Established Players in Tech Industry Are Displaced By New Technologies and Companies Often When They Are Operating At Their Peak

In a column, Steven Sinofsky, former President of the Windows Division at Microsoft, cites various examples from the past to suggest that it is often when incumbents in technology space have established market dominance that new startups rise and displace them: While the tech incumbents are clearly generating massive revenue and profits, nearly all of this comes from products developed long ago. In fact, as we now know in hindsight, it is exactly when conventional wisdom conflates today's economic success with forward-looking product innovation that seeds are being planted for the next massive wave of innovation. Google was formed at time when the incumbents of AOL and even Yahoo were stronger than ever. Facebook came just after the dot com bubble burst. Even the reincarnation of Apple took place after the bubble burst with products being developed as the bubble peaked. And for what it is worth, the PC ecosystem, particularly Windows, was relatively "flat" mired in Windows Vista while Firefox dominated and Google Chrome was appeared (Windows 7 wouldn't come out for a year after Chrome). In the infrastructure space, the seeds were planted for both AWS and VMWare in the shadow of the dot com bubble. In an historical context it is highly likely that the next wave of innovation in new technologies and new companies will happen right under the noses of big companies operating at what the public markets think of as peak (earnings) potential.

Not displaced, the users change

[petes_PoV]

This isn't cause and effect thing. It is not because tech companies are at the top of their game when a newcomer comes along. It is because there is a cycle to these things. One that means that users wants, needs and even just fashions change regularly - and that this often coincides with when the previous "generation" of tech solutions have reached maturity.

Google didn't displace AOL, they produced a search engine that was better than anything around. That gradually blew past the competition over a period of years. Facebook is only cited as an example because (coincidentally) it was successful. There were thousands of failures during the same time period. Any of them could have been used as an "example" here, but they failed, so they didn't make it into the article.

If there is something in this, it is not one of cause and effect. It is down to timing and cherry-picking examples that support the author's thesis.

Re:

[mikael]

Between 1996 and 2000, PC's began to displace UNIX workstations as 3D graphics boards became affordable as Windows NT/95 came out. Many workstation vendors buckled and just gave in to Windows NT. The height of the dot com boom in 2000 was when sales of sub $600 desktop PC's at Walmart and other department stores were also at their peak. As laptop, notebooks, netbooks and web-books became cheaper, the market adjusted Then around 2005, the mobile market took off when it was possible to use GPRS/GSM modems.

PDA

Re:

[houstonbofh]

Large companies at the top of their game are very risk averse. They have a lot to lose now, so play very conservatively. New startups have nothing to lose and take chances because of that. Most of them fail. But we only hear about the successes that took a wild chance with nothing to lose. And occasionally, one of those shots in the dark hits a bulls eye that redefines everything.

Re: Not displaced, the users change

[zaphirplane]

Like google moon shot budget is multiples of many startups that is public, Apple and amazon have multiple hope and a prayer projects or just in case. I am donâ(TM)t follow what you mean by scared of risk. Thats an insurance / bank thing

Re:

[houstonbofh]

Like google moon shot budget is multiples of many startups that is public, Apple and amazon have multiple hope and a prayer projects or just in case. I am donâ(TM)t follow what you mean by scared of risk. Thats an insurance / bank thing

Google will never do anything disruptive with search, because that is their bread and butter. Nor with advertising. Yes, they have moonshots, but only in new markets. and never anything that might hurt YouTube, for example.

Re:

[account_deleted]

Comment removed based on user account deletion

Re:

[epine]

Agreed. Established companies will never cannibalise their cash cows. Its a lot of friction that CEOs just don't need in thier life. Why take risks when the cash is rolling in? Human nature.

"Human nature" is putting forward the tripe you just posted.

Think for half a second. Google has a 730B market cap. That's a mighty large aggregation of stakeholders.

Efficient frontier [wikipedia.org]

Does it really make sense to have behemoths dabbling in high risk activities? Is Google going to make the star employee of some highly s

a DUH! analysis

[swschrad]

existing companies lose business when challenged by newer ones. uh, yeah, that's when their business slides. and that is when the peak ends. you've got to get up pretty early in the afternoon to fool me with that other reading of the data.

The rich and powerful learn

[rsilvergun]

unlike the working class. Once in a while things move faster than they can keep up, e.g. the dawn of the Internet. But for the most part they keep a lid on this kind of 'disruptive' tech. Right now the solution is to keep all the money for themselves (re:Apple and their $650 billion in cash) and then use it here and there to buy any and all potential start ups. The upcoming corporate tax cut in America is going to exacerbate this as companies have a ton of cash but not a lot worth spending it on. R&D, let us remember, is mostly done by the government.

We shouldn't be surprised. This is the essence of what it means to be "conservative". It means to push back against change. It's just nobody ever seems to question the actual motive of that particular ideology. It's always simple time this and when things were better that. Never a word about how it just so happens the ideology favors the establishment over new players.

You can define it however you want

[rsilvergun]

That's the beauty of words. But it doesn't change the fact that a lot of very powerful people are using the sentiment behind your words to maintain and expand their wealth and power, more often than not at your expense and the expense of the entire working class.

I should probably also add

[rsilvergun]

that if you call yourself conservative but then support progressive policies, well, you're not conservative, are you? Similarly if you call yourself conservative but favor rolling back to the 1600s then, well, you're changes are so radical you're not really conservative anymore. One of the most conservative politicians in our time is, oddly, Hillary Clinton. She'd have left everything as it; at most tweaking things just a hair and only really doing that to maintain status quo elsewhere. It was one of the reasons folks hated her with a passion. There are very, very few 'real' conservatives. e.g. folks who don't want change. What I see mostly are people who want to make a better world (the Bernie Sanders crowd) and people who want to profit as much as they can from that world (the Donald Trump crowd). In the middle you've got Hillary Clinton and Mitt Rhomney.

Re: I should probably also add

[dmitriy]

I simply must add that conservatives learn from the past. Progressives learn from the future. Imaginary future.

Re:

[rickb928]

"They just want to see non-whites as the ones in power."
So, by your definition, progressives/liberals are racist by definition?

I agree, and it's refreshing to see it plainly stated. Using race as criteria is racist by definition. Look carefully at the histories of the major political movements in America. and see the undeniable truth.

Re:

[msk]

Why can't people be themselves or make their own healthcare decisions without being labeled a part of "progressive lunacy"?

To borrow a quote, if a religion requires others in public to change their behavior, then that religion is broken.

Because healthcare is too complex

[rsilvergun]

to leave to the free market. It's not a twinkie. You can't shop around for a heart transplant. Also, if you need it you _need_ it. Meaning the person selling it to you has a ton of leverage. And no, it's not doctors selling it to you, it's the for profit insurance industry. Speaking of which, in what kind of healthy industry do you have a situation where the person selling you a product does everything it can to avoid delivering it? None, the answer is none.

We don't need a gov't take over of healthcare,

Re:

[rickb928]

You need food. Does the free market fail there?

Clothing and shelter are considered necessities in the developed world. Does the free market fail there?

Healthcare is a commodity also, necessity doesn't change that. If a free market in healthcare existed in America we could test the theory, but it doesn't and hasn't for decades, if not longer. Your premise, I believe, is flawed.

Re:

[pnutjam]

Are you arguing that food is "free market" in the US?
I have about 25 billion [downsizinggovernment.org] reasons your incorrect.

Re:

[rickb928]

Even clothing, then, is not a 'free market'. As nothing, bu that definition, is free.

Perfect is the enemy of good.

Re:

[Trondheim]

That religion quote is entirely inaccurate. Religion exists to help people become better than they would if left to their own devices.

And as far as people being themselves, tell that to the bakers and florists who are being sued out of business by LGBT groups. Progressive policies that strip people of their First Amendment rights to free exercise of their religious beliefs are, in fact, progressive lunacy. And murdering babies? C'mon, that's not a "healthcare choice." That's flat out murder.

Re:

[rickb928]

"Religion exists to help people become better"

Um, I'm not sure how to express this so that it is understood, but I'm certain that experience shows this is wrong. Some religions may, but ultimately religion exists to show people a truth. What they do with it is largely determined by the truth. If their faith teaches they should serve a god that wants the best for them, including a relationship with that god, they may indeed be 'better' than not. If their faith teaches them to serve a god that requires them t

Re:

[rickb928]

Yes, my chosen religion requires me to change my attitudes and behaviors, not just in public. Most any philosophy would, to be fair, so tarring religion that way seems narrow minded.

Re:

[msk]

The problem is when that religion requires non-adherents to change _their_ behavior.

A big problem.

Do you agree?

Re:

[rickb928]

Absolutely.

Duh - no one notices if they aren't

[gurps_npc]

Lets say your company is doing well, but has a slight pullback, losing 10% of your market share and you are now the #2 player, then a startup comes out of nowhere to take over the entire industry.

People don't talk about how the startup beat the guy that USED to be #1 and is now #2. Instead they talk about the startup beating the guy that just made it to #1 spot after 10 years of hard work.

In fact it's almost physically impossible for someone to create a disruptive technology without taking out the #1 player - it's just not disruptive if your tech only makes you #2. And if you are #1, then OF COURSE you are at your peak. Unless the economy is in a downward spiral, the #1 guy has to be at his peak.

That's like saying the wow, the best scorer in the league is having a good year. He would not be the best scorer if he wasn't having a good year.

Innovator's Dilemma

[MonkeyTrial]

Sinofsky restates well-known book by Clayton Christensen written in 1997. News at 11:00?

Re:

[jbmartin6]

The news is even earlier than that. TFA describes a well known phenomenon across any industry. It's been part of the idea of creative destruction [wikipedia.org] for a century or so at least.

Re:

[Kevoco]

"TFA"?

Re:

[jbmartin6]

The Funny Article

If it gets me off ...

[CaptainDork]

... Facebook, I'm OK with it.

Motorola and Nokia

[spinitch]

Motorola and Nokia - milked their cash cows to long. Iridium helped sink Mot. Nokia still has infrastructure.

Is anyone surprised?

[PCM2]

Court-declared monopolist declares that monopolies, in effect, do not exist, or are at least irrelevant. Stay tuned in the next half hour to hear prognostications about the color of the sky.

Not completely applicable

[Ayano]

For big tech companies, acqui-hires and copying of start up tech something big conventional companies can't do. Changing a product lineup or adding features for physical products or other established services is difficult. For a tech company, introducing new features is second nature, see Snapchat and Facebook for example.

Big tech companies leverage their market dominance such that new startups need an increasingly high bar to vault to complete.

He made sure to break everyone's VB6 world by dele

[DaveSewhuk]

I know there will be VB flames, but multi-year 10s of thousands of production code becomes #2 when idiots like Sinofsky delete the most popular programming language of its day to force you to rewrite/architect it in V0.0 of a new environment called .NET. The made sure I will never depend on Microsoft technology going forward. This is why they got overtaken.

Re: He made sure to break everyone's VB6 world by

[zaphirplane]

Are you upset that MS moved away from VB? Very brave to say that here, prepare for massive flaming

Re:

[rickb928]

I sit next to two team members who loathe VB, and are using it by choice to solve problems and increase productivity in meaningful ways, rather than use tools that are too expensive to justify.

Complain all you want, VB does work. Still. Right tool for the job, my friend. Whatever it is.