Subject: Re: Successful FSBs
From: "Benjamin J. Tilly " <ben_tilly@operamail.com>
Date: Tue, 29 Oct 2002 21:33:40 +0500

Rich Bodo <rsb@ostel.com> wrote:
> 
> Ben,
> 
> I read all your and Tim's posts carefully and I want to understand
> them because I think you guys are smart.  I might read Christensen's
> book.  I did just read a lot about him on the net (several articles and
> some other stuff).  He seems to have formalized a lot of good business
> common sense.

Well, I can say that Tim is smart.  I just try to find
smart people to quote. :-)

> Forgive me if I do not accept your stipulation that the management
> believes Clayton Christensen's thesis (And believe your
> characterization of it.) until I have learned a little more.  (Mainly
> because I don't know precisely what you meant by "the management", but
> if you mean by that "Ben", then I accept ;)).

By "management" I mean "those in management that Tim
meant to influence with his argument".  Given that Tim
was trying to appeal to their understanding of
Christensen's thesis, it is reasonable to assume that
they do believe it.  (Else what Tim said will not mean
much to them.)

> Even though I haven't read The Inventor's Dillema, I would like to
> discuss what I have read about Christensen (CC), and how I think it applies
> to the subject at hand.

OK, but remember that what you are getting here is like
a pop song with a couple of borrowed themes from a
classical symphony.  You won't be able to form your own
understanding of the thesis (including its weaknesses)
until you digest the book.

> I agree that many free software based products fit the characteristics
> that CC laid out for disruptive innovations.  Many OSS projects begin
> life less effective than a commercial counterpart but with a clear
> trajectory of improvement.

Yup.  And (very importantly) begin life unable to be
used by the mainstream customer base - and therefore
unable to interest established players.

> One could argue that the open source development model puts OSS
> projects on a potential trajectory of improvement that proprietary
> projects cannot match.  Observing these trajectories is either
> exciting or scary, depending on where you stand.  It is easy to
> observe that useful OSS projects typically gain momentum along a
> trajectory as they improve.  This can become avalanche-like if they
> become de-facto standards.

It is not needed in Christensen's dynamic for OSS to
improve faster than existing projects.  It is only
important that they improve faster than the needs of
the market.  As long as they do that, there will come
a point where the capabilities of the product intersect
the bottom of the original market, and from there on
the writing is on the wall.

It takes a while for the company to hear about it
though because the customers lost at first are their
least valuable ones, and are ones who hadn't needed any
improvements from the company for a while now.

> According to CC, when a cheaper, simpler version of your established
> product is rejected as crap by you and your customers, watch out.  The
> disruptive technology may be on a trajectory of improvement to kick
> your ass.

Yup.  And confronting it is a lot harder than it looks
for a variety of internal reasons.  A good portion of
the book is devoted to studying how various companies
have tried to handle the challenge, and explained why
they mostly failed.

> Will big companies watch for disruptive technology?  It's interesting
> to speculate as to who takes OSS seriously as and who doesn't.  I
> could point to a few internal MS memos that suggest they don't, but I
> think any student of CC probably does.  MS in particular, can afford
> to cover all avenues of attack.  You can't count on assymetry of
> motivation.  You can't count on new markets and disruptive innovations
> scaring them away.  Those bastards are too damn rich and wily ;).

I can point to internal MS memos suggesting that they do
take OSS seriously.  As for money and brains, they have
both but neither has proven particularly helpful in past
examples of the dynamic.

I could discuss why, for instance, Licensing 6.0 is a
strategy that just sped up the disruptive dynamics that
are nibbling the base of their market already.  But it
would involve undue repetition of what is already laid
out in spaces in the book.

> Will a disruptive OSS technology be used to disrupt the businesses who
> have use that same technology in their products?  I don't think so.
> Being an architect of a free software project puts you in what I
> believe Tim called the "driver's seat".  (Although there is not always
> a "driver's seat", you are either more or less of a driver than a
> passenger.)  You don't have a monopoly on driving the project, you're
> just an expert.  The playing field tilts toward the experts.  Anyone
> can compete with you, but as long as you are better than they are,
> they will be the relative passengers.

Being an architect only works if you can take advantage
of the cooperative dynamics of open source communities.
No matter how effective this might be, most of management
is unable to follow this strategy.  Compare Peopleware to
virtually any manager of your choice to see this in
practice.

> I know, it's not a good enough advantage for most, but it's good
> enough for me.  It's probably not good enough for those who have
> tasted monopoly models and become addicted (and I don't mean those
> little hotels and green houses).  There are a number of little perks
> to sweeten the deal, too.  If you take a chance and invest your time
> developing free software products, you get free marketing, development
> help, and lots of good will.  Some of the people helping you will
> become competitors.  That's o.k.  Pick a big market.  Compete on
> skill.  Run on revenue.  As your technology matures, you can compete
> in more markets.

Opportunities need to be sized appropriately to
companies.  OSS allows one to capture crumbs from a
large market that one cannot dominate.  Monopolies
can take the same market, apply vice-grips, and then
squeeze.  Guess who stands to earn more?

A company which is sized appropriately for a monopoly
will have a very hard time finding opportunities of
interest in OSS.  A start-up concerned about being the
latest proprietary roadkill may find some giant crumbs
interesting.  This leads to an asymmetric view of the
same market that is very characteristic of the
economics of disruptive innovation.
 
> Disclaimers:
> 
> I use free software and OSS in the same document quite often because
> free software is a subset of OSS and it doesn't seem right to use free
> software to describe packages under other licenses.

That depends on how you define "free".  Political
minefield, avoid. :-)

> It may look like I am making fun of a competitor or some other
> company, but I don't think that way.  I'm joking around.  Enjoy ;)

Cheers,
Ben
-- 
_______________________________________________
Get your free email from http://mymail.operamail.com

Powered by Outblaze