistake...

I will say that Clayton does make a mistake in all this...and it was when he didn't acknowledge that Apple's iPhone doesn't really apply to his theory of technological disruption. Perhaps he'll reconsider that in the future and roll that into his thought process. I'd like to hear his input on that.