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The Pursuit of the Dual Disruption – Silicon Valley’s Unbounded Ambitions

We have all grown used to the information technology industry disrupting itself – PCs replacing minicomputers, and now mobile devices surpassing PCs. But in Silicon Valley today, technology disruptions are occurring on an unprecedented number of fronts – cloud computing, Software-as-a-Service, consumerization, social media, open source, DevOps, Big Data, sensors, and the internet of things. Forward-thinking IT leaders know that the underlying platforms of the IT industry are in for a period of profound and sustained change.

Dual Disruption

New firms and ecosystems are now emerging that seek to fundamentally transform entire economic sectors including manufacturing, retail, healthcare, education, energy, food and financial services.

However, in ‘the Valley’ today, these dynamics are largely taken for granted. The more ambitious agenda is for the technology business to become a serial industry disrupter. New firms and ecosystems are now emerging that seek to fundamentally transform entire economic sectors including manufacturing, retail, healthcare, education, energy, food and financial services. These efforts are based on vertical, industry-specific innovations such as 3D printing, wearable devices, MOOCs, same-day delivery services, quantified-self apps, crypto-currencies, self-driving cars, and all manner of crowdsourcing/funding.

From our clients’ perspective, these two disruptions – horizontal technologies and vertical industries – could not be more different. With the former, large organizations are viewed by Silicon Valley as important customers. In contrast, the leaders of the various industry-specific initiatives see traditional firms as competitors. In other words, depending upon which type of disruption we are talking about, your firm can be seen by the technology industry as either a valued customer or potential lunch.

How real is the challenge?

These are heady times in Silicon Valley which – to the growing resentment of many – now extends throughout most of the Bay Area. Facebook’s recent $19 billion purchase of WhatsApp – a firm with just 55 employees – is just the latest sign of exuberance. While the mood today is reminiscent of the bubble, it is important to remember that while most technology stocks crashed, the promises of the era have been largely fulfilled, and even exceeded. Betting against Silicon Valley has generally been a bad idea. The Bay Area leads the IT industry as much, perhaps even more, than ever.

Looking at the marketplace today, the first type of disruption is a near certainty. Modern cloud-based platforms already dominate consumer and small business IT; the only real question is how quickly and completely these new approaches will spread to larger organizations. In contrast, the ability of Silicon Valley (and others) to disrupt traditional industry sectors, while entirely possible, is much less certain. Consider the current situations in the industries below:


Massive Online Open Courses (MOOCs) offer exciting new capabilities and unprecedented scale economies. But like e-learning during the years, most MOOCs have generated a lot of initial interest, but found it hard to sustain student engagement. The vast majority of online courses today have very low completion rates, and thus little impact on traditional educational enrollments.

Payment systems

Bitcoin has received a tremendous amount of media coverage over the last year, and there is little doubt that its sophisticated technologies point the way toward future crypto-currencies and internet payment systems. But unless Bitcoin’s governance structure becomes much more open and transparent, it is highly unlikely to become part of the mainstream financial services industry. The recent closing in Tokyo of the MtGox marketplace (and its missing Bitcoins), followed by the important support of SecondMarket in New York, continues Bitcoin’s rollercoaster ride.

3D printing

Additive manufacturing may be the most revolutionary of all of today’s technologies, and we expect that 3DP will be very successful in a wide range of existing and entirely new manufacturing applications. The big question is whether it will disrupt the current suppliers in major manufacturing sectors such as cars, electronics, aerospace, healthcare and so on. Thus far, there is little evidence that it will, but such changes can often take many years.


There is clearly a great deal of exciting consumer innovation going on – wearable devices, home blood pressure systems, inexpensive testing/imaging equipment, custom implants, etc. There is real potential to disrupt many traditional hospital and doctor practices. But regulatory, privacy and other barriers remain substantial, and the overall pace of change has been slow.

Self-driving cars

The progress here by Google and others has been remarkable. Tremendous advances in data, software and sensors have been made, and will certainly continue. While highways full of self-driving vehicles remain a long way off, cars that help us stay awake, see better at night, make faster emergency stops, and parallel park are rapidly emerging. The key question is whether the smart cars of the future will be led by traditional car makers or by Google, Apple and other technology firms. The renewed excitement around Tesla shows that new players have a shot.

In all of these cases, the pattern is essentially the same. The promise of the modern technology is extraordinary and undeniable. What remains to be seen is whether traditional industry leaders will embrace these capabilities, whether new firms will become the market leaders of the future, or whether some sort of partnership model will prevail. While it may take a decade for many of these possibilities to fully play out, the next generation of market leaders will likely be evident well before then.

Silicon Valley’s ambitions have no bounds, and it will pursue both disruptions with all of its tremendous energy, skills and resources. Tracking its progress is now an important area of LEF research and the theme of this year’s Study Tour. For clients, the big question is whether your firm will remain the Valley’s valued customer, or become its future lunch. Taking a wait-and-see approach is not a good idea.


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