Disruptive Innovation

Enough With the Disruptive Innovation. Collaborate or Fail.

[This is taken in large part from from an earlier blog, but I feel it needs updating to include more than just payments.]

‘Disruptive Innovation’ has become a common cry for anyone wanting to displace the existing players. It is defined as; “an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology.

Unfortunately the original concept is now grossly misapplied. But like how ‘irony’ now has several meanings, I guess disruptive innovation will have different meaning based on its context.

However, I’ve never heard anyone using the phrase ‘Sustaining Innovation’, which; “does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each other’s sustaining improvements.

So why is everyone so interesting in disrupting the existing ecosystems? And by “everyone” I of course mean those who are trying to either break into market, or those trying to wrest even more control for themselves. In payments – as my example -, non-cash payments work [mostly], and you have a large degree of faith in your bank’s ability to protect your monetary assets. Do you really want the whole thing to change? Do you even know what it is that you want that’s different?

But do things even need to change? Well yes actually, they do. And are there innovations available NOW that make the payments process easier, cheaper, and more secure for the consumer? Yes, there are. However, can we expect the entire payment industry to throw out everything they have spent billions on over the last few decades, are used BY billions, just to make room for every start-up with a good idea? No, we can’t, and that’s the real issue here.

In the last 10 years there have only been 2 true [potential] disruptors in the payments industry; the mobile phone, and block chains (Bitcoin et al), neither of which has achieved anywhere near its full potential. Yet. Not because the technologies are flawed [necessarily], but because the introduction OF the technologies was done poorly. For mobile devices, the payments challenges included the ‘fight’ between NFC and BlueTooth, the numerous options for security on the device (Secure Elements, Trusted Execution Environments and so on), and the presumed insecurity of the technology overall. For block chains is was, and still is, the almost complete lack of understanding of how they even work in the first place. I’ve looked into them and I still find the concept nearly incomprehensible.

But even these disruptors need current context, and they represent a fundamental shift from our overly complicated view of payments back to its basics; I go to work to earn value (money), the value gets stored somewhere (a bank), and I access the value when I want it regardless of time or location (mobile payment). This would suggest that the only disruption we really need is the disintermediation of some of the players. There are simply too many middle-men whose only input to the new world of payments will be value erosion. Thank God the Mobile Network Operators (MNOs) are too busy bickering amongst themselves or this would be even more complicated!

As a consumer who has a very good idea of what he want to see change, I know that only those who help the payments industry evolve will have a lasting positive impact, and this will only be through collaboration and fair competition.

I’ve used payments as an example, because that’s what I know the best, but the same can be said for almost every other industry sector. The drive to take away what others have, instead of providing a better service for the common good, is capitalism at its worst. And no, I’m not proposing some sort of socialism, it’s just logic; What’s easier? Completely replacing something, or improving what we have in collaboration with multiple players?

It’s not like there isn’t enough to go around.

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Cloud Computing

Are Cloud Providers ‘Too Big to Fail’ – Let’s Hope So

In a rather ludicrously titled article (yes, even for me!) ‘Too big to fail’ cloud giants like AWS threaten civilization as we know it” the author nevertheless addresses an interesting point. And while I almost entirely disagree with the final conclusions, they represent a valid, if extreme viewpoint. If those conclusions are a little self-serving, this can be forgiven in light of my own issues with some Cloud Providers.

The basic premise is that traditional hardware (servers etc.) sales are dropping, while cloud-based and managed services are on the rise. With the corresponding drop in hardware related skills (no demand), eventually we’ll be dependent on one of the big providers (Amazon, Google & Microsoft).

This is apparently very bad, as: “If one of these goes down hundreds of thousands of other companies go down too.” This is the “interesting point” I referred to earlier, unfortunately the reasoning presented simply makes no sense. Two examples provided are:

  1. power grid failures or natural disasters – with the fallout propagated worldwide; and
  2. AWS’ hiking of its UK prices post-Brexit as an example of how quickly customers could be affected.

First, suggesting the Google, Amazon or Microsoft have a single point of failure that could take them down globally is ridiculous. Second, with regard price fluctuations, this is likely the result of organisations choosing a provider based on price alone, and not performing adequate due diligence. In trying to save money by using US based provider, and not writing mitigating language into contract, you are the ones leaving yourselves exposed.

I’m really not picking on either the subject of the article, or the author, I’m just using this to demonstrate my point. Cloud services, done PROPERLY, are the future. Or without the stupid buzz-phrase; outsourced services over the Internet are the future of infrastructure management. The issue is that a lot of Cloud services are abysmal, and the due diligence performed by many organisations nothing short of a disgrace.

But outsource they will, and they should. For example, how many organisation really want to hire dedicated teams to perform all of the following;

  1. Design Operating System Hardening Guides;
  2. Build and maintain servers;
  3. Install and configure all relevant security software/application;
  4. Patching and Vulnerability Management;
  5. Data Encryption;
  6. Access Control;
  7. Logging & Monitoring
  8. …and the list goes on.

Whilst finding a single cloud provider to take care of this is almost impossible at this stage, that’s where it’s going. Only the economy of scale available to large providers can make these offerings cost effective enough to be an option for non-enterprise businesses. And frankly, the only businesses who actually care about how data is made available, are the ones being paid to make it happen for someone else.

The motivations behind the referenced article are rather simple to deduce; 1) they have a vested interest in selling hardware, and b) they can make more money through channel than Cloud.

Fair enough, but channel’s loss of market share, and their inability to pivot is entirely their fault. They are now suffering because they have never tried to put their products into perspective. The rush to maximise profit margins was at the expense of making themselves a truly valuable partner.

If channel had only put a consulting wrapper around their offerings, they could still be selling solutions, not stuck trying to flog pieces of metal and plastic.

Perhaps this article will make more sense now they they are feeling the pain; Attention Channels/Resellers, Don’t Forget Consulting Services!

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Payments Innovation Should NOT be Disruptive!

By now I think everyone has heard the phrase ‘Disruptive Innovation’, as defined by; “an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology.“. This phase is especially bandied around in payments.

But how many of you have heard the phrase; ‘Sustaining Innovation’, which; “does not create new markets or value networks but rather only evolves existing ones with better value, allowing the firms within to compete against each other’s sustaining improvements.

So if you accept that a payment itself is just a way for you to access your stored value (what we call money) any time / place of your choosing, why is everyone so interesting in disrupting the existing payment ecosystem? And by “everyone” I of course mean those who are trying to either break into market, or those trying to wrest even more control for themselves. Non-cash payments work [for the most part], and you have a large degree of faith in your bank’s ability to protect your monetary assets, do you really want the whole thing to change? Do you even know what it is that you want that’s different from what you have today?

Do things even need to change? Yes, they do. Are there innovations available NOW that make the payments process easier, cheaper, and more secure for the consumer? Yes, there are. Can we expect the entire payment industry to throw out everything they have spent billions on over the last few decades, are used BY billions, just to make room for every start-up with a good idea? No, we can’t, and that’s the real issue here.

In the last 10 years there have only been 2 true disruptors in the payments industry; the mobile phone, and block chains (Bitcoin et al), neither of which has achieved anywhere near its full potential. Yet. Not because the technologies are flawed [necessarily], but because the introduction OF the technologies was done poorly. For mobile devices, the payments challenges included the ‘fight’ between NFC and BlueTooth, the numerous options for security on the device (Secure Elements, Trusted Execution Environments and so on), and the presumed insecurity of the technology overall. For block chains is was, and still is, the almost complete lack of understanding of how they even work in the first place. I’ve looked into them and I still find the concept nearly incomprehensible.

But even these disruptors need current context, and they represent a fundamental shift from our overly complicated view of payments back to its basics; I go to work to earn value (money), the value gets stored somewhere (a bank), and I access the value when I want it regardless of time or location (mobile payment). This would suggest that the only disruption we really need is the disintermediation of some of the players. There are simply too many middle-men whose only input to the new world of payments will be value erosion. Thank God the Mobile Network Operators (MNOs) are too busy bickering amongst themselves or this would be even more complicated!

As a consumer who has a very good idea of what he want to see change, I know that only those who help the payments industry evolve will have a lasting positive impact, and this will only be though collaboration and fair competition.

The greedy can stay home.

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