What I've learned from "After the Gold Rush"
part of Writings
Jan 1 2002

What I’ve learned from “After the Gold Rush”

Note: “After the Gold Rush” is a paper that was once freely available¬†at this site. Now you have to register with them in order to download it.
New technology can be disruptive or sustaining. Sustaining technology is such that allows to do the same thing better (cheaper, faster). It doesn’t create new markets or opportunities. Disruptive technology creates new markets and opportunities, sometimes replacing the old technology. Internet isn’t inherently disruptive or sustaining.
Dell has been selling a custom-ordered PC through phone. For them Internet was sustaining because they could offer the same product (ability to buy a customized PC) more conveniently. They achieved great success by adopting Web as a distribution channel. Compaq was selling majority of their computers through retail stores. For them Internet was disruptive because when they tried to introduce selling through web they faced great opposition from their retail channels and their internal system (optimized for retailing of pre-made computers) didn’t fit well with selling customized PCs through web. They failed.
One can compete on different basis:
For a given product there is a prevailing basis of competition. In order to succeed one has to know what is prevailing basis of competition for his product and compete based on it. One also has to watch for shifts.
As an example: during DOS days functionality was a prevailing basis of competition for operating system. There was a lot of things that DOS programs didn’t do. An attempt to combat Microsoft on price would fail since Microsoft was competing on functionality by creating Windows. People would be willing to pay a premium price to get the functionality of Windows even if a replacement of DOS would be cheaper.

Their summary

Customers and investors control the resources of an organization.
Small markets don’t serve the growth needs of large companies.
Look for a mainstream migration potential - start simple and with a low price.
Disruption predicated on a change of behavior will fail.
Frame it as a marketing problem, not a technology challenge - find customers who value the technology as it is today.
Organization’s capabilities define its disabilities. The capabilities of an organization reside in its resources, processes and values.
Technology supply doesn’t equal technology demand.
Markets that don’t exist can’t be analyzed.
Disrupt your competitors, sustain your customers.
Disruption enables a larger population of less-skilled and less wealthy individuals to do what typically required specialists to do.

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