Understanding Technology Disruption

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New technologies can sometimes cause disruption in existing markets. For many, new technology is a great opportunity. New ideas and new business models with endless possibilities. For many companies, however, this can be threat to their business models. Indeed, established companies usually fail to see the opportunity side and look only at the technology as a threat, unless it helps them save cost. If threatened, the first action they take is usually legal. What surprises me most is the lack of understanding of technology that many business people and lawyers seem to have.

There are number of cases where this lack of understanding is demonstrated. It is not that these people are stupid, it’s simply that they have not taken the opportunity to or not bothered to understand technology and how technological changes occur. Actually it is not surprising since technological disruptions are not so easy to understand and not obvious. But if you think about the importance of understanding how the Internet is disrupting business, it is surprising.

In 1995 I gave a keynote lecture at a Nordic marketing conference of state Lotteries where I demonstrated the world’s first Internet betting system. In a naive way, I was expecting the marketing crowd to embrace the idea and opportunities of the internet. I was ready with lots of ideas of how this could be used. I was completely unprepared that these people might see the Internet as a threat. And of course I was not able to tell them who is responsible for the Internet, so it could be shut down by legal actions.

Another more recent example of technological ignorance was demonstrated at the Pirate Bay trial in Sweden when half of the original charges where thrown out due to misunderstandings. The prosecuters simply did not understand the technology. Due to the fact that this technology is not that complicated, it is surprising that they did not get some expert to advice them on the matter. However, this did not help the Pirate Bay owners who got a guilty verdict.

The latest lack of technological understanding is demonstrated by Associated Press (AP). AP is suing news aggregation web sites such as Google for using their content. It is understandable that the organization wants to protect their content and they should if the use is unfair, but when a search engine lists a news article and provides a link to the source, and hence directs the reader to the source, it difficult to see why they want to stop that. This is how the Internet works. It’s all about getting traffic. AP’s method could of course be a clever legal tactic in bigger scheme.

All these cases have technological ignorance in common. The interesting part is why it is so difficult to see technological changes and trends. This is not surprising since the first and easiest way is to look at the old models and apply the same thinking to a new on-line model which can be totally different. Even the music industry seems to be starting to understand how the Internet works.

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