Silicon Valley and most startup founders that I speak to are obsessed with disruption. We are into the election cycle, so I would be remiss to not allude to Donald Trump’s attempt at positioning himself as the disruptor. This blog post is not about politics or Donald Trump (thank god, in another week we will be over the election fatigue). Luckily, the snap election in Iceland came and went rather quickly. You can read all about what happened in Iceland here. The topic of disruptive technology has been bothering me for a while and for some reason or the other I have been lazy about writing (read catching up on my sleep).

Disruptive technologies are available to everyone, the advent of Cloud Computing, Open Source Software and Open Source Frameworks enables anyone to build valuable services using these technologies. The cost to implement these technologies has not been lower. There are a number of Cloud Platform offerings from Google, Amazon, Microsoft and Alibaba. In addition, there are so many solutions that are being built that really change the traditional business models. The ability to connect, engage and possibly solve a need or want is ubiquitous now. Established businesses need to embrace this change, it is no longer a nice to have, the next wave of technologies whether it is Big Data or A.I. or VR or AR or everything in-between, the foundation is the Cloud Platform. I think a number of large companies are moving in that direction but maybe not at the pace of the market.

It is interesting to see Google Alphabet is back to pushing the Mobile Phone, Android and App Store agenda with the launch of Pixel Phone, which is a direct competition to iPhone dominance given Samsung’s self emulation with the Galaxy S7. It was quite pleasant to see an Icelander (Gummi Hafsteinsson) playing a prominent role in the development of the Google Assistant and Walt Mossberg approves of the new phone. I would say that the cycle is complete and Google and Apple will fight for dominance or maybe they don’t have to given the massive size of the global Smartphone market.

It is also extremely interesting to see the resurgence of Microsoft as a contender, strongly driven by the investment in Cloud Computing platform and moving Office to the Cloud. I could not imagine why Microsoft did not do that earlier but hey better late than never. I can see Microsoft actually giving Google and Apple a run for their money in the Enterprise.

The disruptive technology is not the visible, like the Surface Studio or the Google Pixel Phone or new MacBook Pro. The advancements in physical hardware is Sustaining technology, I had written about Sustaining vs Disruptive technology a while back and it is probably the most read blog post. Sustaining technological advancement is usually incremental and disruptive technological advancement is usually exponential. The reason why everyone is obsessed about disruptive technology is because of the promise of total value capture, i.e. the disruptor keeps the spoils, I believe that to be true but there is more to it than just technology. Remember in order to build a true monopoly you need to have 4 things

  1. Proprietary technology
  2. Network effects
  3. Economies of scale
  4. Branding

The sequence of these attributes is exquisite. You need to get the proprietary technology and network effects right before you can leverage economies of scale and brand building. This is one of the main reasons the early stage investors especially in the venture space harp on technology. Technology has been democratised. Today anyone can use the Cloud, but you will be surprised how few actually use it. The reason why Startups are able to disrupt established businesses is because of their reliance on the Cloud a.k.a technology to  change the business model. The same is available to established companies as well. I have had conversations with established companies and they rely too much on their fleeting advantages, i.e they are profitable and can reinvest their capital whenever they want to change their technology stack. This is like a smoker who has not quit smoking telling everyone that he can quit whenever he wants. Well, if he could quit whenever he wants he would have already done it. The same is true for established businesses.

I have spent a considerable time working with banks and financial institutions, the lethargy in those organisations is like a cancer. The biggest advantage a bank has is its ability to leverage its capital base. It enables banks to have a buffer but in the hyper changing world that is no longer a big comfort. I believe if any bank and financial institution significantly invests in cloud technology and software automation, they can capture a lion’s share of the market. It is inevitable. How do you do it? well, it all comes from the top. If the leadership of banks and financial institutions understand technology they will not think twice about investing in it, unfortunately those who have a strong technical background do not make it to the top of a bank or a financial institution. This gives tremendous opportunity for startups to chip away at the margin and gain a foothold and more or less take away the future market for financial services from the typical bank or financial institution. The emergence of Fin-tech and the amount of capital being invested in Fin-tech startups around the world is staggering and I am pretty sure there is a disruptor in that midst. It is never obvious but when it arrives everyone will know it, disruption has a way of sneaking up on us.