plus/minus epsilon

The natural question that comes up when thinking about disruptive innovation is: How can incumbent companies successfully navigate the transition to a disruptive technology?

The answer I’m familiar with is basically that managers invest in the new technology, and let the old and new compete. This acknowledges the risk that the new technology might fail, and also captures the upside if it succeeds. As the previous company/department begins to decline, the other starts growing just as quickly and you already have an ownership stake in it.

E2E encryption possibly fits into the model for disruptive technology:

1. It’s disproportionately valued by a small set of people.
2. Established companies are unable to effectively deploy it because they either consider plaintext data valuable, or they’ve built a product which is technically unable to be offered in an end-to-end encrypted fashion.

However, it’s not clear that sufficiently developed E2E encryption is able to provide the same service better than an unencrypted alternative would be able to.

Disruptive innovation requires the creation of a new disruptive technology. So if Wikipedia is an example of disruptive innovation, what technology did they create? Like most people, I hear “new technology” and my mind naturally starts looking for machinery and gears combining to accomplish something that nobody thought was possible before. But that’s not here: Wikipedia is widely considered technically unremarkable. Instead, what stands out to me about Wikipedia and makes me think “that shouldn’t work” is anonymous contribution.

Wikipedia is a classic, underrated example of disruptive innovation. They started out by serving the low-end market of people that want information immediately, for free, and are fine with that information not necessarily being high quality. This was previously a market that print encyclopedias like Britannica served with door-to-door salespeople, but while trying to grow their revenue they naturally pursued higher-margin opportunities with universities and academic researchers.

Surprisingly often, well-managed companies fail to compete against startups that pursue their customer base. By not competing, these large companies lose market share and often go out of business, even though they have substantially more resources than their startup competition.