Friday, May 13, 2005

Form, and profits, follows function

Yesterday a professor whom I really respect asked me how will (the people who do "x") make money in a world based on emerging technology (that threatens the way "x" is currently done?) I told him I didn't know and that we cannot know. The nature of emerging technologies is that they replace old paradigms with new paradigms. Evolution of these new paradigms start in the edge, in niche markets. This happens because the new technologies are, at the time they are emergent, not very functional. Because of the lack of functionality at the onset they are not threatening to the sustaining technologies of the time. Only after they find a role in a niche market, evolve and are able to add functionality and new and previously unpredictable capabilities, are they able to disrupt the existing paradigms. These types of technologies are also called Disruptive Technologies! That is the thesis of The Innovator's Dilemma, When New Technologies Cause Great Firms to Fail, By Clayton M. Christensen.

In my opinion this is key to understanding the evolution of these technologies. Because at the time of emergence the exact nature of their potential is not yet clear, neither can be the profit model. For example, how could you predict the profit model of the automobile industry in the 1890's when the automobile was the not very functional emergent technology and steam powered railroads were the sustaining efficient transportation paradigm?

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