Well, maybe for software...for now...
At Documentum, we were fortunate enough to have Geoffrey Moore on our board after having discovered and famously exploiting his theory of Crossing the Chasm. When we started Documentum, Howard Shao's observation was that we should concentrate all our resources in solving a clear customer problem. Sybase had used this technique, unintentionally, in ultimately dominating Wall Street, where high-transaction throughput of data was a huge opportunity. At Documentum, we stumbled on the Pharmaceutical regulatory submission problem and discovered that electronic document management was the only solution.
After a pattern of selling high-value solutions to a string of pharma companies, we were introduced to Crossing the Chasm by Craig Conway. Howard and I devoured the book because it explained why Ingres, our previous company, had failed in the struggle to dominate the database market. Crossing the Chasm became part of the Documentum mystique and mythology. Venture capitalists started (and still) tell their companies to do what Documentum did -- concentrate all your resources in a particular vertical and dominate it. Geoff joined the Documentum board and our connection with Crossing the Chasm was further sealed. Having lived with its success, I became a big believer and proponent of Crossing the Chasm as strategy.
Geoff and I have had a few conversations since I left Documentum in 2001. One conversation concerned the fact that I had a problem with his mixed metaphors of Chasms, Tornados, Gorillas, Princes and Main Streets that makes it difficult for new comers to understand the principles. He agreed that it was an issue, but that his reputation is too tied to these metaphors. Another conversation was about whether he was interested in a new company in which I was involved in 2002. At the time, he said that he was getting out of technology at the time. Smart move, but it definitely made pause to think. Surely his model could overcome any economic glitch, a theory that espoused in the Gorilla Game. It turned out it was a smart move on his part to move out technology, because it was not a place to make money in that timeframe.
The last time I met up with Geoff was for lunch before OSBC last year where he presented a talk about Open Source and his model. In the last couple of years, Geoff has been focusing less on the early stages of marketing to disruptions in all stages of market development. In particular, he has been emphasizing how larger companies use the notion of core vs. non-core to improve operational and strategic performance. During our lunch we discussed where various companies such as RedHat, JBoss and MySQL were in the technology adoption curve that he espoused in his first book. Later in the presentation he has come to the conclusion that open source has crossed the chasm and is into the tornado. More importantly, he was hinting at how open source is a process of offloading non-core activities from companies, such as developing software, and handing it over to the open source community where it is core.
Despite placing open source into his traditional model, Geoff has slowly moved away from his early Crossing the Chasm models for other industries. I believe not because they were wrong, but because they have become irrelevant in a number of areas and there is probably more money in telling large companies how innovation changes them. Geoff wrote an article two years ago for the Harvard Business Review called Darwin and the Demon. For me, this describes better what is happening with both Crossing the Chasm and open source. In this article, he talks about how markets are affected by technology in early markets through technology, application, product and process innovation. Later parts of the market are affected more by customer experience, marketing, business model and structural innovation. In an article promoting his new book based upon similar concepts, he describes how innovation is being perceived as hard or even impossible, but it is not as long as it put into the right context. In Darwin and the Demon, he is describing more how existing enterprises can innovate, but I think the real opportunity is for new or evolving companies to innovate and displace existing incumbents just as Crossing the Chasm did.
Using Geoff's new model of a post-Chasm, post-Tornado market, indefinitely elastic Main Street market, we can see that a question of whether open source is crossing a chasm or in a tornado is irrelevant. Open source has leap-frogged it, something we were once told was impossible. Increasingly, the niches that made up the software industry are disappearing. In Enteprise Content Management, there is no document management, there is records management, there is only ECM. Business Intelligence is going the same way as well as test tools and system administration. Geoff predicted this in 2004, but surprisingly ignored open source. Software is a mature market with a consolidating number of players. Software is past the major growth curve in an indefinitely long period of Main Street, thanks to the severe recession (at least for technology) in the first part of this decade.
At this stage, no start-up can break into this stage of market development and last for more than a couple of years. At least, not with the traditional business model, even using Crossing the Chasm. They will either get gobbled up by a larger player or just fail. New models of innovation -- marketing and business model -- are the future of disruption in the software industry. Anyone who is left standing in enterprise software taht isn't over $500M in revenue and using the same business model as the largest vendors, will not last either. They too will likely be gobbled up by larger vendors as Larry Ellison predicted a couple of years ago. This same type of consolidation that happened in the car, aircraft, and computer industry, will also happen in the software industry. Technology will only disrupt the current model when there is a really substantial change of technology, such as the transition from Mainframes to PCs or from client/server to internet technology. However, this consolidation can be broken with marketing and business model innovation.
Open source is succeeding, not because of its technological innovation, but because of its business model and marketing innovation. Certainly open source has been creating new technology. Apache is creating new web serivces stacks, Hibernate has changed the way we view the connection between objects and relational databases, and Firefox is improving the web browser. The traditional software model cannot ultimately compete with the business and distribution model of open source. Users can download and try it rather than be sold to. Users that sell themselves are more emotionally bound to their decision. Downloading can reach geographies that the existing model cannot reach. The marketing and customer experience of open source is also much different and revolutionary. As users become part of the community, they experience a much more satisfying customer experience when they get their questions answered much faster, bugs corrected sooner, and if they have the knowledge, to be able to fix their own bugs. If they are even more capable, then when they contribute extensions, they become not just users of the product, they are part of the product.
Crossing the chasm in software as we know it is dead. No matter how hard one tries with the existing model, a new start-up in the traditional model is at best a quick flip. Open source and software as a service are leap-frogging the chasm and tornado and attacking straight into the Main Street market. The potential is even greater eat the market from within. Just as Cannon was able to eat into Xerox's copier market through more convenient, lower cost devices and a completely different distribution model, so will open source into the margins and markets of large traditional software vendors. That is why we are having so much fun here at Alfresco.