The era of creative disruption
spread so did the amount of time and money that people spent online.
As the economy dipped in 2001, people went online to nd bargains.
In 2002, Amazon declared its rst prot and Google also started to
become maddeningly protable. The likes of Betfair, Saleforce, Craigslist
and dozens of others all became real businesses, not just cash-burning
proofs of concept. And so the maths of disruption that we saw above
started to take place.
But exactly where creative disruption happens, and how severely it
happens, is down to a number of factors: some relate to the intrinsic
nature of individual businesses and industries; others are external
factors. It is vital to understand these as we start to plot our paths for
the future, and so this is where we turn our attention to next.
Three degrees of creative disruption
Different industries face three different degrees of disruption based on
their inherent characteristics and how they are changed by this new
physics of business.
1 Atoms to bytes
Creative disruption is at its most extreme when a physical product
goes digital, experiencing the shift described by Nicholas Negroponte
in his 1993 classic Being Digital from ‘atoms to bytes’. Once this
happens, the whole industry nds itself having to adapt to this new
physics of business with often violent consequences. This is what
has happened to music, news, classied advertising, directories,
encyclopaedias, movies and photography: a radical disruption in the
economics of both creation and distribution.
These businesses all face the twin challenges of sustaining a tradi-
tional business and its accompanying infrastructure as it goes into
a state of terminal decline, while at the same time having to invest
in developing a new business with completely different economics,
requiring very different skills and operating in a completely different
competitive landscape. It is here that the greatest risk lies to traditional
businesses, and the most radical action has to be taken as a result.
2 Digital products face digital distribution
The second level of disruption is for ‘digital products’ such as software and
computer games that have traditionally been tied to physical forms of
distribution. The creators and retailers of these products face disruption
sometimes from being distributed digitally and sometimes from being
hosted ‘in the cloud’. Rather than being downloaded or installed,
they are accessed over the internet via a web browser. In the enterprise
software market, this is where Salesforce.com led the way, changing the
nature of CRM software from something that required major installation
and access over an internal network to something that anyone in the
company could instantly access from any internet connected computer.
The single biggest battle being fought in 2010 is with Microsoft Ofce
– a disc-based product – facing a sustained attack from the devel-
opment of Google Apps – a cloud-based product that offers reduced
functionality but at an even more reduced price. (For a business, a
move to Google Apps can reduce costs by 80–90%.)
With computer games there is a similar looming disruption with the
shift from buying discs to downloading games straight to an Xbox,
PlayStation or Wii. This could potentially disintermediate both high
street and online retailers (something which they are resisting furiously).
Threats also come from the development of hosted games on Facebook
and other social networks. In both cases, there is a shift in the economic
model: from one-off payments to subscriptions or to a ‘freemium’
model such as that employed by many Facebook games where it is free
to start playing or using the software, but you pay for extras.
There is also a shift in the creative process: physical distribution means
fewer bigger releases to take the product forward; hosted software and
games are continuously tweaked. The mantras of web-based software
– ‘release early and often’ – and the idea of ‘perpetual beta’ are a
complete anathema to the world of physically distributed software.