While it’s easy to read into the story of Taobao village as poverty alleviation measure, it is, in fact, a “disruptive innovation” was coined by Clayton Christensen. The combination of Internet/E-commerce and use of digital fabrications changed the cost of the flat pack furniture verse the mass production and warehousing of Ikea and make them affordable and accessible to emerging middle classes in China. The open collaboration and sharing of the system further brought down the risk and cost of new product development.
Coined in the early 1990s by Harvard Business School professor Clayton Christensen, the term has become virtually ubiquitous from Wall Street to Silicon Valley. Consequently, it’s also one of the most misunderstood and misapplied terms in the business lexicon. Disruptive Innovations are NOT breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable, thereby making them available to a larger population.
The technologies do not bring about change, they are mere tools to facilitate changes in the hands of the right people. The high dynamism of the people of Shaji and other Taobao village quickly adopt the new tools to capture the opportunities. While the number of Taobao villages has grown tremendously over the past decade, there is also a large number of failed attempts. While the technologies transfer could bring in some initial economic growth, the indigenous innovations enabled by high dynamism lead to real sustainable long term growth. Edmund Phelps presents this in his “Mass Flourishing.”