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The business world has embraced the notion of disruptive technologies and, in large part, so has the public sector, and yet so many of the most significant innovations have been tipped by disruptive policies, not technologies.
A brief look back shows that policies can drive innovation in established industries or they deepen the advantages of incumbent technologies and companies. Indeed, it's dangerous to singularly pursue new technologies or new business models without simultaneously pursuing (or at least tracking) changes in policy.
Disruptive technologies, according to Christensen, initially underperform in existing markets but as they improve ultimately go on to disrupt established markets. Incumbent companies that don't recognize the disruptive nature of new technologies risk obsolescence.
But disruption isn't an inherent quality of a new technology—it's an outcome. It's the observable changes to an industry's technological, organizational, and economic structure before and after something happens. In other words, anything that causes disruption is disruptive.
Under this definition, when policies overturn existing the technological, organizational, and economic structure of an industry or, indeed, of multiple industries, they are disruptive. Consider a few:
Many more belong here than can fit: think of the disruptive impacts of the Land Grant acts of 1862 and 1890, the Civil Rights Act of 1964, or the Antitrust Laws (1890–1914). And these are just the peaks. Every industry has its own range of locally disruptive policies that rarely get the attention of scholars of innovation, let alone private and public sector proponents of innovation and change. In sustainability, a number of recent policies are promising but still too young to declare: California's AB32 and Low-carbon Fuel Standard are promising, as are the Renewable Portfolio Standards implemented at the state and federal levels.
In contrast to disruptive policies, sustaining policies ultimately strengthen the advantages of incumbent technologies, organizations, and industries: think of the Citizens United ruling, the Financial Services Modernization Act of 1999, and fossil fuel subsidies as well as more subtle policies like those preventing the release of information on fracking formulas or well leaks, on antibiotic use in livestock, or on GMO ingredients in food. These all serve to maintain the status quo.
And there are neutral policies that regulate and direct industries while threatening neither to sustain nor disrupt them: for example, the Clean Air Act (1970) or CAFE standards (1975) had powerful effects but remained within the established systems.
Bringing disruption into the policy arena
So what does this mean for public and private efforts to innovate against our biggest global challenges?
First, the right policies can drive innovation, not just stifle it. With this in mind, we can and should look more closely at the dynamics behind disruption, and how new policies enable new technologies, new companies, and new business models to emerge, evolve, and grow. Ask, for example:
Obviously, there are more and more nuanced questions to be considered. This is just a start.
Second, new policies, new technologies, or new business models (and new businesses) co-evolve together. In new industries like the internet and information technology, policy lags. But in established industries like electric power, telecommunications, and agriculture, policy innovation may be required to open the door for competing technologies and business models.
Finally, a better understanding of what drives disruption would make for better policy. Short answer: it's not just the technology. Over a half century of innovation studies—in the diffusion literature, in strategy & management, in economic history, and in technology studies—has found this time and again yet had little effect on public policy. For policy to effectively drive disruption, that will need to change.
The popular conversation around innovation has rarely acknowledged its dependence on the disruptive (or sustaining) nature of the policy landscape. At the same time, the conversation around policy has focused very little on its dependence on the process of innovation. It's time the two got together.
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