Intelligence at the Edge #11


The most potent disrupters might not even seem relevant to us.

David's smiling face

By David S. Isenberg                                                          amnetlogo

From America's Network, July 1, 1999

At Vortex99 last May, Bob Martin, the CTO of Lucent Bell Labs, presented a sweeping review of technological progress in the telecom infrastructure. He is a self-described "terrific fan" of The Innovator's Dilemma by Clayton Christensen (Harvard Business School Press, 1997). Referring to Christensen's central concept, he said that Lucent was learning to work differently with incumbent and disruptive customers.

This seemed like an exciting advance, so I arranged a follow-up interview. I expected that Martin would explain how Lucent's incumbent customers were driving toward "better-faster-cheaper" - this is my 'looks-like-a-duck, waddles-like-a-duck' test for sustaining technology. And I thought he'd say that Lucent's disruptive customers were creating markets that seem irrelevant to today's telcos but, with Lucent's help, would expand from below to engulf telephony-classic markets - this is my 'duck' test for disrupters.

Surprisingly, Martin focused on similarities. He said, "Both the incumbents and the disrupters see the end game of the market as very much the same. [They both want] a very high-speed packet backbone, optics at the center, a variety of broadband access mechanisms [and Internet Protocol (IP) as] the predominant application protocol." Describing a two-year-old difference between telcos old and new, he declared, "Cost-effective circuit to packet - we built it. That debate is over."

As for differences, Martin seemed to be saying that Lucent's incumbent customers wanted better ("exceedingly high quality of service"), while the ones he labeled 'disruptive' wanted faster ("getting to market very quickly")

New technology, old marketplace

The Innovator's Dilemma shows clearly that not every new technology is disruptive. Most new technologies, in fact, are sustaining. By extension, not every new market entrant, even one riding on new technology, is a disrupter.

I began to wonder whether most of Lucent's new customers weren't players in the old value space. For example, I suspect that dumb-phone to dumb-phone Internet telephony is a sustaining technology. It serves the same markets as telephony-classic. To a customer, it works like telephony-classic (that's the goal, anyway). And the telco (old or new) retains control of the value chain.

Furthermore, telcos immediately recognized that Internet telephony was relevant. AT&T embraced it because it facilitates telephony-classic via CATV (better). New entrants embraced it because it makes nonfacility-based entry easier (faster). And most telcos embraced it because it circumvents regulatory mechanisms that hold the cost of service high (cheaper).

Martin lists five major disrupters - optics, silicon, wireless, packets and software. The Internet was not on his list, except by inference. When asked, Martin identified two ways that it is disruptive; first, because packet networks have significant efficiencies, and second, because the Internet gives rapid rise to new applications that can change the nature of business.

To me, the Internet (with intelligent terminals) is telecom's biggest disrupter, but for an altogether different reason - internetworking makes underlying details of networks irrelevant. Under IP, the network becomes the transport component of an application, much like the disk drive becomes its storage component. When a device at a customer's fingertips terminates IP, a thousand applications bloom - telephony, every kind of messaging, multimedia, telepresence etc. - without the necessity of telco ownership (or telco participation in value creation).

The illusion of eternal incumbency

It feels discomforting, disloyal and threatening to consider a disruption of our own incumbency. I recently did my will. I had a problem imagining a world in which I didn't exist. Then it occurred to me that if I died first, my wife would eventually find ways to be happy without me. I did not want to analyze this too closely! I prefer the illusion of eternal incumbency.

We are all incumbents on this bus. We depend upon telecom-classic - as suppliers, service-providers, investors, regulators, consultants, writers, publishers, customers and end-users. Even Christensen makes significant income advising incumbents, which makes him correspondingly dependent on sustaining technology. And to the extent we think like incumbents, we might fail to imagine how the most potent disrupters could even be relevant to us.

There is no shame in sustaining technology. Christensen's book shows that sustaining technology is often the sophisticated product of lengthy, expensive and often heroic efforts. There are more circuit switches and more mainframe computers being made now than at any other time in history. Telephony-classic could have a long run yet. But it is worth noting that the absolute pinnacle of the age of sail, the clipper ship era, came a mere decade before sail fell to steam.

Copyright 1999 Advanstar Communications.