Last week, I gave a presentation to a “traditional” publisher on the impact of new technologies on their business. This is someone who has a very successful and profitable “dead trees” business and my mandate was to come in and challenge their thinking with regards to the impact of technology on their business. Their managers feel no sense of urgency to do anything about new technology now because the existing business continues to thrive and despite the prognostications of industry pundits, they have yet to feel an impact on their current business and thus are in no rush to actually invest in new approaches (even while it’s fun to think and talk about them).
This caused me to reflect on the technological change I have seen in my lifetime. I have spent 31 years focused on “disruptive technologies.” I started working on PCs in 1979 — two years before IBM launched its PC — and I’ve witnessed some amazing technological change in those 31 years. As an observer of, and advocate for, those changes, I’ve come to an interesting and important realization. As optimistic as I am about the pace and depth of technological change, I’m usually over-optimistic about the time frames in which it happens. This was the case in the early Internet days and I believe is once again the case with regards to a new set of disruptive technologies.
While I was never a wild-eyed proponent of Pets.com or Webvan, I am certainly guilty of feeding into the hype that led to their elevation.
So, we technology pundits are overly optimistic. No big news there. However, there is big news: while we may be overly optimistic in the short-term, we’re actually overly conservative in the medium-term! Ten years ago, the Internet bubble was about to burst. All those wildly optimistic claims about how the Internet was about to change everything were going to be laid to waste. Yet here we are, ten years later, and the truth is that the Internet has changed everything. It has reached a point where, if you lose your Internet connection at work, you just go home or go somewhere where you can get that Internet connection because without it, well, you just can’t do your job. And it’s not much different at home. When I lose my cable TV connection, well, there are lots of other ways to entertain myself and, short of a major sporting event (on the level of the World Series), I feel no obligation to leave the house. Lose my Internet connection? I may wait around an hour to see if it comes back but anything longer than that and I’m contemplating a run to Starbucks or Borders or somewhere else where I can grab a Wifi connection.
The truth is that the Internet revolution is more profound than even we wild-eyed optimists thought it might be a decade ago. We had the timing wrong but, even more significantly, we had the impact wrong, and weren’t wild-eyed enough. And guess what? We’re doing it again. And this time again, it is going to happen more quickly than you think…and more quickly than the Internet took.
So, what is “it”? Regular followers know that I have been talking about the “perfect storm” of disruptive technologies — social, mobile and cloud — for over three years now. My premise is that each of these, while an interesting phenomenon in their own right, actually serve to amplify each other such that the overall market impact is greater than if any one of these phenomena were occurring in isolation. That amplification effect is one reason why I think that the medium-term impacts of these technologies tend to get understated.
There are two other unique characteristics of these new technologies that I think will cause their impact to be so significant more quickly:
- Pace of change
With regards to pace of change, the fact that we’re heavily Internet-connected enables us to embrace new capabilities much more quickly. In the early Internet days, we were faced with the daunting challenge of upgrading connectivity models from dial-up to broadband and to deploying new software (the browser) on a large number of machines. Having done that now, we’re in a position to embrace new Internet models of distribution (e.g., cloud computing) with very little friction.
Mobile also has some radically different market dynamics than the desktop that enables, and leads to, a faster pace of change. First of all, we’re embracing the mobile Internet even faster than we did the desktop Internet, as famously called out in a Morgan Stanly report. In fact, they project that the number of mobile Internet users will pass the number of desktop users in the next 3-4 years. The dynamics of the mobile market are also very different than those of the desktop, enabling more rapid change. First of all, this is a much larger market. Cell phones of all kinds (not just Smartphones) are shipping approximately 1 billion units per year, or about 4x that of the desktop market. These will rapidly shift to Smartphones across the entirety of the market as prices plummet (in Moore’s Law fashion). Even more striking, the average lifespan of a desktop or laptop computer is in the 3-5 years range whereas the average lifespan of a mobile device is 21 months. That means we are changing over the installed base of a multi-billion unit market every two years or so. There is very little installed base drag in the mobile marketplace! And this perhaps understates the pace of change. Granted, we’re in a period of software immaturity but the leading mobile software platform providers (e.g., Apple, Google, RIM) are upgrading their software platforms with significant new capabilities (both software and form factor) every 3-6 months. That contrasts sharply with the desktop, where software advances are measured in 3-7 year cycles and are often met with significant market resistance because of the cost and disruption of upgrades.
Bigger market, faster turnover, greater pace of change. Yes, the impact is going to be felt faster than you think.
Economics are also contributing to a faster-than-you-think impact of new technologies. I refer particularly here to the impact of cloud computing. In the past, for businesses to embrace this kind of technological change would have required massive capital investments on their part to deploy infrastructure to exploit the new platforms. Cloud computing now enables companies to embrace new technologies in a much more flexible fashion, requiring little to no capital investment and as a result, much faster and more scalable implementations.
I don’t want to get into an argument here about cloud computing. That’s a discussion for another day. Security? Red herring. In fact, I posit that over time you’ll find cloud computing solutions will have better security than on-premises solutions because the cloud computing providers have greater incentive to provide that security. I have come across many CIOs who have an immediate negative reaction to the cloud. I’ll ask them “if you were starting a business today…” and usually before I can complete the question, they’ll go “well, of course then I wouldn’t own infrastructure.” The question therefore isn’t whether or not to do cloud but rather how and when. But I digress.
Bottom line, the flexible economics of cloud computing enable a more rapid embrace of new technologies than would be the case if companies had to make massive capital investments to support new software platforms like social and mobile.
It’s easy to ignore we proponents of massive technological upheaval in the early days. Yes, we’re probably overstating how impactful these technologies will be in 2010 and maybe even 2011. However, ignore our forecasts for 2012 and beyond at your own peril. And if you wait until then to start embracing the change, you will find the pace of the market change then to be so fast that you’re unable to keep up, let alone catch up. My advice to that publisher was this is absolutely the best time to be embracing technological change, while you’ve still got a successful business to fund that change. If you wait until your existing businesses start to feel the impact from technological upstarts, you might find yourself in a very uncomfortable position, akin to the way Barnes & Noble and Borders feel about Amazon. It’s not inconceivable that one or both of them will be out of business within a year. They didn’t feel the urgency to get involved early — and probably saw the demise of Pets.com as validating their thinking — but when things happened faster than they thought, they had already lost the innovation edge and, more importantly, the customer.
We overstated the timing but understated the impact before. I think we’re doing it again, and this time the change is going to be even greater, and so should your urgency.