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SMART Letter #24 - July 18, 1999
Copyright 1999 by David S. Isenberg
At isen.com we accumulate intellectual capital
the old fashioned way -- we LEARN it.
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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CONTENTS
> Lead Essay: Mother of All Disruptions
> Quote of Note: Seth Schiesel
> Smart comments from SMART People
Zhou Wanshu on ATM-Head vs. IP-Head
Andrew Odlyzko on the History of Sail
> Brief Report from 'Disruptive Innovation' Conference
> SMART Contest: Invent a Protonym
> Conferences on my Calendar, Copyright Notice, Administrivia
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MOTHER OF ALL DISRUPTIONS: The Internet combines
disruptive technologies of many component markets.
By David S. Isenberg
As the previous 'Intelligence at the Edge' went to press, (see
"We're all incumbents on this bus," AN, July 1, 1999, page 16)
I realized that I had sketched an incomplete picture of
Lucent's 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 Innovator's 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 market's 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-$1000 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, battery technologies, et cetera.
COMPONENTS OF DISRUPTION
In the same way, communications networks are subject to
disruption as component technologies improve. Optical
transmission, for example, has progressed so fast in recent
years that 'dramatic' is an understatement. This progress grew
from improvements in the component technologies of -- faster
lasers, dense wavelength division multiplexing (DWDM), and
improved fiber, among others.
Altogether, the headlong progress of optical technologies
makes any superhighway analogy seem absurd. By my back-of-
the-envelope calculation, if 64 kilobits per second
represented one lane of a road, with today's DWDM and Lucent's
40 gigabit per second laser (still in the laboratory), a
single glass fiber would represent a 12 million-lane highway.
It'd 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 new optical technologies. Today long-
haul prices are in free-fall. "Without big bandwidth, I don't
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."
NEW MARKET DYNAMICS
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 was technology." Like the laptop computer, the
market impact of the Internet depends upon 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. Lucent's 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, Lucent's homegrown technology has kept up or led.
Christensen has studied how incumbents respond to disruptive
technologies. The only successes he's seen come when
incumbents "acquire disruptive firms early and keep them
separate." This, in effect, creates an independent company in
which the infant technology can mature without competing for
resources with existing lines of business. Lucent is
organized as several independent businesses, but these still
compete at the corporate level for resources and employees.
Maybe Lucent has discovered a new way to create disruptive
technologies. And perhaps many of its leading technologies
are sustaining. Or maybe Christensen is wrong.
Meanwhile, the communications revolution is on, and Lucent --
so far -- seems to be selling what both sides want to buy.
This article appeared in the July 15 issue of America's
Network. Copyright 1999 by Advanstar Communications.
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QUOTE OF NOTE: Seth Schiesel
"The changes in the long-distance industry are
undermining what is perhaps the fundamental rule
of telecommunications economics - that margins stick
to assets . . . in the next century, margins
in the communications business will stick to services
and customers.
From "Jumping Off the Bandwidth Wagon" by Seth Schiesel,
New York Times, August 11, 1999
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SMART REMARKS FROM SMART PEOPLE
ZHOU WANSHU ON ATM-HEAD VS. IP-HEAD
Zhou Wanshu (zhouws@publicf.bta.net.cn) writes:
"When I following the ideas in your article, another
issue [arose] in my head. Even more and more Telcos
have admitted the circuit-based network should be
replaced by the packet-based one, but some of them
seek for ATM as the future solution. And when looking
at the details of ATM, it looks many of its features
are still inherited from the old PSTN, even [when] it
claims they will cover all fields and support all kinds
of applications.
"So I think a[n] interesting topic would be "ATMhead vs
IPhead: who is the basis of the future stupid network."
[Do] you think it's a worthy story to start?
"In [your Communications Week International article,
'Facing up to the full impact of the stupid network']
we can see the conclusion [that] IP has won hands down,
[and] that IP is now reducing the need for ATM, and even
SONET, making the network ever more simple and stupid.
"But I still think a powerful story is needed to make
them, especially the Telco guys and policy makers, to
really understand the reasons. Otherwise they will go
in a wrong way to the next generation network, or they
(Telco) will continue their old PSTN business model or
monopoly with a new face -- ATM."
[Hmmm . . . hasn't somebody made a compelling case yet for
why ATM is not necessary in an all-IP world? If you know of
such an essay, please send its coordinates! If nobody else has
done it, maybe it is my job. -- David I]
ANDREW ODLYZKO ON THE HISTORY OF SAIL
Andrew Odlyzko (amo@research.att.com) took issue with my
statement (from SMART Letter #23) that "the absolute
pinnacle of the age of sail, the clipper ship era, came a
mere decade before sail fell to steam." He wrote:
"The story is quite a bit more complicated . . .
[T]he American clipper, [] went into eclipse less
because of steam ships, than because of the end of
the California gold rush, which eliminated the
lucrative passenger business from the East Coast to
San Francisco, and led to slower but more economical
sailing ships taking over. Soon after came the era of
the British clipper ships, which were built for another
trade where speed over long distances mattered, namely
the China tea trade. The opening of the Suez Canal in
1869 and the introduction of the compound steam engine
in the 1860s killed that era (since now steam ships
could beat the clipper ships by taking a shortcut)."
To which I replied:
"Yes, the picture is more complicated than can be
captured in a single sentence. Yet I believe that
just as the decade 1995-2005 will be seen as the end
of circuit switching and the beginning of the Internet
age (despite the fact that the Internet's precursors
have been around since the 70s), so do I think that
the critical decade for sail was 1855-1865. (The last
US Clipper was build in 1855, and steam technology
made great advances to be used in war & trade by the
mid-1860s.) . . . [But] you are right in [that]
*scheduled* service, possible only under steam, was
not introduced in trans-Atlantic trade until 1878 (by
the Cunard line). This [was, perhaps, the] key
'disruptive technology' for sail."
And Andrew wrote:
"It could be argued that the real pinnacle of the
age of sail was around the turn of the century . . .
The amount of cargo that the steel-hulled and steel-
masted sailing ships of around 1900 could carry per
crewmember was about 10 times as high as the wooden
sailing ships of the Napoleonic era . . . "
To which I replied:
"[By the same token,] I could argue -- given the
use of modern materials and designs, and the speeds
of today's vessels -- that we are living in the
pinnacle of the age of sail right now."
And Andrew agreed:
"Modern composite materials, GPS, and satellite
weather pictures are doing wonders. As an
interesting item, the record time for the
NYC -> SF voyage under sail that had been held
by the [the American clipper] Flying Cloud for
almost 150 years was broken a few years ago by a
much smaller, but more modern yacht."
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BRIEF REPORT FROM 'DISRUPTIVE INNOVATION' CONFERENCE
Last week's 'Disruptive Innovation' conference, with Clayton
Christensen and George Gilder, was not your usual telecom
meeting. It attracted a wonderfully diverse crowd from
strawberry growers to hotel builders and plumbing supply
distributors (in addition to many techies). One of Gilder's
talents is a genius for imbuing technological progress with
higher meaning - the meeting provided an ideal platform.
There were two highlights for me.
The first was MIT Professor Eric von Hippel's talk, entitled
"Listen to your Customers." The title flies in the face of a
central Christensen tenet that if you listen to your customers
you are missing the action at the edge. But von Hippel
introduces a new concept, "the lead user" - someone with
greater needs than the average customer and greater means to
innovate. Often, says von Hippel, this kind of user is the
source of the next disruptive innovation, so the trick is to
find lead users and partner with them.
The second was Carver Mead's closing talk. In the 1970s, Mead
provided breakthrough solid state physics that became the rock
upon which Fairchild, Intel and the rest of the semiconductor
revolution was founded. He recounted his insights with
modesty and simplicity, so non-physicists could grasp their
importance and the process by which he achieved them. It was
an honor to be in the same room as this great man.
Clayton Christensen won the "show-must-go-on" award. He was
wracked with a painful facial neuralgia throughout the
conference, but nevertheless he produced his special brand of
careful listening, his inimitable charming smile, and the
conceptual glue that made the conference a success.
I think I did a pretty good job of presenting my 'Stupid
Network' talk. George seemed to like it, anyway. Bob Martin
followed me, focussing on technology but not disruption. In
the question and answer session, George tried to open the
topic, but Bob would have none of it. At one point Bob
exclaimed to the effect that Lucent stopped choosing sides
when it split from AT&T. Should we expect an arms merchant to
have morality? - David I
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ANNOUNCING: SMART CONTEST - INVENT A PROTONYM
What's a Protonym? Well, 'Stupid Network' is one. So is
Prosumer and Prosultant(sm). They come from Intelligent
Network, Consumer, and Consultant (also note Insultant,
Resultant, Scapesultant). So is monokini (from bikini). So is
protonym (from synonym and antonym).
I just found a new one: Probiotic (from antibiotic). As the
brochure for a lactobacillus product explains, "Probiotics
promote the growth of good bacteria and antibiotics can kill
both good and bad bacteria.
(If you must, see www.live-well.com for the probiotic story.).
Successful contestants will invent and define a new protonym
and submit it to isen@isen.com. (Forget about prescriptive so-
called rules of etymology, like the one forbidding mixing a
Greek prefix with a Roman root! The deal here is whether your
new word makes sense to today's speaker of English!)
Contestants and their logologisms may be featured in a future
SMART Letter, and they could earn the recognition of
approximately 1207 SMART People. Entries will earn extra
points if they parody high tech products, corporate life, the
telecom establishment and/or regulatory bureaucracy. The
decision of the judge will be final.
Thanks to David Weinberger, creator of the Journal of the
Hyperlinked Organization (http://hyperorg.com) for inspiring
this "bogus contest."
Prosultant is a service mark of isen.com, inc.
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CONFERENCES ON MY CALENDAR
July 28-29, 1999, London UK. "Business Discontinuities within
the Ubiquitous Internet" by TTI/Vanguard. See
http://www.ttivanguard.com/ for more details.
September 27-29, 1999, Lake Tahoe CA. George Gilder's
TELECOSM! REGISTER NOW -- It's almost sold out!!!
I'm putting a high-level panel together on The Stupid
Network. For more information, watch
http://www.forbes.com/conf/Telecosm99/index.htm
November 4, 1999, New York City. Merrill Lynch Technology
Advisory Board Panel, quite possibly featuring Gordon Bell
(father of the VAX), Phil Neches (founder of database machine
company Teradata), Don Norman (who wrote "Turn Signals are the
Facial Expressions of Automobiles," and other worthwhile
reads), open source spokesman Eric Raymond (who wrote the
must-read essay "The Cathedral and the Bazaar"), and several
others, no less distinguished, whose work I don't know as
well. I'll participate too. Save the date. Stay tuned for
details.
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Copyright 1999 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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Date last modified: 23 July 99