Lately I've been thinking about how open source is disrupting the software industry. In Silicon Valley, people tend to focus on a very narrow view of disruption focusing on prices or features. But I think disruption is more than that.
Consider these examples:
- The PC disrupted minicomputers by giving individuals power to develop and run their own applications outside of IT
- Digital cameras disrupted film by providing instant gratification
- Netflix disrupting Blockbuster by eliminating late fees
- Salesforce.com disrupted Siebel by eliminating long CRM implementation cycles
Typically new entrant disrupts the market by doing something different than the incumbent vendor. PC's weren't just smaller, cheaper minicomputers. They served a different purpose. Many considered early microcomputers toys --and for the most part, they were right. But along came Visicalc (pictured above on an Apple ][ computer), and later Lotus 1-2-3 and suddenly they opened up new markets based on new applications.
What makes something disruptive is making it more convenient, simpler, more flexible and sometimes, making it cheaper. Often, for a business to be disruptive it requires a different business model. Sometimes the business model itself is the source of the innovation. The idea of getting DVDs in the mail may not seem radical today; but if you're Blockbuster and you've built your entire revenue on thousands of retail stores, its hard to wrap your head around using a web site to send DVDs out by mail. Even more radical was the fact that NetFlix eliminated "late fees" which made up roughly $300 million of Blockbuster's revenues in 2005.
Once you get locked into a business model you tend to hire people to perpetuate and fine tune that model. So the typical response from an incumbent is to ignore a disruptive force as long as possible. After all, the last thing in the world they want is to draw attention to something that could jeopardize their core business. But at some point, they can't ignore it any longer and so they try to craft some kind of hybrid disruption strategy.
Going back to the PC example, Digital Equipment's response was the DEC Rainbow 100, that was "even better" than the IBM PC since it ran MS-DOS and CP/M and it was a DEC VT100 terminal also. But as it turned out, neither DEC's existing customers nor the new purchasers of PC's were looking for a solution that combined the old and the new. Instead it was companies like Compaq and Dell that thrived by meeting the needs of a new market. They could focus on the needs of new customers without worrying about protecting any legacy business.
But as is typical in these "Innovator's Dilemma" situations, the real challenge is not the technology, it's the business model. Few companies are able to successfully navigate those waters. (Interesting aside: Larry Ellison owns the majority share of NetSuite, but it's run independent of Oracle, which likely results in both companies operating more efficiently.)
What other examples are there of disruptive technologies or business models? What makes them disruptive? Is open source disruptive? What are the pains in buying and using closed source software that should be changed? You can post comments here or send email to disruption (at) mysql.com.