Technology Tales & Tails Stories of Techno-evolution Steve Kiely Chairman, Cray, Inc. September 21, 2010.

Technology Tales & Tails

Stories of Techno-evolution

Steve KielyChairman, Cray, Inc.September 21, 2010

Does the best answer always win?

VS.

VS.

VS.

…If not, how do we pick the right horse to ride?

Technology Tails

T1 T2 T3 T4 T5 T6 T70

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Product 1Product 2

Early life cycle

Late life cycle

Life cycle: early phases

T1 T2 T3 T4 T5 T60

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Unit Sales (M)

“Innovator’s Dilemma”

“Innovator’s dilemma”: Clayton Christensen

• Technology evolution Disruptions!

• Disruptions occur at low-end price points▫High-priced product’s managers won’t react…

They’d lose margin!They don’t feel threatened!

▫Buyers moved by price for NEW USESIf milk cost a penny per gallon, we’d water our lawns

with it….

• Disrupt yourself before somebody else disrupts you!

Paradigm shift: low-cost replacement

1980’s:Mainframe Model

1990’s:Distributed

Model

DISRUPTION!

Tale: IBM vs. Intel & Microsoft

1982 2000

IBM IT PRODUCT

MARKET SHARE

INTEL & MICROSOFT IT PRODUCT MKT

SHARE

• IBM exited PC business in 2005• PC business dominated by Intel & Microsoft

Tale of 1982: The Birth of The Industry Titans…

•IBM Funds Intel’s R&D for microprocessors▫Intel faced financial ruin from Japanese RAM

dumping

•IBM chooses Microsoft to supply the OS for IBM PC▫Microsoft had no meaningful business at that

time

TALE: iPad vs. PC: Disruptive Technology?

iPad Paradigm PC Paradigm

• Simpler (touch vs. type)• Killer graphics• Task-focused

▫ Reading▫ Playing

• Lower cost

• Getting better▫ Smaller▫ Faster ▫ Cheaper▫ More portable

• KB/Mouse• Large Storage (HD)

iPad and the Laptop, WSJ

Tale: Low Cost Replacements, Round 2

Apple vs. Microsoft, Round 2 • Apple’s market value (stock) now exceeds Microsoft’s (!)

▫ Apple has attacked the low-price segment iPod, iPhone, iPad enjoy significant user simplicity advantage Microsoft has four failed entries in consumer segment

Zune, Windows phones don’t compete XBox: only hardware differentiation; uses software from game

industry

Intel vs. the world, Round 2• Intel has no answer for low cost hardware engines

▫ ARM, Snapdragon dominate smartphones, specialized devices like iPod and iPad

▫ DSP’s (Digital Signal Processors) dominate mobile devices – no Intel answer

Life cycle: MID phases

T1 T2 T3 T4 T5 T60

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Unit Sales (M)

“Crossing the Chasm”

Crossing the Chasm: Geoffrey Moore

• Build the whole product▫Your product, plus…▫ The “Value Chain”

Hardware, software, network, distribution, service, etc. …

• Target early adopters▫Users who have NO CHOICE▫Users that DRIVE THE BUS

• As volumes peak, change your approach to the market▫ shift investment to the next big thing▫ change marketing (e.g., coupons vs. advertising)

TALE: Apple vs. Android• Apple iPhone approach:

▫Premium priced within its category▫Proprietary product design, even for applications

Steve Jobs’ philosophy: design beauty via total control Side-effect: limited value chain (e.g., Flash Applications)

▫Exclusive network (AT&T only) - #2 behind Verizon• Google Android approach:

▫Supply the key element = the mobile OS▫Let the industry provide hardware platforms &

networks Result: lots of price points, hardware innovation &

competition, broad network adoption• 2010 Year-to-date: Android sales > iPhone sales• Market prediction: Android dominates by 2014

SOME IMPLICATIONS for USERS…

• Pioneers have arrows in their chests….▫Be an early adopter when you have no other choice▫ If you’re an early adopter, realize if it’s for the thrills…

• Laggards walk a tightrope…▫There’s a lot to be said for the stability of maturity▫Laggards put themselves at a competitive disadvantage

• Mainstream Majorities seldom stick out in a crowd….▫“Nobody get’s fired for buying IBM”…▫…But does your business require a technology

advantage?

Life cycle: Late Phases

T1 T2 T3 T4 T5 T60

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Unit Sales (M)

“Technology in decline?”

Cost Wars: Hard Drives vs. DRAMs

VS

Tale: Hard Drives vs. DRAMs

•LESSON: Competition technology improvements!▫Consumer hard drives priced below $0.01 per

GB▫Consumer Flash RAM priced over $2.00 per GB

•LESSON: Competition technology differentiation!▫Hard drives – best capacity▫Flash RAM – best access times

Beware the “Next Big Thing”…

OFFICE O

F THE F

UTURE BLADE SERVERS

CLIENT-SERVERCLOUD COMPUTING

VIRTUALIZATION

…Consultants don’t always get it right…

Closing Thoughts…

•Don’t be the first to buy unless you see no choice (or you are a thrill-seeker)

•Don’t sell an old technology short while it’s still delivering

•Don’t make your organization a dinosaur by riding one

•Don’t forget to look for the WHOLE product

•Don’t forget to look for the shiny new toy at price points below the mainstream product’s

Technology Tales & Tails

Stories of Techno-evolution

Steve KielyChairman, Cray, Inc.September 21, 2010