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Sustaining and disruptive paths to HPC: what it means for startups?

This piece is contributed by Thomas Thurston, President and Managing Director of Growth Sciences International. We last heard from Thomas in October of 2009.

In Newport, Rhode Island on March 16th, pacesetters of the HPC community will assemble as part of a Thought Leader panel to discuss “disruptive” industry trends. Disruption is important to HPC market leaders because few threats are more potent or subversive than “disruptive” ones. Meanwhile to HPC startups, disruption is the harbinger of opportunity.

Much has been written about why disruptive strategies are a good idea for startups. Yet perhaps equally critical for new HPC firms is why “sustaining” strategies — i.e. the opposite of disruptive ones — are a bad idea.

What is disruption?

First, to avoid semantic confusion, “disruption” in this context refers to the phenomenon captured by Professor Clayton Christensen at Harvard. More specifically than just “game changing” or “status quo-breaking” innovation, Christensen uses the term “disruptive” in a precise manner describing innovations that begin with “low-end” or “new-market” origins. From low performance or uninhabited tiers of the market, disruptive innovations increase their performance over time, usurping entrenched competitors in mainstream markets as they gradually move up-market. Instead of a direct attack, disruption is a torpedo from below. Rather, it quietly unscrews the hull from underneath, one bolt at a time, until the competitors break apart and sink.

For example, mainframe computers were disrupted by initially lower cost, lower performing minicomputers. Minicomputers started at the “bottom” performance-wise, but then got better over time, ushering in the eras of Digital Equipment, Prime, Wang and Data General.

Minicomputers with printed circuit board logic were later disrupted by initially lower cost, lower performing CPU-based computers. Such was the triumph of Intel and Microsoft, not to mention IBM, Apple and Compaq. Today, lower cost, lower performance ARM-based mobile platforms (ex. smartphones) are in the early stages of threatening to disrupt traditional X86 CPU-based computing architectures. Will Intel and Microsoft successfully respond? Maybe, maybe not. The point is that, unchecked, disruptive threats can be lethal.

The dangers of sustaining

With this understanding of disruptive strategies, “sustaining” strategies are their polar opposite. Rather than beginning at the low end or in new markets, sustaining businesses position themselves as higher performance. More specifically, they compete by offering higher performance along the top mainstream vectors of performance in their industry. Twice the speed at half the cost. Ten times less power at a tenth of the cost. No matter, these are all examples of sustaining strategies. They are defined by better performance.

The problem with sustaining strategies is that, while often a successful strategy for large incumbents, it is very often a suicidal path for startups — at least empirically speaking. The reason is that, when entrenched incumbents see a startup with a higher performing offering, they have no choice but to buy or squash the startup (and they don’t usually buy it). Inaction is not an option. If incumbents do not buy or squash the startup, it will begin taking their best customers. That simply will not stand.

Reams of research have shown that incumbents are all too effective at getting rid of startups that opt for sustaining strategies. It is typically not a dramatic death — no showdown in the streets. No high noon. Rather, the incumbents pull in their roadmaps, lower their prices, negotiate better terms with vendors, stimulate their vast channels and sales networks, offer bundles, and otherwise mobilize their armies to gradually squeeze the life out of “sustaining” startups until they run out of cash. It is slow suffocation. The startup’s sales become lackluster. Investors lose patience. Eventually the startup is shuttered, picked apart, or its assets are sold off in a fire-sale.

Rather than choosing a sustaining strategy, compelling research suggests that startups should choose disruptive strategies instead. Yet this can be particularly challenging in HPC. The HPC industry is, by definition, high performance. Therefore HPC startups can see disproportional challenges to entering with strategies other than higher performance offerings (or they might be in another industry altogether). Better hardware. Better compilers. Better integration. Better analytics. Better services and support. Better virtualization. Such are the hallmarks of HPC; the siren’s call for startups.

No one really wanted a faster horse

Making matters worse, top HPC customers usually lead startups further down the path of failure. The first thing HPC startups often do is to ask top mainstream HPC customers what solutions they want. Problem is, if you ask top mainstream customers what they want, they tend to ask for better performing versions of what they already have. Henry Ford famously said, “if I’d asked my customers what they wanted, they’d have said a faster horse.” The resulting feedback leads startups towards doomed sustaining strategies. Complicating things further, top customers are often early adopters in the product diffusion life-cycle. Therefore ignoring mainstream calls for sustaining innovations can go beyond larger strategic concerns; it can mean walking away from a purchase order. This is an unnatural act for any cash-strapped startup eager for “marquee” design wins.

Faced by such pressures, HPC startups often find “sustaining” strategies irresistible — despite the evidence that doing so will predictably lead to their doom. This is why, as the wounded economy looks for new footing, a discussion of disruption in HPC is particularly critical and timely.

As so many companies revise their strategies and business development plans hoping to bounce back from the depressed economic climate of the past year, it has never been more important for HPC companies, both the incumbents and the new players, to carefully review their take-to-market strategies and learn from this type of research.

Thomas Thurston is President and Managing Director of Growth Sciences International based in Beaverton, Oregon. Readers can contact the company at info@growthsci.com.

Comments

  1. I have to say that I have heard Thomas Thurston speak twice on this topic of disruption and both were in settings with founders of technology start ups and emerging stage business and in both instances the walk away knowledge and value garnered by those entrepreneurs was as high or higher than from any speaker they had ever seen.

    To me it was clear…the value that they gained was truly understanding how the greatest likelihood for them to survive (survive 1st and then have an opportunity to succeed) vs. fail was to have either a low-entry product or service or to launch a new market. This is game changing for many founders and early stage businesses as it provides a context for the cornerstone of the business (i.e. a disruptive model/strategy) that really is the primary indicator of eventual survival.

    From there they can build the right team to execute upon the disruptive strategy, but all of the sudden that is a process in a path now with greater footing. I don’t work with or for Thomas, but I am bullish on his research, and I think it is the data that every founder of a start up needs to know, implement and share with their investors.

  2. It is refreshing to hear a more analytical approach to disruptive technology. While I am a big fan, people too often talk about disruption in a vague and subjective manner. Everybody thinks they are “disruptive” but it is rarely true. Startups who join the market with a “better performing” solution rarely make it. Yes the big guys kill them, as the article says, but they also end up over-engineering their products and spending way too much money before they know what they are doing.

  3. Steve Ryan says:

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