By David S. Isenberg
From America's Network, July 15, 1999
As the previous Intelligence at the Edge went to press (see "Were all incumbents on this bus," July 1), I realized that I had sketched an incomplete picture of Lucents role in bringing disruptive technologies to market. Yes, Lucent is an incumbent and, yes, I believe that it is missing a big one (the internetworking-induced shift of value creation to the edge of the network).
But clearly Lucent is a prime mover, bringing key components of the telecom revolution to market. And clearly Bob Martin, the CTO of Lucent Bell Labs, is working to apply the lessons of The Innovators Dilemma, by Clayton Christensen (Harvard Business School Press, 1997), to keep Lucent in the forefront of the rapidly changing telecommunications equipment game.
Christensen details how technologies can improve so fast that they outrun their markets ability to absorb the improvement. The recent history of the personal computer provides a vivid example. The PC improved so fast that, by 1998, the market for PCs was saturated the only response left was a dramatic price cut, which created the under-$1,000 PC.
Enter the desktop equivalent laptop. As laptops themselves gain functionality, they are disrupting the desktop PC marketplace. In addition, they bring new, formerly irrelevant values like portability (weight and size) and a small footprint.
Laptop functionality, in turn, depends on improvements in many technologies, such as thin displays, miniature disk drives (that nevertheless store enough), low power-consumption components and battery technologies.
In the same way, communications networks are subject to disruption as component technologies improve. Optical transmission, for example, has progressed so fast that "dramatic" is an understatement. This progress grew from improvements in component technologies faster lasers, dense wavelength division multiplexing (DWDM), and improved fiber, among others.
Altogether, the headlong progress of optical technologies makes any superhighway analogy absurd. By my back-of-the-envelope calculation, if 64 kbps represented one lane of a road, with todays DWDM and Lucents 40 Gbps laser (still in the laboratory), a single glass fiber, lit with current technology, would represent a 12-million lane highway. Itd be 47,500 miles wide. Imagine the toll plaza.
"[Optics] is leading to a brand new class of disruptive carriers," says Martin. Qwest, Level 3, Enron, Frontier, Williams, Global Crossing and others are> building new long-haul networks based on optical technologies. Today long-haul prices are in free-fall. "Without big bandwidth, I dont think the next generation of services will happen," he says. I agree.
Meanwhile, this disruption is only one component of the larger disruption to come. "An unbelievable demand for capacity will really be unleashed when the first-mile problem is solved by cable modems, ADSL, and in a few years wireless," says Martin. "The new market dynamic of how these services will be created, sold and used will emerge."
Yet Martin does not talk much about this new market dynamic. He says the Internet is not on his list of disruptive technologies (optics, silicon, wireless, packets and software) because it is "a network embodying the technologies, and the question [is] technology." Like the laptop computer, the Internet depends on the trajectories of its component technologies.
The Internet will be the mother of all disruptions. Along the way, many component technologies transport, routing, access, computing, etc. are proving disruptive in their own markets. Lucents attachment to its historically strong circuit switching expertise was so blinding, and router technology arrived so suddenly, that it had to acquire external router expertise and product lines. In many other arenas, Lucents homegrown technology has kept up or led.
Christensen has studied how incumbents respond to disruptive technologies. The only successes hes seen come when incumbents "acquire disruptive firms early and keep them separate." This, in effect, creates an independent company in which infant technology can mature without competing for resources with existing lines of business. Lucent is organized as several independent businesses, but most of these still compete at the corporate level for resources and employees. Maybe Lucent has discovered new ways to nurture disruptive technologies. And perhaps many of its leading technologies are sustaining. Or maybe Christensen is wrong.
Meanwhile, the communications revolution is on. Lucent, so far, seems to be selling what both sides want to buy.
David S. Isenbergs Web page is http://isen.com.
Copyright 1999 Advanstar Communications.