I agree that there are different risk profiles. Ceteris Paribus’ing in this situation is inadequate as too many other factors come into play.

So is it legitimate to represent risk as a smooth curve that goes from high to low? as per the post. I think that the answer is no.

Can these risk profiles be ranked according to their disruptiveness and observe some kind of monotony? I think that the answer is also no (or at best no evidence was given.)

I re-read the original post, to see why I misunderstood. It defines: “RISK – lower both for resource and the implications of taking a new innovation to a *market or society*” (emphasis mine)… so I am still confused. But that’s no different from how I normally am

A bit like Toyota playing around with Hybrids in the Prius before rolling them out to the Lexus etc….

And with the sugar free buns example, the recommendation that he’s making is that in that situation, you would maybe start with a small extra batch of those to see how they go (a quick and dirty incremental innovation), and then expand on that if it works.

Suppose I am a baker who sells, among other things, cross buns. Arguably, if I start selling sugar-free cross buns (assuming this is possible), then this is pretty low on the scale of innovation and disruption (after all, it is not like making wheat-free cross buns or like using an entirely new manufacturing process or …)

Imagine I produce and sell 100 buns a day. But because I switched to sugar-free buns, I only sold 10 buns for some reason (they taste bad, no consumer demand, cross buns are supposed to be fattening …) I’d say this is pretty significant risk since my earnings have dropped by 90%.

Now suppose I am one of the largest bakeries in the country (Woolies, for example). If I switch to sugar-free buns nation-wide, arguably this is a more disruptive change since I am changing the landscape of the cross bun industry. But my earnings will not drop as much a sole trader since consumers will often have little choice but to buy the new sugar-free buns.

It seems that in this case risk is correlated with market disruptiveness rather than technological disruptiveness. But also, contrary to what the graph says, that risk is inversely proportional to market disruptiveness.

Where did I go wrong?

As you say, we can go back and forth on historical details, but I think that the bigger point is that the drawing is by far the least important part of that post. I agree that it isn’t perfectly thought out – I think it would go better if it used an actual spectrum just showing the level of discontinuity in an innovation ranging from incremental to highly disruptive and that would have made the point more effectively.

But is this curve descriptive or normative? (i.e. does it describe how things in the world of innovation are or how they ought to be?)

It strikes me that many presumably disruptive innovations are neither hard nor risky (think Microsoft’s DOS in the early days of the PC.) Conversely, some innovations that were touted as future disruptions ended up being expensive and risky without significantly shifting the terrain (think Segway).

We can go back and forth about historical details, of course; but it seems that the generalisation is -at best- glossing over important exceptions.

It also strikes me that the word “Risk” is a weasel word dropped in there to justify the correctness of the graph. If we come up with counter-examples, the authors can very well say “well, at this end of the spectrum things are very risky, and this is just an example of failure”.

But why do innovations on the left side of the scale have small risk? In fact, it seems to me that if we assess risk as a percentage of total investment, then they would contain as much risk (or even more risk) than their more disruptive siblings.

On the other hand, if the curve is supposed to be normative… why?