Something very fundamental is happening in the technology business today. Technology companies are being divided into the "new" and the "old". Gilder is making this division when he says "the computer age is over". Wall Street is also making this division when tech stock prices move in two separate groups. Is new stratification justified?I like to brainstorm about this in terms of Clayton M. Christensen's "Innovator's Dilemma" argument, one of Gilder's favorites. I highly recommend Christensen's book, by the way (HBS press, 1997).Key to Christensen's argument is the difference between "disruptive" and "sustaining" technologies."Disruptive" is the one of those new-economy watchwords. Used by some people to label any technology that might challenge the old guard, Christensen uses "disruptive" to refer to technology that the big companys cannot master. Instead, big old companies work on developing "sustaining" technologies, while the little guys become the experts at the sneaky "disruptive" technologies that will eventually topple the world order. Then the cycle repeats, with the new leaders falling victim to the next generation of disruptive technologies.Steamships were disruptive to the sailing ship industry, and the technology toppled a generation of shipmakers. Clunky DOS was disruptive to big-computer operating systems. And now, the claim is, the "new economy" technologies of the Internet age are disruptive to the old companies of the computer age.The most important thing Christensen points out is that the difference between a disruptive technology and a sustaining technology is not in the science: the difference is in the market.A disruptive technology is a technology that your customers are not demanding. It's not economic. It doesn't make sense. It doesn't solve their problem. For example, it's the steam engine that is so unreliable that it can't go a few miles without repairs; customers who want to cross the ocean have no use for it. The market division between riverboat customers and ocean vessel customers explains why the big oceangoing ship companies missed the sail-to-steam trend, according to Christensen.A sustaining technology is what your customers are demanding. It may be a radical new technology. But it gives them what they want today. For example, using copper instead of aluminum on CMOS chips is a radical technology that is nevertheless sustaining, because it gives CMOS customers more of what they want: speed and efficiency. As a result, Intel is fully aware of the development, and there will be no "suprise" startups that topple the giants using copper chip technology.This leads to a seeming paradox. When a new technology is a direct threat to a company, the company is better-equipped to respond. It is those technologies that present no direct threat that are the true long-term danger.But it's clear today, even to the most narrow-minded managers in the tech industry: broadband Internet is a tidal wave that is crashing over us all. This is no "steath" trend. All our customers are demanding better connections, better web sites, and so on, today.Technologies being driven by large customer demand. Large demand is the hallmark of a sustaining technology, not a disruptive one! Has Gilder got it wrong?My favorite stock in which I am in disagreement with Gilder is Cisco.It is clear to me that Cisco's current customers demand what optical networking promises: higher bandwidth and lower routing costs. It doesn't matter how different the "new" technology is from the "old." Cisco is aware that if it doesn't "learn" the new technologies, it will lose its existing customers. There is a kind of corporate urgency when there is a danger of losing big customers. Cisco will do anything it needs to do to keep them.For this reason, I don't think that optical networking is disruptive to Cisco. To me, it seems clearly sustaining. I fully expect Cisco to recognize the challenge and thrive as the market makes the transition over the next decade from electronic to optical routers. They will buy, develop, or steal whatever they need to make the transition.But what about the other old-technology giants? I'm talking, of course, about Microsoft, Intel, Dell, and the like. Are they being toppled by disruptive technologies as we speak? Or is the Internet just another sustaining development, just like copper chips?
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