Dr. Clayton M. Christensen, author of The Innovator’s Dilemma, said, “Disruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are generally cheaper, simpler, smaller, and frequently, more convenient to use. … . Ironically, in each of the instances studied in this book, [Innovator’s Dilemma] it was disruptive technology that precipitated the leading firms’ failure.
It is very interesting to see how Christensen’s research is being further validated by the rise of up-and-coming incumbent internet technology companies who are now taking away market share from enterprise application vendors. Telecommunication, content management, customer relationship management (CRM), database, and portal enterprise vendors are slowly seeing their market share erode as smaller more agile companies are building technologies that meet 80% of the customers need at a much lower cost. Companies such as Alfresco, Liferay, mysql, and salesforce.com have all built products that are competing against leading vendors such as IBM, Oracle, Microsoft, SAP, and EMC.
Other smaller companies have selected not to compete directly with enterprise application vendors, but to compete with specific functionality in an enterprise application. A good example of such a company is Xing. Xing created a business network that allows business professionals to maintain and share their business contacts with others. Xing now has over one million members who share their contacts freely. Businesses have been trying to do this same thing with CRM systems but with little success. As Xing continues to grow and build its network, businesses have started to turn to Xing for assistance with managing their company contacts.
The Internet provides a way for small businesses to build a solution that either competes directly with enterprise vendors or with functionality in an enterprise vendor’s product. Both strategies are potentially disruptive to enterprise vendors. Today, expensive marketing budgets, unaffordable infrastructure costs, security concerns, and technology superiority are a lot less penetrable barriers to entry. Companies can leverage the internet to cheaply market their solutions, buy hardware and host their products at very low and affordable costs, and outsource and use open source components to build products faster and cheaper. Although security concerns are increasing, trust in vendor hosted solutions has greatly increased. All these forces, plus the fact that existing vendors are tied to out-of-date architecture and are delivering functionality for the most demanding user, set the stage for market disruption.
In the Collaboration market, the innovative disruption has started. Companies such as 37signals, Zoho, and Zimbra have build collaboration solutions that challenge the likes of IBM, EMC, Oracle, and Microsoft. Collaboration prices have dropped, and continue to drop, making technology more affordable for the enterprise. But because of their hosted architecture, that incurs hosting and storage costs, incumbent vendors have faced price barrier that have prevented them from truly disrupting enterprise vendors and serving underserved markets.
Similar to Xing, Collanos choose to first compete against a few specific functions offered by enterprise and incumbent collaboration vendors. Where more holistic collaboration solutions required a high degree of computer expertise, monthly costs to support hosted infrastructure, restrictive company policies, and closed networks; Collanos choose to focus on a basic collaboration functionality that was easy to use, free, and open. Selecting a peer-to-peer (P2P) architecture was the innovation that has enabled Collanos to become a disruptive technology.
User feedback has been overwhelming positive. Students, small businesses, non-profits, and global markets have received Collanos simple but very innovative Collaboration solution. Users around the world can now experience the benefits of a collaboration system and a collaborative network for free. Thousands of users have downloaded and registered with Collanos. Daily teams have joined the Collanos network.
Collanos ambition is to provide its user network with a complete set of functionality that will allow them to benefit from the same tools that help make the enterprise successful.
Collanos aspiration is in line with Dr. Christensen’s findings, and according to Christensen’s theory, disruptive technologies such as Collanos who successfully start out serving underserved markets, eventually blossom and pick up the speed required to displace established vendors.