Investing in Disruptive Technologies

Previous articles have highlighted some of the challenges in attempting to develop disruptive technologies and products in a traditional corporate environment – basically it doesn’t work.

So, how can disruptive technologies and products be developed? This apparently simple question is actually three separate questions:

  1. How can disruptive technologies be developed?
  2. How can disruptive technologies be incorporated into current product offerings?
  3. How can new markets be addressed?

All of these questions have technical, economic, product, and corporate components.

Let’s start off with the first question.

In many ways, the easiest approach to developing new technologies is “somewhere else”. That is, let someone else develop a technology and acquire rights to the technology once it is proven. This is the fast follower or second mover approach. Like all potential approaches it has strengths and weaknesses.

The most obvious danger in fast follower is in missing a new technology. However, the greatest risk is actually a corporation’s ability to implement and execute disruptive changes to products, internal processes, existing resources, and corporate structure. There is massive resistance to major changes – the common outcome is to resist change until it is too late.

A good place to start is by asking the question “do we have a corporate strategy and mechanism for investing in small, poorly defined, low margin markets with high risk of failure?”

The two most common answers are “no” and “are you crazy?!?”. Companies like large, well defined markets with good margins. A good return on investment needs margin and predictability.

Where does this leave us?

What we are talking about is actually research, not product development. It needs to occur outside of traditional corporate environments. The logical thing is to do it in a corporate R&D group.

Unfortunately, corporate R&D groups are typically not tightly connected to discovering and nurturing new markets. Our focus here is on profitable products, so classic R&D only addresses part of what is needed.

So, what is needed?

  • We need a product and market focus – technology is a tool, profit is the goal!
  • We need minimal yet sufficient resources for exploration.
  • We need a place for unreasonable people to follow their passions.
  • We need the ability to experiment, try alternatives, learn as we go, and to change directions.
  • We need the ability to seek out and work with non-traditional customers.
  • We need the ability to target small market opportunities.
  • We need the ability to fail – and to learn from the failures, adapt, and move on.
  • We need time – time to explore and mature concepts.
  • We need freedom from many of the constraints, processes, rules, and overhead of mainstream corporate life.

Experience shows that this needs to be done outside of traditional corporate environments. “Skunkworks” projects and business incubators provide a model for how this can be done. You need a small, highly motivated team with not quite enough resources, probably in an isolated facility.

The funding model needs to focus on learning, not revenue. This is a way to address the risk inherent in research and to provide an appropriate level of control and structure. When the goal is learning you have a mechanism dealing with failures without failing. As long as you learn something actionable and can use it to guide the next steps you are making progress.

Next: Incorporating Disruptive Technologies into Existing Products

About Russell Doty

A technology strategist and product manager at Red Hat, working on the next generation of open source systems.
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