No Technology Has
Been More Disruptive…

… Than Digital Technology…

… It has invaded industry…

… after industry…

… after industry…

… after industry…

…Television…

…Music…

…Video Surveillance.

This technological revolution has Destroyed or
nearly Overthrown hundreds of industrial giants…

All these firms which suffered in the
transition to digital technology - Why?

They are so many, and the
pattern is stunningly similar…

The first digital products are usually big, expensive
and appear as rather silly. They look like toys, and it’s
hard to imagine that a disruption is going to happen…

Despite recognizing the technology,
established firms are in the end often destroyed…

To understand this puzzle, we need to dig into the
nature of digital technology and its economics.

The transistor is the building
block of digital technology.

It is an electronic device which can
switch between two modes.
So, it is binary – ONE or ZERO, YES or NO

And what’s so special about that?

Very little information can be stored in
one single transistor, so the technology is
initially not capable of much.

The inferior performance of the transistor
implied that the inventors were not
encouraged to work further on it.
Vacuum tubes was the dominant technology for
computers back then, and it was hard to
see how the transistor could
possibly replace the tubes.

Ignoring the transistor is a mistake
that hundreds of industrial giants would make over
the next decades, often resulting in bankruptcy.

William Shockley and the other
inventors left Bell Labs, moved to Silicon Valley
and founded Shockley Semiconductor…

Many engineers left Shockley in
order to start Fairchild Semiconductor…

airchild was later disintegrated, Gordon Moore
among others then founded Intel…

As Intel and other semiconductor firms developed
cheaper and better transistors, putting them together
into Integrated Circuits and Mikroprocessors,
Gordon Moore recognized a fascinating pattern….

Over time, the amount of transistors that could be put
on a circuit for the same price doubled every 18th month!
So for the same price you can buy something which
can store twice as much information, every 18th month!
This is Moore’s Law.

The implications are enormous!
If the price/performance ratio
doubles in 18 months…
And then doubles again in 18 months…
And then doubles again in 18 months…
Then the price/performance is 8 times
higher in only 4,5 years!
16 times higher in 6 years!

Source: intel.com

This is a furious pace of technological development!
It implies that as the price of a transistor goes down and
he performance of digital technology increases, virtually
everything can sooner or later be expressed or
represented with digital technology.

Let’s take a look at how Moore’s law has improved
the graphics in computer games over time…

More and cheaper transistors makes Pacman
look better than the Space Invader…

Mario looks better than Pacman…

Super Mario World looks better than Mario from 1985….

And today Link looks better than ever!

The graphics are stunning nowadays!
oore’s law has been working on this for many decades…

Moore’s law can help us to understand why digital
technology has disrupted so many industries…

The price/performance ratio is initially much
inferior to the dominant technology,
so the technology usually attacks from below.
This calculator cost 395 USD in 1972

The lower initial performance of the transistor was
the main reason why Bell Labs thought Shockley
should keep working on Vacuum tubes instead…

Vacuum tube technology was after all
what the main customers demanded!
Why work on digital technology which had
lower performance and is more expensive?

While established firms are busy
listening to their customers, Moore’s law
gets ready to disrupt the industry

Drawing upon their competence in the old technology,
Olivetti tried to make better mechanical calculators
instead of going into the digital technology.

The Swedish firm Facit encountered the same destiny…

The technology which looked like a silly and
expensive toy only a few years ago,
would with only a few more years of
Moore’s law overthow the entire industry!

The Swiss watch industry went
into the same trap as Olivetti and Facit…..

… And so did Polaroid.
They listened to their customers, stayed in the old
technology and were then disrupted by Moore’s law…

The music industry is today painfully aware of
Moore’s law and the digital revolution

Those who have dismissed the digital technology
as inferior and silly usually have one thing in common…

They’ve paid a terrible price.

Summing it up:
Moore’s law – the rapid improvement
of digital technology,
has disrupted hundreds of firms
and reshaped entire industries.
The high pace of development combined
with the fact that digital technology initially has
an inferior performance has created
great problems for great firms.
Listening too carefully to
current customers, established firms
stay in the old technology for too long,
and are then disrupted.

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Christian Sandström