as a whole. Apple was a new entrant in mobile phones. The iPhone provided better Internet performance and a better interface at a higher cost—not poorer and cheaper—yet it was very successful from the start. “When it’s wrong, it’s interesting,” Thurston says. “We hope to improve the theory.”
What about Amazon.com, which offered a much larger selection of books than the incumbents when it first appeared in the mid-1990s? “I’d argue it was a new entrant with a disruptive strategy,” Thurston says. “It sure took a long time and a lot of money. It was lower cost for the most part, and lower performance than a bookstore. It was more inconvenient—you had to wait for a book to show up, so it wasn’t instant gratification.” Then, he says, as Internet service got better and more consumers went online, Amazon started to take market share from bigger players like Barnes & Noble and Borders. Now, of course, it is a huge player in retail, cloud computing, and many other sectors besides books.
In biotech, a current example of a disruptive young company is Complete Genomics, Thurston says. This Bay Area company (backed in the Northwest by OVP Venture Partners) uses advanced computing technology to sequence human genomes very cheaply. For $5,000, it can’t do all the tests that a fully staffed laboratory can, but it is a lot cheaper. So it “really allowed a huge market of researchers to begin to incorporate genomics, when before it was too complicated and expensive,” Thurston says. “We’d predict that it would survive.”
I also asked Thurston for his take on what the biggest disruptive threats are to some of the current tech giants. For Intel, he says, the No. 1 threat is the ARM processors found in smartphones, netbooks, and other devices like the Apple iPad. “ARM processors are cheaper and worse [than Intel chips], but they’re getting faster with Moore’s Law. It’s a monster. It’s a small chip but a huge market,” he says. “Intel can’t kill it anymore. Only in the last few years has Intel realized what a threat it is. But now it’s too big to be swatted.”
As for Microsoft, he says, the biggest threat lies in mobile software. “If I was Microsoft, I would be terrified of mobile apps on Android and Apple,” he says. “Now there’s more mobile apps than desktop software. There’s a huge ecosystem on different operating systems. [The software is] cheaper, worse, but getting better all the time, and vast in number. Disruption would say it’s not Oracle that should keep Microsoft up at night—it’s the little apps.”
It’s all good fodder for entrepreneurs and investors to chew on. Still, Thurston is quick to point out the limits of his model’s predictions, especially for startups. “It’s not a verdict. It’s an observation, a diagnosis,” he says. “It’s the difference between sailing with the wind at your back, or in your face.”
