Incremental Vs Disruptive Idea Vs Disruptive Innovation
Ptolemy, a 2nd century Greek astronomer, was the premier astronomer and mathematician of his times and propagated the geocentric theory prevalent at the time that all celestial objects, including the planets, the sun, the moon, and stars — orbited the earth. Further, he also believed that the earth, in the center of the universe, did not move at all. He provided the framework for most astronomical research until the 16th century.
The 16th century brought a bunch of disruptions in all fields of science, including astronomy. Copernicus proposed the heliocentric theory with the notion that the planets orbited the sun, and that the moon orbited earth. But Copernicus was apprehensive about widely publicizing his theory as he was worried about upsetting the prevalent theological and philosophical power circles who believed that the earth is at the center.
Copernicus’s theory is what we’d call in the investment world as a disruptive idea. While Copernicus may not have wanted to take on the might of the theological elite, there was still a fundamental shortcoming in his theory. His astronomical model still couldn’t predict exact planetary positions (of the planets discovered at the time). Copernicus believed the Aristotelian requirements, like Ptolemy, that the planets move in circular orbits. Consequently, Copernican planetary position predictions were only marginally better than those of Ptolemy.
Most companies, especially once they are past their startup phase, fit a Ptolemic model where they make incremental improvements to an existing model/market/product. Rarely do they make a disruptive leap into a new market. Some companies act on a disruptive idea. But either they don’t have the conviction of upsetting the status quo with the disruption or the disruptive idea may not be a disruptive innovation.
After Copernicus came Johannes Kepler. In the 17th century, Kepler built on the observational data compiled by Tycho Brahe and vindicated Copernicus’s theory that the earth does indeed go round the sun. The key missing piece that Kepler worked out that the planetary orbits around the sun are elliptical and not circular, and with this he predicted planetary positions with a higher degree of accuracy than astronomers before him.
Working out that the orbits are elliptical was the innovation needed to elevate Copernicus’s disruptive idea into a disruptive innovation.
While few companies have a disruptive idea that they act on, even fewer create a real disruptive innovation. Analyzing a disruptive idea, which goes against the existing convention, and figuring out the innovation necessary to move the convention into the new realm is a space where several hidden gems lie buried.
For several years when Amazon built AWS, it got a largely uncontested run from the likes of Microsoft and Google. An e-commerce company building a cloud infrastructure business sounded like a disruptive idea at the time, but the market leaders did not perceive it as a real threat. By the time they could wake up to the innovations that Amazon created to scale AWS, AWS had become by far the market leader and a significant revenue stream for Amazon. AWS ended up being a very successful disruptive innovation for Amazon - a Kepleresque innovation.
What Ptolemy, Copernicus and Kepler have taught us is that the stars have to align…literally…for a disruptive innovation.