Disruption By Innovation

Today, smart enterprises are carefully examining innovation to stay competitive. This has created fertile ground for progressive open source software: email servers, web servers, databases, content management systems, office automation systems.

For every breakthrough in the computing industry, there are fundamental ideas that shape the industry in the years that follow. One of the foremost observers of these changes, Dr. Clayton Christensen, proposes that investing in growth instead of profit is the secret to navigating the changing shape of the industry. Using innovation to generate new products, services and new markets is key. Let’s look at three examples.

Red Hat - Disruptive Innovation at Work

Red Hat is one of the clearest examples of a software company using disruptive innovation inherent in the open source model. Using the benefits of open source technology to propel itself into the forefront, Red Hat is building market momentum to disrupt existing market players and create a place for innovative open source software. This strategy of “disrupt and create” has transformed Red Hat from selling low-margin Linux distributions into a serious contender in the lucrative enterprise services market. Red Hat changed its business model from a low-margin, low-risk software publishing to focus on high-margin, high-risk opportunities of the enterprise.

IBM - Catching the Wave of Disruption

For IBM, Linux is both a nemesis and a savior. IBM took at least three years to evaluate Linux’s potential as a disruptive technology force threatening its future. Market demands and industry dynamics forced IBM to catch the disruptive wave of Linux and restructure itself around Linux – “… sell the hardware under it, the software over it and the services around it…” says Daniel Frye of IBM. IBM continues to evaluate open source software and evolve with it. Linux and the open source model catalyzed IBM to create new business units and to shut down old ones that had reached their end. The lesson that IBM teaches us is that the disruption of innovation must be permitted to phase out old lines of business as necessary. Otherwise both new business opportunities and the legacy business will fail in the long run.

Novell - Will it make the cut?

The difference, today, between IBM and Novell is that IBM is a Linux company that also does mainframes while Novell is a Netware company that also does Linux. The question is whether Novell can navigate the rough seas of a dual strategy that supports its legacy business together with the new opportunities of OSS. Especially while it still appears to favor its legacy product line. Novell’s acquisitions of SUSE and Ximian are beginning to shift the balance but it is unclear if it’s far enough.

The rest of the pack is far behind. Sun is struggling to find an identity – stuck between trying to reinvent Solaris and trying hard to be OSS friendly. Open sourcing Solaris and Java could help but it may be too late. HP and CA are heavily burdened by their past lifetimes, struggling to find a niche in the new open source model. Oracle likes Linux on good days but is still straddling the fence as MySQL moves into its market. Apple is too small to matter in the grand scheme of things. All these companies are lost in trying to maintain profits first while innovation is still optional.

Some companies will ride the wave of disruptive innovation and some will sink. Companies that are desperately trying to re-inflate the profits of their legacy products are at risk in the long run of losing to new growth markets fueled by OSS innovators.