There are many stories in business lore of companies failing because they tried to protect their legacy business against a new technology they could have implemented themselves. Probably the most emblematic example – and the one that will be used as a case study in business schools for many years to come – is Kodak. Kodak’s R&D invented and prototyped a digital camera back in 1975. The R&D guys didn’t know what to do with it, and the management only saw the risk to their film business and couldn’t conceptualize how users would relate to it (which, to be fair, wasn’t all that easy in pre-PC, pre-Internet days). My favorite part of that story is the comment in the technical description of the project:
“The camera described in this report represents a first attempt demonstrating a photographic system which may, with improvements in technology, substantially impact the way pictures will be taken in the future.”
Talk about an understatement. Fast forward 30 years and Kodak files for Chapter 11, its film business having been blown to smithereens by the digital cameras they themselves had invented.
The difficulty for large corporations to adapt to a technological shift when short term interests prevail has come to be known as The Innovator’s Dilemma, after the title of a book by Harvard professor, Clayton Christensen. There’s an interesting variant of the Innovator’s Dilemma that I’m starting to witness in the broadband business, and that’s what I want to talk about today.
If the Innovator’s Dilemma is a decision paralysis that affects legacy businesses that can’t decide when to start cannibalizing their own lucrative product and service lines with new ones that risk displacing them, then it stands to reason that the competitors of these legacy businesses should be less affected. Newcomers to the market should not be affected at all.
Yet when I, as part of my day job, examine competitive broadband providers around the world, and particularly new entrants, I find precious few examples of disruptive approaches to the market. Could this explain why incumbent operators still dominate their market 20 years after a big wave of liberalization?
The first thing I asked myself is “why this lack of disruptive thinking in competitive and new entrants to the broadband market?” Having examined this in-depth, I think it comes down to essentially two things:
And yet there are examples of very successful disruptions in the broadband market, disruptions that have reaped great success for those who embraced them. Interestingly, one way or another, all of these disruptive approaches link back to abundance. I’ll come back to that.
The above examples should not in any way suggest that only these players were disruptive (or successful), but they do highlight that radical disruption pays when you’re a new entrant. Of course, these companies took big risks, but they did it to acquire a powerful position in their respective markets. I often despair of broadband projects – especially publicly led – that go through incredible pains, litigation and accelerated learning processes to deploy fiber networks in their territories… only to offer the same services the incumbent is offering, handing said incumbents the tools to retaliate on a platter.
One thing the three examples above have in common is abundance. Legacy operators, incumbents, cable operators or competitive operators all share a worldview: they came to be at a time when the technical resources powering services (especially voice) were rare. They acquired, and still have today a scarcity mindset that pushes them to envisage any use of connectivity by the customer as a “billable event”. This may pad the pockets of OSS/BSS vendors, but it also leaves them wide open to disruption by new entrants who understand that IP enables abundance …