Hard Disk Industry’s Disruption

The hard disk industry is in danger of being disrupted but I think the industry players are still in denial mode.    Traditionally, the HDD (hard disk drive) industry competes on cost per capacity.   Whoever can pack higher density into a single platter of magnetic disk, resulting in low cost per storage capacity,  wins.      Vendors compete to deliver low cost hard disk sooner and at higher volume.  All other competitive factors are secondary.

That is fine as long as PC users continue to prefer higher capacity drives at a given price.   However, in recent years, the market has shifted.    Firstly, PC is no longer the primary computing device any more and PC’s significance will continue to slide.   Tablets,  wearable computers and internet of things will take over.   No longer is cost per GB the most important competitive advantage.    Power consumption,  physical size,  vibration proof, mean-time-between-failure, access speed etc. become equally if not more important.

Secondly, even for PC users,  there came a point where there is just too much storage capacity in a PC for an average user.  Today, an entry level notebook easily comes with 500GB to 750GB of HDD space.   There are many researches that find most users hardly consume half of that in the lifetime of the PC.     Any additional storage is great if it comes free but capacity is no longer an advantage valued by consumers.   Instead even PC consumers are asking for alternative storage products that boot up faster, consume less power and don’t crash that easily. 

However, talking to ex-colleagues and friends in the industry,  it became clear to me that “old thinking die hard”.  Very few leaders in the HDD industry are thinking outside the box.    As Christensen has warned,  the reason why innovator’s dilemma problem is so difficult to solve is not because of technology nor is it because of money,  but rather the main obstacles lie with the inertia of the human minds.    Once people are brought up to think in certain ways,   they will find it extremely difficult to accept changes that do not conform to their mental model.      It often requires a crisis to either wipe out the incumbents or force them to completely re-engineer their business.

The irony is Christensen started his famous book “Innovator’s Dilemma” by citing example of how the HDD technology replaced older forms of storage because the  incumbents during that era couldn’t think out of the box.   Now, unfortunately history is repeating itself as Christensen predicted.

Innovator’s Dilemma

The year was 1997 and I was working for Intel.     I remember vividly a speech which left a profound impact on me by our then CEO,  Andy Grove during a worldwide sales conference.

It was one of those highly anticipated keynote speeches during dinner.    Andy walked up the stage and started to demonstrate two computers running the same applications side-by-side to show the relative performance between the two machines.    After couple minutes, the computer on the left finished first and then followed by the one on the right.

Andy said, “Ladies and gentlemen,   the computer on the left which ran faster is a PC running Intel’s newest microprocessor and the PC costs $2,000.    The one of the right is a Silicon Graphics workstation that costs $10,000.”

Before Andy said another word, the audience burst into applause.    It’s obvious isn’t it?     Intel platform won !        However, Andy raised up his arms to interrupt the applause and said,  “I want you to know that what you have just seen isn’t something to be celebrated. If we are not careful,  it’ll be our downfall.”

What?   Why?   Didn’t we just win?

Andy continued, “Yes,  Intel-based PC performed better and it’s cheaper, but think about it –  the applications that the two machines just ran are among the most CPU intensive in the industry.    If our middle-of-the-range CPU is able handle the workload so efficiently and even outrun a powerful workstation today,  in a few years’ time,  our low-end products will be good enough for most applications out there.       Guys,  this is not good news.   Our products are out-running market needs.    This is called innovator’s dilemma.”      Andy proceeded to explain the concept of technology disruption and the discussions he had with Dr. Clayton Christensen,  the Harvard professor who wrote the book “The Innovator’s Dilemma“.   That was the first time I have heard of the concept and my understanding of innovation has forever changed since then.

Fast forward to 2012,  I had the opportunity to watch Dr Christensen gave a speech in person.   For those who are interested to view Dr Christensen’s speech,  click here.      Dr Christensen reminded us how relevant the issue of innovator’s dilemma still is today.

This is what I found most fascinating –   in spite of the warnings by Dr Christensen and with all the great minds in the industry,  successful companies continue to march themselves off the cliff.      Perhaps the answer lies in what Dr Christensen said in his speech (at approx 00:38:45).     In Dr Christensen’s own words –  “I was able to tell the whole story without using the word ‘stupid managers’ once because there was no stupidity here….”.      What he meant was the leaders of the disrupted businesses generally aren’t stupid, and they aren’t asleep at the switch either.   In fact, they usually are competent and they do exactly what they “think” they are supposed to, ie trying to increase profitability and listen to their customers.    However, by following rational decisions guided by what supposedly are sound management principles,  they inadvertently contribute to the downfall of their companies.       Dr Christensen shared many of his original research work in his speeches and in his books to prove the point.

Undoubtedly this evolutionary process will wipe out those companies which are not able or are not willing to change, but clearly there are so many companies in the IT industry as well as key executives who are still in denial mode.      Therefore, in my opinion,  it is not only critical that every leader in the IT industry understands innovator’s dilemma,  but companies must have active processes in place to ensure they are not among those frogs that are being slowly boiled to death.