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Free Software and the Innovators Dilema
If you wanted to assemble a "must read" list for any businessperson looking at the Linux/Free Software industry, what would you include? Certainly "Open Sources" from O'Reilly, is the most obvious answer, probably followed by Bob Young's upcoming "Under the Radar," which details the story of Red Hat's rise. But I would argue that a third book belong in the top tier of that list as well: "The Innovator's Dilemma," written by Clayton Christensen and published by Harvard Business School Press.
"The Innovator's Dilemma" traces the histories of various industries, from disk drives and microprocessors to steamships and automobiles, in which established market leaders have been beaten out by smaller, more nimble competitors. This idea, that startup firms have noticeable advantages over their larger rivals, has been one of the cornerstones of the internet era, not to mention Microsoft's antitrust defense, but Christensen is one of the few authors to actually address the specifics of these show-downs. In almost every case, he claims, his example established industry leaders were managed well, by conventional standards. They listened to their customer base and constantly sought to increase their penetration in high-margin, high-end markets. These seemingly-innocuous strategies become disastrous, however, when a "disruptive technology" enters the low end of the market. The established firms shy away from these new technologies to avoid undercutting their core, profitable businesses, but this ultimately leaves the market open for a new player to implement the disruptive technology, then slowly march up the food chain, overthrowing the old market leader. Minicomputer manufacturers in the 1980s, for instance, diligently followed their customers' demands to invest only in faster minis, while ignoring the PC market, which held little interest for the companies' established base of scientific and business customers. How many of those companies are still alive today?
This isn't, of course, a book review. Instead, I guess you could call it my attempt at a wake-up call to those software companies (you know who you are) who still think they can make a living on "business as usual" in the next millennium. Specifically, I want to focus on Linux, which might be the best example of a truly disruptive technology that we've seen since the advent of the internet. In fact, this theory gives us a guide to understand how established software firms risk missing the boat with respect to Linux, just as brick-and-mortar retailers were overtaken on the net by smaller, more daring startups. Consider three statements that a software vendor looking at Linux in 1999 might make:
- "That sounds like an interesting idea, but we asked our customers and they don't seem interested."
- "That sounds like an interesting idea, but the profit margin sounds too slim."
- "That sounds like an interesting idea, but it would eat into our more profitable core business."
Now take those same three statements and imagine them coming from an executive from an established retail vendor considering e-commerce in 1995. It's not much of a stretch, is it? In this case, though, we're hampered by our hindsight. We fail to appreciate that the executives who turned down a chance to take, say, Barnes & Noble to the web in 1995 were in fact making a very reasonable decision based on the traditional, financial bottom line. They would have spent millions to set up shop, made it easier for customers to price compare (and see that, in fact, the Barnes & Noble of 1995 was a fairly expensive bookstore); the customers who did buy online would need at least some discount to offset the cost of shipping; and the site, like Amazon, would have been a spectacular way to drive the parent company into the red. By not embracing the net, however, they opened the door to the B&N's greatest threat in decades, and they ultimately had to spend even more money to build play catch up against the $20 billion internet rival that wouldn't even have been created if the existing booksellers hadn't dropped the ball.
How have today's successful technology firms, then, fallen into the "innovator's dilemma" with respect to Linux? By focusing on the short run and the high end. When companies like Sun, SCO, and Microsoft dismiss the OS, they talk about its lack of scalability, its relative newness, and its lack of a journalling file system. These features, however, are irrelevant at the workstation and workgroup server level, and, more importantly, they're all being developed at an unbelievable pace to help the OS scale to enterprise levels. As commodity hardware becomes more and more powerful, while Linux and Windows NT continue to scale up to new heights, the traditional Unix vendors will find themselves increasingly marginalized to the very highest-end of the computing spectrum, falling into what I call the "Silicon Graphics trap."
Silicon Graphics (now SGI) was notorious for their focus on the high-end, sexy technologies: Cray supercomputers, 128-processor Origin servers, $10,000+ workstations, etc. While each unit sale at this level seems highly profitable, in reality the R&D costs involved in pushing the envelope of technologies at the microprocessor, OS, server, and applications levels was simply impossible to maintain, and the company spiraled deep into unprofitability as companies like Intergraph ate away at their core graphics business with low-cost graphics workstations. Now SGI has become the first traditional Unix company to truly embrace Linux, making it their platform of choice for the IA-64 architecture. Perhaps they were lucky to fall into the trap while they still had time to ride the first wave of the Linux movement.
But that leaves a question for the rest of the OS, hardware, and computer services worlds: are you willing to concede the entire low-to-mid-range server market to smaller, faster companies that position themselves as Linux early adopters? Do you want your future customers to think of you as a Linux pioneer that can accurately evaluate and deploy the OS, or as a second wave Johnny-come-lately that doesn't really understand the phenomenon at all?
Clayton Christensen's prognosis for these established players is unequivocal: unless they form new business units with the autonomy to embrace such disruptive technologies "the probability that they will survive as industry leaders is zero" (Bloomberg Personal Finance, October 1999). In my opinion, some of these market leaders need even more fundamental changes in their structures to address this disruption; they need thorough forward-looking reorganizations, such as SGI is undergoing with Linux and open source, as Microsoft restructured their product lines to face the internet, and as I advocated that SCO should change in my last article.
A bloke at my work thinks it will.
Will this make hardware the business of choice?
or tech support etc....
Wiggeda Wiggeda Wack - Kriss Kross
I seem to recall that B&N developed a plan for an internet bookstore and deliberately didn't implement it. They didn't think it would be profitable. But more importantly they thought that if someone did come in and start an online bookstore that was successful, B&N could simply implement their plan and crush the rival with their superior brand name and financial resources. Obviously they were wrong about that. Though the fact that their site is simply a lame ripoff of amazon surely doesn't help.
This story may be apocryphal and I don't remember where I heard it.
Why does it seem that organizations are always in need of a wake up call? Even companies that are doing great tend to need these calls! If so many companies have this need, why are they profitable? Would they be more profitable if they woke up? What's the deal man?
How to Download YouTube Videos
3M Corp always stood out; IIRC every division is expected to garner 35% of its income from products that did not even exist three years previously. Obviously this kind of organisational dynamic requires some funky organisational structures, and these structures might provide cover for those "intrapeneurs" who would eat away at the edges of the large organisation's older, more established, still-highly-profitable core businesses. Case in point: for the IBM PC, they sent everyone to Boca Raton and sheilded them from the rest of IBM.
I'd like to hear some "war stories" from people in the "skunk works" of large outfits, about battles fought to keep alive ideas that scared the hell out of other parts of the company.
The simple fact:
Larger corporations tend to move more slowly and carefully, they are unable (due to commitments to their shareholders and employees) to set up risks where they might take a bad fall.
They tend to have a large overhead as well as a large profit. If MS were to drop win98 from $99 to $98, they would lose millions of dollars a month, which they can't afford to lose.
They tend to have employees which demand high salaries which they can't shove off easily.
Small companies can make large risks.
Small companies have little overhead.
Small companies can get dirt-cheap employees that are really good because they can bill themselves as 'the next big thing' which will vault said employee up to positions where they can demand high salaries and force the company to move more slowly.
-Adam
To minimize loss and damage in a quake, try not to own things.
When companies like Sun, SCO, and Microsoft dismiss the OS, they talk about its lack of scalability, its relative newness, and its lack of a journalling file system. These features, however, are irrelevant at the workstation and workgroup server level
What does this have to do with the "Innovator's Dilema"?
Once again, an opportunity to do some useful writing is wasted by ridiculous, tired, pro-linux jabs.
Just for once I'd like to see some interesting technology writing that doesn't mention linux. You guys are really flogging the dead horse beyond all reasonable limits.
"Larger corporations tend to move more slowly and carefully, they are unable (due to commitments to their shareholders and employees) to set up risks where they might take a bad fall."
The customer's needs and demands play a part in this as well. An ongoing enterprise needs some assurance of longevity and stability from its vendors. If I am building a worldwide information system, at a cost of (say) 5% of corporate revenues, which is a huge investment, that system has to last x years. x can vary but certainly not less than 5 for a Fortune 500 company. Therefore, I cannot afford to base this system on untried technology from a small startup. No matter how good they are, I can't take the risk.
This will lead me to use large, established, conservative vendors, and pay them big bucks. Digital, (the old) IBM, Control Data, Sperry, etc. But of course, these large and profitable sales are exactly what holds the vendor back from innovating in the long run (note that none of the vendors I list above really exists today).
Crucially, this also affects the type of people a vendor has to hire and promote to fulfill these contracts. If you want a stable, secure, high quality system you have to employ knowledgable, experienced, conservative, belt+suspenders+extra-string-inside-the-pants guys, who are probably somewhere around 40-60 years old. It makes me shudder to hear that Microsoft doesn't hire anyone older than 22 (per Bill Gates interveiw in Newsweek 2 years ago) - these are the people I will trust with my mission critical systems?
But at the same time the conservative guys by their nature will resist innovation (having seen numerous failed innovations in the past, no wonder), and eventally prevent the vendor from advancing with the "next wave".
No real answers here - just some observations. But I think my observation does go a long way toward explaining why we have seen a substantial decrease in the quality and reliability of software and computer systems in general over the last 10 years: reliability and stability are in direct conflict with speed and innovation.
sPh
This sounds a lot like the history of the animal kingdom on earth...who is the "best designed" animal? The Big, Bad and Mean T-Rex or the small, fast and adaptable rat?
:)
We can see that in technollogy, as happened in biology, the winner usually is the rat, able to stay hungry for long periods of time, eating whatever insects it may catch, adapting fast to circumstances.
I firmly belive small companies (even when they are small "companies" within big companies, like the PC division in IBM mentioned in a previous post) will allways outmanuver the bigger monsters...yes, MS may have all the money in the world, the may have the big market right now, they may have even proven that they can turn on a dime when needed...but they are still not fast enough, when compared to a company like RedHat or a community like the one driving Debian, and when the next big breakthrough comes, MS will go out of the track trying to take the curve, while RH, Debian and others will continue in the race.
I think most of the people here will agree with me when I say that I rather work for a small company (untill it grows) than for a big company (till it sinks?).
Better be a rat alive than a dead T-Rex
Vox
Pain is the gift of the gods, and I'm the one they chose as their messanger...
Part of the trick is understanding the difference between your job and your business. Example is the collapse of the railway tycoons who forget their purpose was transporation and not constructing superfast trains. Companies that understand what fundamental role they play and can stick with the "last-mile" to the consumer will have a decent chance of surviving disruptions. Thus companies like Coca-cola have shifted from dominating the carbonated drinks segment, to being the market gorilla of the liquid refreshment sector, to the mindshare game (associating their taste with pleasant memories such as rock concerts). It is usually the less complicated systems that are the most robust to disruptions (something to keep in mind when designing software). Any complex manufactured capital good can usually be undercut by a lower cost substitute and any fad (whether toys/games/culture) will be difficult to sustain.
One can apply this trick to existing OpenSource vendors to ask what their role is. The clearest example I think of is:
Mandrake - bundling/packaging
MacMillen - distribution/catalog
LinuxCare - support/reassurance
Thus Mandrake could probably be more profitable customising/bundling specific packages for various predefined sectors (business, education, small business, etc), MacMillen on finding alternative distribution channels besides books (e.g. sponsor contests to find who can convert the largest number of boxes to Linux), and LinuxCare in demonstrating key metrics such as cost of repair/replacement, as well as alternative mechanisms of support (e.g. user groups to weed out basic computer problems unrelated to Linux). So long as each company understands the core role and what are bolt-on businesses, then they can adapt even if new technology comes along.
The disk manufacturers are in a bit of a bind since they compete with anything that can store bits ranging from punch-card to next-gen holographic crystals. At least the file system experts like Veritas are less vulnerable.
Technology is like a treadmill in Alice in Wonderland, you have to run as fast as you can just not to go backwards. Stick with coke if you don't like the guessing game.
LL
This is just linux FUD. Making vague allusions
to the past, and presenting a certain set of limited viewpoints intended to convey a sense of historical inevitability. Those are some nice quotes, but how about the ones you didn't mention:..
"Linux is nice, but there is no real desktop environment." (GNOME is a piece of shit and doesn't count. KDE is the only thing that even comes close.)
"Where is linux professional video editing software" (Nowhere.)
"Where is GNU mathematica"(Nowhere, never ever.)
"Where is a good compiler for Linux?" (Not GCC!)
Now if I'm confusing the issue of open source and linux, it's because the original post seemed to, and lots of people are talking about the end of the software business. Open source is great for things like a web server, or a kernel, or a compiler. But bigger stuff? Like antenna simulation software? Things like that? Forget it. No one is going to write something like that and just give it away.
Well in fairness, there are a lot of reasons for companies to go to linux. I personally wish more of them did. But Linux has a lot of problems, GCC being one of the more prevalent ones, as well as the heavy reliance on free software, most of which _sucks ass_. I couldn't stop laughing at the commerical thing the other day. You think commercial software is bad? How about my xplaycd that crashes every time I move a track? I can think of 5 or 6 open source tidbits that come standard on redhat that are pathetically broken. Just earlier today, GIMP went in to spastic mode and opened about 200 windows with an error message, before KDE crashed from the load. And GNU software is usually the best of the bunch...
Rather than just dismiss the companies that aren't going to linux, consider the many valid reasons that they don't.
If you don't offer a service that distinguishes you from a competitor, you will find it hard to compete on the basis of commodity products alone.
For linux vendors, this means you have to offer more than just a nice CD and install script. You have to provide a unique service.
The best way to avoid this is to not get involved with the production or distribution of commodity products at all. Take the Yahoo approach and develop a super-strong brand name built purely on services.
The phenomenon of small nimble companies growing under the radar of a large corporation market leader is not exclusive to IT industries.
FedEx grew in the late 70s despite UPS's dominance of the package delivery market because it's hub and spoke system could get more packages to the right places faster and cheaper. It was ignored for a long time by UPS as a small time, regional carrier. Eventually UPS got screwed(though they still have the lead in overall number of packages delivered annually) by its willful ignorance of potential competition.
On a larger scale, Japanese manufacturers were able to slip under the radar of their American counterparts, manufacturers of everything from TVs to steamshovels, by coming out with a cheaper product, being ignored by the market leader, and improving until their quality met or bested that of the former market leaders. (BTW: It is a process currently underway with Korean manufacturers, of everything from TVs to steamshovels, who are undercutting both their American and Japanese counterparts).
This even happens with countries. France, the market leader in wool production in the early 18th century, ignored Britain's increasing productivity due to early industrialization and lost its lead, which contributed in part to the economic stagnation that predicated the French Revolution. Western Europe has consistently underestimated Russia, and was caught by surprise when, under Leninism, it exploded economically and fully became a world power. The Arab world ignored Zionism when it was a small and powerless movement and did not realize what was happening until control(or market dominance of the political sphere, if you want to think of it like that) had shifted, at least for part of Palestine.
Now these last two examples bring up an important point: sometimes the overturning of the market leader by a previously ignored underdog is a good thing and sometimes it is not. As applied to the current situation, I would hazard that an overwhelming majority of /. readers think that a potential for Linux to overturn the current market of OSes would be a good thing, but, looking at other examples of similar phenomena, we ought to hold judgement on the benificence of all such overturns until the facts are in.
Another problem occurs when new technology undermines a company's product. Anyone hold any stock in slide rule or buggy whip manufacturers?
NT is based on the premise that anyone who can manipulate a mouse can administer a system. Huh?!?
I think the fact that conservative businesses (those that shy away from innovation) will eventually fail is almost tautological. The alternative (only slightly extreme) seems to be that there will be no more substantial innovation ever. I suppose it's also possible that big companies will suck up all useful innovation with their financial muscle, but things haven't gotten quite that bad yet.
Not to beat a dead horse, but it does seem pretty intuitive why conservative strategies won't be successful against a lot of competition. Shakespeare would be justly nervous against a sufficiently large fleet of monkeys with typewriters. This is not necessarily good news for each individual competitor. It does suggest that Shakespeare would do well to experiment a bit more and rest on his laurels a bit less, more so the more monkeys are out there.
I think if you had to plot the probability of long-term survival for big companies and small innovative companies vs time, the guess would have to be that big companies would start off with a huge advantage, and end up with a small disadvantage. By embracing innovation, one would imagine the initial downwards slope for the big companies would increase, but that they shouldn't cross over the line. I guess this just suggests a graphical representation of shortsightedness, but also I think suggests why shortsightedness is not such a bad idea sometimes.
dan
in theory at least.
;) ). Specialised beasties can't adapt, and the smaller more nimble ones end up filling the void left by the death of the specialists..
..Big business definitely finds it harder to adapt to changes in business environment faster than a small one. I know, I've lived the nightmare politics (and I think many others who post here too).
You get a phenomenon known as "punctuated equilibrium" - periods of "relative" calm, then a disruptive event, then a period of rapid evolutionary change.
There are definite parallels here between evolution and business (especially if you view a business as behaving like an organism).
Big successful businesses concentrate on core markets, and get specialised. Then the disruptive event comes (e.g. meteor from space, Linux from Finland
In the Cretaceous case - small furry mammals (or I wouldn't be at the keyboard), and in this case - Who knows?
Maybe Linux services companies? or just any company focusing on quality? Or maybe something new entirely?
Oh well, back to grindStone(nose);
Jari
The best companies realize that it is better to make their products obsolete themselves, rather than waiting for their competitors to do it. There's a good example of this in the current issue of wired - Schwab aggressively moving into on-line trading despite the fact that is would cut into the more lucrative traditional market. Sure the stock price took a short term hit, but the resultant growth more than made up for it.
If you're not innovating by small increments in a fast-moving market, you're going nowhere. And even standing still in a growing market means you're going out of business.
If you've got the capital to invest in big development projects, sure, you can go for a huge return -- but with an equally huge risk. But small, rapid investments yield more efficient returns; it's pretty simple to demonstrate that the innovation investment against return graph is an inverted quadratic curve.
So maybe our Bazaar, with its many and rapid small 'investments' could end up a better business proposition than the monolithic Cathedral...
Linux being representative of a new tech *is* the point of this article. The new tech is free source software, exemplified by Linux:
How have today's successful technology firms, then, fallen into the "innovator's dilemma" with respect to Linux?
--
Infuriate left and right
...is The Tom Peters Seminar: Crazy Times call for Crazy Organizations. He advocates not just "re-engineering" businesses (an overused term if there ever was one), but wholesale the dismantling of businesses, processes, etc., and putting things back together into small, nimble units. I'm only part way through it, but he seems to be heading in the same general direction as Christiansen's book.
------ "Darn floor. Big bite." (Koko the gorilla's best attempt at explaining the experience of an earthquake.)
For years now I have been reading various pieces that proclaim "The internet will change the way the world does business!" and before that even "Computers will change the way the world!". I wouldn't doubt that some scribe wrote "Printing presses will change the way the world does business!" shortly after Guttenberg invented the printing press. My reaction to these things is pretty profound - I go "Duh!" and you can quote me on that. Frankly, (and I don't mean to be rude here,) I see this as being another one of those pieces. If open-source becomes a big enough threat to change the way traditional software houses do business, they will change to accomidate it. My only observation here is that I just can't see MS being a premire supplier of technical support! With every innovation, every new idea, people in business need to look at it, figure out how to work with it or against it and then they need to incorporate their ideas into their business model. All this takes time, and it takes more time for the larger entities. Duh (again). Small businesses are like small boats, big businesses are like ships. They take longer to change course. My prediction is that open source will change the way that the world does business but that the change won't be what most of us envison. My guess is that the people that incorporate software into businesses will make liberal use of existing code, in essence cutting and pasting it to make customized applications for different businesses. This will still require strong programming skills but they will be able to rapidly develop custom software. Support and documentation will have to come from this cadre of programmers and they will earn a lot of their money providing these services.
The thing you have to remember is "what is your core market?" A disruption in your core market is devistating, but a distruption in an ancilliary market isn't- in fact, it's often an opportunity.
Two examples: Sun and Linux, and SGI and PCs.
What killed SGI/Cray was _not_ Linux- it was cheap PCs. SGI's (and Cray's) core market was selling hardware to solve large linear algebra problems (almost all uses for super computers- from scientific simulations to weather predicting to Hollywood special effects- are at heart simply large matrix problems). These problems parallelize very easy, meaning it doesn't matter if the MFLOPS come in one big box, or a whole bunch of little boxes, what matters is the total cost for the necessary MFLOPS.
As such, it wasn't Linux that killed (is killing) SGI/Cray, it's the explosion of cheap powerful PCs and low-end Workstations, which make it possible to buy a few hundred PCs and wire together the same number of MFLOPS as a major super-computer, at a much lower cost.
Now, let's look at Sun. Like SGI/Cray, Sun's core buisness is selling hardware. The main purpose Solaris has in life is to give customers a good OS to run on the hardware Sun is selling. But, unlike SGI/Cray, Sun concentrated on selling Database machines. Unlike large linear algebra problems, databases don't parallelize so well- the various CPUs end up needing to communicate a lot more. It's easy to replace a Cray doing weather prediction with a stack of PCs, but extremely difficult if not impossible to replace an E10K running Oracle with the same stack of PCs.
If Sun can convince Linux users to run Linux on Sparcs, then Linux is no threat to Sun's core buisness (hardware). In fact, it's an opportunity to cut development costs of Solaris (allowing Sun to target Solaris at the high-end, where Linux isn't a good fit at the moment). If Linux were to grow to the point where it could replace Solaris at all levels, then Sun could drop the overhead of supporting Solaris altogether. While I don't think Solaris is a loss for Sun, it certain isn't a profit center. In either case, Sun doesn't lose in it's core market.
Now, a company whose core market _is_ expensive PC-based operating systems has a lot to lose to a disruption in that space. So it's important to look at what the core market is for the companies before panicing about a possible disruption in the low-end.
SGI won't be "saved" by linux. It is adopting Linux in a last-ditch effort to keep it's head above water in the low end of the market. Smarter, savvier companies like Penguin Computing and VA Research will eat them -alive- in the x86 Linux sweepstakes. SGI's problem with the low end stems for a reluctance to make and -push- low-buck RISC/Unix workstations. The Indy was wildly popular, because it was (relatively) cheap, fast, and feature-laden. SGI made it faster and better and -more expensive-, so new customers eventually lost interest. Their competitors took the hint: the Sun Ultra line of workstations are the best selling computers Sun has -ever- made, and rescued them from the "Wintel Menace". On the other hand, the O2 was a bit too expensive, and not pushed anywhere near as hard as they should have been in the face of "wondows everywhere". Instead SGI decided to go the commodity hardware route: Intel processors and commodity operating sysytems. These were -monumental- flops, and SGI had eviscerated it's R&D core to come up with their Visual Workstation failures. Meanwhile, Intergraph, the first company to turn it's back on RISC/Unix, is now out of the computer buisiness. The HP Kayaks aren't making any more headway into the workstation market. Commodity, mass-market crap does -not- a decent workstation make. Digital (now Compaq) is a better illustration of your point. The Alpha was designed to power the next generation of VAX systems running VMS. Digital, however, has always liked to cover all of it's bases, and ported OSF/1 Unix, and then it's own homegrown Unix (now True64). They also hired Linus to port his little kernal to low-end Alpha workstations. The result? The alpha is the second most popular Linux platform, supported by Red Hat, Debian, TurboLinux, and even FreeBSD. The Alpha has moved so far beyond what Digital had hoped for in the low-end market, that it is now a cornerstone of Compaq's IT strategy. By adopting new operating systems, allowing clones, and adopting commodity PC manufacturing techniques, Compaq has positioned the Alpha for ongoing success in an otherwise wintel world. Sun has aped the Alpha buisiness model, with OEM system boards, licensed clones, funded Linux ports, etc, etc. As I mentioned before, the Ultra series workstations and WGS's are doing -very- well for sun... Adopting Linux is not a golden ticket. Something unforseen could come along to disrupt the little penguin's steamroller momentum, be it a new open source project, or a sudden, global realization of how -good- OpenBSD is . The key to success to to remain flexible, to see new opportunities and sieze them, and to structure your product strategy around constant and unpredictable change. It works for Compaq, Sun, IBM, and it will work for your company. Just because it is new and popular doesn't mean that it will make you money if you're not smart. SGI and Intergraph, who shackled themselves with rigid "vision statements" and had a slavish devotion to "industry standards" got themselves in deep, deep trouble. Intergraph is out of the game for good, and SGI close on it's heels... SoupIsGood Food
I keep seeing misspelled words in the title of the postings, and within it. If people are to take this site seriously, you guys either need to learn how to spell correctly, or get a copywriter.
"Dilemma" is not spelled "Dilema"
Look it up... I'm sick of this.
-Justin
-
This is not flamebait. It seems that the strength of Linux is that it has taken existing ideas and re-implemented them well. When I look around at the projects going on I haven't seen anything on Linux that I would call innovative. Even in the KDE/GNOME desktops, there is no pushing of the boundries.
And no, I haven't done anything innovative either.
Sure Amazon has attracted a lot of $$$ from their IPO, and their stock has gone very high, but have they in fact turned a profit yet?
A major problem faced by big established businesses is that it's not easy to determine what innovations will be successful. Most new ideas do not result in a successful product, most new businesses go bust. Even in this business climate, most startups will never reach the IPO stage, and most stock options will eventually be worthless.
When innovation is an integral part of the corporate culture, as it is at 3M, the expertise to turn an idea into a product is there. But I don't know of any company other than 3M that has learned how to do this.
Occasionally something comes along, like the Internet or Linux, that is clearly a winner; and then it's easy to decide to jump on the bandwagon. Today, any company that is not at least seriously checking Linux out is asleep at the switch. But just because two such phenomena happened so closely together does not mean that we have entered a period of highly predictable innovation. Yet another obvious winner may arise this year or next, but the most likely future is one in which the technology winners emerge from a confusing market battle. Microsoft is a good example of this. Until they had achieved dominance, it was not clear that they actually would.
Small companies bet the farm on their ideas. The individuals are willing to put in long hours for little pay in exchange for a chance to get very rich. Big companies, and the people who run them, are already very rich, and don't have the same motivation to push themselves. More than that, no single company can afford to back every possible new idea; and picking the winners is a very difficult job.
Even with something like Open Source development, it's tough to figure out a winning stragegy. While it's clear that Open Source development is a winner, it is not clear for any given product whether it would be best to create it using the cathedral or the bazaar. ESR has presented some guidelines in this area, but only time will tell whether they will stand up to real use.
All in all, I don't see any way for a big company to avoid the innovation trap.
Information is not Knowledge
I have the book on my desk right now. When I read it I instantly saw how Linux fit in. The point was that there are these products that are "good enough" for some jobs. They are nowhere near as good as the industry leaders at most jobs. Pick a random job that the industry leader is good at and the new guy can't do it. But it can do some jobs "good enough".
So the new guy charges less and learns how to produce his product for less in order to survive. Then he starts to improve his product. (If he doesn't charge less or improve his product he remains a niche player or disappears so we don't care about him.) Since he has an inferior product he has more room for improvement. He delivers the improvement at the cheaper price because he is used to the working cheaper and also he can cut corners because he just has to be "good enough" not "the best in the industry". The cheap product actually opens up a bigger market because it is cheaper (think sub $600 PC's for instance.)
Meanwhile, the industry leader is making improvements but at a slower rate. He is at the top of the line and is the best in the business. It is HARD for him to improve. The new competitor may never get to the point that the top guy is at now but he can get to a point just below the top guy and do it at a cheaper price. Soon everyone but the very top customers is buying the new guy's stuff and the leader can't afford to compete.
Right now Linux is "good enough" to be a web server or a file server or a mail server. It will probably become the OS of choice on really cheap PC's, dedicated 1 function servers and embedded devices because it is "good enough" and cheaper than Solaris or some NT variant. Whether it takes the desktop or really high end server market or not is irrelevant in the near future. The desktop will become a small percentage in the overall market. Your Fridge and Microwave will probably run something like Linux. Not because it has a journaling file system or supports 5 Terabyte individual files. It will because it is good enough and cheap.
It will improve because anyone who wants to will improve it for various reasons. Individual fanatics. Computer science students. Big companies trying to run Bill Gates out of business. Hardware companies wanting to sell hardware etc. These improvements will be cheap because the improvers aren't out to make a buck on the software. They make money elsewhere. Solaris and NT may always be better than Linux but Linux will improve, be "good enough" for more and more things AND be cheaper.
If they come out with a new edition of the book Linux should be used as a case study. They have hard drives and the Intel Celeron chip in there as examples. Linux should be a good one too.
That's what the book says to me. It's small and has applications to almost any area of business. I recommend it highly.
Whats the link between O'Reilly advertising on slashdot and all the pro-Reilly "news" lately?
A great deal of academic/government research ends up as open source. Take Beowulf, for example, or some interesting ideas like the Reiserfs filesystem. Part of the problem here is that the academic CS community and the OSS community aren't one in the same (any more). So good ideas from one side don't always flow to the other. I know of several really great research projects in everything from compilers to OS that have been released under the GPL from my school, but I don't exactly hear about them on Freshmeat.
--JRZ
troll me if i'm repetitious, but biz that wants to survive accelerating churn doens't need to re-organize re-assemble or re-engineer.. it needs to *re-conceive*, chaorganize , distribute ownership equitably among all participants, including customers. keywords: ingenuity, (innovation), loyalty, (repeat bizness).
GE has managed to grow and survive more nimble competitors despite its being the archetypical large, slow-moving ship. True, it was in _serious_ trouble before Jack Welch came on board, but by most analyses, Welch is only part of their magic, although the Temple of Superstar CEOs has raised him to demi-god status.
I only know what's been written about GE in general business journals, so I'm sure someone more knowledgeable can come up with a better example (or counter-example) of GE's survival instincts, but remember when EDI first came about, and it was shaking the established manufacturing practices to the core? Newcomers such as Sterling and Harbinger were the nimble new entrants, and yet GE managed to largely beat them off, turning GEIS into one of its most profitable divisions and charging straight into EDI. Now that Internet EDI is knocking at the doow of the traditional, _very_ profitable EDI Value Added network business (a sort of EDI ISP), it is actually Sterling and Harbinger that have been slow to embrace the future. All VANs are slowly acceptiing the reality, but GEIS has adapted with more alacrity.
Now I'm not playing praise-singer for GE: I still think they are terribly over-extended, and it's amazing that they haven't gone the way of so many other mega-conglomerates in the new economy. Nevertheless, if anyone is teaching that it's such good business sense to avoid embracing the future rather than cannibalize your current business, they are certainly using the wrong companies as example.
--Uche
"What thou lovest well remains, the rest is dross" -- E.P.
You guys crack me up. You can't even see the validity in the post, since it attacks linux (heaven forbid).
Spot on - we can't see the validity of the post, as it attacks Linux - it doesn't make any points, throw up questions or answers, or indeed consist of anything but "It talked about Linux, I gave up at that point because I don't want to hear it"
The author would like to see a discussion of Open Source software that doesn't mention Linux. No doubt there would be people who would like a discussion of Webservers that doesn't mention Apatche, or of Operating Systems that doesn't mention Sun, Microsoft or HP - but they would be trolling as well.
Yes there is open source software out there that not only isn't Linux, but without which Linux itself couldn't have been created - GCC for example; but it has to be accepted that Linux, particularly in the eyes of the media, is the Flagship of the Open Source community, and that a piece without any mention of it at all is likely to be flamed for that omission and it's otherwise valid points overlooked.
--
-=DaveHowe=-
.
In all seriousness:
I also recommend Christensen's book; Linux has many of the characteristics of the disruptive technologies he discusses, and his insights certainly have prompted me to look at the industry in a new light. However, I don't believe the Innovator's Dilemma was the primary problem that led to SGI's failure. Christensen does a good job of characterizing the ``flight upmarket'' that established firms do in the face of disruptive innovations. Although SGI maintained a strong presence in the high end (the high-end graphics group was still showing significant profit, last I heard), for years it was pushing actively downmarket into the ``disruptive'' areas -- with NT-based systems, and more importantly, with projects like Nintendo 64. I suspect the fundamental problem with SGI was not that it failed to handle disruptive innovation, but that it failed to remain competitive within its core markets. Sun, in particular, avoided this problem. Arguably so did HP. But SGI was late with new machines in its traditional strongholds of CAD and content-creation, and when the new machines shipped they were underwhelming in terms of price or price/performance. Like most SGI veterans, I have opinions as to why this happened despite the fact that everyone from senior management to the lab technicians saw the market shifts occurring. But I'll skip that for the moment. The Innovator's Dilemma is an excellent work, and well worth reading, especially in the context of Linux. But be careful when applying it to any particular corporate failure; it's not the only reason technology companies stumble! Allen
Everyone is suddenly making a big deal about it. I looked it up on the web and it says its kinda metadata on all the files that have been opened and their states. Is this log good for data recovery. Is this why NT takes so long to shut down? It seems to be some sort of marketing checklist thing that no one has explained WHY it is useful.
Try "Corporate Level Strategy." I can't remember the author's name. It's about multi-business corporations and GE is a major case study.
They do a lot of compartmentalization of their different businesses, allowing them to grow at their own pace.
It's not a bad book about corporations that have grown a lot by acquisition, but it's not targetted at the brightest bulbs in the box, if you know what I mean. Aimed at big-company CEOs.
--JRZ
If one thing, history has shown us that the software industry, while it parallels many other industries, cannot be compared accurately to other industries. The developmentally fast and easily adjusted nature of software development means that while large companies like Microsoft may easily be toppled by a relative newcomer, those same large companies can make small changes very fast return the favor. People talk about what a behemoth Microsoft is, and they are quite large, but that largesse does not compare to, say, a large steel company. Adjusting a steel company means developing new technology, constructing new facilities only after producing the same thing for many years. In software, developing new technology is an ongoing process. New facilities simply aren't needed, just new computers. And, if the same exact thing is produced for many years, something is incredibly wrong with the world around us. It's unfair to Microsoft to assume that they can't quickly change to address the oncoming threats of smaller companies. I think they've already shown with the Netscape fiasco that they can, and ruthlessly, and they've shown that they're on the ball regarding the Linux threat, at least in terms of recognizing and addressing it. Barnes & Noble got shafted because they had to setup all the back-end stuff to implement their plans and that takes time and money, but there's very little back-end stuff in software development. If something's amiss, you just put the programmer on a new task and set him to it. If anything, many open-source projects are followers, not innovators (notable exceptions being Apache and mySQL) as they simply react to other people's innovations. Yes, their product won't cost anything, but something has to become established before someone decides that a free program would be a better implementation of it. This has gotten a little off-topic, but basically, Microsoft won't go the way of Barnes & Noble because a) they can adjust much much quicker as a result of their product and b) because they recognize the threat.
I firmly belive small companies (even when they are small "companies" within big companies, like the PC division in IBM mentioned in a previous post) will allways outmanuver the bigger monsters...
Nobody notices when these small (sometimes never seen) rats die, but everyone seems to hear the big heavy beasts fall. Wonder if you could ever weigh the two groups of demised critters and actually see which, pound for pound, is the larger mass of deadness?
I agree that it seems like a small zippy company is likely to outlive a slow monsterous company, but does anyone have any birth/growth/death poundage comparrisons to back it up?
Just for once I'd like to see some interesting technology writing that doesn't mention linux.
There is no interesting technology that doesn't involve Linux.
Something else is starting to happen with increasing frequency (in the technology sectors, at least). Startups, funded by venture capital, are becoming sort of contract R&D labs. If they come up with a good idea that seems to work, some big company buys the startup outright. Cisco and Microsoft, among others, are known for doing this. Keeps the pesky little mammals from getting at the dinosaur eggs. :)
I can tell you the meaning of life,
I can tell you the meaning of life,
but you have to promise not to laugh.
A decent article, the old railroad companies was a good example. However there are some differences when comparing this to the linux/open source vs. microsoft/software companies.
Small, competitive companies with new ideas that are superior and cheaper aren't always able to topple the giant (actually I'd say it's uncommon). There are several ways to defeat it. One is FUD tactics, which is a marketing technique, and understood by everyone who reads slashdot.
The other techniques, however, linux seems to be immune to.
Cost of entry is minimal in the software industry.
If I come up with a car thats runs on water, I can't simply build them in my garage and make a dent in car companies bottom line. I need big, big, cashola, more than what any venture capitalist could give me. Car companies know this, and will never develop this product either, why waste money on R&D when you can make just as much money off the public with the cars you sell now? Oil companies might make sure your operation never gets off the ground either, they might buy you out and run the company into the ground. It's different for software, however. You don't need a big manufacturing plant or fancy test equipment to write good code. You just need a computer for coding and an internet connection for distribution. Market exposure can be a problem, but word of mouth can be just as powerful. This is similar to what is happening to the record industry with mp3s, and will soon happen to the movie industry and publishing industry (to varying degrees, I won't get into that). Code is basically just a form of information, like movies and music. With the internet information can be reproduced and transmitted at an almost negligable price per copy. The means of production are taken away form the big companies, into the hands of everyone.
So maybe I'll just sell my idea to the car companies and make millions off it, or get bought out if I got enough money to make my manufacturing plant and make a dent in the car companies bottom line. This is something microsoft does as we all know.
We also know that linux can't be bought. This is point number two. I suppose microsoft could buy RedHat, but redhat doesn't own the rights to linux. It will always be available for free (or at least much cheaper than windows for some sort of "user friendly" version) because of this. Even if Linus sold the rights to the kernel to microsoft (does he actually own them? I'm not sure about that) linux is much more than the kernel, its the "loose" network of people around the world who contribute to it. These people can't and won't be formed into a capitalist corporation.
These are the reasons I consider linux, open source software, and the internet as such a huge threat to software companies, or any company that deals strictly with "information".
While we're picking nits, let's consider the following sentence:
"I keep seeing misspelled words in the title of the postings, and within it."
Notice that "postings" is a plural noun while "title" and "it" are singular nouns. Oopsie!
If you live in a glass house it's best not to throw stones.
To distill this all down to one pithy saying, it seems that the key to corporate survival is to always work to put yourself out of business before someone else does the job for you.
(A trickster type of lesson.)
T. Coyote
Ideology is for ideots.
...if you want another example of a company which "suddenly emerged". Wal-Mart's market presence was first really noted in the 1980s. The firm had been around since the 1950s (possibly earlier), and was almost completely missed in a competitive analysis done by Sears in the 1970s, except for a brief mention.
It's the lilly-pad (or bacteria) growth phenomenon -- a long period of slow but steady exponential growth takes you from too small to notice to "bit player" to "how'd we miss that!" -- much faster than the old school cares for. It's also why momentum is important.
What part of "gestalt" don't you understand?
The larger mass of deadness should be the more successful species. It's been around long enough to accumulate such a mass of deadness. That being the case, I bet the rats would win this one hands down.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
Even file/web/print servers need tweaking once in a while, even if they don't seem to be such maintenance hogs. The majority of IT projects, however, seem to be quite more labour intensive. I don't see linux breaking through in day to day business practices, unless IT people start picking up linux skills at a much faster rate than is the case today. And since services account for the bulk of IT business, I guess that leaves linux as being promising, but nothing more than that.
Most software written is custom software written in-house, or contracted out but written specifically for the company's needs. This stuff will continue no matter what.
Stephen Molitor steve_molitor@yahoo.com
Don't forget all those hard drive manufacturers who went under because they didn't get in on 'bubble memory' technology - which, of course, we all know has now completely replaced hard drives :-)
The same arguments could be said about other technologies - those that haven't done so well.
Circa 1994
"With this network computer, also known as an 'NC', we will revolutionize the world. With your funding, we'll be in every household in 5 years!"
"Great, I'm sold! To who do I write the check...?"
...
"With betamax, your videos will be much cleaner and clearer. This will blow VHS away!"
...
Etc. etc.
- Darchmare
- Axis Mutatis, http://www.axismutatis.net
- Jeff
It's called big brother and it's free. It was written by someone when they found out how much some consultant was trying to rip off their company.
It allows you to monitor any process, your entire network and to write custom monitor modules to do whatever you want. It will even page you if something goes wrong.
BB is cross platform, and displays itself to a web page.
Is this what you are talking about? And if it isn't, how hard would it be to extend BB to have the functionality that you want?
Well, one example of a technology that was NOT very quickly replaced by a superior one (superior in some aspects anyway) was AM radio. In the 20's and 30's a very large patent holding company named RCA had a large vested interest in both capital and experience in AM. One radio pioneer named Maj. Armstrong sought to find a solution to the problem of 'static' and invented FM. He even invented mux FM (multi channel, stereo), but had very great difficulty getting it out, particularly with the RCA problem. Eventually he just walked out a 13th floor window - and FM didn't 'catch on' untill the 60's.
Chuck
try { do() || do_not(); } catch (JediException err) { yoda(err); }
A number of comments have either questioned whether Linux is superior to the existing alternatives or pointed out that the superior tech does not always win in marketing battles. Both statements have validity, but neither really gets to the core of the dilemma.
Linux is not disruptive because it's a radical, new, great technology (it's not). It's disruptive because (a) It works well for reasonable-sized market (small servers) and (b) It's unbelieveably cheap and easy to advance (due to the GPL) compared to existing technologies.
Put 'em together, and you have necessary and sufficient conditions for a disruptive technology, as they say.
--JRZ
I'm surprised no one has mentioned this. The Osborne effect is when you (you being a successful technology company) screw yourself with your own innovation. EDO RAM and the Pentium MMX chip are some obvious examples. I'm sure many readers here are more learned on this effect than I, but it seems like something we should keep in mind when discussing the benefits of innovation to established companies.
You can certainly gripe at their pricing, but bear in mind that Schwab are really trying to position themselves inbetween the full service brokers like Merrill, and the deep discounters like Datek ($9.99/trade), or Brown & Company ($5/trade for market orders). It's a segmented market.
My real point was that Schwab were willing to eat into their $80/trade offline business, because if they didn't others would. You can argue about their positioning, but it's hard to argue that they'd be doing much worse if they hadn't made this move.
In a similar vein, you can expect Microsoft to reduce Windows licence prices to compete with Linux, but don't expect them to reduce it to zero to have to compete. Even a Microsoft branded Linux wouldn't necessarily have to underprice other distributions if they market it correctly. The big mistake of course would be to sit pat, do nothing, and watch Linux gain unstoppable momentum.