A series of things. Go online and get a map and printed out. What came next was the standalone gps devices. They told you where to go. After that, the smartphone killed off everything. How . You have the device, the network in place, you are paying for it, you have the app stores were software can be automatically downloaded and google realize they had the mapping data, they had the gps data, they had the Government Data and they said there is no reason why we cant put that together and use this existing network and offer our own navigation app. They did. Mapscreated google navigation, downloaded it to android devices, and suddenly everyone had a free, better, cheaper, and more customized navigation tool on their phone. They did not and that they did not need maps. They did not need maps. That was helped by a decision by president clinton, wasnt it . The decision was to declassify gps data. It was out there for intelligence purposes. Clinton they realize clinton realized they could keep that use but make it for not for profit uses and we have the ability to find out how well our tracking was. We knew where everything was. Send a signal up, it comes back down and you knew where it was. That is one of the decisions and one of the unintended consequences that have created whole industries and opened up technologies in ways that have big markets, jobs, economy, and completely unpredictable ways. That is an exciting part. You never know where it will wind up. Google has been around for 20 years . Is it still a disruptor . It is. We still think of it as an incumbent company. It is a Public Company and a large company. They have to worry about things that startups do not have to worry about. One of the Amazing Things about google so far in its history is it has never really made a huge wonder. There are little mistakes. Google plus, not so good. Some of the rollouts. What they understand is that they are not in the search business. They could have stopped there and said, we are making money. They said, no, no, no. We are in the information business. Andmore information we have the more information we give back in different forms, the more uses people have and the more we can do with it. They are into everything. Not just in search, but the driverless vehicles. They are investing in smart homes with their acquisition of nest. They have the google last and the next generation of display technology, energy, broadband business, they really understand that the more information there is, the bigger the company gets. As long as they continue that philosophy and innovate around whereey will survive other Tech Companies have had their moment and gone away. In your new book, big bang how do you and your coauthor define disruptor . Thatis taking off of work was done about 20 years ago by the harvard is the School ProfessorClayton Christensen who talked about Disruptive Innovation as something that enters the market as a technology that comes in it is cheaper than what the incumbents are offering, but not as good. Personal computers are a good example. No one thought that they would replace mainframes when they showed up. They were cheap, but only hobbyists could get them to work, it if at all. Slowly but surely, they were able to move up through the market and take over that is exactly what has happened. Mainframes are gone and now there are banks of personal computers. What we discovered in our research is that something fundamental had changed even from that disruptive model. Of many decades of computers getting cheaper and faster and smaller and using less energy all the time, it was now possible for a disruptor to enter the market not only cheaper, but also better right from the start. The example we start with, talking about google maps navigation. App, compared to paper maps or standalone tools that you would buy it from map companies, you are getting something that is better. It was on your phone. It talks to you. It was cheaper in the case of google maps in that it was free. Cant get much better than that. It was more custom. If you saw a web search and please you wanted to go, it links you to the in navigation map. Better, cheaper, and more customized is very hard to compete with when you are an incumbent, especially when it shows up that way from the beginning. That is what we mean by the big bang disruption. Oores law . Sorcite m he was one of the founders of intel and he made a profound observation. Semiconductors are made is that they have tremendous cost of scale. Lots of money to build a fabrication plant, but once you get it up and going, the more you make, the cheaper it comes. There was a miniaturization as they proved improved on the manufacturing. They get smaller. Fore is also less distance the signal to have to travel. He predicted in the 1960s that given the trend in engineering and manufacturing that every 1218 months, computers would get twice as fast as the same price. He said he is not sure that how it will last. It is still going. Every 12 or 18 months, we get that or, smaller, cheaper computer processors, memory, storage and everything that goes with it. That has driven the information revolution and driven disruptive information. Looking ahead, is moores law going to continue . Someones out there that says the law has hit a wall. We cannot get any smaller and sure enough, the engineers come up with a way. I no longer my engineering props are that the out of date. I was an engineer, but i had my team of Kitchen Cabinet engineers who i always ask that question to an nature me that moores law is in no danger. We have experience with molecularlevel computing that will continue to push the barrier for the rest of our working lives. In big bang disruption, you write four incumbents and their strategic plans, big bang disruption is the innovators disaster. The work i mentioned earlier christianson said that one of the ways when you have to respond when you see the disruptorsheaper means it is the time for you as the incumbent to start experimenting. When you saw the pc, you say to yourself, no threat to me now. This is a signal that something will happen eventually. Now it is time for me to make a transition plan. What christianson said you have to have to start thinking about it. You launch your own replacement from within, which is hard for Large Companies to do. We saw many large Computer Companies that were not able to make that transition, both in this country and abroad. A lot of them went out of business. Unisys. They disappeared or went into other businesses. It is a research disaster because if you wait until the thing shows up, the worse but cheaper alternative, you have waited too long. When it shows up, it is not worse and less expensive. It is better and less expensive. In the case of our navigation example, we had Companies Like garmin and tomtom and magellan. They knew that the smartphone was taking off. They understood it was possible that someone else could launch a navigation app, but they said we do not see any threat yet. We will wait. We will respond when it shows up. When it did respond, it took off and you had millions of people saying this is better and cheaper. Which one will i choose . By then, it was too eight to respond. We say that innovators incumbent businesses of any kind need to look much earlier into the lifecycle of new technology and recognize that even before there is a product, there will be a lot of experiments going on. Many of them are visible. They are right in the market, things like kickstart your and other crowd funding platforms, allow you to see how people are playing with other technologies and that is the moment when you should get worried and when you yould start planning how incorporate. Maybe youre acquire them or do your own experience. You need to start sooner. Tomtom, garmin, do they exist . They do. They are much smaller. They lost a lot of value in their stock and revenue in their product. They go to more specialized markets. You may have an indash device and a higherend car. If you buy your own standalone gps device, that business is pretty much gone. Walk us through the four steps of big bang disruption. Lifecycle the new we see as information enters, saturates, and leaves markets. They are all named from the Big Bang Theory of the universe. Were using it metaphorically. We say the initial. I was discussing, with all these experiments, that is a singularity. It is cheap to do experimentation. You can find people to fund you. You can work with offtheshelf components. What we see is lots of that kind of experimentation. In an incredible range of fields. You can go to brooklyn, new york. It has turned into an incubator. People are doing their startups. They are funding it through these platforms. It may be food, a fashion, into electronics, 3d printing, whatever it is. It is very easy to do these experiments and find out if there is a market for it. If you can find this market for you spend any money on your own. This is the hotbed which is like when the universe was being formed. It is compressed energy and matter getting ready to explode. It had not exploded yet. That is the second phase called the big bang. That is when someone figures out the right combination of technology, the right business model, a good example is the kindle. There has been a decade of electronic book readers before that, but no one quite got the right technology or price point or network or business. Amazon had the right. They put them together at the right time and when it launched, it was not a slow uptake. It was not taking market. The others had failed. They were gone. When the kindle came and it was right, the market said, this is what we have been waiting for. Forave heard about this decades and finally someone cracked the code. The uptake is essentially a vertical line. It is not about customer segments arriving in a sequential way. It is now what we call catastrophic success. It your customers arrive could be in days, it could be in years but it is a very compressed piece of time. Straight up. Then comes the big crunch. You have all these customers in a short. Of time. You dont want to make the assumption that the Straight Line will continue indefinitely. The markets are fickle and everything is more like fashion in the sense that there is seasonality great if you buy a smartphone, you dont expect it selling for five years. You need to know you have a replacement that is cheaper and better and smaller and more customized in two years time. That is the model that is playing out. You have to be ready. The big crunch will come. Your current product is going to die not quite as fast as that vertical of take, but it will start to drop off dramatically once the customers have arrived. Theyre waiting for the next thing are someone else or you are offering the next thing. This stage, entropy is the home for companies who could not get out of the market in time. Maybe they were not allowed to, like the post office. They are forced to stay in the market even when customers have largely disappeared. We look at customers or agencies that were stuck in markets that were down to a fraction, a shadow of their former selves and look at how they either managed in that smaller world or found ways to escape the incredible gravitational push of a dead market. Where would you put twitter in those stages . Sweater is still in the big bang stage. It has that great story. It is going straight up. The pace of signups is not what it was in the first year. It is still growing very dramatically. It is finding itself as a company. What are the products . How will they make money . How will they diversify . Will they go horizontally or vertically or will they do acquisitions the way facebook is doing . It is a very Young Company and it is still growing and initial product. It is an big bang mode. Where would you put the cable industry . I am not sure there is such a thing as the cable industry anymore. The reality is one of the Amazing Things about what has happened in the internet and internet protocol products. ,t has now compressed our world a world of voice and video and data, in ways that no one would have imagined her it used to think that imagined. You used to think that cable is for television and broadcast is over the air and phone companies do voice. Both the technology and the application were thought to be restricted to one combination. The internet has thrown all of that out the window. Everyone can do anything on the same network. Cable, in some sense, is not what it used to be. It is not just about television. It is also voice and video and data. Isps as well. They are in this mode of rapidly changing technologies. Broadband, both wired and wireless are improving dramatically thanks to moores law and the corollaries that go with it. On one hand, it is a huge opportunity, and on the other hand, an enormous risk. That is the struggle that all industries in that big bang experience have to deal with. Role of thet the government and regulation . It is interesting. We did a horizontal view in our study of industries. We did not want to talk just about consumer electronics. Computing makes the best example because the most mature. We wanted to look at every industry. We look at 30 different sectors of the economy and asked where is it happening, or where is a not happening, or where is it faster or slower and white . One of the things we discovered and why . One of the things we discovered is that some industries think about health care or industry are the slowest to experience the bank disruption. Why . The regulars created a barrier to entry. You may have a better, Cheaper Technology but you have to get permission to start selling it. You might have a better and cheaper way of doing health care. Maybe it is wearable devices using sensors and monitors. As lots of companies have learned, the fda does not approve it. You cannot sell it. Barriersnse, those slow down the way in which big bang disruption happens. At the same time, when someone finally cracks the code, voice over Internet Telephone protocol is a good example of this once it is in, it is all over. Utilitieshat public dont have a big incentive to innovate. They have disincentive sometimes. They made you need they may need to get permission before they are allowed to invest in the next generation of Energy Production or distribution. If they have not been innovating, an innovator arrives and it could be more chaotic and catastrophic than in the more traditionally competitive industries. Where are you based on what is your day job . I am based in Silicon Valley and i work with technology companies. I write for a number of different publications and mostly, the last couple of years i have been doing research for this book. This is your third book . Yes. Big bang disruption. When you talk about exponential technologies, what do you mean . We talked about it before. Computer technologies. Moores laws and exponential rocher. Youble it every double it every two years. To 18 months, a bigger and bigger number. That is one of the technologies you look at. There are exponential technologies in other fields as well. Some of them are not as well developed. Things like the human genome project, the cost of decoding or sequencing human dna is falling at the same rate as moores law. If you look in optics, the way that leds are improving, that is moores law as well. Theyre doubling the capacity and keeping price constant every 12 to 18 months. Potentialing sustainable sources of energy that may exhibit those properties as well. Any industry where you have exponential technologies at work or supporting your work, and the case of computers and information, that is where we see the most obvious examples of big bang disruption. World at cspan and in washington involves the energy and Commerce Committee for the federal communications commission. From your seat in Silicon Valley, how much attention you pay to them . I pay a lot. I think many of my colleagues, and many of them in the investment community, do not pay enough. Where we haves not experienced a lot of regulation and we think of this as permission less innovation. We are out in the valley, we do stuff, and we sell it. We throw it at the market and see if anything happens. We often gets a prize were government regulators show up and say, you cant do that without our permission, or you cant do that without passing a number of tests, or filing all sorts of rates and tariffs. Increasingly, those in Silicon Valley recognize that we need a much more current understanding of what washington does and does not do and a much closer working relationship to make sure that they dont inadvertently get in the way. We, in adownes, arent sense, in the age of a monopoly, or an oligopoly, when it comes to the last mile into home . I dont think so. We are increasingly seeing of course, according to the sec, most americans have at least two if not more choices for broadband providing and that could be cato cable, fiber, wireless. Possibly in the future, satellite providers. We have seen interesting moves there by people like directv and dish. We have somewhat direct competition. We are getting more competition. We have to look more broadly at the entire internet ecosystem because it is not just our petition directly between the carriers. It is also market discipline that is provided by the content providers. Countries like facebook and netflix can say, we have the relationship with the customer. It is our content that they are interested in and that gives us leverage and how you might price your products or how you build your networks or how you work with us. We have seen lots of examples of that. The content providers, the operating system makers, the smart makers have leverage, too. There is more of them all the time. In some sense, regardless of where youre getting your Internet Connection from, the people that run the network have a lot of Competitive Pressure both from actual competitors and these more indirect ecosystem competitors. One of the examples in the book is an oldschool comparable company, corning, and its role in our modern world. Corning is great. They are an oldschool company. They are in the physical business of making glass and physical products. Think partlyome, i by design, parlayed by good already, and partly by accident, they have become a major player in the Smartphone Display and covers for display. It happened by accident. They didnt experiment. I dont remember they were trying to do, but in the 1950s they were working to try to find a more sturdy, unbreakable glass. They could not the experiment did not work and they could not get the price right. They put it on the shelf until steve jobs showed up and said, for the iphone, i need something over the display that will protect it from all kinds of abuse. They said, you know, we did that experiment and we could not figure out an application or price point for it. Lets pull it down. In less than a year, they were in production making gorilla glass. That has become the major product. Is gorilla glass a standard . Not everyone uses it, but it is the dominant product. Improving it up to gorilla glass three now. If the consumer electronic show, they were demonstrating the next generation, which had antibacterial properties. They compete in some ways with themselves by constantly updating it. There are other makers. Who is this book written for . The primary audience for all the work that i do is for the incumbents. Traditional businesses and industries that we talk about in with thewho are faced potential entrance of a big bang disruptor. Maybe it is coming from a startup, maybe from someone like ogle moving into their industry, accidentally in the case of the navigation product. Need tonal businesses learn a different way of responding. They need to understand the four phases we talked about. Thats the way that markets develop. If it is not happening in their industry today, it likely will in the knot too distant not too distant future. We are trying to teach them to leverage that. We want them to have their intellectual capital in a way that will not only survive the big but come out better on the other side. What is the benefit of consumers to this book . To consumers i often say we are living in a golden age for consumers. When products get better and cheaper every cycle, whether it is a year or two years or more, we are getting tremendous economic consumer surplus. So much so, consumers expect that will happen. Apples what happened when came out with the iphone 5 s. Consumers were expecting the iphone 6. They said they will wait. This happens more and more. Consumers are very savvy. Are sometimes the marketing function for companies. They decide what is the best product and that is what everyone buys. Second, third, and fourth dont get much profit. Consumers have much more leverage in all kinds of industries. The communication industry is another good example. For consumers, this helps them understand why it is that markets have changed and where their new power comes from and what they can do to leverage it, to exploit it, not only with companies but with regulators, get what they want or dont have what they do like taken away more quickly. All these things in which social media has empowered consumers in dramatic and unpredictable ways. Just recently, we saw an article about a Company Called oculus that facebook bought for several billion dollars. Is that one way to prevent disruption, to buy your competitor or potential competitor . Yes. This is a very good strategy. It has been a strategy for a long time in Silicon Valley. We have had for decades what we call corporate venture capital. It has had its better and worse moments. Companies come out to Silicon Valley. They invest along with the venture capitalists in earlystage companies who products or services may be closely related to or integrated with what they are competing. Fewave seen in the last years dramatic examples of this with facebook and other companies doing multibilliondollar acquisitions of companies early in the process. In the case of oculus, they have not created the products. They are still selling prototypes and development kits. They started as a kickstart a project kickerstarter in 2012. If youre going to acquire disruptors, you dont want to do a too soon. We may have hundreds of experiments going on. That was the case in Virtual Reality gear. You pick one and you are more or less picking at random. You may get the right one, but youre more likely to get the wrong one. You cant acquire them all. You have to wait. If you wait for too long, like in the case of twitter imagine before they went public there was someone who wanted to acquire them. That point had been reached where it was no longer economically feasible to acquire them. They were going to the Public Markets and monetize that way. There is an increasingly short. Period of timert where the big bang is the big bang. If you want to do short acquisitions as a hedge against disruption, you have to be on target with the market, no the technology, no who develops it, know which ones the consumers are leaning towards and voting for and acquire them quickly. Something that is different in todays world is we are doing these experiments and development in public. Exactly. One of the side effects of the information revolution and Broadband Networks and mobile computing is that it is now much cheaper to experiment directly in the market. Launch a campaign and see if anyone donates it. We do in the way we used to, enclosed labs. The price of innovation has come down to now where it is better to do it in the open to do it secretly. That is another big challenge for our friends in the incumbent businesses. The book is called big bang disruption. Larry downes is the coauthor. Brought to you as a Public Service by your local cable or satellite provider. Cspans new book includes financial journalist Gretchen Morgan seven. Nson. If you want to subsidize housing and the public agrees that it is something we should subsidize, then put it on the Balance Sheet and make it clear and make it evident and make everyone aware of how much it is costing. But when you deliver it through these thirdparty enterprises, fannie mae and freddie mac, when you do it to a