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| Disruptive Technology |
July 6, 2006 |
Ten technologies that will change everything
The story of the Sam the Record Man retail chain began in 1937. That was the year Sam Sniderman began
selling records out of a family-run radio store. The company would grow into one of Canada’s best-known
music sellers, opening its iconic Yonge St. store in 1961 and expanding to more than 30 outlets.
In October of 2001, Sam the Record Man filed for bankruptcy, its business squeezed dry by new competitors but, more tellingly, by illegal Internet downloads. Despite the chain’s reputation among serious music lovers, it simply could not compete with free. The Yonge St. store re-opened a year later, but the retail powerhouse that had been Sam’s was gone.
At the time of the bankruptcy, 81-year-old Sniderman said “I’m very sad... It’s been my life.”
And that is an apt epitaph for any company wiped out by disruptive competition. Many definitions of
disruptive technology exist—Harvard Business School professor Clayton M. Christensen has written two
recognized books on the topic—but for this article we defined the concept as a new technology that many
people want to use, and that makes lots of money for some while dropping others into the unemployment
line.
Here is our take on 10 big up-and-coming changes.
The high-tech industry has always been characterized by
waves and turbulence, but even for those unpredictable waters, think of these technologies as cannonballs dropping from the high board.
VoIP
What is it? Voice over IP uses the Internet Protocol standard to transmit voice conversations over a data
network, such as the Internet. And it is the battleground for what will likely be the biggest disruption
of the decade.
Why use it? VoIP promises cheaper calling with more features, and big telcos are losing customers — by one estimate, Canada’s four largest carriers lost 538,000 residential phone lines last year alone.
Who wins? Anyone who makes a phone call. From a consumer standpoint, the problem with traditional
telecommunications has been that there wasn’t any choice: if you wanted a phone and Bell was the provider in your area, you became a Bell customer. Period.Now, there are simply more options, and that is always good for consumers.
The other big winners—and this is one reason VoIP is so very disruptive — may be the non-telecom
infrastructure providers like MSN, Yahoo!, Google and eBay, the new owner of VoIP provider Skype. These
companies already own a fair chunk of consumer communications through e-mail, instant messaging and video
chat. They are clearly hungry to further consolidate that hold.
Who loses? Obviously, you’re expecting to see the telcos here, mainly Telus and Bell. And yes, they’ve
lost lots of revenue already. But don’t be surprised if the big traditional companies come out of this ahead.
First, they are furiously rejigging their pricing and service offerings. Bell, for example, has landed
large corporate IP network reconstruction deals. Second, telcos may increasingly provide cable/TV service
to their own high-speed customers. The best way to structure a deal in a multi-product environment is
through effective bundling of services and feeds, because most consumers don’t really care who is
delivering content, they care what they’re getting and how much it costs.
RFID
What IS IT? Think of Radio Frequency Identification (RFID) as an advanced and wireless version of the bar
code. Instead of a label printed with bars, RFID uses an inexpensive electronic chip called a tag that is
loaded with a unique identification. This tag can be attached to a pallet or embedded in an object. When
it’s scanned, the tag sends its identification to a reader, which can then use the number to look up
information in a database. Most tags need no internal power supply.
Why use it? The most popular application for RFID is asset tracking — often used for inventory. By tagging
pallets, cartons or individual items and installing readers throughout the supply chain, a company can
monitor its inventory in real time. But RFID can also control access to corporate facilities, be used to
pay for gas and groceries, reunite pets with owners, and track baggage and livestock shipments. It has
even been used to monitor people. One Japanese school board uses tags in clothing or bags to track
children, as does Denmark’s Legoland, while RFID bracelets monitor prisoners in the U.S., Europe and Asia.
Who wins? Companies that understand how to deploy RFID can dramatically improve processes. Efficient
supply chain management means lower warehousing costs and better customer service, while RFID-based
payment systems are essential components in many retail loyalty programs.
But deployment is key: RFID can generate mountains of information, and deciding what needs to be tracked is a bigger challenge than actually tracking it. RFID systems integrators and database management experts will find their services in high demand.
Who loses? RFID means a bad time for warehouse employees. Some consumer advocates worry that tagging individual retail goods could allow retailers and manufacturers to track customers. And the prospect of implanting RFID chips in people — approved in the United States in 2004 — stirs up a hornet’s nest of privacy concerns.
Overall, RFID is another example of technology outpacing society. As often happens we are faced with a
fundamental question: we can do this…but should we?
Digital entertainment
What is it? When it comes to entertainment products, the real question is, what isn’t digital? Music,
movies, games, sports, TV, ringtones and even, increasingly, sex, are now accessible in a digital format.
Why use it? Europe mostly shuts down for soccer’s World Cup. The few industrious employees who actually go to work when matches are on keep up-to-date online.
North Americans enjoyed digital coverage of the 2006 Olympics and will consume FIFA World Cup clips online or on cellphones, as long as they use a Rogers service, because Rogers owns the Canadian rights.
The point is, digital delivery means entertainment now occurs where the consumer is, as opposed to, say, in the living room from 8:00 to 8:30 on Tuesday, and only then.
Who wins? Rogers, if it can convince us to watch the World Cup online. And that’s the challenge: to be
successful, the industry has to transition consumers to a new way of consuming.
Or the reverse is true: consumers are driving this bus, demanding personalized content — what we want,
when we want it, wherever we are — and the industry has to keep pace with consumer demands.
Who loses? Anyone who fails to understand the preceding paragraph. North Americans quite liked digital
replays of the 2006 Olympics, and NBC’s evening Olympic ratings tanked. Or consider employers: with the
explosion of Internet video and online broadcasts, long gone are the days when workers only wasted time
playing PC Solitaire. This has led many employers to install site-blocking filters.
And let’s not forget the poor consumers. Most of the time, wide-open programming and access options are
presented as a positive development, but what about those people who just want to watch The Office every week, same time, same channel? They may soon be required to download episodes for viewing on an iPod, instead of just sitting down on the couch with a remote.
Mobile media
What iS iT? Once all entertainment is digital, it can be pumped over the ‘net or through the air, for
enjoyment anywhere. The current mobile entertainment hoopla mirrors the portable radio craze from a couple of generations ago: once radios broke free of furniture-sized wooden cabinets, people began carrying them around and putting them in cars, and radio became an even bigger entertainment force.
Why use it? Because we can. Why suffer through a five-minute bank line-up listening to Muzak, or a
three-hour flight with nothing but the airline-selected movie to watch? Why not program your own
entertainment?
Who wins? Winners will be the ones who can program for the third screen — the cellphone or mobile PDA. The first screen was the TV, the second the PC monitor, and innovators in those areas are still rich today.
Third-screen programmers are also likely to cash-in.
In addition, there’s new radio: the satellite-powered broadcasters XM and Sirius finally made it to Canada
and that technology updates the old idea of mobile voice programming for an entire new generation.
Similarly, the recently launched Slingbox is updating TV. The device connects to your TV signal or
personal video recorder and then “slingshots” the signal to anywhere you have Internet access, including a laptop or connected PDA or mobile phone.
Who loses? Traditional radio stations are still making money but they are also still complaining to the
CRTC about the satellite providers and about Canadian Content regulations. Similarly, some content owners are less than pleased with the Slingbox. If you want to know who will lose, look at who is complaining the loudest about new technology and then add five years.
Open source
What is it? In its simplest form, open source is software that is freely shared and for which the source
code is available, so others may improve upon it. On a deeper level, open source is a philosophy which
believes quality arises from the ideas of many and that the outcome of that labour should be shared by
everyone.
Why use it? The Linux operating system, the Netscape and Firefox browsers, e-mail client Firebird, the
Apache Web server, the OpenOffice productivity suite, and on and on. All are free and all are useful. The
“Why use it question?” is answered by the thousands of people who rely on these applications.
Open source technology, by its very nature, was meant to be disruptive from the beginning. Clayton M.
Christensen, the Harvard Business School professor who coined the phrase “disruptive technology” in his
1997 book The Innovator’s Dilemma, wrote that in order for a technology to be disruptive it must either be
introduced to less demanding and more price-sensitive customers in an existing market (“low-cost
disruption”), or to new customers, or for new uses by existing customers (“new market disruption”). The
open-source software movement falls into both those categories.
Who wins? Two groups, primarily. The first are users, as noted above. Free is nice to get but it can also
drive significant business benefit: a company that does not have to pay software licensing fees can put
that money into R&D, marketing or employee bonus envelopes. The second group are the businesses that grow up around open-source software. When IBM got in on the Linux game, it validated the entire market segment.
Many experts point out the true irony of the open-source movement is that it has caused several huge
software companies, including IBM, Sun Microsystems and Oracle, to spend millions of dollars on
technologies that may net them little or no direct revenue.
In their drive for disruptive leadership, the way software is written and maintained has changed
completely and offered users more choices.
Who loses? Big tech companies, because every user of a free product is a lost potential customer. Consider Microsoft. While the extent of its loss is debatable — company coffers continue to fill — one person using
Linux is one person not using Windows. One of the most interesting battles here is between Microsoft’s
Internet Explorer and Mozilla’s Firefox browser. Both are free, so revenue is not a factor, but there is
no doubt Microsoft resents the incursion of the open-source Firefox into its browser dominion.
LAMP
What is it? LAMP is a set of complementary software, comprised of Linux (the open-source operating
system), Apache (the most popular Web server available, holding 64 per cent of the market according to
Netcraft), MySQL (an open-source database system) and PHP (a free scripting language used to build Web
applications and Web service-enabled software). All of these are open-source applications, but they
deserve their own entry here because of what the four create in concert.
Why use it? Taken together, LAMP is a fast and inexpensive development platform for turning business ideas into technology solutions. Linux and Apache provide the base operating platform, while MySQL and PHP enable application and data delivery.
In the dark old days of computing, converting a business idea into a commercial operation was a daunting
task. Software products would cost tens of thousands of dollars, and customers would then be tied into
maintenance contracts that would further increase the cost of doing business. Consequently, many promising business ideas died on the vine simply because companies could not secure the necessary development funding.
All of the LAMP components can be had for free, but there are also commercialized versions that come with
some documentation and support. While not free, these offerings are less expensive than their big-company counterparts.
Who wins? Any company that needs to develop a piece of software can use LAMP and do so at a bargain price. Similarly, companies that outsource their development needs may find better deals from LAMP coding shops.
Who loses? Fast and cheap can have a downside: a hacked-together PHP application may be fine to manage a certain transaction workload but, if the traffic grows, a quick-and-dirty LAMP system will have to be monitored closely, and perhaps rebuilt.
Remote access
What is it? Remote access technology exists in many forms, but we’ll look at the process of controlling a
computer, server or peripheral from far away.
Why use it? The idea has been around for a while. Citrix, PCAnywhere, GoToMyPC and Microsoft’s
RDP/Terminal Services are all various takes on ways to control or emulate another computer, usually via an
Internet connection.
Properly implemented, this technology allows a single network administrator to handle hundreds of PCs,
often at 5:45 a.m. from a home office while clothed in comfy coffee-stained pajamas. The technology exists
today and its benefits multiply as society moves towards mobile computing and the office-anywhere model: the more mobile the worker, the less able a company is to monitor and assist that employee without some
form of remote access.
Who wins? Company bean counters. Many firms can now get by with 80 per cent fewer network admins than they had previously. And yes, many of these people are now out of a job, but the smart ones are no longer just maintaining systems, they are using their extra time for higher-value work. That means the firm is the big winner. Technology delivers on business initiatives, so any tool that boosts overall efficiency and reliability is an important bottom-line advantage.
Who loses? Few people, really. Yes, some techs lose specific jobs but smart techies can always be
retrained in the next big thing. Remote access is delivering a huge change in day-to-day operations, but
it is almost all upside.
Nanotechnology
What IS IT? Nanotech is the construction of products on the nano scale by manipulating matter in the one
to 100 nanometer range. A human hair is approximately 80,000 nanometres in width. If the tiny size is
impossible to imagine, so too are all the potential advances in manufacturing, computing and medicine.
Why use it? The commercialization of nanotechnology continues to gain speed worldwide. More than US$32 billion in products incorporating emerging nanotechnology were sold last year, and mentions of nanotech in major media articles rose by a whopping 40 per cent, according to a May 2006 report released by analyst
firm Lux Research. The potential this indicates is staggering.
Who wins? Creating nano materials that are lighter, stronger and less corrosive would have a positive
effect on the environment. Regenerative neurotechnology is something else that may be on the horizon,
according to published reports. In preliminary experiments, scientists were able to stop paralysis in rats
using nanoscale fibres. These could one day form the most significant life-saving technologies ever
developed.
The world of the tiny may also clean your clothes. According to Forbes.com, scientists in Hong Kong have
built a nano-thin layer of particles that react with sunlight to break down dirt. Clothes coated with the
substance simply need to be exposed to ultraviolet light for the cleaning process to begin.
Who loses? Nanotech is among the most obviously disruptive technologies on this list.
Clothes that clean themselves are bad news for Tide and Whirlpool. If science can fabricate strong metals
in any quantity or composition, who needs mining, drilling and processing facilities? And forget about all
the semiconductor companies: new nano components will make traditional computer designs as obsolete as the phonograph.
NetZero energy
What is it? Imagine a monthly electricity bill showing a balance of zero. This can happen through an
initiative called NetZero, a home that generates its own electricity. Gordon Shields of Net Zero Home
Coalition (www.netzeroenergyhome.ca) insists the idea is viable with just a little help from various
levels of government.
Why use it? “Net Zero homes draw electricity from the grid when it is needed and feed the grid when there are no requirements,” he said. The average home consumes about 7,000KwH of power per year. Efficient
houses built to R-2000 standards and equipped with renewable energy and passive solar technologies can be self-sufficient, Shields said.
Who wins? This one is obvious: zero energy use is good for the environment and the bank balance. Longer term, fossil fuels are a finite resource; when they run dry, self-sufficiency will be paramount.
Who loses? No one, really. Oh sure, big oil and gas companies could lose some revenue as this idea slowly
takes off, but energy-sector profits are so huge that it’s hard to imagine the big boys will notice the
hit for a long time.
However, while consumers can benefit here, getting in on the game is expensive — recouping the upfront
costs may take 25 years.
A photo-voltaic solar power system, for example, will set you back $15,000, while a ground-source heat
pump, which taps stored energy from the earth to cool in the summer and heat in the winter, is another
$20,000 hit.
Some items are less expensive. Passive solar design uses the sun to heat the home in winter and stores
energy in tanks embedded in the structure. In the summer, consultants advocate positioning a structure to minimize heat gain and create shade using strategically planted trees. Active solar technology is common
and cheap and uses roof panels to absorb the heat of the sun.
But even if a homeowner went the Full Monty, the other end of the equation remains a question mark — what price will the utility pay for any electricity fed into the grid? Many have not specified, although
Ontario will pay 42 cents per kilowatt hour for solar-generated power and has cleared hydro meters that
run backwards when electricity is being fed into the grid.
Attention spans
What is it? Okay, attention spans are not a technology, but our ability to concentrate on any one thing
for any period of time is diminishing, and that is a fact all content and technology providers will have
to address. If you’re a TV exec, you have to ask: are people still willing to watch a 60-minute drama,
with four, five or six commercial breaks? Will they be willing in five years?
Why use it? Because you have no choice. More entertainment options means it is less likely you’ll stick
with any one for a long time. In the 1950s, you could listen to one of a handful of radio dramas or watch
one of a handful of TV dramas. That was choice then.
Who wins? Jeff Elliott of Bite TV, for one. On the surface, the collection of videos and animation at
www.bitetv.com is merely low-brow programming aimed at an 18 to 34 demographic for whom boobs, beer and flatulence are large-denomination currency. But this popular collection of very short entertainment bites illustrates the idea that short is good and demonstrates how the format can bridge television, the Web and mobile phones.
And Elliott is a guy who knows entertainment. The former driving force behind TSN, he has also been senior vice-president at Alliance Atlantis and managing director of Netstar Interactive.
“Our tagline is that ADD is A-OK,” Elliott said. So is this the next step after reality shows? The point, he said, is this demographic “doesn’t worship the golden box in the corner,” they have other choices, including Xbox, cellphones, the Web, etc. “So we have to go to where they are to monetize that touch
point.”
Who loses? Anyone who can’t monetize the idea, or organizations with too much invested in the old model. Think traditional TV networks. Or maybe not: ABC recently began streaming four of its biggest shows for
free on the Internet. It is only four shows, it’s only available in the U.S. and all the commercials are
still there, but the initiative shows that big companies are willing to monkey with their own business
models.
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