Technology Tales & Tails

Stories of Techno-evolution

Steve KielyChairman, Cray, Inc.September 21, 2010

Does the best answer always win?

VS.

VS.

VS.

…If not, how do we pick the right horse to ride?

Technology Tails

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Product 1Product 2

Early life cycle

Late life cycle

Life cycle: early phases

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Unit Sales (M)

“Innovator’s Dilemma”

“Innovator’s dilemma”: Clayton Christensen

• Technology evolution Disruptions!

• Disruptions occur at low-end price points▫High-priced product’s managers won’t react…

They’d lose margin!They don’t feel threatened!

▫Buyers moved by price for NEW USESIf milk cost a penny per gallon, we’d water our lawns

with it….

• Disrupt yourself before somebody else disrupts you!

Paradigm shift: low-cost replacement

1980’s:Mainframe Model

1990’s:Distributed

Model

DISRUPTION!

Tale: IBM vs. Intel & Microsoft

1982 2000

IBM IT PRODUCT

MARKET SHARE

INTEL & MICROSOFT IT PRODUCT MKT

SHARE

• IBM exited PC business in 2005• PC business dominated by Intel & Microsoft

Tale of 1982: The Birth of The Industry Titans…

•IBM Funds Intel’s R&D for microprocessors▫Intel faced financial ruin from Japanese RAM

dumping

•IBM chooses Microsoft to supply the OS for IBM PC▫Microsoft had no meaningful business at that

time

TALE: iPad vs. PC: Disruptive Technology?

iPad Paradigm PC Paradigm

• Simpler (touch vs. type)• Killer graphics• Task-focused

▫ Reading▫ Playing

• Lower cost

• Getting better▫ Smaller▫ Faster ▫ Cheaper▫ More portable

• KB/Mouse• Large Storage (HD)

iPad and the Laptop, WSJ

Tale: Low Cost Replacements, Round 2

Apple vs. Microsoft, Round 2 • Apple’s market value (stock) now exceeds Microsoft’s (!)

▫ Apple has attacked the low-price segment iPod, iPhone, iPad enjoy significant user simplicity advantage Microsoft has four failed entries in consumer segment

Zune, Windows phones don’t compete XBox: only hardware differentiation; uses software from game

industry

Intel vs. the world, Round 2• Intel has no answer for low cost hardware engines

▫ ARM, Snapdragon dominate smartphones, specialized devices like iPod and iPad

▫ DSP’s (Digital Signal Processors) dominate mobile devices – no Intel answer

Life cycle: MID phases

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“Crossing the Chasm”

Crossing the Chasm: Geoffrey Moore

• Build the whole product▫Your product, plus…▫ The “Value Chain”

Hardware, software, network, distribution, service, etc. …

• Target early adopters▫Users who have NO CHOICE▫Users that DRIVE THE BUS

• As volumes peak, change your approach to the market▫ shift investment to the next big thing▫ change marketing (e.g., coupons vs. advertising)

TALE: Apple vs. Android• Apple iPhone approach:

▫Premium priced within its category▫Proprietary product design, even for applications

Steve Jobs’ philosophy: design beauty via total control Side-effect: limited value chain (e.g., Flash Applications)

▫Exclusive network (AT&T only) - #2 behind Verizon• Google Android approach:

▫Supply the key element = the mobile OS▫Let the industry provide hardware platforms &

networks Result: lots of price points, hardware innovation &

competition, broad network adoption• 2010 Year-to-date: Android sales > iPhone sales• Market prediction: Android dominates by 2014

SOME IMPLICATIONS for USERS…

• Pioneers have arrows in their chests….▫Be an early adopter when you have no other choice▫ If you’re an early adopter, realize if it’s for the thrills…

• Laggards walk a tightrope…▫There’s a lot to be said for the stability of maturity▫Laggards put themselves at a competitive disadvantage

• Mainstream Majorities seldom stick out in a crowd….▫“Nobody get’s fired for buying IBM”…▫…But does your business require a technology

advantage?

Life cycle: Late Phases

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“Technology in decline?”

Cost Wars: Hard Drives vs. DRAMs

VS

Tale: Hard Drives vs. DRAMs

•LESSON: Competition technology improvements!▫Consumer hard drives priced below $0.01 per

GB▫Consumer Flash RAM priced over $2.00 per GB

•LESSON: Competition technology differentiation!▫Hard drives – best capacity▫Flash RAM – best access times

Beware the “Next Big Thing”…

OFFICE O

F THE F

UTURE BLADE SERVERS

CLIENT-SERVERCLOUD COMPUTING

VIRTUALIZATION

…Consultants don’t always get it right…

Closing Thoughts…

•Don’t be the first to buy unless you see no choice (or you are a thrill-seeker)

•Don’t sell an old technology short while it’s still delivering

•Don’t make your organization a dinosaur by riding one

•Don’t forget to look for the WHOLE product

•Don’t forget to look for the shiny new toy at price points below the mainstream product’s

Technology Tales & Tails

Stories of Techno-evolution

Steve KielyChairman, Cray, Inc.September 21, 2010