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CHAPTER II - The Taxonomy of Disruption

Disruption typically involves a challenge to the seemingly entrenched success of an incumbent. But what form do these disruptions take? According to Hagel and Brown, they can play out along two different dimensions—the scale of operations or ways of connecting with others.

To provide a framework for considering how disruption is taking place in specific sectors, Hagel and Brown proposed the following taxonomy.

I. Disrupting the scale of operations

Two diametrically opposed forms of disruption are playing out along this dimension, one that is driving toward greater fragmentation of operations and a second that supports increased concentration.

A. Increasing fragmentation

In significant parts of the economy, smaller economic entities are becoming more viable and are taking increasing share of markets from large, established firms. Empowered by the erosion of the scale economics that have protected incumbents, start-ups and small entrants will increasingly disrupt the leadership positions of large firms.

One factor driving fragmentation is the increasing ability of smaller players to aggregate and deliver their offerings through online platforms. For example, one of the most potent forces that has contributed to the decline of the once mighty newspaper industry has not been the rise of another mass medium but the emergence of thousands of independent “citizen journalists” and quasi-journalists (bloggers, tweeters, etc.) who are able to use the Internet at little or no cost to provide faster, more immediate coverage of events than traditional publications. Hotel chains that have dominated the travel industry through their ability to offer access to accommodations globally are being challenged by millions of individual householders who are able to aggregate their offerings through online reservation services.

In addition, the means of product design and development are becoming increasingly affordable by smaller entities. This initially played out in the digital arena but there is now increasing potential for this to expand into physical product categories as well. Activities that still require scale—for example, manufacturing, logistics and call center operations—will increasingly be available on a “rental” basis to even the smallest players.

B. Increasing concentration

At the same time that increasing fragmentation is playing out in certain parts of the economy, increasing concentration is playing out in other parts. In many cases, concentration is not being driven by incumbent leaders but by “edge” participants who understand where and how scale economics are evolving to enable greater value creation.

These disruptive approaches are being driven by two supporting trends that are the “flip side” of the previous trend:

  • The availability of shared utilities. A growing number of companies are beginning to realize they can drive significant scale by providing outsourced services to third parties—whether it is in the form of massive data center operations, manufacturing facilities, logistics networks or customer call center facilities. The emergence of cloud-based services is perhaps the most dramatic example of how vital business assets can be provided on an as-needed basis rather than owned, giving smaller players access to large-scale resources without requiring large-scale capital investments.
  • The growth of aggregation platforms. We all benefit by having access to platforms that enhance our ability to find and connect with relevant resources and people. Whether it is content platforms like YouTube, product marketplace platforms like eBay or Etsy, data platforms like Axciom, trading platforms like electronic stock exchanges, labor platforms like oDesk or Elance, funding platforms like Kickstarter, or even idea platforms like InnoCentive and Kaggle, a growing array of platforms are leveraging network effects to provide value to participants.

    One particularly interesting form of targeted disruption in this category is the opportunity for product-based companies to shift their focus from product to platform. An early example of this was Apple’s move to redefine the smart phone from a stand-alone product with applications supplied by the device vendor to a platform that invited third parties to develop a growing array of applications. (While Apple still makes most of its money from the sale of hardware, the existence of a vigorous ecosystem of applications and content add considerable value to its products.) Google’s initiative with Android took this shift one step further by creating a two-sided platform that invites both application developers and device manufacturers to create a growing array of products and connect with each other using its operating system as a platform.

It is worth noting that these two trends are simultaneously promoting both concentration and fragmentation: at the same time that the creators/operators of shared utilities and aggregation platforms are effectively moving toward concentration through their ability to dominate a particular market space, they also encourage fragmentation by empowering the growth of smaller participants. In fact, these ostensibly opposing trends are mutually reinforcing!

II. Disrupting ways of connecting with others

Here again, two primary forms of targeted disruptions focus on re-conceiving ways people and institutions connect with each other—first, by redefining relationships to tap into existing resources more effectively, and second, by accelerating learning to enable participants to realize more of their potential.

A. Redefining relationships

Disruption can happen not just by aggregating resources. It can also be based mobilizing and coordinating resources, including human resources, in new ways that increase value for all participants. This is a direct reversal of the trend over the past several decades by which large, established companies intentionally reduced the number of relationships they maintained with suppliers and distribution channels in order to improve their efficiency. We are now seeing innovative approaches that help participants dramatically expand the scope and substance of their relationships with others, opening up new forms of collaboration and putting those who continue to adhere to the narrower practices of the past at an increasing disadvantage.

Approaches to redefining relationships can take several different forms:

  • Moving from hierarchical to peer-to-peer networks. One approach involves moving from relationships based on hub and spoke networks that are ultimately controlled by the network operator to mesh networks that enable participants build relationships directly with each other. Another approach involves the development of peer-to-peer transparent ledgers where decentralized interactions among participants can be reliably recorded and tracked in ways that build trust and eliminate the need for a central “authority.” The blockchain shared transaction database pioneered by Bitcoin is an example of this approach. (A sidebar on the significance of digital currencies appears later in this report.) Both of these approaches suggest the potential contribution that a radical decentralization of relationships can make to increasing returns from rapidly scaling networks.
  • Developing modular, loosely coupled networks. In some networks, it is necessary to have an orchestrator who can organize multiple stages of activity across participants. Modular, loosely coupled networks substantially reduce the complexity overhead of mobilizing and coordinating the activities of a growing number of participants by limiting the role of a central orchestrator. This in turn enables organizers to more effectively tap into the increasing returns that come with network effects as more and more participants join. The Internet itself is a dramatic example of the power of a simple set of operational rules developed and adhered to entirely through voluntary participation to create a robust and highly scalable global network. In fact, it is the demonstrable success of this loosely coupled model that is inspiring emulation in other areas.
  • Moving from transaction to relationship through new pricing models where participants can access resources more flexibly through a rental or usage-based model or where the price is determined by outcome. A transaction mindset (buy low, sell high, move on to the next transaction opportunity) has been fostered by the prevailing purchase pricing model where the participant must pay up front. By contrast, these more flexible models encourage development of a relationship mindset. They also tend to significantly increase the utilization of products that are underused or that stand idle for long periods of time under a conventional purchasing model. (For example, compare use patterns of shared car services like Zipcar to existing auto rental agencies, or consider the more intensive use of private vehicles made possible by ride sharing services like Lyft and Uber.)
  • Shifting from reactive product/service vendor to trusted advisorthrough greater awareness of context. The ability to develop a much deeper awareness of context of individuals through technology like mobile phones, wearables and sensors makes it possible for network organizers to add value by becoming trusted advisors, making participants aware of resources that they had not even thought to seek out. A trusted advisor proactively makes recommendations rather than simply waiting for a participant to request something. Today, there is an opportunity to move the trusted advisor relationship model from the niche of the very affluent, who are able and willing to pay for expert advice or personalized concierge services, to a mass market offering. A current example of this trend is the re-conception of Foursquare from a simple “check in” app to a recommendation service keyed to users’ locations or activities.i
B. Accelerating learning

In a world characterized by a more rapid rate of disruption, institutions that have built their success on scalable efficiency are increasingly vulnerable to a new set of players who develop the institutional architectures and practices that enable them to learn faster at scale. These approaches stand in contrast to the ones discussed in the previous section: rather than focusing on building relationships in order to make better use of existing resources, these practices focus on building relationships that will help all participants to get better faster by working together. They unleash a second level of increasing returns—rather than just growing value with the number of participants, these approaches amplify value by enabling all participants to rapidly increase the value that they can provide through acquiring (or generating) new knowledge or learning new skills. This form of targeted disruption can play out at two levels:

  • The Institution. By systematically applying user-centered design thinking to the day-to-day work environment, institutions can tap into significant potential for more rapid learning and performance improvement. As competitive intensity increases and change and uncertainty accelerate, institutions that embrace this approach could disrupt the established positions of incumbents that are still wedded to the scalable efficiency model of the past. This requires taking a holistic view of the work environment—physical layout, virtual platforms and tools, and management systems—and pursuing more rapid learning and performance improvement as the primary design goal.ii

    This approach goes well beyond traditional corporate training programs to deeply embed learning opportunities in the fabric of daily work. For example, jobs can be redesigned so that any project, role or initiative that an employee or a team takes on can offer a meaningful opportunity for learning. To achieve scale, these initiatives need to integrate participants who are not employees of the company—e.g., suppliers, distributors, customers and domain experts—who could help accelerate learning and performance improvement for everyone. accelerate learning and performance improvement for everyone.

  • The Ecosystem. Beyond the level of individual institutions, we are beginning to see the emergence of mobilizers who explicitly take on the task of focusing large numbers of independent participants on ambitious performance outcomes. In doing so, the mobilizers are creating governance structures and processes to enhance the coordination of these participants and evolving environments that can help all participants to learn faster by working together. The open source software community is a classic example of a decentralized but robust mechanism (including making the source code for every open source program freely available) that enables collaboration and shared learning among programmers who use these non-proprietary programs. An example of this approach in the corporate world is provided by Li & Fung, the Hong Kong-based company that orchestrates a global network of thousands of small independent apparel manufacturers through an incentive and support system that encourages them to keep improving their performance.iii

While these two types of disruption—targeted to the scale of operation and to ways of connecting with others—are distinctly different, they do not necessarily occur in isolation, and may be woven together in ways that substantially intensify their impact. In the rest of this report, we explore how these approaches are being manifested in different domains, ranging from lodging and transportation to healthcare and education.

Living in a time of disruption is always challenging and is destined to produce casualties. Experience shows that new ventures and “edge” initiatives that are free of burdensome legacies of the past are most often the main beneficiaries of—and perpetuators of—the disruptive forces that overthrow old models and replace them with newer models that leverage new opportunities. It is undoubtedly more difficult for large, well-established institutions to react quickly to changing circumstances and transform themselves—essentially becoming their own disruptors. But it does happen and there is no reason why larger organizations cannot thrive in the era of the big shift. In fact, there are opportunities emerging for new kinds of collaborations between large and small entities to create offerings that blend the distinctive strengths of each in new ways.

Patterns of Disruption

The concept of disruption is hardly new, but the idea of continual disruption is relatively new. The role of technological innovation in driving disruption has been studied for some time. At the 2014 Roundtable, John Hagel noted that he is a “big fan” of the work of Carlota Perez, the Venezuelan-born scholar and consultant who developed the theory of techno-economic paradigm shifts. In fact, the report from the first Aspen Institute Roundtable on Institutional Innovation, published in 2009,iv cited Perez’s theory that economic progress has been based on a series of periodic technological breakthroughs that have extended human capabilities and brought about fundamental changes in the way that work is done. But according to Perez, just five major paradigm shifts have occurred over a period of 200 years since the Industrial Revolution (1771-1971). The gating factor in determining the duration of these waves is the time required for society to understand and assimilate the true power of each type of innovation, a process which necessitates the “collapse” of the prevailing paradigm—which, historically, has involved a major economic crash—in order to clear the way for the shift to a new paradigm and full deployment of the new technology.v

Figure 1.Technological Revolutions and Financial Capital:
The Dynamics of Bubbles and Golden Ages

Source: Carlota Perez,

Today, more than 40 years since the last big technology-driven innovation, society would seem to be poised at the brink of a sixth grand “wave” of disruption. Or has it entered a Post-Perezian world of continual innovation and continual disruption? Are the processes of innovation-driven concentration and fragmentation now permanent parts of the economic landscape across a wide range of industries? Do virtually all enterprises, no matter how well established they may seem, need to worry about the possibility that the markets they dominate may be disrupted?

Harshul Sanghi, Silicon Valley Managing Partner at Amex Ventures, agreed that even though we have moved from a world in which big shifts were followed by periods of stabilization to a time of essentially continuous disruption, it is likely we will still see big shifts followed by some sort of relative equilibrium. But the timing of these developments is difficult to predict and the periods of stability do seem to be getting progressively shorter. The biggest disruptive force in recent times has been the emergence of the Internet, which has served as a platform for the development and the dissemination of all sorts of innovations.

Disruption may be becoming more pervasive, but is it necessarily a good thing? In general, innovations succeed because they provide new, more efficient ways of operating (e.g., the replacement of water power with electrical power in the textile industry and other manufacturing sectors or the introduction of standardized containers for shipping) or offer new types of products with new benefits that attract customers (the automobile a century ago or the personal computer a few decades ago). But there are almost always losers as well as winners when these transitions occur.

Patterns of Disruption—Industry Examples

Power industry. Sonny Garg, Chief Information and Innovation Officer at Exelon Corporation, noted that many industries start out as fragmented, but move toward concentration over time driven by the desire to achieve efficiencies of scale. An example of this pattern is the electrical industry, which he described as a “great success story,” based on a high level of concentration in power generation that has provided safe, reliable, affordable power to everyone. Today, new decentralized sources of power have become available which could fragment the industry. But the consequences of this disruption could be greater inequity: solar and other forms of clean, renewable power for the rich, while the existing power grid becomes the equivalent of an urban public school system used mainly by the poor or the disadvantaged. The most important factors here are not technological, but human issues of equity and fairness.

Media industry. Some business sectors seem less vulnerable to disruption. Jonathan Taplin, Professor at the Annenberg School for Communications and Journalism at USC, observed that there has never been a time when scale has been more critical among media companies. It has become virtually impossible for anyone to compete effectively against Google, Amazon, Facebook or Apple, all of which have created platforms that seem to be immune to disruption: innovators either get acquired or dragged into the ecosystems that these companies have created. Content companies are also able to maintain their dominant position because their businesses are “hit driven:” 80 percent of all music downloads are for just one percent of songs, and six million out of eight million available music titles have been downloaded four times or less. There are some three million songs on Spotify that no one has listened to. In short, the long tail—at least in the music industry—doesn’t really exist.

The prevailing pattern in media has been greater not less concentration. A quarter century ago, many thought that cable companies were doomed, another likely victim to the rise of the Internet and alternative channels for distributing programming. Yet today, cable companies are still powerful, having become the dominant provider of broadband Internet access as well as traditional television programming. Similarly, the telcos that seemed fated to become irrelevant as their legacy copper-based landline business faded away have reinvented themselves as the dominant providers of wireless service for both voice and data.

But even the media industry is not exempt from disruption. Maker Studios was founded in 2009 to create digital entertainment content aimed primarily at Millennials. Making use of the YouTube platform (now owned by Google), the company has attracted millions of viewers and billions of views for videos like Epic Rap Battles of History, a series of short, somewhat silly “confrontations” usually between an historical figure and a contemporary celebrity who take turns belittling their opponent. By 2012, Maker had become the most popular independent channel on YouTube, and in 2014, Disney announced that it was acquiring the company for $500 million, a move that Zipcar founder Robin Chase described as Disney “hedging its bets” in new media.

If Maker Studios represents the disruptive potential of a nontraditional player, an even wilder wild card is Twitch. Launched in 2011, Twitch is a platform that lets viewers watch others playing videogames, either live or on demand. Terry Young, Founder and CEO of sparks & honey, described the service as the “marriage of Skype, Twitter and Xbox.” As of early 2014, Twitch was attracting over 40 million viewers per month and had become the fourth largest source of peak Internet traffic in the United States. vi

Yet, because the content of Twitch is so unlike more familiar media programming, it has been virtually unknown to non-digital natives. Young recounted meeting with a group of senior communications industry executives who admitted that they had never heard of Twitch despite its rapid growth and massive popularity. (When Amazon announced that it was acquiring the company in August, 2014, The New York Times reported the story with a headline that contrasted the company’s relative obscurity with its impressive economic value: “What’s Twitch? Gamers Know, and Amazon Is Spending $1 Billion on It.”vii) For Young, the emergence of Twitch represents a “signal” in the environment (i.e., that video gaming was evolving from a solo pursuit to a new kind of spectator sport) that is important to notice and track as a harbinger of bigger changes to come.

The divide that is being created by accelerating innovation may be generational, at least in part. Stephen Gillett, COO of Symantec, and one of the younger participants in the Roundtable, pointed out that he cannot remember a world in which accumulating stocks of knowledge was more important than participating in flows, or a world in which India and China were not dominant powers. He grew up playing video games, and learned to improve his technique by watching videos of the hands of Koreans, who were especially skilled at playing, slowing them down to analyze their moves, and emulating their techniques. For him, this was as much a part of his education as sitting in classrooms.viii

Schools and libraries. The world of education has seemed to be relatively immune from the disruptive changes sweeping through other industries and economic sectors. Historically, schools had an effective monopoly on providing education. In fact, the dominant model of the classroom that persists to this day is essentially a “factory” model that arose in the 19th century when the U.S. shifted from an agricultural to an industrial society. To meet the need for workers who were literate and able to function well in structured environments like factories and offices, we developed a system in which groups of students moved through school grade-by-grade in more or less lockstep fashion to learn the three Rs and also learn how to function in a highly regimented environment.

In higher education, the dominant model for instruction today has an even longer lineage. A wit has commented that if it were possible to go back 500 years and visit a lecture hall in a medieval university, the only differences that one would see between then and now would be that the instructor was wearing a monk’s robe and lecturing in Latin.

Technology is now offering the possibility for creating dramatically different models of teaching and learning, but they have encountered a somewhat mixed reception from the educational establishment. In the world of higher education, the emergence of Massively Open Online Courses (MOOCs) represents a potentially big change in how instruction is delivered, even though the content may be much the same. Instead of restricting a class to the number of students who can fit into a classroom and restricting participation to students who have been admitted to a particular school, MOOCs make it possible for a virtually unlimited number of students located anywhere in the world to participate in a single class.

Not all academics have rushed to embrace this new mode of education. One common critique of MOOCs has been that their ability to reach large numbers of students is offset by an inevitable dilution of the quality of the education that they can deliver. However, a recent study at Stanford provides encouraging evidence to the contrary. This past fall, the school’s introductory economics course—Econ 1—was given in online form for the first time to a group of Stanford students for full credit at the same time it was offered as a conventional in-person class on campus as well as a non-credit MOOC to any student globally. The Stanford students who took the online version of the course for credit earned the same grades as students who took the conventional in-person version and gave the course equally high ratings. In addition, more than 15,000 students in 150 different countries, most of whom were in Africa and Asia, participated remotely. Taylor concluded with a reassurance that while online learning may in fact disrupt higher education, it need not do so massively: “My experience—starting small, dovetailing with rather than replacing existing structures, and collaborating with people in other fields—has been about creating new ways of teaching and learning, building on, rather than disrupting, existing ones.”ix And the fact that courses are being offered online offers new opportunities to gather extensive data on exactly what students are doing in the course—what they are reading and when, what errors they are making on exercises and tests—that provide a basis for identifying what is working and what it not in order to improve how the course is taught.

The Nature of Disruption

A new study of the nature of disruption by researchers from MIT, the University of Toronto and Wharton is based on the evolution of automatic speech recognition software.x The study concludes that rather than attempting to become rivals of incumbents in an industry, start-ups that develop new potentially disruptive technologies often choose to license them or agree to be acquired by larger firms. The first challenge for the developer of a new technology is to establish its workability and its value. But once that has been accomplished, the authors found that start-ups tend to form alliances or merge with market leaders rather than attempting to go it alone. In fact, many large companies have track records of regularly acquiring smaller companies, either to get access to their technologies or to eliminate a potential rival. Multibillion-dollar acquisition by companies like Facebook (Instagram, WhatsApp), Amazon (Twitch, Zappos), Google (Waze, Nest Labs), Yahoo (Tumblr) and Microsoft (Minecraft, Skype) are examples of this pattern.

Of course, acquiring innovative companies is not a foolproof shortcut to innovation. Jackie Kosecoff, Managing Partner at Moriah Partners, LLC, pointed out that large companies that acquire “something wonderful” can end up killing it. In fact, there are numerous examples of small companies with well-loved products that essentially disappeared after being acquired. Innovation that thrives in small companies often perishes when it is incorporated into a larger enterprise.

Finally, disruption is not necessarily a threat to incumbents if they disrupt themselves. A classic case of a company that has done so successfully is Apple, which remains one of the most valuable companies on earth and currently derives only about one-fifth of its income from computers. Today, over half of Apple’s revenue comes from phones and tablets, products that are largely responsible for the ending the dominance of the personal computer that Apple pioneered and that had been its core business since its inception. But Apple is the exception. As Bill Goodwyn, CEO of Discovery Education pointed out, the television networks could have created CNN, but it was an outsider, Ted Turner, who did so. Netflix could have been invented by a cable company or a movie studio, but the founders came out of the software industry.

John Hagel concluded this discussion by noting a paradox: at a time of mounting competitive pressure on incumbents, they are reacting by consolidating—getting even bigger by buying other incumbents (e.g., Comcast’s proposed acquisition of Time Warner Cable, AT&T’s intention to acquire DIRECTV, Google’s acquisition of Motorola, and Microsoft’s acquisition of Nokia). The question is whether this kind of consolidation is a viable strategy for survival—assuming that these are sectors of the economy where concentration rather than fragmentation is a sustainable strategy—rather than a desperate last gasp of incumbents about to “topple” from their positions of power.

Deeper Disruption: Peers and Platforms

Perhaps the most far-reaching disruption is based on the appearance of a radically new business model that can challenge the dominance of incumbents across many industries. Robin Chase, Founder of both Buzzcar and Zipcar, believes that just such a new model has appeared in the past few years, a model that she calls “Peers, Inc.” The model involves three key elements: the existence of “excess capacity” in a market, the use of a platform to provide more efficient access to that capacity, and the collaborative, creative engagement of a group of peers who serve as suppliers and/or customers. The power of this model comes from its ability to scale faster and engage participants more deeply than is possible for more traditional businesses.

Consider, for example, the lodging industry, which is dominated by a handful of large international companies that offer hotel rooms globally. Hilton Worldwide, which is now 93 years old, has built a network of 4,100 hotels (under brands such as Waldorf Astoria, Hilton Hotels, Doubletree and Embassy Suites) that provide a total of 680,000 rooms in 91 different countries. The Intercontinental Hotels Group (IHG), which is 65 years old, has created a network of 4,400 hotels under several brands (Intercontinental, Crowne Plaza, Holiday Inn, and Candlewood Suites) that operate in 100 countries and offer 645,000 rooms. Accor, a relative newcomer based in France, took just 44 years to create a network of 3,600 hotels (Sofitel, Novotel, and Ibis) with a total of 440,000 rooms in 92 different countries. These companies have grown into multibillion dollar enterprises by building strong hotel brands, unified by a central booking system that offers a highly standardized product, typically at different levels of price and service ranging from luxury to economy, in many different locations. Even though smaller, boutique chains of hotels that can offer more distinctive experiences have grown rapidly, they have not posed a serious threat to the dominance of the global hotel companies.

But in the past few years, a very different and potentially more formidable challenge to these incumbents has emerged in the form of Internet-based room-sharing services. These services have shown the capacity to grow at a rate that the older, more traditional companies have been unable to match. The pioneer in this new arena is Couchsurfing, which matches travelers with hosts who offer free lodging in their homes. Founded in 2003 as a not-for-profit organization (and operated since 2011 as a “mission-driven for-profit corporation”), Couchsurfing now provides access to the equivalent of 2.5 million rooms located in more than 200 countries. Using a model that is somewhat closer to that of traditional hotels, Airbnb enables travelers to rent a room from a host. Founded in 2008, the company has 500,000 listings for lodging in 33,000 cities and 192 countries globally. (An April 2014, investment of $450 million in Airbnb gave the company a valuation of approximately $10 billion.xi)

Figure 2. Leaders in Lodging

Source: Robin Chase

What has allowed these services to grow so rapidly? Rather than creating new capacity, they have established platforms that leverage the existing infrastructure of the Internet to match people with excess capacity (empty couches or rooms) with other people who can make use of that capacity (travelers). Unlike the hotel chains that have to build and operate (or franchise) their own facilities,xii these services have figured out a way to make more efficient use of existing resources by aggregating them and devising a convenient way to match users and suppliers. In others words, the value added is software not hardware.

A similar model for aggregating and then offering access to excess capacity is used in transportation by companies like Lyft in the U.S. and BlaBlaCar in the UK that make use of empty space in drivers’ cars to offer a taxi-like service in dozens of cities at rates that are substantially lower than typical cab fares. This model also describes the fundamental strategy of eBay, which built a vast marketplace for buying and selling goods of all kinds that created a cadre of small merchants who lacked the means or the desire to operate a retail store or a conventional mail-order business.

In addition to these businesses based on an aggregation strategy, Chase identified two other types of platform-based business strategies—“slice” and “open.” Slice models make use of a platform to provide more efficient sharing of a resource than was previously possible. In these cases, the providers typically own and operate the resources themselves but have found a better way to share their use. Perhaps the most prominent current example is cloud computing, where companies offer online access to remote computer capacity that enables users to “rent” just the amount of capacity they need when they need it, rather than having to buy and maintain their own hardware. (The availability of cloud-based computing has dramatically lowered the barriers to entry for many businesses. Jonathan Taplin, who had been an early pioneer in delivering entertainment content over the Internet, noted that when he launched his business in the mid-1990s, it was necessary for them to buy all of their own servers in order to provide video on demand. Today, starting such a business would require much less capital thanks to the availability of resources in the cloud.) Another example of a slice-based platform is Zipcar, which provides a fleet of vehicles stationed in key locations that drivers can rent for as long as they need a car—essentially, a more convenient, more flexible version of traditional car rental services.

The third model—based on an open platform—holds the greatest potential for growth and disruption. In fact, the potential of this type of model is so large that it is almost always vastly underestimated when it first appears. Consider the case of GPS-based applications. In 1996, the Clinton administration considered opening access to the satellite-based global positioning system that was being run by the Pentagon exclusively for military use. The administration estimated at that time that opening the system for civilian use could generate $8 billion in revenue and create 100,000 new jobs by the year 2000.xiii In fact, by 2013, there were more than two billion GPS units installed worldwide, and more than $200 billion in annual revenue was being generated by the technology.

Perhaps the most potent example of the power of an open platform is that of the Internet itself, which Harshul Sanghi described as the biggest of all disruptive innovations. One of the Internet’s essential features is precisely its radical openness: anyone who agrees to conform to the technical standards that define the Internet’s operation can plug into it and use it without requiring permission from anyone else. Owned by no one and controlled by no one, the Internet has become the most pervasive global communications infrastructure ever built and has served as an unprecedented engine for innovation on many different scales.

Ping Fu, Vice President and Chief Entrepreneur Officer of 3D Systems Corporation, described a partnership with the Smithsonian Institution that will involve “scanning national treasures” to make them more widely available. The Smithsonian currently has some two million objects on display, but it has another 10 million items in storage that cannot be shown publicly due to lack of exhibition space. By scanning these hidden objects and putting the templates online, it will be possible to give Americans an entirely new relationship with their cultural heritage. Since the objects are in the public domain, individuals will be free to make exact duplicates or “hack” them to create unique artifacts. Instead of being confined to museums, these historical objects can have a new existence in the world, providing a new way to leverage human capabilities.

Another example of an emerging technology-based platform is 3D printing. In this case, the platform is disrupting the process by which physical objects are created and distributed. According to Ping Fu, humans have always been involved with “making stuff,” but it is only in the last two centuries that, as the result of the Industrial Revolution, people no longer felt the need to make their own goods. Education became more academic and deemphasized vocational training that taught the skills for making things. The rise of the maker movement and the emergence of 3D printing are responses to this loss and an attempt to bring back the full capacity of human beings to make as well as to think. 3D printers mobilize the power of digital computing to open up new opportunities for making—marrying bits and atoms to enable a new relationship between people and the physical objects that surround them.

The exploration of the potential for 3D printing is still in its infancy. In November 2014, a small 3D printer was delivered to the International Space Station in order to evaluate “how well 3D printing and the microgravity of space combine.”xiv According to NASA, this new technology may enable new opportunities for space-based manufacturing and also could enable astronauts traveling in space to make their own spare parts by transmitting the instructions needed to print the part to them rather than having to send it physically via a resupply expedition from Earth. Closer to home, a number of public libraries have acquired 3D printers to give patrons an opportunity to learn about the capabilities of these devices for personal making.xv

i Alex Hern, “Foursquare: 'The way people explore the world is going to change,’” The Guardian, August 4, 2014, the-world-is-going-to-change.

ii For more on this topic, see John Hagel, John Seely Brown and Tamara Samoylova, Work environment redesign: Accelerating talent development and performance improvement, Deloitte Center for the Edge, July 3, 2013,

iii For more on Li & Fung, see the 2013 Roundtable report, Adler, op. cit.

iv Richard Adler, Talent Reframed: Moving to the Talent Driven Firm, Report on the 2008 Aspen Institute Roundtable on Institutional Innovation, Aspen Institute, 2009,

v Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. London: Elgar, 2002.

vi Cody 'evoli' Conners and Rod 'Slasher' Breslau, “Wall Street Journal chart lists fourth in U.S. peak traffic,” onGamers News, February 5, 2014,

vii Nick Wingfield, “What’s Twitch? Gamers Know, and Amazon Is Spending $1 Billion on It,” The New York Times, August 25, 2014,

viii An article about the educational and vocational value of multiplayer games that featured a younger Stephen Gillett concluded by speculating that “the day may not be far off when companies receive resumes that include a line reading ‘Level 60 tauren shaman in World of Warcraft.’” John Seely Brown and Douglas Thomas, “You Play World of Warcraft? You're Hired!” Wired, Issue 14.04, April 2006,

ix John B. Taylor, “A New Twist in Online Learning at Stanford,” Wall Street Journal, September 1, 2014,

x Matt Marx, Joshua S. Gans, and David H. Hsu, “Dynamic Commercialization Strategies for Disruptive Technologies: Evidence from the Speech Recognition Industry,” Management Science, July, 2014,

x1 Mike Spector, Douglas MacMillan and Evelyn M. Rusli, “TPG-Led Group Closes $450 Million Investment in Airbnb,” Wall Street Journal, April 23, 2014,

xii A dramatic illustration of how capital-intensive the hotel business can be is provided by the October 2014 purchase of the Waldorf-Astoria Hotel in New York from Hilton Worldwide by a Chinese insurance company. The sales price for this one property: $1.95 billion.

xiii Carl Rochelle, “Coming soon: Global navigation for consumers,” CNN, March 29, 1996,

xivStephen Clark, “3D printer activated aboard the International Space Station,” Spaceflight Now, November 18, 2014,

xv Matt Wilson and Alia Wilson, “Emerging 3D printers prove useful to users of all ages,” San Jose Mercury News, July 23, 2014,

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