Why Preventing Disruption in 2017 Is Harder Than It Was When Christensen Coined the Term

When Clayton Christensen conducted the research for The Innovator’s Dilemma, he looked at industries that were asset-heavy. Construction equipment and disk-drive manufacturing required heavy machinery, distribution facilities, and immense amounts of working capital. In today’s world the most pointed disruptive threats look different. They are not asset-heavy. They are asset-light. And while that may seem appealing to unsavvy onlookers, it can be the kiss of death for a CEO facing disruptive entrants. Why? Asset-light businesses are not financed with debt. They’re financed with equity. A resource that is much less expensive for new businesses with no track record than for established businesses with all the credibility in the world. That means it’s going to get even harder for established companies to disrupt themselves.