Saturday, July 12, 2014

Case Study: Disruption

Back in the 1980s I worked for a computer timesharing company. We had a large mainframe computer with a proprietary operating system and a corporate internet with nodes all over the world. Our customers used dumb terminals (a monitor with a connection to a mainframe) to do their computing work, and they paid by the minute. We had the world's largest (or second largest) corporate internet, and a large customer base of companies such as insurance companies who needed more processing power than was available elsewhere.

My division, Data Services, provided databases that users could access, and they paid based on usage (so much per data point). Data Services provided statistical software that ran on our mainframe and could be used for the timesharing fee. We provided enormous economic and financial databases, but really shone in the areas of energy and aviation.

My colleagues were extremely bright and forward-thinking and we were in a constant state of innovation, but in many ways we were always a few years behind the rest of the world. When I started there in the mid-80s PCs were already widely used in business, but my terminal had no monitor, just a wide paper feed: all input and output was recorded on paper. After a while we upgraded to dumb terminals and then to PCs. Our customers used acoustic couplers to connect (a kind of modem where you put the handset of your phone into connectors), and I worked on helping them move to faster modems. I attended endless meetings where we grappled with alternative ways to deliver data to customers, such as floppies, CDs, and quarterly downloads. We fretted over ways to modernize our pricing, and one of my jobs was to create pricing models to estimate the effect on revenue from alternatives such as subscriptions, or unlimited and report-based pricing. It was a bitch teaching our workforce the basics of PCs, and transitioning our developers from APL to C++.

As data storage and processing power exploded, the basic business of the company, computer timesharing, became anachronistic. Eventually the company was purchased, cherry-picked, and mostly shut down. But in a lot of ways the company was ahead of its time. We had software that changed traffic lights for emergency vehicles decades before others produced anything as sophisticated. My division, Data Services, was a leader in value-added data and statistical analysis software. We were achieving good profits and growth right to the end.

When I was eventually laid off I was traumatized. I had been so invested in my work that it was like slamming into a brick wall at 70 mph. That was 25 years ago but in some ways I haven’t recovered. I worked at RIM when it became clear it was failing, back in 2012, and couldn't stand the idea of suffering through another slow death: I jumped ship as quickly as I could, but for a year I maintained an almost obsessive watch on the company, checking the stock price and reading the analysts and pundits daily.

My experience with a failing company led me to pick up Clayton Christensen’s The Innovator’s Dilemma some years ago. It seemed that we fit his thesis (PCs disrupted the timesharing business). It was (and is) important to me to understand why bright people - who realized their predicament, had the will, and had the resources to change – couldn't make it. Christensen’s contention that you can’t make substantive change from within, but need to start a new subsidiary, is pretty compelling.

Despite its strengths, the book didn't pass the smell test for me. It is too simplistic, too dogmatic, too anecdotal, and inappropriately universal. Christensen seemed most intent on proving that we have to throw out old values and instincts, that we have to adopt a new way of doing business that is even more ruthless and cut-throat than before. It seemed more like propaganda than theory: another phase in the right-wing attack on civilization, a new libertarianism for the private sector. The smartypants premise is that the best and the brightest must admit defeat to the small and the weak. The innovator’s dilemma is that “doing the right thing is the wrong thing.”

I don’t have a copy of the book and I don’t want to critique it, but I am energized by Jill Lepore's fantastic piece in the New Yorker (link). This is the first in a planned series of articles about what Lepore calls the disruption machine.

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