This post starts in the early 1998. I had just started as a new analyst at Aberdeen Group and was still learning networking technology. I was not that busy so I took every briefing request that came my way – so did not hesitate to take briefing with an MIT professor to talk about Internet protocols. The person was Tom Leighton, and he outlined a method for delivering Internet content more efficiently. I could not follow the technological nuances his concepts, but I was impressed by the elegance of the solution and thinking that it made a lot of sense, but that commercializing it would be a bear. The most memorable part of that day was afterward, a colleague pulled me aside to ask me who I met with. After telling him about the meeting, he chastised me for wasting time with someone who did not have a product. About a year later, Tom’s company, Akamai had one of the most successful IPOs in history.
The point of this post is not about my brush with fame (Tom probably does not even remember me or the meeting), but how I distinguish “break through” trends from fads before the rest of the crowd.
So here is a stab at identifying some of the things what I do intuitively.
- Monitor the news flow in your market segment and in other segments because many disruptions come from adjacent markets or segments. For example, the iPad, which is arguably the single most disruptive innovation in the TV industry, did not exist a year ago and was not designed specifically for consuming video content.
- What is in it for the end user? Does it require a major shift in habits, if so, does it offers something in return like dramatically lower costs. In its early days, VoIP was plagued with quality problems, required microphones and speakers, and required keeping the PC turned on. However, saving $3/minute for international calls made it worth it.
- What can I learn from similar disruptive technologies that we have seen in the past. It is amazing how often history repeats itself especially if the disruption comes from a similar sector. The pattern of social media adoption by enterprises was eerily similar to what occurred when the browser and web sites were first introduced. A few years ago, senior executives were asking the same questions about blogs, wikis, Facebook and twitter as they did about the web: what is this, is it real and what does it matter to my company?
- Who are the winners and losers and what steps might the losers take to block the adoption. Sometimes the better idea does not always win. We are already starting to see this was content owners are reevaluating their licensing to OTT vendors. For example, Showtime, announced that it is not going to renew its licensing of its newer shows to Netflix.
For example, I was one of the first analysts telling enterprises to pay attention to social networking, and over a year ago, I pointed to OTT as the major disruptor for pay TV operators and equipment vendors. Here is the back story.
I had read about Facebook for a while, but did not really understand it until I got my Facebook account (right after it was open to non-students – and much to the chagrin of my children). I saw the power of it was in its simplicity, abilty to consolidate content, provide news/updates to a group, and generate and publish content without breaking a sweat. If applied correctly to an enterprise, these basic social networking functions could greatly enhance their communications with customers and streamline enterprise communications and collaboration.
I was covering STBs when we bought our first Internet enabled Blu-Ray player and that let me watch YouTube and my Netflix instant queue on my home screen. Before that, to be able to watch our Netflix instant queue on the big TV, we had to put a laptop on a tray table and run an extra cable to the back of the TV set. The Blu-Ray set up was simple and did not require an extra box like AppleTV, Roku or Boxee. The quality was not as good as the pay TV but was acceptable. The price was a no-brainer, a flat $15 a month for two DVDs at a time and streaming more of movies than I care to watch. Sure, I would like more recent movies, but at that price, it was OK. I knew it was only a matter of time before Netflix and YouTube would quickly get more content and competitors. It became clear also that over time, I would not be totally reliant on my pay TV provider for all of my video content, which meant that I could cut back my premium options or drop my service all together.
That being said, I am not perfect: I thought buying Google stock was risky (because there was nothing preventing another competitor from developing a better search algorithm and taking the market much like what Google did to Yahoo). I missed Twitter’s success and its value as a marketing and customer service tool and underestimated how fast OTT video viewing would grow (Netflix alone can be 20% of an ISPs prime time traffic).
What is your opinion, is my record average, above or below? Am I missing something in my analysis? I look forward to your feedback.
You are doing very well, David, especially in spotting trends and writing about them. If you did as well in investing in them, you’d be rolling in the stuff. I trust you did not buy Akamai or Google in their infancy!
Thanks Murli, You are correct, I did not buy either one and given my long term view, I do not generally agree with the market. Remember AOL-Time Warner? I thought that AOL was going to become irrelevant pretty quickly as broadband services became available – then but the stock market did not realize this until many years later.