26 Feb 2001  Research & Ideas

David, Goliath, and Disruption

When introduced with speed and flair, disruptive technologies have the power to boost new companies and lay low other, seemingly invincible incumbents. Technology-savvy experts at Cyberposium considered their own successes and failures with the volatile medium, and passed on a bit of advice, too.

 

As elegantly described by HBS professor Clayton M. Christensen in his 1997 bestseller, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, so-called disruptive technologies are upstart innovations that manage to penetrate the market share of some apparent business Goliaths, despite formidable odds.

A Cyberposium discussion devoted to the phenomenon, titled "Uncovering Disruption: Moving Your Company Several Steps Ahead of the Incumbents," had several executives weighing Christensen's principles (see sidebar) against their own real-world experiences.

While "disrupting" is of course the goal of their business activities, panelists said, it is also no small trick to cut through the entrenched practices surrounding established incumbents. Nor is it simple to prevent others from dislodging their companies, too — in effect, neatly turning a disrupter into a disruptee.

Learning to chicken-scratch

If a technology is to succeed, in theory at least, it should not require people to radically change their behavior. Instead, companies that promote the technology should hope for a gradual evolution of behavior, according to panel moderator Michael Overdorf (HBS MBA '99), CEO of Innosight, LLC, a company founded by Christensen in January 2000 to advise other firms about dealing with disruption.

However, countered a panelist, citing the Palm Pilot as an example, some technological innovations requiring a behavioral change do turn out to be extremely popular, in a way no one might have predicted. "It just depends on what behavior you're changing," said Michael Schreck (HBS MBA '96), principal of the venture firm General Catalyst, which attempts to fund potential disrupters.

"How many of us knew how to write graffiti on a Palm? How many of us ever said we wanted to do that?" Schreck asked the room. "I'm sure I didn't wake up one morning saying, 'I just want to write chicken-scratch, slowly, on a Palm.' It's just a horrible behavioral change. But we all do it."

photo of Jeffrey Miller and Bharat Sastri
Jeffrey Miller, of Documentum,
and Bharat Sastri, of HelloBrain.com

Intelligent, handheld devices that hold basic information such as personal calendars and statistics have been around for some time, Schreck reminded the group. The great innovation of the Palm, he offered, was that it allowed anyone, with the push of a button, to synchronize select information from a desktop to the device.

Once the capability became clear, he said, he too wanted to learn chicken-scratch graffiti. That push-button capability linking to a vast array of information from a desktop, he indicated, had fired people's imaginations about the possibilities of handheld devices.

That simple step, in Schreck's opinion, "changed the nature of where we're going, I think, with global computing. It depends on what behavior you're asking [people] to change, and what the incentive and benefit is to change."

Companies can go about disruptive activities in very different ways, added Jeffrey Miller, president and CEO of content management firm Documentum, Inc. In the 1980s, Miller told the group, he'd been a marketing manager at Intel when Intel management made the radical decision to throw over their memory business — on which they'd founded the entire company — in favor of concentrating on a future in microprocessors. Not every company head, Miller noted admiringly, would have had the chutzpah of Intel chairman Andrew Grove to do just that: throw out what had made their company disruptive in an industry, and introduce yet another disruption.

After relating the story, Miller said, "I believe in Christensen's fundamental premise that you find very few of those guys who are actually successful at disrupting the market, and [then disrupting] themselves."

How to not miss the boat

Another of the criteria for disruptive technologies, pointed out panelist Bharat Sastri, should be the ability to create entirely new markets.

"It's not always an evolutionary process," he said, referring to his 20-year background in various technology companies as both a manager and engineer.

A self-professed "nerd" who cofounded HelloBrain.com, a company that functions as an "intellectual capital exchange" for technology, inviting online collaboration, Sastri said that in his career he had also witnessed a great company commit a serious misstep by failing to recognize potential demand for a new market.

I'm sure I didn't wake up one morning saying, 'I just want to write chicken-scratch, slowly, on a Palm.' It's just a horrible behavioral change.
—Michael Schreck, General Catalyst

"I worked at SGI [Silicon Graphics] during the golden years, on big monster machines that did amazing stuff," Sastri told the audience. "But some of us arrived at the conclusion that the future of 3-D was not in CAD, but in entertainment.

"The popular wisdom around the company was, "'Who's going to play games?'" he related. "'And why would they need 3-D?' ... Of course, 10 years later, companies like Sony and Sega and Nintendo have a combined market cap that's 10X of SGI's.

"To me, that's a classic example of drinking your own bath water and not realizing it. SGI had the technology; they were 10 years ahead of everybody. But that simple — what I call arrogance, you know — and denial of the obvious, cost the company just a huge, huge opportunity," Sastri concluded.

Technology for business's sake

In courting venture capitalists for funding, Miller advised the audience, it's best to play up with "a number of compelling ways" what the technology can do to serve customers. "I would not highlight the technology for the sake of technology," he cautioned. "Most VCs in Silicon Valley are enamored with technology. But at the end of the day, they really don't give a damn about it. They are more enamored with money."

"There's an over-breeding of innovation right now," even a surplus of technology, added Schreck. In Schreck's opinion, so much venture capital and corporate capital is pouring into technology for technology's sake, he said, that "the last thing a venture capitalist wants to see is world-class technology. They see it a lot, and that's great." Better, he said, aiming his remarks at entrepreneurs, is to focus on what a technology can be used for in order to create a viable business.

"When we talk about what it takes to bring a disruptive technology out, it may seem daunting — and it is," Miller told the audience. "But it's also a hell of a lot of fun. If you have something that truly is new and different and better, if you can focus it on a market ... you can do amazing things against some awfully big competitors."

"Disruption often comes in service delivery packages," observed Schreck. "There are only so many major innovations that change our lives radically: the light bulb, the television, the automobile, the telephone.

"That's not where I'd be looking for disruptive technology. I'd look for innovation in service. Look for innovation in small packages, in the way innovation is delivered to the customers.

"Technology combined with those things can really disrupt industries," he added, "and can do it much quicker than to try and reinvent entire categories."

Photo by Martha Lagace