We hear a lot today about the importance of “disruptive innovation,” “deep technologies,” “moonshots,” and even “technological miracles.” What do these terms mean and how are they related? Are they just silly clichés used to hype techno-exuberant books, articles, and speeches? Or do these terms have real meaning and importance?
This article explores those questions and argues that, while these terms are confronted with definitional challenges and occasional overuse, they retain real importance to human flourishing, economic growth, and societal progress.
Basic Concepts
Don Boudreaux defines moonshots as, “radical but feasible solutions to important problems” and Mike Cushing has referred to them as “innovation that achieves the previously unthinkable.” “Deep technology” is another buzzword being used to describe such revolutionary and important innovations. Swati Chaturvedi of investment firm Propel[x] says deep technologies are innovations that are “built on tangible scientific discoveries or engineering innovations” and “are trying to solve big issues that really affect the world around them.”
“Disruptive technology” or “game-changing innovations” are other terms that are often used in reference to technologies and inventions with major societal impacts. “Transformative technologies” is another increasingly popular term, albeit one focused mostly on health and wellness-related innovations. Continue reading →
Today marks the 10th anniversary of the launch of the Apple iPhone. With all the headlines being written today about how the device changed the world forever, it is easy to forget that before its launch, plenty of experts scoffed at the idea that Steve Jobs and Apple had any chance of successfully breaking into the seemingly mature mobile phone market.
After all, those were the days when BlackBerry, Palm, Motorola, and Microsoft were on everyone’s minds. Perhaps, then, it wasn’t so surprising to hear predictions like these leading up to and following the launch of the iPhone:
In December 2006, Palm CEO Ed Colligan summarily dismissed the idea that a traditional personal computing company could compete in the smartphone business. “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”
In January 2007, Microsoft CEO Steve Ballmer laughed off the prospect of an expensive smartphone without a keyboard having a chance in the marketplace as follows: “Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”
In March 2007, computing industry pundit John C. Dvorak argued that “Apple should pull the plug on the iPhone” since “There is no likelihood that Apple can be successful in a business this competitive.” Dvorak believed the mobile handset business was already locked up by the era’s major players. “This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp. and Motorola Inc.”
argued that innovation is at the heart of economic progress. It gives new businesses a chance to replace old ones, but it also dooms those new businesses to fail unless they can keep on innovating (or find a powerful government patron). In his most famous phrase he likened capitalism to a “perennial gale of creative destruction”.
For Schumpeter the people who kept this gale blowing were entrepreneurs. He was responsible for popularising the word itself, and for identifying the entrepreneur’s central function: of moving resources, however painfully, to areas where they can be used more productively. But he also recognised that big businesses can be as innovative as small ones, and that entrepreneurs can arise from middle management as well as college dorm-rooms.
Schumpeter’s work on the dynamism of high-tech markets (later married with Clayton Christensen‘s concept of “disruptive innovation“) is one of the most persistent themes across cyber-libertarian thinking of all stripes on a wide variety of issues. You can listen to an interview with the new column’s author on the Economist podcast here (MP3). One important point the author makes is that Schumpeter realized that celebrating capitalism did not preclude criticizing individual capitalists when justified and vice versa—something all too often forgotten today.
I’ve noted that Google and Microsoft both face what Clayton Christensen famously called the “Innovator’s Dilemma” in trying to handle disruptive innovation in search technology. But noting Microsoft’s innovations in bringing social functionality to search with its “Ping” tools in Bing, I pointed out a few days ago that, “Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s ‘Prime Directive’ of elegant simplicity, may have an easier time introducing ‘disruptive’ innovations to search than Google.”
The trick will be for Microsoft to find ways of promoting radical innovation from inside, despite the forces of inertia inherent in any large company. One way to do that, as I noted, would be by imitating Google’s “20 percent” program. But a more radical way would be for Microsoft to make Bing a “skunkworks” much like Lockheed Martin’s original “skunkworks,” Xerox’s Palo Alto Research Center (PARC), AT&T’s Bell Labs, GM’s Saturn Motors—or Microsoft’s own XBox. That’s precisely what SEO guru Rand Fishkin (CEO of SEOmoz) suggests Microsoft needs to do to “get serious” in an interview with Affilorama:
I think Google[‘s search market share] could be reduced from like 85% to like 75%, and you could see Microsoft, basically Bing taking over 25%. I don’t think they’ll get more than that. I don’t think they have the ability to do it. Until or unless they are willing do with Bing what they did with Xbox.
So Microsoft had, you know, the game market was well established – Sony competing head to head with Nintendo and other players like Neo Geo coming in and this kind of thing and how is Microsoft going to win this? They didn’t know the first thing about it, you know, they weren’t in this field. So what they did with XBox is they
made it a startup. They didn’t even put it on Microsoft campus, they made it a different team of people who were only reporting to Xbox people, they basically built a separate company. The fact that it was owned by Microsoft just means that they get the benefits of the cash and the relationships. That’s extremely powerful. The fact that they’re unwilling to do this with search tells me they’re not serious about it. Right? So you might hear like Steve Balmer and other executives from Microsoft say like “search is very important to us, we’re really serious about it”. I think it’s like “serious to them” and I’m using air quotes here, like serious to them in the same way that Google says “competing with Microsoft Office is serious to us”. It’s just sort of like, “Oh yeah?! You’re going to fight us there, well we’re going to fight you on this front!” Like, serious my ass. I just don’t see it.
If they do serious and spin it out, I’ll be interested – I’ll be very interested if it becomes it’s own startup if it becomes like its own XBox, that kind of thing, that could be exciting – that could be interesting.
Microsoft missed its opportunities to get into paid search not because it was “dumb,” “uninnovative” or a “bad” company, but for the same sorts of reasons that big, highly successful and even particularly innovative companies fail. The reasons companies generally succeed in mastering “adaptive” innovation of the technologies behind their established business models are the very reasons why such great companies struggle to encourage or channel the “disruptive” innovation that renders their core technologies and business models obsolete. This dynamic was described brilliantly in Harvard Business School professor Clayton Christensen’s classic 1997 book The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail…
Let’s hope that Microsoft—as well as Yahoo!—have carefully studied the vast literature produced by business schools in the wake of Christensen’s book about how big companies can avoid the Innovator’s Dilemma by promoting—and capitalizing on—radical innovation from within. Indeed, this seems to be precisely what has guided Google’s own strategy as it has grown from “disruptive innovator” to become the very sort of behemoth that cannot easily escape the Dilemma, even if corporate managers are fully aware of the problem on a theoretical level. If Google can do it, Microsoft should be able to, too. But let’s also not discount the possibility that, no matter how hard Google’s management might try to retain the innovative culture of a start-up, the giant
can’t do that well enough to prevent its own apparent market dominance from being disrupted by new upstart innovators in search and advertising technologies.
My prediction seems to be coming true: Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s “Prime Directive” of elegant simplicity, may have an easier time introducing “disruptive” innovations to search than Google. Of course, it’s unlikely that any
one feature will prove the “killer app” that suddenly causes Bing’s market share to explode—and Google’s to plummet—but a steady stream of such nifty features could convince many users to switch to Bing.
At 29, I’m old enough to remember when Microsoft seemed as cool as Google does today. Hell, I remember being thrilled as a sophomore in high school by Bill Gates’ 1995 book
The Road Aheadand the accompanying CD-ROM (which included, as I recall, a tour of Gates’s ultra-futuristic home). If Microsoft can “get its mojo back,” the company could truly become a web services provider to rival Google. We’d all benefit from having more choices in search engines, advertising platforms and related tools. And, driving each other to “build a better mousetrap,” the two companies could lead us down the “Road Ahead” from Search 2.0 to Search 3.0 and beyond. So here’s to hoping that Redmond can solve the “Innovator’s Dilemma” with tools like Google’s “20 percent” time that free engineers to innovate!
Jerry Yang’s departure as Yahoo! CEO opens the door to a renewed bid by Microsoft to buy Yahoo!’s search business (or Yahoo! itself). Such a merger could produce a significantly stronger challenger to Google in the search market. With this possibility in mind, the WSJ just ran a fascinating history of the “paid search” business—the placement of “contextually targeted” ads next to search engine results based on the search terms that produced those results.
In a nutshell, Microsoft failed to see (back in 1998-2003) the enormous potential of paid search—just as small start-ups (such as Google) were starting to develop the technology and business model that today account for a $12+ billion/year industry, which is
twice the size of the display ad market and which supports a great deal of the online content and services we have all come to take for granted online. Microsoft first put its toe in the water of paid search with a small-scale partnership with Goto.com in 1999-2000. But this partnership failed because of internal resistance from the managers of Microsoft’s display-ad program. In 2000, Google launched Adwords and thus began its transformation from start-up into economic colossus. By 2002, Microsoft realized that it needed to catchup fast, and approached Goto.com (by then renamed Overture) about a takeover. But Microsoft ultimately chose in 2003 not to buy the startup because Bill Gates and Steve Ballmer “balked at Overture’s valuation of $1 billion to $2 billion, arguing that Microsoft could create the same service for less.”
Microsoft, meanwhile, spent the next 18 months deploying hundreds of programmers to build a search engine and a search-ad service, which it code-named Moonshot. The company launched its search engine in late 2004 and its search-ad system in May 2006.
But Microsoft’s ad system came too late:
Advertisers applauded Moonshot for its technical innovation. But Microsoft had trouble coaxing people to migrate to its search engine from Google; advertisers were unwilling to spend large sums on MSN’s search ads. By building a new system instead of buying Overture, Mr. Mehdi says, “we really delayed our time to market.”
What’s most fascinating about the piece is that it seems to suggest that Microsoft missed its opportunities to get into paid search not because it was “dumb,” “uninnovative” or a “bad” company, but for the same sorts of reasons that big, highly successful and even particularly
innovative companies fail. The reasons companies generally succeed in mastering “adaptive” innovation of the technologies behind their established business models are the very reasons why such great companies struggle to encourage or channel the “disruptive” innovation that renders their core technologies and business models obsolete. Continue reading →
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business—the placement of “contextually targeted” ads next to search engine results based on the search terms that produced those results.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.