Rapidly Growing Niche

What is disruption? How does it occur? When we answer these questions, we will see that in many cases the leaders in the market are blindsided by the rapidly growing niche.

The word "niche" describes a market that fits nicely into a crevice of the overall market, but, according to popular opinion, doesn't really matter. And that's actually the funniest thing of all, in a way: the market that doesn't matter can actually take over the larger market, given certain characteristics. Love this stuff.

Cars

Consider the rise of the automobile. The specific market that internal-combustion vehicles displaced was the horse-drawn carriage, trap, dogcart, brougham, or whatever Sherlock wanted to call them. But consider the advantages of the new niche technology.

The space taken up by the conveyance is the first issue: having a horse and a cart means having both a stable and a garage, while a car only requires a garage. Umm, not to mention that the stable had to be swept out(!).

Which brings us to the next issue, consumables: a horse must be fed, and so must a car. But what the horse eats can go bad, and must be carefully regulated to avoid having the horse eat itself to death. Fuels can be easily stored. In plain fact, people were used to using fuels because they lit their houses with kerosene.

Repair was another issue: a horse can go lame and a car can also break down. But when a horse goes lame, it's usually not recoverable (and sad). However, a car can be fixed.

In the personal transportation market, the ever-growing advantages of the rapidly growing niche product, the car, increased its uptake dramatically, even exponentially, displacing the horse-drawn carriage. It took decades to fully play out.

Instead of sweeping out stables, we are now dealing with the hydrocarbon emission problem, and its carbon footprint. One thing is clear: we need to be smarter about the environmental impact of our disruptive technologies!

But now consider electric vehicles. In the US by the high cost of gasoline, which was almost $4.10/gal in June 2008, drove the hybrid Toyota Prius to great success as they were selling about 20,000 of them per month at the time. The cost of gasoline went down, driven by an economic downturn (caused by hurricanes and a crisis in mortgage lending which led to bad debts and a foreclosure increase). This occurred simultaneously with the introduction of the disruptive technologies of shale oil extraction, fracking, and improvements in deep-sea drilling. This caused the biggest oil producers, Saudi Arabia and Russia, to be dominated by the production in the US, for a while. The Saudis countered, with their huge cash hoard as a life boat, by increasing oil production, thus decreasing the price of oil even more, but diminishing their spare capacity. This had the dual effect of helping them to retain clients that they were losing left and right, and also of putting pressure on the Americans whose revolutionary oil extraction techniques might (still) be made too costly by reducing their profit margins.

All of this will eventually lead to a spike in oil prices and thus even greater reliance and demand for electric vehicles, like the Tesla Model S, which I am seeing everywhere. Perhaps because I live near Silicon Valley. Hmm.

Progress is accelerating

As mechanical wonders turn into embedded computers and sensors make them ever more cognizant of our environment, the size of a gadget is going down dramatically and the capabilities of a gadget are increasing tremendously. Once you can carry it in your pocket, it becomes irreplaceable, essential. The smaller gadgets get, the faster they will improve: now the improvements are often a matter of simply writing new software.

So what used to take decades now takes a few years. In the future it likely won't even take that long. Now let's look at some more examples of disruption (and disruption prevented) in this era of faster progress.

Computers in general

Well, now we come to the biggest disruption of all, which is actually in progress: computers. The rise of the smartphone shows that an all-in-one gadget can succeed over the feature phone. And by modifying its form factor and use cases, the rise of the tablet shows that there is a great alternative to the netbook, laptop, and even the home computer. Even businesses find that iPads can replace a host of other, clumsier gadgets.

What were the advantages that triggered the displacement of the feature phone by the smartphone? A single high-resolution glass touchscreen was an astounding improvement over the button-cluttered big-fat-pixel interfaces of the feature phones. A simpler interface with common visual elements won out over the modal menu environment that had to be searched through laboriously to find even the simplest commands. It can even be argued that the integrated battery made the process of owning a phone simpler. What cemented the advantages of the smartphone was the ecosystem that it lived in. On the iPhone, this is exemplified by the iTunes Music Store, the App Store, and the iBookstore. A telling, crucial moment was when the smartphone didn't have to be plugged into a desktop computer to be updated and backed up.

The next step was the tablet. In retrospect, it was more than just increasing the size of the screen. It required more power and it probably had a very different use case. The use case was closer to the laptop. On the smaller end, tablet sales are probably being cannibalized by the larger phones such as the iPhone 6S Plus. On the larger end, the power of tablets will increase until they become viable alternatives to laptops.

Still, I love my laptop.

But all it would take is a significant increase in battery technology to let the tablets reach the power of the best laptops. Then it will be purely a matter of ergonomics. Tablet are lighter, still quite useful, and clearly good enough for many types of businesses. The disruption of the PC market is but a few years away, I expect.

The post-PC era is nigh.

Those who call tablets PCs really don't quite have a handle on the form factor. Perhaps it's like Microsoft says: all it takes is a keyboard and your tablet becomes a PC. Detachables have the advantage of a keyboard and a bigger battery, with the prohibitive cost of the weight of the device.

While I like my laptop - it IS heavier than a tablet by a huge margin. Perhaps the rapidly growing niche of tablets will displace the laptop - but the growth isn't there yet.

Social media

Now: why did Facebook buy Instagram? Because it was a rapidly growing niche that was taking on more and more of its customers' time. By purchasing it they accomplish two things. First, it's a hedge against the niche technology taking over and displacing them. Second, it prevents their competitor, Twitter, from purchasing it. Mark Zuckerberg, Facebook's leader is smart. He knows that the rapidly growing niche can take over. After all, Facebook successfully did the same to other portals such as MySpace and Yahoo.

And what comes around goes around.

Observing Microsoft, Part 3

When a company chooses a strategy, it is usually important that the strategy must make sense given its existing business model. A strategy of changing the business model, however, is a much harder one to implement and takes years. And that's one of the reasons why I'm observing Microsoft.

OMG there's so much to catch up on! But it's clear the trends I was referring to in my previous installments are being realized. To start with, I looked at their Surface and Windows 8 strategy, and then I looked at their management of the Windows brand, and its subsequent performance in the crucial holiday season.

Converting themselves into a hardware company, in the Apple model, is sheer madness for a software company like Microsoft. It will kill off their business model very quickly, I think. And yet they continue to do it, company culture be damned.

Ballmer is a coach personality, and clearly business looks like a football game to him. I can imagine him saying "if a strategy is not working against our opponent, then we must change it up". But it's clear that it's much easier to do this with a football team than it is to do the same with a company of 100K employees.

So I wonder why Microsoft doesn't just focus on making business simpler? Instead, they have been making it more and more complex by the ever-expanding features of Office, their business suite.

Software, hardware, nowhere

As one of Steve Jobs' favorite artists, Bob Dylan, once said "the times they are a changin'". And Steve knew it, too. At TED in 2010, Steve said that the transition away from PCs in the post-PC era had begun and that it would be uncomfortable for a few of its players. I took this to mean Microsoft, particularly. But how has it played out so far?

Microsoft is a software company that dabbles in hardware. Most of its revenues come from software, but remember that they make keyboards and mice and also a gaming console. These are only dabbling though, because the real innovation and money is to be made in gadgets like phones, tablets, and laptops. But their OEMs make gadgets, which requires a significantly greater level of expertise and design sense. So Microsoft's entry into gadgets can only represent their desire to sell devices, not licenses. They want to be like Apple, but specifically they want to own the mobile ecosystem and sit on top of a pile of cash that comes from device revenues. And the OEMs like HP, Lenovo, Dell, Acer, and Asus are a bit left out; they must compete with their licensor. That can't be good.

So Microsoft is clearly changing its business model to sell hardware and to build custom software that lives on it. Hence Surface RT and Surface Pro. But their first quandary must be a hard one: what can they possibly do with Windows? Windows 8 is their first answer. The live tiles "Metro" style interface is unfortunately like greek to existing Windows users. The user experience, with no start menu, must seem like an alien language to them.

This entire process is beginning to look like a debacle. If it all continues to go horribly wrong, the post-PC era could happen a lot sooner than Steve thought.

Microsoft ignores their core competence as they blithely convert themselves to a hardware company. Specifically, I think that's why they are doing it badly.

They could end up nowhere fast.

Microsoft's numbers

Microsoft is a veritable revenue juggernaut and has done a fairly good job of diversifying their business.  An analysis of Q4 2012 reveals the following breakdown of their business units in revenue out of an $18.05B pie:

23% Windows and Windows Live
28% Server and Tools
35% Business
4% Online Services
10% Entertainment and Devices

This reveals that business is their strongest suit. Servers also speak to the business market. Online services also largely serve businesses. Each division, year over year, had the following increase or decrease as well:

-12.4% Windows and Windows Live
+9.7% Server and Tools
+7.3% Business
+8.1% Online Services
+19.5% Entertainment and Devices

This reveals that Xbox is their fastest-growing area. It is believed that Xbox is leaving the PowerPC and moving to AMD cores and their Radeon GPUs. This could be a bit disruptive, since old games won't work. But most games are developed on the x86/GPU environment these days.

It also shows that their Windows division revenue was down 12.4% during the quarter year over year. This involved a deferral of revenue related to Windows 8 upgrades. Umm, revenue which most likely hasn't materialized, and so you can take the 12.4% as a market contraction.

Why is the market contracting? Disruption is occurring. The tablet and phone market is moving the user experience away from the desktop. That's what the post-PC era really is: the mobile revolution. Tablet purchases are offsetting desktop and laptop PC purchases. And most of those are iPads. It gets down to this: people really like their iPads. It is a job well done. People could live without them, but they would rather not, and that is amazing given that it has only been three years since the iPad was released.

The consequence of this disruption is that PC sales are tumbling. If you dig a little deeper, you can find this IDC report that seems to be the most damning. Their analysis is that Windows 8 is actually so bad that people are avoiding upgrades and thus it is accelerating the PC market contraction. On top of the economic downturn that has people waiting an extra year or two to upgrade their PC.

Microsoft CEO Steve Ballmer stated in September 2012 that in one year, 400 million people would be running Windows 8. To date, it appears that only 80 million have upgraded (or been forced to use it because unfortunately it came installed on their new PC). That's why I said we need to ignore that deferred revenue, by the way.

If you look at OS platforms, Microsoft's future is clearly going to be on mobile devices. Yet they are not doing so well in mobile. In fact, they are becoming increasingly irrelevant, with about 80% of their Windows Phone models on only one manufacturer, Nokia. Soon, I think they may simply have to buy Nokia to prevent them from going to Android.

In the end, you can't argue with the numbers. The PC market is contracting, as evidenced by Windows revenue declining year-over-year. Tablets are not a fad. As the PC market contracts there are several companies that stand to lose a lot.

Reorganization

What is the Microsoft reorganization about? There are three things that I single out.

The first and most noticeable is the that the organization puts each division across devices so the software development is not device-compartmentalized, and so that Windows for the desktop is written by the same people who write Windows for the devices. At least in principle.

And, of course, games are now running on mobile devices, dominating the console market. And undercutting the prices.

This closely mirrors what Apple has been doing for years. And this clearly points out that Microsoft is envious of the Apple model and its huge profitability.

Second, in reorganizing, Microsoft is able to adjust the reporting of their financial data, to temporarily obfuscate the otherwise embarrassing results of market contraction. This is because if each division reports across devices then the success of a new device will hide the contraction of the old ones. At least, in theory.

But Microsoft made a huge bet in the Surface with Windows RT. And it's not panning out. They have just reported that they had to write off $900M of Surface RT inventory in the channel. The translation is this: it's not selling. They have instituted a price drop for Surface RT. I bet they won't be able to give them away. But when they finally are forced to, they will be the laughing stock of the mobile market.

Today, Microsoft is down 11%. That's represents a correction. A re-realization of the capitalization of Microsoft. This represents a widely-help perception that the consumer market is lost to them.

Third, Ballmer wants the culture of Microsoft to change. They have been having problems between competing divisions. Coach, get your team on the same page! Wait: they should have been on the same page all along. After all, the iPhone came out in 2007, right? Ballmer didn't think too much of it at the time. That's why coaches hire strategy consultants.

A reorg can be even more traumatic than a merger. It's all about culture, which is the life blood of a company. It's what keeps people around in a job market that includes Google and Apple.

Monkey business

I have to give it to Microsoft: they really want to give their tablet market a chance. But they are doing it at the expense of their business market. They are reportedly holding off on their Office for Mac and iOS until 2014. A deeper analysis is here.

This is a big mistake. They need to build that revenue now because BYOD (bring your own device) is on the rise and they need to be firmly in the workplace, not made irrelevant by other technology. If they lag, then other software developers that are a lot more nimble will supplant them in the mobile space. Apple, for instance, offers Pages and Numbers as part of their iWork suite. And those applications read Word and Excel files. And they can also be used for editing and general work.

Microsoft should be focusing on making business simpler. Cut down on the complexity and teach it to the young people. Reinvent business. This entails making business work in the meeting room with tablets and phones. Making business work in virtual meetings.

They certainly had better make their software simpler and easier to use. They must concentrate on honing their main area of expertise: software.

If they don't do it, then somebody else will. Microsoft should stop all this monkey business, trim the fat, and concentrate on what adds the most value. They simply have to stop boiling the ocean to come up with the gold.

The moral

There are some morals to this story. First, don't ever let "coach" run a technology company. Second, focus on your core competence. Third, and most important, create the disruption rather than react to it.

Greatness

People who change the world for the better do so because they are led to do it by their conscience. Sometimes it's intuition of what the future should look like. Sometimes it's belief in enriching people's lives. Sometimes it's a feeling about what makes the best experience. Sometimes it's the sense that they are meant to do this.

Once in a generation

When you find yourself in the presence of greatness, there is no way to ignore it. You are stricken by the clarity, the simplicity, and the inarguably correct statements. Their way of understanding is fresh and insightful. Imagine talking with a scientist or mathematician that changed the world: Euclid, Sir Isaac Newton, Karl Friedrich Gauss, Srinvasa Ramanujan, Nikola Tesla, or Albert Einstein! Imagine spending the afternoon in conversation with a great leader that forever changed the way society works, like King Solomon, Charlemagne, Emperor Augustus, or Abraham Lincoln. How I would like to sit and exchange musical ideas with a composer who forever changed the language of music such as Johann Sebastian Bach, Ludwig van Beethoven, John Lennon, or Paul McCartney (I still have that chance, since McCartney is still around!). And what could I do but sit in admiration at the brilliance of the artists and geniuses that forever affected style and ignited our imaginations, such as Leonardo da Vinci, Jan Vermeer, Vincent van Gogh, Pablo Picasso, or Maurits Cornelis Escher?

When I was an idealistic kid, I wondered about each of these people. I wondered what it would be like to be one of them. Was that even something I would want? How did they accomplish what they did? What sort of difficulties did they go through?

I had so many questions! And I was bursting with ideas also. How should I channel my creative energies? How would people look at my life's work?

It was an interesting motivation, to imagine myself in the shoes of someone great. Soon I forgot all about it, though, and immersed myself in number theory, computer programming, music, and analytic geometry.

I couldn't figure out how they did what they did. All I had was their work to look at. But, once exposed to it, I began to want to create my own music, write my own programs, investigate my own areas of mathematics. It was the start of a journey that I am still on today.

The weight

Talented people are also flawed. It's a bit like they carry the weight of their greatness that is always with them. This theme, with the ring of truth to it, has been expressed in fiction several times. For instance, Sir Arthur Conan Doyle's Sherlock Holmes, a beloved character adept at following clues and making deductions, was only the intense, enlightened sleuth when the game was afoot. During off times, he fell prey to cocaine addiction.

But is the theme of the tortured genius only around because it makes a better story? No.

Beethoven went deaf at the pinnacle of his fame. Einstein had his remorse at unleashing the atom and yet urged Roosevelt to build the atomic bomb. Van Gogh courted madness and tinnitus, even cutting off his ear. Newton's mother abandoned him, remarrying when he was only 3, which left him a furiously competitive, ruthless, and paranoid man who never had any romantic relationships of any kind. Ramanujan lived in squalor much of his life, starving at some points, and yet made discoveries of such genius that even today we are still struggling to decrypt them. When they tried to school him in modern mathematics, he spouted ideas at such a furious pace that it became useless to continue.

So let's look behind the curtain. What makes this happen?

Some people believe, once they have exerted great change on the world, that they deserve more than mere humans. This is a corrupting influence borne of pride, conceit, even megalomania. Such people may make great changes, but they are rarely truly great. This kind of flaw has brought us dictators, generals, and warriors.

Other people find, when they are working obsessively on a very hard project, that it is their destiny to solve the problem. Even that it is their duty to humanity to build it. I know that, once I am wrapped up in a problem, I often think of nothing else. It is this vacuum, however, that leads to the pathways of delusion. Still, you have to get your motivation from somewhere!

It's true that people can be driven to overcome their difficulties in life. If they are hurt by those around them, they might easily escape into a self-created world where they can feel comfortable. Such a world allows them to channel their genius. Or they might be disabled in some way. The compensating behavior for a disability can also become a framework for channeling their specific talents. This was certainly the case in Beethoven's career. In his silent world, he was no longer influenced by the local styles and instead created his own. Work can be a distraction from a painful existence. In Karl Friedrich Gauss' case, the death of his wife and son in 1809 led to a depression that he couldn't shake. Only his work could give him respite from the blackness.

Madness can be an influence that compels the genius to excel. There can be ideas in the head that are literally struggling to get out. Sometimes creation is the only therapy that helps. This was certainly the case with Vincent van Gogh. Nikola Tesla suffered from obsessive-compulsive disorder, finding it ever necessary to do things in threes and loathing to touch round objects.

Obsession can be a weight as well. Someone driven to solve a problem will exhibit behavior that is simply obsessive. This can drive them to forget about the responsibilities of life such as relationships, food, and sleep.

Producing greatness

To make a great thing is not just something that is done in a few minutes. The first thing you must do is to understand fully what the concept is for what you are making. And write it down. Clarify it. Make drawings. But never lose sight of what makes it great. Spend some time thinking about the concept. Figure out what its value is. Put the concept away and return to it later. It happens that the best things might come to you when you are driving, shaving, or even dreaming.

To produce it may take many, many tries. I have mentioned before that a large fraction of things tried often must simply be thrown away. This is the way it is when I am solving an unbounded, difficult problem with no general closed-form solution. Examples of this are common.

When Thomas Alva Edison was working on the light bulb, he tried 2000 different materials before he settled on the carbon filament. Isaac Newton spent a laborious eighteen months working on his Principia, itself the result of a decade of thought. In it, he developed the infinitesimal calculus, laboriously rewriting it in standard geometrical terms so astronomers of his day could understand it.

When producing a great product sometimes the product is not the only thing you have to produce. It is clear in many cases that you have to build a whole system of capabilities for it to live in. A context of usefulness.

For Edison, it wasn't enough to create the light bulb. He also had to create a generator of electricity so there was an ecosystem to support it. When Newton was writing his Principia, he had to incorporate and prove the work of people before him, like Johannes Kepler, whose second law, shown above, had already been empirically verified.

For Steve Jobs, it wasn't enough to produce the iPod, iPhone and iPad. He also had to build the iTunes media store, the app store, and several other web services. These are considered to be essential to the success of the iDevices.

You learn things along the way to creating and perfecting it. Some aspects of your product don't even occur to you until it gets used.

This wasn't the case with Albert Einstein, whose General Theory of Relativity finally provided the framework that superseded Newton's physical laws. While it was introduced in 1915 and correctly accounted for the procession of Mercury's perihelion (part of its orbital mechanics), it wasn't until 1959 and later that a systematic series of precision test had verified many of its provisions.

Productizing greatness

Most inventions are not so theoretical. With these, you get a chance to make sure they are right. And the best inventions, the ones that really have an effect, are productized.

If you are making a product, decide what it is that you want this product to be. Do you want it to be the lowest price product so you can sell a lot of them? Or do you want it to enrich the life of the person who buys it? You must deeply care what happens after they buy the product. It's not about what they will do with the product. It's about what the product will do for them. You must understand how it will transform their lives. How will they feel about the product? You must find a way to own the customer because they believe that their life is better. What you don't want to happen is for the user to not care at all about the product. Then it will just sit in a drawer. Instead of being on their person at all times.

To ship a product without first perfecting it is not a good thing. So, when developing the product, use it for everything. Keep on improving it and its main modes of use. Make sure that everybody using the product will appreciate it as a fundamental advancement. Ensure that it will change their lives as well as the nature of all products that come after it.

Fearlessness

Great people don't fear change. They embrace it, right? No, that misses the point! You should realize it's much more than that.

Change is their most valuable tool. Let's look at a key example that is already changing things.

In the recent conference call, when asked about the iPad, which appears to be cannibalizing Mac sales, Apple's CEO Tim Cook said this:

We’ve learned over the years not to worry about cannibalization of our own products. It’s much better for us to do that than somebody else to do it. The far, far bigger opportunity here is the 80 million to 90 million PCs that are being sold per quarter. There’s still over 300 million PCs being bought per year, and I think a great number of those people would be much better off buying an iPad or a Mac. So that’s a much bigger opportunity for Apple, and instead of being focused on cannibalizing ourselves, I look at it much more that it’s an enormous incremental opportunity for us.

Instead of fearing the cannibalization effect, he is using the effect to gain entry into a larger market. He's seeing the forest for the trees. Disruption thus becomes a useful tool and a cantilever to huge potential growth.

Disruption is necessary for change. So, if you want to change the world, think about what comes next, and how that process of disruption will occur.

The Nail That Sticks Out

There is a rule in conformist societies (and companies) that implicitly limits their evolution: the nail that sticks out gets hammered down. This rule almost single-handedly leads to stagnation.

Why Hammer It Down?

When a civilization is structured, the nature of specialization helps to build an intricate machine of the society, where individuals must do their specific part to keep society going.

And when various winnowing forces such as feudal warfare, disease, or sequestering on an island keep a society's population constant, or force it to grapple with a shrinking base, the structure of society must be tested and tempered. The machine that society has become must operate in lockstep to survive. The pressure on an individual to carry on his parents' trade and role models becomes very strong indeed. An individual with new thoughts, swerving from traditional roles and creating disruption, cannot be tolerated. And such rules are born.

Culture thus evolves to accommodate and sustain this pressure on the individual.

However, this doesn't happen quite as easily when a civilization's population is sufficiently large during its structure-formation stages. When services can be performed by a small fraction of the population base, there is actually pressure to move away or to do something different. Progress is rewarded, not squelched.

For the same reasons, competition also leads to progress.

On an island there is practically nowhere to go, since the barrier to moving away is essentially life in exile. But consider for a minute the case study of San Francisco, where the population has held nearly constant since the 1950s. There it is possible to move away but sweeping changes are still difficult to accomplish. Yet culture continues to evolve. Mass transit was developed. Even urban renovation continues.

Cultural forces can also promote or prevent stagnation. San Francisco's culture has changed over the last few decades significantly, and this has prevented stagnation. Pockets of culture remain and provide alternatives to what could have been a regimented, conformist society. Particularly after the 1906 earthquake and two world wars acted as winnowing forces.

Culture and Its Influence

Culture can also be a force that leads to societal stagnation because culture provides us with laws, through morality, and peer pressure, and thus imposes its will on individual behavior. When culture is too regimented and strict, this can lead to suppression of new ideas. In the middle ages, Copernicus' views of a solar-centric astronomical neighborhood were suppressed in favor of an established view. Even Galileo, whose views were provable in ten minutes with common everyday objects, had his views suppressed.

Culture can come from religion, this is true. But it can also be influenced by war and other external forces. After a war, for instance, a local culture's survival can be threatened and so the pressure of sticking around to keep the culture alive can become paramount.

The conformist society also promotes a rigid class structure with despotic rulers. The fear of being hammered down is constantly reinforced by this.

Copying

So, what does a structured, conformist society do when it is presented with external forces that threaten to overcome it?

It evolves.

But it does so by examining the advantages of its external threat and duplicating them. In this process the society applies its machine-like efficiency to survival. The society is already efficiently shaped for the purpose of retooling and adapting. Feudal warfare and the constant advances of weapon-making have shaped the society to this task.

What a society must never do is to kill off its talent, and thus its greatest advantage. It is this capability that keeps it alive during times of adversity. It is the talent that keeps a society mobile and adaptable.

Disruption Then

But there are inherent adversarial forces that even the talented cannot surmount: disruptive forces.

Technology can provide disruption like no other force.

I have talked about disruptive technology before and its effects on brick-and-mortar, the dissemination of information, the replacement of old gadgets by new ones (cameras, televisions, games, and music media).

I have also talked about the disruption of fossil fuels and their eventual replacement by battery energy storage.

Disruption Now

Right now there is a disruption in mobile technologies that is challenging the old guard of desktop systems. This is a serious problem for the old guard. Either they must embrace the change or they must use disinformation to fight it. And the second option only really postpones their inevitable death. Adapt or die. Never was this more at issue than at Microsoft.

Their core talents were in the desktop Wintel paradigm, which is quickly fading. Megalithic applications like Office and Word are quickly being replaced by the lighter mobile applications, which can be sold over the air. The advantages of an adaptable, mobile enterprise are obvious.

Now Microsoft is being criticized for implementing two different interfaces in Windows 8, provoking some usability researchers to declare that users should just wait for Windows 9.

As for the advantages of the mobile enterprise, consider for a moment the Apple store and the Microsoft store.

Here's a YouTube video contrasting the traffic of the two stores on Black Friday, the massive shopping day after the American holiday, Thanksgiving.

Microsoft copied the spartan wood tables and lighter ambience of the Apple store, yet their inability to embrace mobile point-of-sale systems seems to be costing them.

At Apple stores, the salespeople help you one-on-one, and use an iPhone with an integrated credit-card reader to complete your transaction. You even sign for the credit card transaction on the iPhone. The first time I visited an Apple store, I got the sense that it was the future of the in-store buying experience.

Let's contrast that with the Microsoft store experience. A friend of mine went to a Microsoft store to buy a Surface tablet. He was directed to a single place where the sales took place (sounds a bit like a cash register doesn't it?). The point-of-sale system crashed, complicating the transaction significantly.

While Microsoft stores might start using iPhones with integrated credit card readers, it seems improbable that a Microsoft employee would actually suggest that. Perhaps there is a Windows 8 Phone alternative? Well, if so, why aren't they using it?

My point is this: Microsoft has almost 100,000 employees. They should have some fraction of those employees building apps for their Windows 8 Phone ecosystem. They can't afford to catch up by attracting developers at this point! That would take precious time. They should already have such a point-of-sale system in their bag of tricks. Don't these guys think ahead?

My suspicion is that somebody probably wanted to do just that, but he got hammered down.

New ideas and new concepts replace old ones. Many of the trends that shaped the progress on the desktop simply do not work in the mobile computing space. Even Moore's law seems outdated, as I mention in one of my more recent posts Keep Adding Cores? It's clear that computers are simply built differently as a result of this disruption. When you consider that batteries are the power source, then power management becomes central. Efficient and targeted computation becomes highly desirable, rather than general processor computing.

What Disruption Comes From

Disruption comes from people.

People with new ideas.

New ideas whose value can easily be demonstrated to a large number of people.

If everybody sees the value then they want it.

When everybody gets it, this results in significant change.

Change in how people spend their time. Change in what people buy. Change in how people think.

So disruption comes from that nail that didn't get hammered down: an individual with radical new ideas and a conviction that his or her ideas can succeed like nothing else.

Different Perspectives

You can look at things from different points of view. And this can help in almost everything you do.

Look at each new point of view as a degree of freedom in understanding. The more degrees of freedom, the more independently your thoughts can move.

With each new degree of freedom, concepts that you once thought of as constant can now change. Perhaps things you once took for granted can become emergent truths of your new frame of mind.

Or become surprisingly refutable.

One thing is certainly true: if you don't at least try to look at things from different perspectives, you become stagnant.

Degrees of Freedom

Look for a dimension along which there is some give and take. Perhaps things are not completely fixed and immutable.

When technology changes, for instance, slippage occurs and a new dimension of possibility opens up. This can cause disruption.

Once it was cheap to send megabytes through the Internet, intangibles like music and movies could be easily sent.

Record stores and video stores died.

So find that degree of freedom before it finds you.

Human Interface

With true-color displays and greater ability to compute, transparency became possible in interfaces. A new dimension opened up: opacity. But in this case, a little overuse quickly showed that things could get confusing.

Nonetheless, in modeless situations that are optional, such as heads-up displays, inspectors, and the like, transparency does still get used.

In UI, transparency really refers to whether the use of a control is obvious. Aside from this attribute, ergonomics and simplicity are also paramount design considerations.

To make an interface item cool without regard to its function is simply gratuitous. I have certainly done that from time to time, but I suspect those days are over. Or are they?

The use of three-dimensional interfaces is another interesting design consideration.

There have been a few attempts at creating fully three-dimensional interfaces, such as SGI's button-fly interface. Our approach to three-dimensional interface is much more sophisticated today, and integrated into our workflow.

Two-year-olds and grandmas alike have been brought to the computer as never before by glass and multitouch.

Nonetheless, Minecraft is quite popular, as is Spore and The Sims, all three-dimensional worlds manipulated directly. It's important to teach three-dimensional thinking.

And it is true that some interfaces appear to be three-dimensional, like Apple's cover flow. Put simply, magic counts.

But form still follows function.

Fit Together

Things must fit together and dovetail perfectly. Seamlessness counts. When human interfaces are inconsistent, something feels wrong. Even to two-year-olds and grandmas.

Both workmanship and workflow fall into one category now: fit.

Once again, when you consider fit as a guide rule, suddenly things might reorganize themselves in a wholly different way. A new pattern emerges because you discovered the right degree of freedom to work from. You found the right perspective.

Did things ever line up quite so right?

The value of your creative output is at stake.

Curiosity

Someone once said that curiosity killed the cat. But that's really giving a bad reputation to a key form of behavior that has distinguished humankind ever since the invention of fire. And, it turns out, one of the main ingredients of creativity is curiosity.

You see, in order to put things together that normally might not go together and create something new and distinctive, one has to be curious about lots of things. Becoming a semi-expert in several fields is the domain of the generalist, the polymath, the renaissance person.

Let's consider an example: quantum physics always interested me because there is quite a similarity to group theory in the modeling of bosons and hadrons and their decomposition into quarks. Learning about one can help in understanding the other. And, well, number theory has a lot in common with group theory as well.

Companies

But companies can't really consist of a lot of polymaths. So a company does the next best thing and it puts together lots of people who are experts in their fields. And then it binds them to a task that keeps them concentrating on the company's goals. High-level executives should probably be polymaths, though, because they will have to know a little bit about all the technologies within their domain in order to do a good job. And they will have to put them together into the proper path for the company. They make the goals that the experts within the company relentlessly pursue. They see the value of research, albeit limited, within areas that might be immensely profitable in the long term.

What to be Curious About

Now let's discuss one of the ramifications of curiosity for business: top-down management can only work when the top person is curious and willing to consider lots of things. Though, this doesn't mean you have to boil the ocean to find the next greatest thing. But it does mean that you have to at least pursue the things you may find that bear on your goals, even when they seem to be unrelated. The trick is deciding which of them to prune away, and how quickly to do that.

What is there to be curious about these days? Well, this is the domain of the futurist. Which future technologies will bear on your business? If you are running an automotive business, then the mechanics and synergy of hybrid drives is one area to be curious about. And to have active research into. But if you are thinking even farther ahead, you should be very curious about all-electric vehicles and technologies that bear on them. This would include batteries, supercapacitors, fuel cells, new low-power processors and their use in distributed control techniques, the inclusion of camera technology and object-recongnition technology.

Redundancy vs. Simplicity

When you build a car or a gadget or even a company, the most important thing is that it should not break down and thus fail to achieve its intended use. This means you have to be curious about techniques for redundancy (because parts break down and so you can use multiple parts to support and back up each other to achieve a higher mean time between failures) and simplicity (because the fewer parts something has, the less there is to go wrong, and the more reliable it will be). And you should be curious about how these two contrasting principals trade off against each other. But this also means you have to fight a battle at two fronts: making things more reliable and making parts more simple by combining them.

Consumables

In the modern day, minimization of the use of consumables becomes a priority. In the ecological sense, this means using fewer things that can't be recycled. In the energy sense, this means having devices use less power to achieve their intended uses. Executives should be curious about these things because they are becoming increasingly important. For the auto executive, this comes from the increasing rarity of fossil fuels, and the implications for their rising costs. For the gadget executive, this comes from the trend towards mobile computing, and the subsequent use of batteries.

Energy becomes a consumable in both cases. But, within the discipline of batteries, we are learning more quickly in the gadget world than we are in the automotive world, I think. This has spawned techniques in distributed processing and custom chip design.

Modeling: Vision and Execution

It is important to be curious about the modeling of things. Let's consider a real-life model for a business and how that has led to immense success.

It was once said to me (I was a CEO at the time, and this was said by another CEO) that a company cannot be both a hardware company and a software company simultaneously: it was a recipe for failure. Well, Apple has proven this maxim to be utterly false. One side of Apple is curious about the vision of the coolest, easiest devices. The other side of Apple is curious about how best to manufacture them to meet inevitable user demand: it's all about vision and execution.

Apple's model of creating the coolest hardware along with the easiest-to-use software is a winning solution. This took decades of work, though, to prove it: Steve Jobs operated with conviction and so he has been proven right.

And this model appears to be right because it is true that the greatest profit can be extracted when you do this. Yet, and this is massively important, this model is not sustainable unless you perfect your ability to execute. And Steve knew this, which is undoubtedly why he hired Tim Cook. Tim has brought the science of supply chain management, manufacturing, and sales to a high art through his superlative logistics expertise. This is not something easily accomplished.

Not Being Curious

The downside of not being curious is that your products will be quickly obsoleted by those companies that have leaders that are curious. And apparently it doesn't matter how much money you have. If you are not curious enough to figure out the model, the technologies, and thus the mechanics of disruption, then you yourself become disrupted by an opponent with the ability to execute.

Vision counts. When you lack the innate curiosity to form a vision, you lose.