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July, 2007

Disruption vs. Innovation

What makes something "disruptive"? Wikipedia defines disruptive technology/disruptive innovation as a "a technological innovation, product, or service that eventually overturns the existing dominant technology or status quo product in the market." In the book Space Race the focus is much more on giving people something they didn't know they wanted: "Disruptive technologies emerge that are not what consumers think they want, or claim in resarch to want . . . ." (Thanks Adrian).

Personally, I take issue with both of these ideas. My definition of disruptive technology is something which re-routes a flow that once came from a single source. In other words, products themselves are not disruptive, rather the disruption is the effect. Disruption is normally achieved in one of two ways: Innovation or scale.

Some examples might help . . . Napster was a disruptive technology. It took an industry that once controlled the flow of music and democratized it by allowing people to freely trade and download. Joost, on the other hand, I wouldn't call disruptive (yet). The flow is still coming from the same location (big media), it's just being offered in a more innovative interface. If Joost were bought by someone like Sony, however, and they started loading it up on every flat-panel display they sold, that would disruptive. All of a sudden people would be able to get content without going through their cable company (other than a modem of course . . . ).

Google's a very interesting example. I wouldn't call Google's original offering disruptive. While they certainly changed the dynamics of the market, it didn't change the way information flowed: It was the same process as Yahoo!, just better algorithms (and PageRank, of course). However, what Google has done since they became the leader is pretty much constantly disrupt. They've done this through a combination of innovation and scale. Take Gmail: When Google decided it was going to give away something like 10x more storage than everyone else, competitors were forced to change their offerings. What was once costly became free. GOOG-411 is another example of this, because of their size they can afford to give away what others charge for. (Wal-Mart is pretty good at this as well.)

So finally onto the iPhone. Call it semantics, but I don't think the phone itself is disruptive. Innovative for sure, but as Umair points out the disruption comes what Apple does when it's shifted the way people think about what a device should be. Umair suggests, and I agree, that Apple couldn't open unlocked devices at first because of the pushback it would have gotten from the operators. However, if this is really a superior device and gets the market share people think it might, Apple will be able to disrupt the way the mobile market works. As Umair puts it, "after the iPhone shifts massive market power to Apple, network guys will have little choice but to play by Apple's rules, to accede to it's newer, better value chain design - because the pool of consumers Apple offers access to will simply be too large a percentage of the profit pool for decisions not to be dictated by them."

So there you have it . . .

July 1, 2007
Noah Brier | Thanks for reading. | Don't fake the funk on a nasty dunk.