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In the September 3rd, 2007 edition of Business Week I found an op-ed relating to disruption entitled Why "Good Enough" is Good Enough. I thought it was a pretty decent piece that correctly illustrated an important principle of disruptive innovation. Some of the reader comments, though, weren't as friendly. Ever one to stick up for disruption, I entered the fray with a response of my own. Business Week cut me off, however, at 1000 characters. I thought I'd post the full text of my response here:

The main idea expressed in this article, that "good enough technologies are succeeding, is spot on. I wish, however, that this article had done a better job of making clear what "good enough does and does not mean. I can see in the reader comments that some people are confused.

Saying that "Good Enough is good enough is not some pronouncement advocating that corporations abandon quality control efforts in favor of pedaling second-rate crap. It is not an argument against improving products. It is not a statement against being good to consumers.

Instead, saying that "Good Enough is good enough is a recognition that there are different jobs that consumers hire products to do and that sometimes companies "overshoot these customers needs with their products. Companies applying this thinking can hone in on what is really important to the consumer and tailor their products to those important jobs, making performance tradeoffs that can benefit you and me and all consumers, enormously.

Sure, it would be great if we didnt have to make those performance tradeoffs. I would love it if my Treo was 99.999% reliable and had voice quality as good as my home phone. But if getting there means that Verizon would have to spend billions and billions more building more and newer towers with better network technology, passing along every one of those charges to me every month, Ill keep what I have now. Good enough is good enough for me.

Of course, as time goes by, Ill continue to expect better and better service from my mobile phone. If Verizon and Palm dont improve their products and services, Ill buy a different phone and switch to a different carrier. The good news is that what is "good enough" changes. [Here I'll make my own editor's note: I'm not actually so sure that "good enough" changes, perhaps it is better to say that although I prefer my mobile phone to my landline, I'm still underserved by current mobile phones, and want them to improve along a sustaining trajectory until they reach where my true preferences and jobs are. -LL] There is still pressure on companies to keep up in order to beat competitors. But regardless of whether Verizon (and other carriers) improve, Im not going back to using only a landline phone. Mobility and convenience is too important to me. Im happy with the tradeoff "good enough gives me.

What are your thoughts on why "good enough" is good enough?

When people think of successful innovations they often picture technological innovations; conjuring up images of the latest gadget or the most-talked about website. These associations are by no means erroneous, innovation success often includes a component of technological improvement or application, but associating innovation success only with a technological edge doesnt complete the picture. The reality, one that firms often miss, is that successful innovators dont just develop an innovative technology, product or service, they develop an innovative business model that allows an idea (be it new or old) to flourish.

Few places is this reality more apparent than in the realm of municipal Wi-Fi.

Over 400 municipalities large and small across the United States have built, are building or are planning to build municipal Wi-Fi networks. Here's a Map. But many of these projects, including some high profile ones like San Francisco, have stalled recently as the same firms that only a couple of years ago were falling all over themselves to bid and win municipal Wi-Fi contracts are discovering that their business models are not sustainable.

Earthlink and other companies who bid on early municipal Wi-Fi projects frequently agreed to build and maintain the networks at their own expense. They also made other concessions; agreeing to share revenue from ads and subscriptions, to provide free access to city workers and to pay for space on city light poles where access points would be mounted. These companies hoped to create profitable networks by relying on the public to sign up, replacing their current internet subscriptions (whether dial-up, DSL or Cable) with municipal Wi-Fi offerings.

But city residents havent subscribed in the numbers that were anticipated. Glenn Fleishman, an editor at wifinetnews.com told Business Week that only 1-2% of populations have signed up, much lower than the 15-30% subscription rates expected. The reluctance of the public to adopt municipal Wi-Fi is forcing EarthLink and others to pull back. New EarthLink CEO Rolla P. Huff said in his July 26th earnings call that his company would "delay any further build-outs and scale back operating expenses. An understandable move given that EarthLink has lost money for the past four quarters and estimates that it will continue to lose money throughout the end of this year.

It seems to me that EarthLink has committed two classic innovation blunders. First, it took a disruptive technology (Wi-Fi) and tried to apply it using a sustaining-type model (general public internet access), leading to significant losses. This blunder, however, would have been quickly corrected had they not compounded it by committing a second blunder; Instead of testing the assumptions of their business model in a cheap, low risk way (by first building Wi-Fi networks in smaller cities or by building a network for limited and specific uses instead of general public access), EarthLink tried to "go big immediately. It wasnt patient for growth, nor impatient for profit.

In so doing, EarthLink learned that it isnt reasonable to expect a profit from public subscriptions and ads. It learned that it should require cities to cover some of the costs of construction, or at least sign up as anchor tenants for the network. These are lessons that theyve spent untold millions learning. Millions that they neednt have spent if theyd have followed the principles of disruptive innovation that we at Innosight advocate.

And following the principles of successful disruptive innovation is exactly what Id recommend to EarthLink now. Im convinced that Wifi still has disruptive potential. (Even if other technologies, like WiMax loom on the horizon). To harness this disruptive potential, EarthLink (and others) should look first to develop profitable foothold markets, remembering that it should be patient for growth, but not for profit.

EarthLink might find that municipal WiFi is better suited to smaller cities and markets where other competitors (the DSL and Cable internet providers of the world) are absent or less willing to lower prices in order to respond, and where rollout costs are lower. Indeed, many of the 400+ municipalities that have built, are building or are planning to build Wi-Fi networks are smaller, "tier 2 or "tier 3 communities. Not all of these small communities are success stories. For every St. Cloud, FL there is a Lompoc, CA, but the stakes are lower and the sort of lessons EarthLink needs to learn in order to finally develop the profitable business model it needs before it can make it in San Francisco and other big cities will come cheaply and with less pain.

It might also apply jobs-to-be-done thinking to municipal Wi-Fi. What jobs, other than giving the public internet access, can municipal Wi-Fi get done? St. Cloud, FL found that emergency response services including firefighters and EMTs were greatly benefited by Wi-Fi. Corpus Christi, TX built a municipal Wi-Fi network in order to more efficiently and cheaply monitor utility usage. Perhaps convincing cities to subsidize subscription costs as a way to help bridge the "digital divide amongst city residents meets a political job. While each municipality is going to have its own unique set of jobs, I would bet that many of the jobs will be present in most communities. If it can turn municipal Wi-Fi into solutions for these sorts of jobs (particularly those that cant be accomplished by competing technologies like DSL or Cable), it might find success.

The bottom line is that municipal Wi-Fi is a technology that companies like EarthLink (whom I have singled out here in this entry because of their prominence, I could have written about others) have failed to apply with a sufficiently innovative business model. But if they can learn the right lessons from their struggles and develop a better business model through the application of disruptive innovation principles and jobs-to-be-done thinking, there is still hope.

In my last blog post, I referenced recent announcements by Microsoft, Google, and Apple of new or increased online storage offerings. In the post, I took advantage of these announcements to envision a world where personal computing (i.e. applications, storage, content) would migrate to the cloud, signaling an end to local computing as we know it. Rather than requiring a heavy client device such as a traditional desktop or laptop computer, a user would be able to access online applications, storage, and content through any connected device with web browsing capability (i.e. from a wristwatch and mobile phone to a home appliance with a screen or a television to a connected vehicle).

The evolution of inexpensive (moving to free) online storage, ad-supported online applications, inexpensive connected client devices, and inexpensive (one could argue that its costs will shift to zero at some point) connectivity have tremendous implications for the ways in which business gets accomplished in the future. Consider the following

In 1937, economist Ronald Coase published an article, The Nature of the Firm, in the journal Economica. Within the article, Coase argues that firms exist because there are costs inherent to free markets such as costs of communication, of sharing information, of trying to find goods and services. Given these costs, Coase suggests that firms are formed because it is more efficient and less expensive to complete many of these tasks internally within a formal organization rather than outsourcing them to the market and thus incurring these added costs.

In September 1998, MIT Professors Thomas Malone and Robert Laubacher published an article in the Harvard Business Review entitled, The Dawn of the E-Lance Economy. In the article, Malone and Laubacher describe how the evolution of technology and the decreasing cost of communications are making the traditional corporation obsolete. Taking this idea further, the authors envision a world where business is "carried out autonomously by independent contractors connected through personal computers and electronic networks. These electronically connected freelancers--e-lancers--would join together into fluid and temporary networks to produce and sell goods and services. When the job is done--after a day, a month, a year--the network would dissolve and its members would again become independent agents. (Citation)

Consider these two articles jointly. In essence, Malone and Laubacher argue that the evolution of technology reduces to zero, over time, many of the costs that form the basis for Coases argument. If the costs inherent to free markets disappear or at least become negligible, it becomes possible to marketize all sorts of functions and tasks traditionally left to formal organizations. Along these lines, in 2004, Malone published The Future of Work, an excellent book examining how decreasing communication costs will lead to the decentralization of organizations.

These trends and analyses, when viewed through an Innosight lens, fit the patterns of interdependency and modularity. In 2003, Clayton Christensen and Michael Raynor authored The Innovators Solution, a follow-up to Christensens 1997 work, The Innovators Dilemma. Within Solution, Christensen and Raynor introduce a discussion of interdependent and modular systems. Synonymous with optimized or proprietary systems, interdependent systems have unique linkages between elements ranging from product components to the members of a product value chain. Essentially, the pieces are integrated like puzzle pieces and have only specific partners (consider the iPod and iTunes). Modular product architectures, on the other hand, are synonymous with the concept of plug-and-play and resemble building blocks, consisting of standardized interfaces, enabling parts to be easily swapped in and out (consider Linux or Java vs. Microsofts integration of Internet Explorer with the Windows operating system).

By definition, interdependent systems often lead to higher performance than modular systems because the system is closed and optimized. In contrast, modular systems often lead to lower costs because there are a greater number of suppliers, since interfaces are standardized and pieces can be swapped in and out. In industry, interdependency is often required to raise the performance of a new solution. Eventually, however, continued interdependency often drives the performance of that solution beyond that which the target market is willing to pay for. The target market then frequently turns to modular solutions which, at that point, often offer good enough performance along with modularity-driven advantages such as lower cost, convenience, or other ancillary benefits.

Returning to the Coase and Malone and Laubacher articles, it is clear that the potential shift from hierarchical, industrial corporations and multinational megacompanies to one of individual e-lancers can be considered similar to the shift from interdependency to modularity. Indeed, considered in the context of the definitions above, the dominant corporations and value chains of today can be thought of as interdependent architectures, delivering high levels of performance when complex coordination is called for. On the other hand, such corporations and value chains are often fraught with challenges such as high costs due to overhead and of putting specialized systems into place (e.g. the costs of maintaining physical infrastructure, HR systems, training employees, employee benefits etc).

As Christensen and Raynor found, modular architectures are often the solution when interdependent architectures prove too costly. Considered in the context of this research, the e-lance economy may represent a modular stage of organizational evolution - indeed, an architecture of easily swappable or plug-and-play components (e.g. individuals or resources). In an age where closed, proprietary systems are recognized as inhibiting the ability of organizations to respond to or even identify innovation-borne change, modularity seems a promising answer; virtually every element of the value chain could come together on an ad-hoc, objective, modular basis without being hamstrung by the subjectivity and myopias brought on by business process and the long-term commitments to physical infrastructure, a capital investment in which innovation may quickly make irrelevant.

On the premise of a future in which organizations become increasingly loosely organized, a forthcoming blog post will examine how vendors can put themselves in the best position possible to create and capture value when an immense shift (such as this one) occurs - as Christensen, Raynor, and Matthew Verlinden articulated in their 2001 Harvard Business Review Article of the same name, it is important to Skate to Where the Money Will Be. In the meantime, I look forward to any and all thoughts, reactions, comments, and questions.

Google and Sun Microsystems announced today that Google will offer Suns StarOffice suite of powerful productivity software for free online, in conjunction with its expanding set of free, "light versions of doc and spreadsheet programs (we here at the Innoblog have been tracking the disruptive development of Google Office; as recently as yesterday my colleague Alex Slawsby posted this exposition on the trend). This is Googles latest move upmarket as it seeks to offer free "good enough online software that it can uniquely monetize via its world-class advertising engine and customer base, and yields perhaps the most interesting outcome of the partnership between the companies that Innosight wrote about in Strategy & Innovation two years ago. The next question is whether or not Google will be able to seamlessly integrate the best of Suns office suite into its nascent docs and spreadsheets program, and the watch-out we raised in 2005 stands will the two companies be able to structure their venture appropriately, or will they succumb to the common problem of death by committee in which each company seeks to impose its own rules, regulations and culture onto a venture until the end result fails to please anyone? The fact that Google has begun to build a channel for free software delivery via its docs and spreadsheets programs indicates that this relationship may be more about Sun licensing its programs to Google indeed Google is paying Sun for access to StarOffice in which case organizational issues could be obviated so long as Sun gives Google permission to control the integration of StarOffice into its offering. But if the relationship demands more tightly coordinated activity between the two companies, watch closely to see how the venture is structured.

Wiive talked about the disruptive gaming system from Nintendo before, both on the blog and in S&I (May-June 2007 and May-June 2006). I thought Id just post a few links that show both how successful Nintendo has been to date and how it continues to expand its horizons for the future.



Recent reports at VG Chartz show that the Wii is close to overtaking the Xbox 360 for most units sold amongst the newest generation of consoles. That means that Nintendo has sold nearly as many units in 9 months as Microsoft has in 21. Sony lags behind, a distance third. They have a nice comparison graph here.

Any Wii owner can tell you that it isnt uncommon to work up a light sweat playing Wii Tennis or Boxing, a fact that hasnt gone unnoticed at Nintendo. Last month at the E3 Media and Business Summit, Nintendo announced plans to further expand the fitness jobs addressable by the Wii via a new accessory and game (if you can call it that) called Wii Fit. Judging by the cool demo video it seems pretty spiffy. Look for homes (retirement and otherwise) to continue buying Wii consoles as fast as Nintendo can make them.

In recent days, Google, Microsoft, and Apple have all announced new online storage offerings. Approximately 17 months after Amazon.com launched its own "Simple Storage Service, the widening race to stake claims in online storage heralds the impending emergence of a new platform, or paradigm, that has massive disruptive potential.

On August 7, Apple announced that user accounts on its .Mac service would now feature 10GB of storage, increased from 1GB. According to news reports, the increased storage level would not result in an increase in the yearly subscription rate ($99) for .Mac.

Two days later, on August 9, Google announced that folks with Google accounts could purchase additional online storage capacity over-and-above the free 2.82 GB allotted to Gmail and the free 1 GB allotted to Picasa Web Albums. For $20/year, one can purchase an additional 6 GB of storage (the minimum upgrade level) and there are three greater price/storage tiers up to an additional 250 GB of storage for $500/year. At present, the storage can only officially be used for Gmail and Picasa accounts, although one suspects that through the use of an extension such as Gmail Drive (not approved by Google), individuals could use that space to drag-and-drop any file for remote storage.

On that same day, Microsoft announced that Windows Live SkyDrive, an upgrade to Windows Live Folders, was publicly available. Still in beta, the service comes with 500MB of free online storage that folks can use, much as the Gmail Drive solution noted above, to drag-and-drop any file for remote storage. SkyDrive also allows for the posting of files to public directories that anyone can browse.

Given the decreasing cost of storage solutions and the revenue generated by online advertising, it is not surprising that free or inexpensive online storage options are beginning to enjoy accelerating growth in both variety and capacity. Coupled with the growing availability of wired and wireless broadband connectivity, it seems to be just a matter of time before the mainstream user transfers the majority of his or her storage from local/attached solutions to cloud-based solutions. Ultimately, only limited applications will required the type of performance that local/attached solutions can provide while cloud-based solutions will be less expensive, more accessible, and more reliable from a data backup standpoint.

Consider the implications of the following scenario. End-users are already beginning to discover the benefits of no cost, ad-supported, online services. The depth and breadth of those services will expand extremely quickly and it is likely that the majority of frequently-used applications will move online, perhaps with the exception of performance-intensive applications. As Google and other providers have already proven (and as we have blogged about here, here, here, and here), some of the local client-based applications used most frequently by consumers and enterprises, including electronic mail, word processing, and spreadsheets, can be quite compelling in an online-only form.

The expanding availability of high-bandwidth, low-latency connectivity will also make it possible for end-users to increasingly store their own personal files online, making them easily accessible from any connected client with that accessibility delivering tremendous value. Furthermore, it seems likely that if end-users are willing to accept a certain level of advertising (say, the interaction with one advertisement a day or listening to a brief audio advertisement before the beginning of a song), online hosts may be more than willing to offer free, unlimited multimedia files to end-users to draw them to such advertisements or to have greater access to their habits and preferences.

The logical progression of this scenario finds end-users completing an increasing amount of those computing jobs-to-be-done online, particularly those of a personal nature. Further, consider end-users accessing their music or video files from a personal computer at home, a mobile phone while walking, a car while driving, or an airplane while traveling. Next, consider end-users knowing that they can always access all of their content from any location, just so long as they have some connected, smart client device, from a mobile phone or personal computer to a vehicle or watch to a television or other appliance, within reach. The value of such accessibility, particularly if it is ad-supported, is clear and significant.

Upon the premise that a rapidly growing percentage of end-users are willing to accept advertisements and give up some personal information in return for free content and services, the long-dominant American model of personal computer-centricity and repeated hardware and software upgrade cycles now comes into question. With the exception of computing-intensive jobs, such as video game playing and high-performance computing, there is no reason why the vast majority of applications and vast majority of end-user content will not simply find its way online in the future.

Once end-user tasks shift from local applications and storage to online storage and online access to information and applications, the age-old emphasis on local computing resources will begin to fade. Rather than building or purchasing personal computers with significant hardware specifications and thick, expensive layers of local software, from the operating system to office suites, end-users will increasingly look for connected client devices with browsers capable of satisfying their particular jobs.

If the job is one of content creation, for example, the end-user will seek out a client with a large-display, keyboard and mouse, and a browser capable of delivering a compelling, hosted, word processing, spreadsheet, or presentation application. If the job is one of mobile content access, the end-user may select a small client device in the form of a mobile phone or media player with limited display and input capabilities, but long battery life, portability, and a browser capable of accessing and playing streaming multimedia through speakers or headphones.

If an end-user is simply looking for glanceable information, he or she may choose a small client in the form of a stylish, connected, watch with a wearable design, but minimal display capabilities and a limited browser capable of displaying only text-based information such as news and instant messages. Perhaps the end-user is driving to work and would like his or her messages read verbally as well as access to streaming audio, maps, and directions the browser built into the car would do the trick. During breakfast, a display on the side of a refrigerator, perhaps coupled with a limited browser and touchscreen, would deliver the morning news in a manner conducive to passive consumption, rightsized to the relevant job.

Prior to the delivery of applications or content, online hosts would identify the characteristics of the client device, the browser, and the connection and deliver an appropriately-formatted experience. If the client device and browser are full-featured and able to leverage a wired, low-latency, high-bandwidth broadband connection, the host would deliver a rich, pleasing, bandwidth-intensive experience. On the other hand, If the client device and browser are designed for mobility and online via a spotty, high-latency, relatively low-bandwidth connection, the host would adapt, greatly reducing the feature set delivered and ensuring that only the most essential bits and pieces of information found their way to the client device. Essentially, content and applications would be available in any location, at any time, and end-users would select the most appropriate client device and browser for their specific needs, tasks, and usage profile.

The implications for this scenario on the business of software, hardware, services, and content are significant and the potential for disruption is widespread. Will the network finally become the computer? Are the days of the personal computer and packaged software, as we know them today, numbered? How soon might this scenario play out? What are your thoughts?

Blockbuster has struggled over the past several years to respond to disruption in the movie rental industry disruption led largely by online movie leader Netflix. This isnt news to our familiar readers, who will recall that weve profiled Netflix success before both here on the blog and in several issues of our newsletter Strategy & Innovation and that weve detailed Blockbusters struggle to respond (Innovators Insights #88: May 15th, 2007). Our perspective has been that Blockbuster has missed out on the online rental wave of disruption "Total Access is a response that is too little and comes too late.

But news this week shows that Blockbuster understands that it needs to do more. On Wednesday, it announced that it would be acquiring Movielink, a digital movie download service. The acquisition is a step forward for Blockbuster, but it moves them into a crowded area, where big players like competitor Netflix, Amazon.com and Apple already play and where success is far from guaranteed. In order to win the battle for digital movie downloads (rental and otherwise), Blockbuster will have to overcome some serious hurdles.

Movielink gives Blockbuster the content and the competency to let customers make digital rentals and purchases, but it doesnt make watching digital movies that much more attractive if it anchors movie watching to the PC. True, Movielink does allow you to watch movies on your television, but it requires a network with your PC, Xbox 360, or an AT&T set-top box. These arent impossibly high barriers Im sure that thousands of people overcome them. But for many millions of people (particularly those not living in a college dorm), Im sure the extra hassle and money involved take away from the attractiveness of digital rentals. If you have to move around a bunch of furniture to hook up your PC, buy an expensive gaming system or sign up for an expensive AT&T service, you might just opt to keep checking the mail to see what has comes out of your Netflix (or Total Access) queue.

I wonder to what extent digital film will follow the path of digital music only taking off when one company (Apple, in digital musics case) is able to create a seamless, integrated process from purchase to playing. If digital film does adhere to such a similar trajectory, I dont know how Blockbuster plans on winning against Apple (Apple TV + iTunes), against Amazons Unbox (partners with TiVo), or against any of the other seemingly endless list of companies developing set-top boxes or download services.

But at the very least Blockbuster wont be sitting on the sidelines for this next wave of disruption.

This past weekend, Wikipedia founder Jimmy Wales new startup, Wikia, announced that it had acquired an innovative web crawler called Grub, moving it a step closer to offering an open-source search engine. But is the Grub acquisition a step in the right direction?

Grub works differently than the webcrawling systems used by search leaders such as Google or Yahoo!. Rather than maintain a giant bank of computers that "crawl the internet, indexing it as they go, Wikia can use Grub to spread out the computing burden. Anyone can download the client and contribute their own processing power and bandwidth to the effort.

The innovation isnt just a cost-cutting measure. According to Grubs website, "Almost 50% of the database a search engine uses is either out-of-date, or incomplete at any given time. For this reason, Jimmy Wales says that "search is broken.

I wont argue with that fact that 50% of a search engines database is either out-of-date, or incomplete. Im not a search guru and really dont know. But as a user of search engines like Google and Yahoo (and, occasionally Windows Live), I have some doubts as to whether the comprehensive index Wikia hopes to create is really the way to innovate in search.

Grubs stated goal of creating and maintaining an up-to-date, comprehensive internet index is an innovation that consumers cant absorb. Based on my own experience, I think that the Googles and Yahoos of the world do a fine job of indexing. The pages they leave out are probably not the ones most people want to find. Most peoples frustrations with search arent related to incomplete or out-of-date indexes, but probably have more to do with the difficulty of finding the right combination of keywords that bring up the desired search results.

Grubs index just isnt an innovation in the right direction, it wont be valuable to the end user. What Wikia needs for success is a better search experience for the end user. It might need to be better at semantic search, or maybe it needs to leverage an open community like Wikipedia does in order to give search results a human touch. The problem is that both have been tried, at least in part, before. Will Wikia be able to succeed in an area where so many others have failed?

Wikia is supposed to launch "the first stab of something by the end of year. I suppose well see how innovative it is then.