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Recently a reader commented on our earlier piece on Clearwire that WiMax will probably meet with greater success in developing countries than in developed ones. We thought it was an intriguing comment so for this piece, we decided to look into Malaysias WiMax efforts.

Malaysias telecom regulator, the Malaysian Communication and Multimedia Commission (MCMC), recently awarded Wimax wireless high speed internet licenses to four companies. While the awarding of the licenses is not ground breaking in itself, the regulators motivation in choosing these 4 companies out of a field of 17 deserves a closer look.

The four firms chosen were all smaller firms while among the losers were some of the largest companies in Malaysia, including the largest mobile operator in the country, Maxis Communications. At first blush, this decision may seem to be an odd one. Wouldnt the larger, more established firms have an easier time rolling out a nationwide network? Wouldnt granting licenses to the market leaders be a less risky choice.

But MCMCs choice does makes sense if we look at the situation through the lens of disruptive innovation. The theory of disruptive innovation says that established firms have a tougher time taking advantage of disruptive innovations than smaller start-ups do. This happens because, over time, established firms optimize their processes, resources, and values, to succeed in their current environments. When faced with a truly disruptive innovation, these firms have difficulty changing their entire business models to take advantage of the new innovation. So, for example, instead of offering a quad-play package (traditional wireline voice, wireless, video, and internet) over the new WiMax network, these incumbents would be more inclined to try to use their existing infrastructure to leverage their existing investments as much as possible and only sparingly use WiMax to augment their offerings. Of course, this makes sense for the incumbent firms given their large investments in their current infrastructure but it also has the affect of slowing down innovation by keeping the market from realizing the full potential of the new network.

Smaller start-ups, on the other hand, have none of the historical baggage of the incumbents and are free to enter the market in a truly disruptive way. Since the MCMCs goal was to disrupt the market and increase competition and choice for the consumer, it made the right decision when it chose to award the licenses to smaller, more nimble firms instead of the market leaders with established processes.

Solar power is taking off around the world. Capacity and installations are growing between 30-40% a year, supply can hardly keep up with demand, venture investment is reaching Internet bubble levels ($264m in 2006), and IPOs are popping with furious abandon. And yet, solar still barely registers in the sum total of global energy production it represented some .04% of the energy mix in 2005. Can such breathless growth be sustainable? Will, and when, will solar become significant on a local, regional, national, global scale? We have long argued that a disruptive approach would hold the most promise for the development of solar technologies and business models at scale. Compared to conventional power sources, solar is inherently disruptive it excels on certain underappreciated dimensions of performance (it is distributed and emission-free) while being considerably less good than coal, gas and oil when it comes to traditional metrics like price and energy density. To maximize their chances for disruptive success, companies could, for example, initially target regions with underdeveloped infrastructure where solar would compete against nonconsumption of electricity rather than ubiquitous and cheap grid power. They could pursue low cost solar technologies that attain price-competitiveness without the help of government subsidies. Or, they could focus on applications that require portable power where recharging is a pain. One such promising niche application was previewed at the annual CeBIT fair in Germany the other day. A Chinese mobile devices company called Hi-Tech Wealth is releasing a solar-powered cell phone that will get 25 minutes of talk time from 40 minutes of charging in the sun. The phone will also be able to draw on indoor light, and will, theoretically, be entirely self-sufficient on standby mode so it will never have to be turned off. This is interesting for at least three reasons: 1) Niche applications for portable micro power are great breeding grounds for solar technologies and business models. Batteries are worlds most expensive form of energy and recharging cell phones, laptops, and mp3 players can be a hassle. As far as electricity needs go, this is relatively low hanging fruit. 2) It is not surprising that this phone is coming from China, which has less developed power and communications infrastructure than much of the western world. There is much greater need for self-sufficient mobile communication devices there, and thus much greater incentive for innovation. 3) Wireless charging capability can be a powerful new feature for cell phones, generally. Mobile device manufacturers seem to be caught in an endless race to pack as many features as they can into phones; Motorolas RAZR made such a splash a few years back because it differentiated on another dimension of performance form and style, rather than features. Differentiating in this way might be a new avenue to success, especially in the developing world. The emergence of the cell phone decentralized communications, unlocking all sorts of new consumption. It liberated consumers from the wires that tied them to their homes and officesexcept for that pesky charger (and personally, my phone charger always seems to be either underfoot or lost at the exact moment I need it). Solar-powered cell phones promise to relegate that last wire to the dustbin of history. See: http://www.trustedreviews.com/mobile-phones/news/2007/03/20/CeBIT-2007-Self-Suffient-Solar-Mobile-Unveiled/p1

According to a survey from the University of Tennessee Health Center, an estimated 40 million Americans suffer from allergies. For those 40 million, a story in the New York Times today has another example of "good enough health care just in time for that seasonal ritual of watching pollen counts and allergy forecasts.

Diagnosing allergies has long been the province of specialists using a labor-intensive skin prick test to isolate and measure patients reactions to specific allergies. For the uninitiated, the test involves injecting small amounts of allergens under the skin of the arm or back dozens of times and judging the severity of the reaction by the size of the red bump that results from the patients antibodies attacking the allergen. A full panel of tests can last hours and cost hundreds of dollars.

A radically different testing method involving a simple blood test has been around since the 1970s, but initially lacked the level of sensitivity afforded by skin prick tests. Ongoing research and development has improved the sensitivity and precision of blood testing, but the industry has been slow to adopt the new method. One factor, according to the Times, is that endorsing the now "good enough blood testing method threatens the lucrative testing business many clinics have developed. The revenue from skin prick testing goes to the allergist, while the money for a blood test goes mainly to the lab. Also, blood testing does not require the experienced eye to judge a skin reaction, meaning that patients could be tested by their general practitioners, another factor sure to alarm the specialists who dominate the industry.

So what does the theory of disruptive innovation suggest for the future of allergy testing? First, in the end simpler and cheaper almost always trumps the high end solution. The prospect of a single blood test sent out a lab for processing is appealing for both patients and insurance providers. Second, subjective tests and treatments offered by specialists are eventually supplanted by rules-based diagnosis. Recent news is filled with examples of medical procedures migrating from the specialists office to the general practitioners practice to (eventually) the home remedy. Allergy testing seems poised to repeat the pattern. In fact, MinuteClinic has already started offering $60 allergy testing with their quick service model. Finally, "pain in the market is a good indicator that consumers will be amenable to alternative solutions. Large numbers of un-diagnosed or self-diagnosed allergy suffers have been scared away from the doctors office by the prospect of skin testing. Speaking from personal experience, 50 pin pricks followed by a few days of freaky looking arms, constitutes pain in the market.

Congratulations to WebEx and its shareholders Cisco announced yesterday that it is buying the company, the leading online meeting service provider, for $3.2 billion. This is yet another indication of the value inherent in disruptive innovation. WebEx is in many ways a classic new market disruptor. It democratized and decentralized a critical function remote business communication and in so doing enabled loads of new consumption. WebEx's online applications empower nonconsumers, enabling small and medium-sized businesses that could not otherwise afford remote collaboration systems to hold meetings on the web, and also make online collaboration so simple that they unlock nonconsuming occasions as well. Instead of having to decide whether or not to fly people in for meetings from disparate locations, companies can now simply rely on WebEx. Meanwhile, WebEx marched to market dominance (it controls some 64% of the space, serving 2.2 million customers at 28,000 companies in 85 countries worldwide) via a disruptive path. Its core technology is less sophisticated and in many ways less good than competing products like video conferencing. But WebEx simplified complex operations it was the first to make it easy to display files across formats, for example and therefore became the application of choice. Meanwhile, kudos to Cisco, which has an impressive track record of buying and developing disruptive businesses. It seems to have a rare talent for knowing when to integrate acquisitions and when to keep them separate and relatively autonomous (Ciscos acquisition of wireless home networking pioneer Linksys, for example, is a textbook example of an incumbent mitigating a disruptive threat while tapping into new growth by buying and leaving separate the would-be-disruptor). It will be interesting to see how closely Cisco integrates WebEx with its high-end online collaboration offering, TelePresence. Given Ciscos track record, Microsoft (LiveMeeting) and Citrix (GoToMeeting) had better watch out

Clearwire, the potentially disruptive WiMax pioneer supported by Intel, Motorola, Bell Canada, and others, went public today to much fanfare and skepticism. It priced at the high end of its range, netting some $600 million, but finished the day 10% lower than where it started.

Investors are entranced by the massive transformational potential of its technology wireless broadband, essentially, that is more powerful and has greater range than wifi and therefore threatens to disrupt existing broadband and cellular technologies. But they are wary of its massive upfront costs, piling debt, technological adoption hurdles, and looming competition from the likes of Sprint.

In a 2004 article in Strategy and Innovation, Clayton Christensen and Scott Anthony applauded the company for taking an emergent, disruptive approach by rolling out its technology in small, underserved, rural markets where it would initially compete against nonconsumption rather than powerful incumbents. Two and a half years later, Clearwires promise continues to grow (as evidenced by the four billion dollar valuation the IPO fetched), but doubts and challenges are mounting as well.

This post is a thought starter what do you all think of Clearwires chances? What strategy should it pursue to optimize its chances of success? Does WiMax represent the next wave of disruption in telecomm? Will Clearwire win the space it has pioneered? Would love your thoughts on this one