Elon Musk Vs. Clayton Christensen: A Look At The Nature Of Disruption

Elon Musk

JAN 5 2019 BY EVANNEX 23


The words “innovation” and “disruption” have been casually tossed around in the press so much that, like “awesome,” they’ve lost most of their meaning for the average reader. However, there’s a whole community of people who study these phenomena in minute detail, and Dr. Clayton Christensen is one of their prophets. Recently, a doctrinal difference between Christensen and Elon Musk has catalyzed a lively theological debate.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Two iconic figures in the realm of business disruption, Elon Musk and Dr. Clayton Christensen (Images: Wired UK / Nieman Reports)

To simplify for the layman, Dr. Christensen is an exponent of “low-end disruption,” whereas Tesla is an object lesson in “high-end disruption,” the concept that innovation can begin at the high end of a market and later trickle down to the mainstream. In December, Elon Musk tweeted, “Clayton is wrong. New tech is always expensive. Tech disruption occurs at *high end*, eg computers & cell phones. It takes many iterations & vast economies of scale to achieve mass market affordability.”

Far from being offended, Dr. Christensen replied, “We’re all rooting for you!” and invited Musk to join him for a chat on innovation.

Jay Gerhart, a practitioner of disruptive innovation theory and “a huge fan of both of these brilliant men,” set out to reconcile their conflicting positions in an article published in Medium.

Apparently the current debate was sparked by an article in TechCrunch in which Chandrasekar Iyer of the Clayton Christensen Institute argued that Tesla’s entry into China represents a “sustaining innovation” (as opposed to a “disruptive innovation”), and that Tesla “will enter an established market to compete along existing measures of performance, like acceleration, style and luxury.”

Above: Elon Musk argues that Christensen has it backwards when it comes to disruption in the tech sector (Twitter: Elon Musk)

As Gerhart points out, many have written about the phenomenon of high-end disruption, citing Uber, Tesla, Apple, Garmin and Dyson as examples of transformative technologies and business models that started at the high end of the market and worked their way down. However, Shaye Roseman of the Harvard Business School recently argued that high-end disruption is “unlikely to occur,” because struggles for the high ground favor deep-pocketed incumbents, and it’s difficult to move down-market once you start at the top.

Much of the disagreement among these theologians may have more to do with terminology than with real-word results. As Gerhart puts it, “I find many debates these days to be framed a bit too black and white. Dr. Christensen’s theory has certainly sparked decades of debate since its introduction more than twenty years ago [and] the digital era has introduced new, complex dynamics.” In a 2015 article, Dr. Christensen argued that Tesla should be classified as a “sustaining innovation” rather than a “high-end disruption.” But could it be that the distinction is not so clear-cut? “Is it possible that under specific circumstances, a sustaining innovation could have characteristics that have a transformative impact on incumbents?” Gerhart asks.

Gerhart believes that the uniqueness of Tesla’s business model (and of its CEO) may enable it to have a transformative effect on the automotive industry while still fitting the definition of a sustaining innovation. He points out that Tesla’s highly integrated approach, which has many similarities to that of Apple, gives it a significant near-term advantage over incumbents that are struggling to manage the transition to electrification.

Will the legacy automakers rise to the challenge? Ford, VW and others are currently making the right noises, but it remains to be seen whether the promises in their press releases will lead to volume production of compelling electric vehicles. Gerhart suggests that automakers may need to set up separate divisions to compete effectively with Tesla.

Above: Touching on an experience at BMW, Christensen discusses some of the disruption dilemmas facing companies (Youtube: Implement Consulting Group)

Regardless of which side you take in the sectarian schism in the religion of disruption, there’s one thing everyone can agree on: “This will be a fascinating market to watch over the next few years.”


Written by: Charles Morris

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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23 Comments on "Elon Musk Vs. Clayton Christensen: A Look At The Nature Of Disruption"

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If 3 years ago Elon advice model3 at >60.000$ never ever got 400.000 founds 1000$ each one. So really disruption is only posible at low end market. He knows and so promiae 35000$ car.

Does anybody know what market Dr. Clayton Christensen disrupted from the low end?

He is probably a descendant of the professor in Oxford who was busy proving steam engines can’t work using principles of thermodynamics while his lab’s machinist James Watt was busy building one.

This high vs low end disruption debate feels like a complete waste of time. The only way you can disrupt a market is by introducing a new technology that consumers find more desirable than what’s already available. If it’s high or low end depends on the nature of the new technology. For example the quartz crisis in the watch world was definitely low end. Electric cars might be high end but who really cares?

I agree, the microcomputer craze did not really start until Commodore and Atari had complete systems for less than $1000. There were Commodores and Apples for sale before then, and a number of hobbyist computers but the mass selling did not take place until after the drop in price.

Before that most people would s=ask me “What good is having a computer at home”, afterwards it became “Can you come over and help me setup my computer”.

It is important to remember once the cheaper computers paved the way that sales of expensive home come computers $1500 and up also took off.

I think we will see the same thing. After-all how many times do we hear ICE cars are too expensive for the average person to buy since the high end models can cost over a million dollars. We don’t, yet tons of those expensive cars are sold every year.

Quite wrong. Watch world, started HIGH END. So did the microcomputer world.

For example, LONG before Commodore and Atari were other systems like Sinclair, Tandy and Apple that did more for starting the micro-computers. Tandy in particular with z-80 back in 1977, Apple with motorola’s microchips in 1976, and sinclair with with z-80 in 1980 really started these.
And these were selling quite well, which is what caused commodore and atari to jump into this world back around 1980s. Yes, they were $1000. Of course, I could buy a new tandy or apple with more power for $1050. I still recall the ads of those days and reading byte mag to stay up on things.

The first quartz watch was the Pulsar and it cost about $1,200 in 1970ish. That’s about $12,000 inflation adjusted, so not very low end. It would take a bunch more years of Moore’s Law for the price of transistors to fall enough that quartz watches would become low end.

Sounds like a rather pointless discussion about semantics. Bottom line is that Tesla is forcing an industry burdened with legacy cost and an ICE mindset to do battery electric powertrains they were really loath to do with huge long term implications for the global energy market to boot so that sounds pretty disruptive to me.

200K Teslas sold means 200K luxury cars’ opportunistic sales gone. BMW, Lexus, MB, Porsche, Infinity, Acura customers, 200K of them went and became Tesla customers.

I read some of Nizowitsch’s Chess Praxis, (theory & practice). So you apply the theory though it doesn’t always work in practice, as it does in theory. Musk found that out with recreating the assembly line. So they go back to using people in some parts of the line that were not amenable to innovative disruption. Sometimes things work a certain way, and that’s the best way they work. Of itself the ev is naturally disruptive. It’s vastly superior motor in regards to efficiency, torque, longevity, smoothness of operation, weight, and cost, then add the battery innovation and you have superior technology to drive vehicles when compared to the ice. So Tesla already has a leg up in the disruption category, then you layer on the computer, software elements, with an emphasis on performance, and you have the sustained disruption piece. Tesla is more of a blend of the two, than anything. Making automobiles, selling, delivering, and servicing them, is not an easy thing, as Musk has said, but they are getting better at it, while legacy auto advanced to a certain point and stopped or slowed down with innovation, and now they are getting disrupted. It’s really merely semantics… Read more »

I think you hit a important detail.

Musk is not scared of being wrong. And if he finds he was doing something wrong he is willing to scrap the idea and try something new.

The old industries have a real problem there, no-one wants to try something new that might fail. And part on that is the culture that have all the department heads looking for mistakes in the others, then using any mistake to make themselves look good (get more more/control). This means people are almost forced to take the easy slow paths and not take real risks.

You nail it.

It is not so much as getting a few things right and a few things wrong. Elon gets the big thing right. “Battery prices will halve every 7 years. 12 years from now battery+motor will cost the same as an engine+transmission+emission control+fuel tank.” That is the big thing get right.

Too much/too little automation Or Lidar vs cameras are a smaller thing he gets wrong. Once you adjust for the significance and magnitude of the impact the “right” and “wrong” decisions, only then you get the full picture.

This is exactly why, when we have to bail out Ford and GM again, I want to see us break them up into about 5 car makers each. If any fails, no big deal. BUT, failure will show the others that doing what Fiat nee Chrysler, GM and Ford have done for the last 10 years, is how you FAIL.

‘Will the legacy automakers rise to the challenge? Ford, VW and others are currently making the right noises, but it remains to be seen whether the promises in their press releases will lead to volume production of compelling electric vehicles. Gerhart suggests that automakers may need to set up separate divisions to compete effectively with Tesla.’

This not quite true. For example, VW says that they will spend 50B on EVs. Of course, what they do not tell you is that it will be spread over 5-10 years. IOW, they continue to lie.

I, the director of the Whatever Institute think that Tesla is a case of “sustaining innovation” in the automotive industry, however it might be a case of “disruptive innovation” in the energy sector with its effective implementation of battery technology.
Am I brilliant or what?

For the detailed analysis explaining the mechanism by which the automotive incumbents are being disrupted read this:


Interestingly, while I agree with Musk about Tesla, SpaceX is an opposite example; it looks to me like something more like the low-end disruption concept — take over a stagnant market by providing a better product at a lower price.

Disruption always begins at the high end. If Clayton refuses to call it such until it reaches the masses – well that’s circular isn’t it…

Forced Volt->Bolt Conversion

Including Dyson on a list with Tesla is a category error (and a nice illustration of hype being confused for invention).

The BEV industry is growing, limited only by production capacity, the submarkets it currently targets, and suppliers particularly battery cells. Meanwhile the pure-ICE car industry is exhibiting disruption by contracting, submarket after submarket (supercars then luxury sedans then more affordable sedans; later we’ll see SUVs then trucks). Dartmouth Professor of Business Richard D’Aveni in his article “Ford Motor And Choosing To Lose” compared Ford and GM to Sears’ strategy of underinvesting and retreat: “Whenever a big company faces disruption, it always has the option of “choosing to lose.” Instead of trying to compete head-on in this new context – which requires massive investment with no guarantee of success – it can hold on to what it has and milk it as long as possible. Executives will never admit this strategy, and they might make symbolic or superficial changes toward this new reality to prop up sales. But they’re still choosing to lose. Deep down they’d rather keep doing what they’re comfortable with, rather than exercise strong leadership to turn the company around.” Professor D’Aveni prediction from 2017 is playing out like this: some incumbents like Ford & GM are milking truck sales and SUVs while withdrawing from sedans. Their claim… Read more »

Dartmouth Professor of Business Richard D’Aveni’s Forbes article “Ford Motor And Choosing To Lose” is a great read: