Disruptive innovations - Friend or Foe
Ok, so I'm going to change direction now and look at two forces steerining the broadband internet.
File sharing and VOIP(Voice over internet protocol).
File Sharing
It wasn't until 2001 that filesharing really hit home with the emergence of Kazza by Niklas Zennström and Janus Friis. Pre 2001 napster reigned supreme. This service alloed users to download music for free from the internet. Though this was a form of file sharing it wasn't filesharing as we know it today. With napster all files were located on a central server and had to be downloaded from this central server. The further you were located on the internet the longer it took to download the file. Furthermore the more users requesting from the central server the more congested it became and slower. With P-2-P(peer to peer) technology, pioneered by Kazaa, users could now share amongst themselves directly excluding the centralised server. This meant the shortest path to the nearest user was utilised rather than going all the way to the central server.
VOIP
This technology was then utilised in the VOIP software Skype, from the same inventors. This meant that users could transmit voice data directly over an internet connection without the voice having to travel to a centralised location as in Kazaa. This allowed the voice to maintain utmost quality and allowed the network scale quickly as there was no need to augment a centralised location.
Disruptive innovations
These two offerings are what we refer to as disruptive innovations. A new technological innovation, product, or service that eventually overturns the existing dominant technology or product in the market.
"Disruptive innovations can be broadly classified into lower-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption, whereas a lower-end disruptive innovation is aimed at main stream customers who were ignored by established companies. Sometimes, a disruptive technology comes to dominate an existing market by either filling a role in a new market that the older technology could not fill (as more expensive, lower capacity but smaller-sized hard disks did for newly developed notebook computers in the 1980s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has begun to replace film photography).
By contrast, sustaining technology or innovation refers to the successive incremental improvements to performance that market incumbents incorporate into their existing product."
The dominant player in the Kazaa case would be the Movie Industry as Kazaa allowed a new method of accessing movies free of charge. While the dominant player in the Skype case would be the Telcos.
An interesting rebuke from Zennstrom when asked about the legality of his software:
"When radio stations started playing music the record companies started suing radio stations. They thought now that people could listen to music for free, who would want to buy a record in a record shop? But I think we all agree that radio stations are good stuff.
"And the VCR did the same thing: the movie industry thought nobody would ever watch movies any more.
"But that technology enabled the movie industry to make much more revenue. The single largest revenue source for the movie industry is videos."
In a similar way fax machine companies might have wanted to sue the makers of email as the telegraph users wanted to sue the makers of the fax machine.
These disruptive innovations will always continue to develop and enrich our daily lives. They are intended to bring benefits to the user and because they can do this better and more cost-effictively than the incumbents, the incumbents become unnerved. They don't want to lose their dominat position to a technolgy that is superior to theirs. This is ofcourse a natural reaction on their behalf but what would have happened if the movie industry had won their lawsuit against the VCR companies or the music industry had won against the radio broadcasters. Develeopment and progression would have suffered and we would have had it alot more boring!
In the end with these innovations everyone wins, only the incumbents can't sit back in their dominant position. They are forced to change their offering or business model so it can fit with the new innovation. The new innovation can even serve as a new element of their business model. For example, how radio allows users to "buy now" the song they have just heard or how the major bulk of money for the movie industry in generated through videos.
File sharing and VOIP(Voice over internet protocol).
File Sharing
It wasn't until 2001 that filesharing really hit home with the emergence of Kazza by Niklas Zennström and Janus Friis. Pre 2001 napster reigned supreme. This service alloed users to download music for free from the internet. Though this was a form of file sharing it wasn't filesharing as we know it today. With napster all files were located on a central server and had to be downloaded from this central server. The further you were located on the internet the longer it took to download the file. Furthermore the more users requesting from the central server the more congested it became and slower. With P-2-P(peer to peer) technology, pioneered by Kazaa, users could now share amongst themselves directly excluding the centralised server. This meant the shortest path to the nearest user was utilised rather than going all the way to the central server.
VOIP
This technology was then utilised in the VOIP software Skype, from the same inventors. This meant that users could transmit voice data directly over an internet connection without the voice having to travel to a centralised location as in Kazaa. This allowed the voice to maintain utmost quality and allowed the network scale quickly as there was no need to augment a centralised location.
Disruptive innovations
These two offerings are what we refer to as disruptive innovations. A new technological innovation, product, or service that eventually overturns the existing dominant technology or product in the market.
"Disruptive innovations can be broadly classified into lower-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption, whereas a lower-end disruptive innovation is aimed at main stream customers who were ignored by established companies. Sometimes, a disruptive technology comes to dominate an existing market by either filling a role in a new market that the older technology could not fill (as more expensive, lower capacity but smaller-sized hard disks did for newly developed notebook computers in the 1980s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has begun to replace film photography).
By contrast, sustaining technology or innovation refers to the successive incremental improvements to performance that market incumbents incorporate into their existing product."
The dominant player in the Kazaa case would be the Movie Industry as Kazaa allowed a new method of accessing movies free of charge. While the dominant player in the Skype case would be the Telcos.
An interesting rebuke from Zennstrom when asked about the legality of his software:
"When radio stations started playing music the record companies started suing radio stations. They thought now that people could listen to music for free, who would want to buy a record in a record shop? But I think we all agree that radio stations are good stuff.
"And the VCR did the same thing: the movie industry thought nobody would ever watch movies any more.
"But that technology enabled the movie industry to make much more revenue. The single largest revenue source for the movie industry is videos."
In a similar way fax machine companies might have wanted to sue the makers of email as the telegraph users wanted to sue the makers of the fax machine.
These disruptive innovations will always continue to develop and enrich our daily lives. They are intended to bring benefits to the user and because they can do this better and more cost-effictively than the incumbents, the incumbents become unnerved. They don't want to lose their dominat position to a technolgy that is superior to theirs. This is ofcourse a natural reaction on their behalf but what would have happened if the movie industry had won their lawsuit against the VCR companies or the music industry had won against the radio broadcasters. Develeopment and progression would have suffered and we would have had it alot more boring!
In the end with these innovations everyone wins, only the incumbents can't sit back in their dominant position. They are forced to change their offering or business model so it can fit with the new innovation. The new innovation can even serve as a new element of their business model. For example, how radio allows users to "buy now" the song they have just heard or how the major bulk of money for the movie industry in generated through videos.
posted by the author at 1:13 AM
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