Interesting post indeed. However I would replace the term
"Disruptive" with "Competitive" or "Parallel".
But maybe that
is more of a semantics issue.
Anyway, the most important and insightful
part of this (Article?)
is the following:
A disruptive technology can also crack a
monopoly, by replacing the existing
network with a new and larger one. A larger
network will consume a smaller
network operating in the same space, because
the value of the network increases
exponentially with the size of the network.
But a disruptive technology doesn't
(initially) operate in the same space;
it starts by finding a new market with wants
and needs that the old technology cannot
meet.
Because a disruptive technology can't initially
compete directly against the existing technology for the original uses
even without taking the network effects into consideration, the only successful
way to market one is to carve out a new
"roaches under the floorboards" niche taking
advantage of the new technology's
distinctive advantages. This new niche
is a market the existing technology can't fit
into, and is usually too small and low
margin for the existing companies to care
about anyway. But it gives the disruptive
technology a protected base within which
to develop, and which can finance an upscale
attack into the existing value
network. Since the disruptive technology
can eventually be made to serve the
same purposes as the old technology, and
it has its protected base to draw from
as well, it forms a larger network than
the old technology.
Richard J. Sexton wrote:
Here is, i my opiniopn the crux of the entire DNS debate. It'sRegards,
a cultural clash between the way things have been done on the
net and the way big business wants them to be done.I remember talking to a certain unnamed but very drunk IAHC commitee
memeber from Geneva two years ago in DC. I said almost word for
word, this:>The disruptive technology currently attacking Microsoft (Nasdaq: MSFT) is the
>Open Source development model. Eric Raymond's classic paper "The Cathedral
>and the Bazaar" has recently been published by O'Reilly as part of a book by the
>same name. It explains how software can be developed not by a team of highly
>trained professionals, but by a loose association of hobbyists organized through
>the Internet as a kind of fan club. It also discusses why this software development
>model often beats the pants off of the old way of writing software.And was treated to a condescending "Richard Richard Richard... you don't
UNDERSTAND. Big business doesn't weant it this way, it wants a corporate
structure.Silly me. I forgot to ask which three lettered company "big business"
was.http://www.fool.com/portfolios/rulemaker/1999/rulemaker991124.htm
>GAITHERSBURG, MD (Nov. 24, 1999) -- On Friday, I reviewed The
>Innovator's Dilemma, a book about disruptive technologies that encourage
>start-up companies to replace large established firms. On Monday, I talked about
>"use value," which is discussed in greater detail in Eric Raymond's book The
>Cathederal and the Bazaar (which I'll be talking about some more today).
>Yesterday, I explained how network effects can create natural monopolies, and
>discussed the first way I know of to compete with this type of monopoly:
>participating within the existing network to share the market.
>
>A disruptive technology can also crack a monopoly, by replacing the existing
>network with a new and larger one. A larger network will consume a smaller
>network operating in the same space, because the value of the network increases
>exponentially with the size of the network. But a disruptive technology doesn't
>(initially) operate in the same space; it starts by finding a new market with wants
>and needs that the old technology cannot meet.
>
>Because a disruptive technology can't initially compete directly against the existing
>technology for the original uses even without taking the network effects into
>consideration, the only successful way to market one is to carve out a new
>"roaches under the floorboards" niche taking advantage of the new technology's
>distinctive advantages. This new niche is a market the existing technology can't fit
>into, and is usually too small and low margin for the existing companies to care
>about anyway. But it gives the disruptive technology a protected base within which
>to develop, and which can finance an upscale attack into the existing value
>network. Since the disruptive technology can eventually be made to serve the
>same purposes as the old technology, and it has its protected base to draw from
>as well, it forms a larger network than the old technology.
>
>The disruptive technology currently attacking Microsoft (Nasdaq: MSFT) is the
>Open Source development model. Eric Raymond's classic paper "The Cathedral
>and the Bazaar" has recently been published by O'Reilly as part of a book by the
>same name. It explains how software can be developed not by a team of highly
>trained professionals, but by a loose association of hobbyists organized through
>the Internet as a kind of fan club. It also discusses why this software development
>model often beats the pants off of the old way of writing software.
>
>While traditional software development is motivated by the sale value of that
>software, Open Source development is motivated by the software's use value.
>People who use the Apache Web server naturally want it to be the best Web
>server it can be. So, if they are capable of improving it, many of them will -- in
>their spare time or when they encounter a problem they need to fix. All that time
>spent on hold to tech support for proprietary software companies is spent actually
>finding and fixing the bugs and limitations of Open Source software. The
>availability of the source code to Apache gives the technically inclined individuals
>and organizations using Apache the ability to do whatever they like with it.
>
>Sharing the improvements through the fan club doesn't cost Apache's users
>anything, since they didn't plan on selling those improvements anyway. They just
>want a good Web server. The fact that it's a free download is merely a bonus.
>What they really get is control over the tools they use to run their business -- high
>quality tools created by people motivated by how well they work and not how
>well they sell.
>
>Apache is the server behind the majority of the websites on the Internet. In that
>niche, Open Source is the dominant paradigm. To examine Open Source as a
>disruptive technology, we need to look at a clean room clone of Unix that started
>as the Free Software Foundation's GNU project and was completed (well, first
>made independently usable; Open Source development and improvement never
>ends) by a graduate student at the University of Helsinki in Finland named "Linus
>Torvads." You may have heard of it; it's called Linux.
>
>Linux started out in a "roaches under the floorboards" niche. People who couldn't
>afford what AT&T and others charged for Unix but wanted to use it anyway
>reverse engineered the thing and made it run on PC hardware. Then, Linux
>became popular to turn old, discarded, underpowered PCs into file servers and
>print servers. As the Internet (created by and full of Unix machines) became
>popular, this reverse engineered Unix clone was a cheap way to use a PC as a
>Web server, gateway, or firewall to hook up to the Internet.
>
>Microsoft's high end is the desktop, and that's the last market Linux will take over.
>From the low-end machines that other operating systems were too inefficient or
>expensive to use on, Linux jumped straight to high-end multi-processor machines.
>As the Web became important and expensive hardware was thrown at it, Linux
>was moved over to that expensive hardware where the lean and mean efficiency
>required to run at all on the cheap junk was just as valuable to squeeze every drop
>of performance out of the expensive stuff.
>
>Again, this was fringe territory as far as Microsoft was concerned. Although they
>have tried to push Windows NT on the high-end for almost ten years, it has never
>shipped in volumes even approaching that of its desktop home ground. Microsoft
>may have been unwilling to yield any niche, but Linux definitely attacked where it
>was weakest.
>
>Linux has also had success with embedded systems, and has virtually driven
>Windows CE from the field. Microsoft may have unlimited funds with which to
>develop their products, but Open Source products simply cannot be starved for
>cash. Their development is funded with their users' time and effort, not with
>revenues from any sale. Use value again, not sale value.
>
>If you remember FUD from yesterday, Linux is un-FUDable. As long as the users
>have the source code, development will continue. And how can it go out of
>business if it never made any money? Companies make money off of Linux, of
>course. Red Hat's (Nasdaq: RHAT) IPO shot to a multi-billion dollar market
>capitalization, and hundreds of established companies like IBM and SGI are
>betting heavily on its success. But like dating services, they seek to cash in on an
>existing phenomena. They dip their mill wheel in a river that's already there, and
>could go on without them just fine.
>
>Like all companies performing an upward retreat (however grudgingly) in the face
>of a disruptive technology, Microsoft's profits will probably continue to increase
>right up until the end as it tightens its focus on the areas that make it the most
>money. The desktop is Microsoft's home ground, its strongest niche, and where it
>makes the most money. It will be the last niche Linux penetrates, and the one
>Microsoft will fight hardest to keep.
>
>According to the Gartner Group's estimate, Linux passed the 10 million user mark
>during 1998 and was growing at 212% annually at the time. Assuming it slows to
>100% annual growth (which it has maintained since its introduction in 1990), it will
>surpass the Windows installed base in about three years. At that point, the
>network effects will favor Linux and hinder Windows.
>
>Strangely enough, many of us in the software industry view the trial as an
>interesting supplement to the main action. Microsoft IS an abusive monopoly, and
>unrestrained perhaps it could force the entire computer industry into stagnation.
>But we're busy working on its replacement.
>
>- Oak--
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