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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: BDR who wrote (37592)	1/7/2001 8:05:38 PM
From: Eric L	Read Replies (1) \| Respond to of 54805

Re: 'disruptive technologies,' in Wireless << I don't pay much attention to Gilder and haven't read Telecosm but the review is interesting >> In "Telecosm" Gilder expresses the viewpoint that spectrum is relatively infinite, and you shouldn't need to assign specific spectrum to carriers because "smart radio's can be designed to sniff out and usr momentarily available spectrum. Anyhoo ... this one is interesting: >> An Innovator's Dream Is Another's Disruptive Technology Peggy Albright Wireless Week January 5, 2001 When Sprint Corp. entered the U.S. long-distance business in the early 1980s, it took a then-radical approach to differentiate itself from the old guard: It put in an all-fiber network that shook up the dominant player AT&T Corp. AT&T, which had not yet completed its fiber buildout, had to scramble to expand its use of the technology to stay on par with the little-known company. While AT&T didn't make a big deal of it - even though the upgrade cost the company billions of dollars - the point is this: The motivation for change came from outside of the industry's establishment. AT&T had to follow Sprint's lead or risk getting upstaged by the younger firm. The case is a classic example of what business observers now call 'disruptive technologies,' new and effective innovations that are difficult to incorporate into legacy systems. The concept has become a popular way of looking at technology trends ever since Clayton Christensen made it the focus of his popular book, 'The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail.' The concept is cropping up frequently in wireless business conversations these days because the industry, as young as it is, is itself entering an era of innovation. Companies today will face fundamental changes tomorrow as they encounter numerous technology trends all hitting at the same time: emergence of third-generation systems, packet-switched networks, broadband radio access technologies and IP core networks. How companies succeed in embracing the best of such innovations may influence who dominates the market in the coming years. The disruptive technology concept also is getting attention in wireless because it causes entrenched companies to reassess the platform that they're building from, says Craig Farrill, managing director and chief technology officer at inOvate Communications Group, formed last year specifically to develop companies that are building breakthrough products. 'Every operator in the world that I'm familiar with is going through a huge transition in their network,' he says. The availability of new innovations is causing companies to make their decisions earlier than they normally would. The main challenge for both large and small companies that are facing such decisions is to identify disruptive technologies at the right time and embrace the good ones, thereby turning them into opportunities, not obstacles. Otherwise, according to the theory, market-leading companies could lose their competitive edge over time if they bypass strategically important innovations that are introduced by startup firms. Disruptive technologies have a few general characteristics. Often the innovation offers customers distinct performance or cost advantages, but the technology is difficult to incorporate into a legacy production process or business approach - the primary reason an established company may pass it by. Remember what happened with computer disks, when PC companies switched from flimsy 5.25-inch floppy disks to higher capacity, durable ones that were 3.5 inches in size? Any disk manufacturer who refused to adopt the new approach is now a marginal player - if they're still in business at all. Often a disruptive technology is one that appeals to the low-end segment in a marketplace that serves high-end customers who ensure better profit margins. Dominant companies may not give much priority to serving the low-end segment because such services would cannibalize existing revenue streams. Thus a newcomer who grabs those customers cost-effectively can, over time, whittle down an incumbent's hold on a given market. Cricket Communications Inc., the domestic wireless service operated by Leap Wireless International Inc., has been described as just that type of technology. The company offers a low-cost service targeted to a niche market of low-budget phone customers or first-time wireless users. While still early in its buildout strategy, the company has shown that it can grab a good share of POPs in its markets and that its customers are beginning to do something that is really disruptive to the status quo: abandon landline altogether. So what other types of technologies are likely to earn the label 'disruptive' in the wireless industry? Some will no doubt occur in radio-access networks, which will soon become the bottleneck in the overall wireless Internet equation, Farrill predicts. 'Everything else can be widened up on an almost unlimited basis,' he explains, and that's why RANs will continue to see a lot of research and development. Advanced RANs, which might include software-defined radios or advanced CDMA technologies, may qualify as disruptive because they all have the potential to revolutionize cost structure, network capacity and quality of service, as well as signal range. Ultrawideband radio, if it succeeds, would be another one of these. The move toward server - and router-based network applications - and away from those that reside on specially designed processors with proprietary language programs - could be another type. Such an approach will help operators reduce costs because it uses open standards that will facilitate creation of multivendor systems, which in turn increases cost competition for contracts and reduces capital costs. But the approach likely will be very disruptive to incumbent infrastructure manufacturers that have traditionally sold network equipment as platforms, not components. Those manufacturers will have to meet the market's new need or risk being sideswiped by newer firms. Likewise, the evolution to a transaction-based environment - and away from an airtime-based environment for billing calls - to keep track of how customers use their services could shake things up. That type of billing will be necessary for companies offering packet-based services. But because the billing system often is a company's most visible tie to its customers, and because these systems already are so complex, adopting the new approach will be much harder for established operators to implement than it will be for startups. Regardless of how disruptive technologies affect the emerging environment, Farrill believes the theory can be viewed, simply, as an accelerator of change. The companies that embrace change first will have a vision, the in-house capability to incorporate the technology and the ability to tolerate the risk it poses. Those are the companies that will benefit. Being able to differentiate themselves in a crowded marketplace, Farrill believes, is a 'must-do.' << - Eric -