THE WORLD BELONGS TO AGILE, FLEXIBLE COMPANIES

THAT DARE TO INNOVATE ANO OISPLACE OUTMOOEO BUSINESS

MOOELS. e/l5fL/A/f CHECKS OUT THE MOST DISRUPTIVE
COMPANIES ANO SHOWS YOU HOW TO SPOT THE NEXT
BIG THING IN TIME TO GET ON BOARD.
 BY CHRIS GONSALVES
T'S BEEN 10 YEARS SINCE CLAYTON CHRISTENSEN TOOK A HARD LOOK AT THE INNOVATION
that separates business winners and losers, coining a new term in
the process: disruptive.
"Disruptive technologies bring to
.jnarket 3 very different value propo-
sition than had been available pre-
viously," the Harvard scholar and
business expert wrote in The Innozhitor's
Dilemma. Disruptors offer tcacures that
-_líí^wxy§tíMners value and "are typically
cheaper, simpler, smaller [or] more
convenient to use."
As can be gleaned from its title,
Christcnsen's book makes the point that disruptive activity is
as likely to bring pain and bardsblp to the innovator—at least in
the near term —as it is to result in fame and riches.
For change that, by definition, needs to be simple, cheap and
revolutionary, disruption is hard work. Small wonder so fevv'com-
panies ever make the effort. 'ITic majority are the ones disrupted:
banks and newspapers that couldn't imagine what ubiquitous
internet access meant to them; music companies that fought
downloading; télécoms that missed the signals of 802.11 wire-
less technologies; airlines that couldn't imagine simple discount
routes and e-commerce initiatives.
But this report is not about them. This is about the com-
panies that dare to inno^'ate despite disruption's often rockv
road. Baseline, in consultation with market analysts and business
leaders, compiled this Hst of companies that exemplify what
Ncrac analyst David Fazzma calls. "People who follow their own
dreams despite lack of popular support and even if their ideas are
not considered the latest buzz."
Tracking these dreamers in real time is no easy feat, since
most real innovation—like love or economic recession—can't
be recognized until it's past. While disruption often can't
be predicted, educated ^;uesses can be made and monitored,
according to experts such as IBM's Innovation Services manager
Ruoyi Zhou. Under the right circumstances, she says, you can get
a sense of what might be disniptiye before it happens.
Sometimes the best way to spot an innovator is by what
they don't do, namely follow the leader Southwest Airlines, for
example, did not copy the airline industry's leading players and
provide first-class service and maintain a heterogeneous fleet.
Instead, Southwest made one type of plane work for all flights,
treated all passengers as equals and limited ticket sales to its own
Web site.
It's that sort of radical thinking that lets disruptive companies
offer consumers what they need the most: a maximizing of their
time and money analysts point out. What the companies get in
return is greater profit. When Apple improved the interactive
response of its iPhonc, for example, the company was rcwiu-ded
with higher margins in a largely commoditized market.
Not everyone gets it the first time around. For some compa-
nies on our list, getting caught flat-footed served as a wake-up
call. Such was the case at LG Klcctronics. The company finally
dropped older products like VCRs and pushed hard to improve
revenues from the newer products in its arsenal. It moved from
laggard to leader in consumer electronics, with dividends in the
form of higher prices and increased profitability
11 you're not churning out the next disruptive technology your-
self, the best—and easiest—way to get on board wnth those shaking
up the market is to be a trusted source, say some experts.
"Since [innovators] are in uncbarted waters, any support in
'navigation* will help them, and make you [as a trusted source] part
of the effort," Nerac's Fazzina says. "They get additional resources
from you, and you get indoctrinated in innovative thinking.
"If you approach innovation with a similar minilset or atti-
tude, tbe tendency is to be welcomed into the group. If, on the
other hand, you're crying out, 'Come back to shore, you could
get lost or fall off the edge,'you may not be engaged."
25
WWW.aASELINEMAG.COM
 DISRUPTIVE

"SO FAR, WE'VE RUN

INTO VERY FEW
THINGS WHERE
SEARCH IS NOT AN
. / ^
INTEGRAL PART.
GOOGLE IS, FIRST
AND FOREMOST, A
SEARCH COMPANY,
AND THAT'S AS IT
SHOULD BE."
Google CEO; Ertc Schmidt

GOOGLE
LOCATION:
C£O:
RCVENVES: J6 billion
WHATTHETDI Hing Google a search company at this
.ivety insulting. But that's how CEO Schmidt
any, adding that it keeps its innovations
ose to core by always tying new initiatives to the company^s [
'e doesn't have all the -
as for business O ^ ^ ^ ^ H i t — i u s t the good ones. The
mpany has b e c o m M H H w K o n machine by encouraging its ;
ployees to churn our entrepreneurial ideas: currently about • -
100 per year. And the best part? Thanks to a restrictive employee
agreement, Google owns every single idea.
The further the company stretches, the more industry pundits
'"onder if it may be losing its way. It's an innovator's dilemma thff.
chmidt knows well. "Google is not a normal company, .we're a com-
îny of great ambition around our mission," Schmidt tells Baseline.
nternally. we make sure we focus on our core business most of
le time. If you think about Google Health, it starts with search. So
e look at that and say health is something that really matters, and
can be done in a search-centric way. Google Sites uses search ,
i its organizing principle. So far, we've run into very few things •
where search is not an integral part^Google is, first and foremost, a
""^^ pany, and that's as it should be." *
' I ' " . Search
rithms that^imply find what Web surfers want through an
estructure so big it's hard to comprehend. With a world-
wide infrastructure that boasts between 500.000 and I million
servers—ail running its proprietary file system, data format and
BigTable database management platform—Google's system is
fast, highly redundant and resistant to failure. Couple that with
readily available APIs for independent software vendors and a
growing list of cloud applications and specialized tools, and you
/ much redefined the Internet.
" After crushing every
other Internet search service, Google now specializes in punishing
traditional advertising companies, client software vendors and
traditional IT vendors. It's not just Microsoft that should be worried.
j Google used to
-.,^^^^^^^^^^^^^^^.~ -Jarch page that promised
it ^V^B^B^H^^^^^^P^'^iQu'ty ^°'^ h^s <' •" t)^B ë^'^
s i g K ^ n v e ^ m i ^ ^ t e c n v e n S o r ! In fact- Google is the only
reason Microsoft would empty its wallet to bid for the remnants of
the once-powerful Yahoo. Google is also facing antitrust investi-
gations-here and abroad, and folks are getting skittish about how
much data this company owns—especially as it looks to collect
sensitive personal information like health records.
ZIPCAR
L O C A T I O N : Cambridge, Mass.
CEO: Scott Griffith
REVENUES: N/A (private)
W H A T T H E Y D O : In just seven years,
Zipcar's car-sharing service has lured more
than 180,000 members—mostly city dwellers
and college students—who take advantage of
self-service vehicle rental as an alternative
to the costs and hassles of car ownership. As
a result of its merger with rival Flexcar late
last year, the company now boasts more than
5,000 vehicles in 50 cities across the United
States. Canada and the United Kingdom.
DISRUPTIVE QUALITIES: IttOOk
fhe convenience and ease of Zipcar's ser-
vice-made possible by the company's sizeable
investment and clever reservation technoi-
ogy—along with savvy inclusions such as in-
surance and gas to make car-crazy Americans
even consider giving up their wheels.
THE TECH THAT MAKES THEM
T I C K : Zipcar recently overhauled ifs propri-
etary Z3D Knowledge Center, the system that
manages its fleet and all customer interac-
tions, from the Web site to the vehicle. The
new system is faster, and it provides targeted
search results, one-click rentals, vehicle
photos, reservation times and costs, maps and
user instructions. "The upgrades to Z3D and
back-end systems are based on the experience
of processing 1.5 million reservations," says
Griffith. The company also carefully analyzes
the cost of parking, public transit availability
and the scale of a metro area. In addition to big
East Coast cities, most of Europe (especially
France, Spain and northern Europe) look very
attractive to Zipcar.
WHO THEY ARE DISRUPTING:
Zipcar is taking business from the big auto
makers, auto insurance providers and rental
giants such as Hertz, Avis, Budget and
Enterprise. Why pay day rates when you
need a car for only a few hours?
A ROAD LESS TRAVELED? Much as
Zipcar would like to give everyone the chance
to forsake car ownership, some of the country's
most well-heeled markets wili never be good
candidates for the business. Places such as
Houston, Dallas and Denver will remain "driver
cities with big interstates as opposed to good
transit." Griffith concedes.
GENERAL ELECTRIC
L O C A T I O N : Fairfield, Conn.
CEO: Jeffrey Immett
REVENUES: $169.7 billion
W H f l T T H E Y D O : As one of the United States' last truly great diversified
industrial corporations, GE has divisions that deliver military and commercial aircraft,
train and heavy-equipment parts; wind, gas and steam turbines; factory automation;
medical equipment; and home appliances and lighting. Ifs NBC Universal division
entertains us both on the air and at its theme parks, and ihe company's finance arm is
there to help customers pay for it all.
^ S - GE's labs remain among the world's most creative
places. The latest GE television ads tout fhe company's "Ecomagination" as they race
through images of some of GE's most important new efforts. It's a heady mix. Energy-
sipping hybrid trains that cut emissions in half, new jet engines, powerful new medical
scanners that improve diagnoses while cutting radiation exposure and a resfructuring
of its famed lighting business to focus on organic LEO illumination.
T H E T E C H T H A T M A K E S T H E M T I C K : Topping the list of innovations at
GE are its newest photovoltaic cells, which are ramping up commercial solar power
adoption, and cutting-edge health care imaging that is promising to detect more can-
cers earlier and double cardiac disease survival rates. Powering all this innovation is
a massive network of servers and high-end applications that span every time zone. In
addition, GE has mastered design and supply chain management to shorten the time
between inspiration and time to market.
W H O T H E Y A R E D I S R U P T I N G : GE may not yef even be playing in the place
where it could be the most disruptive. As Intel co-founder Andy Grove posited late
last year, GE could instantly take the lead in efforts to build an efficient, affordable
electric car. (If currently invests in companies that manufacture electric vehicles and
batteries.) Not only would that upend the super-innovative little guys like Tesia Mo-
tors, it also would turn the auto industry on its ear,
D I M M E R S W I T C H ? What some see as heft, others view as a dilution of cre-
ative energy. Indeed, GE may be overextended in many areas. In challenging Grove's
call for GE to enter a new market, business expert William Taylor wrote in the Harvard
Business Review: "Why would GE, with so many headaches from Wall Street—GE
shares are barely unchanged from when immett took over six years ago—lake on a
high-profile gamble such as electric cars?"
Think
Û two
ilia; arc piuductiún in Norway.
DISRUP
WS,CES
NINTENDO
L O C A T I O N : Kyoto, Japan
C E O : Sartoru Iwata
R E V E N U E S : $7.8 billion
W H A T T H E Y D O : Nintendo has been around
for I3Q years and has spent most of that time making
playing cards. But it's the company's video games
that made Nintendo a household name.
Dfçrîi^iP'ï'iiVi"; •Qvril.-'iJ.í^S'- Relegated fo the
niche handheld gaming market in 2001 when the
GameCube got trounced by Sony's PlayStation and
Microsoft's Xbox, the company came back strong
with the Wii. a console focused on family fun and
interactive games that feature Nintendo's cutting-
edge motion-sensitive controller. The Wii outsold
both its competitors last year, largely by attracting
new gatners and their parents and grandparents.
THE TECH THAT MAKES THEM TICK:
The real innovation in the Wii fits in both hands.
Wii remotes enable games that incorporate lifelike
throwing, swinging and hitting movements and,
dare we say, actual physical exercise. In fact, the
console's wireless input devices are so popular
that they're getting the attention of developers
outside the game industry. Cynergy Labs' Project
Maestro, for example, uses Nintendo controllers to
let users navigate Windows applications without a
mouse or touch screen. Other efforts in the works
include interactive whiteboards and using Wii
remotes to allow users to control their computers
withhoad movements.
WHO THEY ARE DISRUPTING: Nintendo
is battling Sony and Microsoft in a worldwide gaming
market that is quickly approaching $50
billion annually.
GOING ON TILT? For all
its technical prowess. Nintendo
failed famously this past holiday
season when global demand for
the Wii outpaced supply. The
company sold more than 20
million units worldwide, but
lost out on an additional
$1.3 billion in sales due
to shortages, analysts
said. Lesson; Project-
ing market demand
and matching it to
the supply chain
is always tricky.
AMAZON.COM
L o c a t i o n ; Seattle
C E O : Jeff Bezos
R e v e n u e s : $14.8 billion
W H A T T H E Y D O : Online retail, storefronts for small businesses and enterprise-
class cloud computing
D I S R U P T I V E Q U A L I T I E S : Amazon tripled revenues in tbe past six years with
innovations that include adding outside vendors to its marketplace and perfecting
digital book, music and movie delivery. Now. Amazon is distributing the keys to its
technology kingdom by opening its massive infrastructure to innovative startups that
use Amazon Web Services' pay-as-you-go computing power and storage to handle their
computing and storage needs.
T H E T E C H T H A T M A K E S T H E M T I C K : For Amazon's Web services, it's all
about heft: a $2 billion infrastructure in tbe form of 10,000 distributed servers, along
with standards-based REST and SOAP interfaces designed to work with any Internet-
development tool kit,
: D I S R U P T I N G : Amazon used to threaten only book and
record stores, but now it's going after everyone who sells on-site IT infrastructure,
not to mention the other emerging cloud-computing players such as IBM and Sun
Microsystems. Can Salesforce.com and Microsoft Live be far behind?
B U N G L E I N T H E f U N C L E ? Amazon Web Services has had its sbare of growing
pains, including an outage of its Simpie Storage Service (S3) hosted storage in Febru-
ary, which brought down thousands of startups for the better part of a day. Reliability of
Web-based services can be difficult.
WAL-MART
L O C A T I O N : Bentonville, Ark.
C E O : H. Lee Scott
R E V E N U E S : $351 billion ^
W H A T T H E Y D O : Tbe nation's preeminent discount retailer is a fixture in nearly
every U.S, city and town.
D I S R U P T I V E Q U A L I T I E S : Any company tbat racks up sales of $1 billion per
day leaves a big wake when it changes course. When Wal-Mart said it would get into
the movie-rental business, analysts starting predicting tbe demise of Blockbuster and
Netflix, The company's RFIO initiative has almost single-handedly buoyed the nascent.
technology. And when the retailer said it would open health clinics in 400 stores, Intel
Grove said American health care was in for a sea change. "Wal-Mart is in an excellent!
position to assume the role of the disrupter," Grove wrote. Recent forays into banking:
and smaller neighborhood markets has two new sets of businesses trembling before •
the Wal-Mart juggernaut.
T H E T E C H T H A T M A K E S T H E M T I C K : Wal-Mart is an early adopter of
a lot of cutting-edge distribution, tracking and inventory technologies, most notably
RFIO. The company also ramps up efficiency with the world's largest installed base
of NCR FastLane self-checkouts. But Wal-Mart's proactive IT efforts are perhaps
best known for the retailer's supply chain management capabilities, which combine
traditional and online tools to improve the efficiency of procurement, warehouse and
logistics management, inventory management and demand forecasting. Now among
the biggest players in the green movement, Wal-Mart, which sold more than 100 million
CFL lightbulbs last year, is using a Cleantech Web-based tool to identify environmen-
tally friendly technologies and make green improvements to its operations.
W H O T H E Y A R E D I S R U P T I N G : Wal-Mart is a threat to Main Street America
and every personal service offered therein.
R E A S O N T O D I S C O U N T ? Harvard Business Review's Taylor wonders whether
Wal-Mart's infamous tin ear for customer service and employee relations might thwart
its efforts to move up the services food chain. "The only thing less attractive than a
visit to the doctor's office is a trip to Wal-Mart," he says.
APPLE
LOCATIOI Cupertino. Calif.
CEO:
REVENUE!
For a company that garners just 7 percent of tlis
lare for personal computers, Apple lias a knack for generating
: around products with a cultish following of users. The company ha
ers into operating system software. ¡Pod players, iPhones, periphen
networking gear and services such as iLife and iTunss. and is now the li
retailer of music in the country, behind Wal-Mart (Sorry, 8esi Buy).
Apple just seems to know how peopti'
live. By understanding how the hip new computer cognoscenti would wa,
to integrate music, videos and communicaiions, Apple shoved its way int„
ail things consumer electronics. Whether you love or hate the company, you
I'l deny that it strikes the same tone with that Apple je ne sais quoiev.
THE TECH THAT MAHES THEM TICK: -|e"s growth tripl"
inovation, ted by its
isoft Vista, nobody had t
guess why Leopard was a worthy upgrade. Wtiilc hackers are beginning
make dents in the UNIX-based façade, Apple's wares are still more secun
than Microsoft's. And let's not forget the continually improving iTunes Juke-
box, which sets the standard for online media purchases, and the upcon
software development kit for the iPhone, which promises lots of innovât!,
fhird-party applications in the coming year.
Apple has gotten beyond the ,
battle for fhe corporate desktop and is now taking on traditional media :
and advertising companies, as well as the video rental market—especially
with its new movie download service and the surprisingly cool Appie TV
appliance. And integrating with Microsoft's Exchange e-mail server will j weekly newspapers and other traditional media are feeling
" "111 position the iPhone against the dominant Blackberry in the battlef'
:-based computing.
1 Apple put a lot of stock
we model for the tPhone that has them depending on a cut of each
, j\ce contract with the telecom providers. So, recent news that a significant
number of iPhones had been 'unlocked" and activated on non-partner networics.
esoBcially in China, has analysts predicting a touglier year ahead for Aaple.
CRAIGSLIST
L O C A T I O N . San Francisco
C E O : Jim Buckmaster
R E V E N U E S : $50 million (est.)
W H A T T H E Y D O : With its signature Spartan
interface. Craigslist serves up local classifieds and forums
covering goods, services, jobs and relationships in 450
cities worldwidB.
DISRUPTIVE QUALITIES: Craigslist gets 15
million page views every month, putting them comfortably
in the top 10 English-language sites amid the Googles,
Yahoos and eBays of the world. That's not just a stagger-
ing number of eyeballs, it's also a death sentence for local
media—especially newspapers—that survive on the money
generated by classified advertising.
THE TECH THAT MAKES THEM TICK:
Simple Web interface, which is served up by collocation
services from San Francisco's 365 Main, keeps Craigslist
quick, with redundant systems readily available, and,
as always, it's free to most end users. Not even Google,
which was expected to crush Craigslist with its Google
Base service two years ago, can come close to the
traction and market penetration of Craig Newmark's
braitichild.
WHO THEY ARE DISRUPTING : Local daily and
the pain.
^ T T I N G r u ^ G G E D ? Craigslist has always gener-
ated controversy for its reluctance to censor its users.
The site is frequently cited in court cases involving local
prostitution rings, and a Michigan woman was recently ar-
rested for placing a Craigslist ad seeking a contract killer
to take out a romantic rival.
WWW.BASELINEMAG.COM
 DISRUP
SUN MICROSYSTEMS
L O C A T I O N : Santa Clara, Calif.
CEO: Jonathan Schwartz
REVENUES: $13.9 billion
W H A T THEY DO : The com-
pany that created Java and SPARC
once claimed to be "the dot in dot-
com." Sun survived the Internet
implosion in 2001 by pitching its
network computing infrastructure
products and services with the idea
that "the network is the computer."
The company continues to play hard
in a lot of areas, including micro-
processors, software development,
high-performance computing,
business applications and software
as a service.
DISRUPTIVE OUAXJTIES:
Sun is making a big bet that folks
S NETFLIX
LOCATION:
CEO:
REVENUES:
WHAT THEY DO: a month, Netflix gives more than 8
. more than 90,000 DVD movios, makii
online movie rentals. The company is also aJ
iwnloads with more than 6,000 streaming
gn of disruptive hehavi<
,i.rh,asin"l'mgoingto
a movie can get these days is.
critic's call to "Netflix H right away." Continually improving a model i
created has helped Netflix defy critics who said online movie rental;
would either be overtaken by tbe big-box retailors or usurped by
THE TECH THAT MAKES THEM TICK: is a fulfill
mêiit machine. To d e r v ' ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ n T i a s eschewed te
gewgaws lika RFID in ia^i^^^^^^^K^^KS and scanners, an_
a boma-brawad customar relationship management system in its 100
sbipping centers. The real magic at Natflix, howaver, livas witbin its Ci
ematch recommendation engine. The top-secret algorithm makes mov
suggestions used by more than 90 percent of Natflix customers. The
technology is so valuable that the company is offering $1 million to an;

II
care enough about tbe environ- programmer wbo can improve its performance hy at least 10 percent.
ment—or at least about their : nobody bas claimed the prize, a team from AT&T took a S50,00(
electric bills—to rethink their data •cent.
centers. That seems a safe wager .Is hurting Block-
since more than 3 percent of tbe ..gTsignJficant barrier '
world's energy is being used to
power IT systems. Sun is attacking what it says will be the collapse of
the traditional data center with tbe expected mix of hardware and soft-
.„.„,„„„., ,tias peeved some of its faithful
jervice. sluggish deliveries and
ware, hut the company maintains its freewheeling creative side with •le company's own usar forums are
folks like Chris Melissinos, tbe chief gaming officer, who finds ways to he service in favor of Blockbuster or
incorporate gaming s immersive virtual worlds into business software.
THE TECH THAT MAKES THEM TICK: Sun is greening
up IT in three areas. Its newest UltraSPARC processors deliver
the industry's best multi-tbreading capabilities to date, allowing
users to squeeze massive performance from a smaller number of
servers. Tbe effort also depends on Sun's aggressive Solaris and
Java adoption agenda, which is fueled by the company's champion-
CISCO SYSTEMS
ing of open-source development and the delivery cf tools like Sun's
LOCATION: San Jose, Calif.
xVM open-source virtualization software. Aiming to eliminate data
CEO: John Chambers
centers altogether, there's Sun's Network.com. which offers high- REVENUES: $34.9 hillion
performance computing capability for a par-hour fee.
WHAT THEY D O : Maker of all things networking
W H O THEY ARE D I S R U P T I N G : Sun may he competing
D I S R U P T I V E QUALITIES: It's a serious belief that unified
with tech big-iron vendors, hut at the center of its disruption radar
communications and telepresence will change the way business
are utility companies, and the power and cooling vendors that feast
is done.
on today's sweaty, energy-hungry data centers. Vendors that can't
deliver business productivity tools both on the desktop and in the
THE TECH THAT MAKES THEM TICK: Cisco has a
sexy IP combo of 720p and IO8Op high-definition cameras using
cloud are also threatened. The $1 billion purchase of MySQL in late
H.264 video codecs; delay-fraa wideband audio coding; multichan-
February adds nicely to Sun's open-source portfolio and indicates
nel spatial audio with echo cancellation and interference filters;
that the battle is just getting started.
and specially designed office furniture to hide all the broadband
B E I N G E C L I P S E D ? Eco-friendly computing is on the minds networking gear. The system plays well with IP telephony and syncs
of many tech players, hut nona more so than IBM, where tbe green with Office, Notes and other groupware apps.
data center is a major initiative. Sun also has to compete on numer- Cisco impacts télécoms,
ous fronts against specialists such as Intel and AMD in silicon and airlines, hotels, business event organizers and, especially, Hewlett-
30 Microsoft and Googia on software. Packard's Halo,

WWW.BASELINEMAG.COM
NEW ENGLAND PATRIOTS
AND BOSTON RED SOX
L O C A T I O N : Foxboro and Boston, Mass. , CEO: Paul Ofelini
C E O s : Robert Kraft/Larry Lucchino
R E V E N U E S : $250 milljon/$206 million
W H A T T H E Y D O : New England's top sports franchises compete at the
top cf the National Football League and Major League Baseball, respectively.
•" " " " U P T I V E Q U A L I T I E S : Say what you will about the 18-1 Patriots
could they have hlown the Super Bowl like that?) and the World Series
hampion Red Sox, but they are leading the way in transforming professional
sports through their use of business intelligence and analytics software for
game planning and player recruitment,
THE TECH THAT IVIAKES THEM TICK: For the Patriots, win-
ning business has largely been about building the most robust e-commerce
infrastructure in the league. Not only did the team's 18-1 season generate a
blitz of traffic from fans buying team gear, it also made the site a constant
target of hackers frcm rival cities. Despife ifs success, the Pats' site is being
retooled this off-season tc improve search, add registries for locai sports
teams and improve visitor experience. As for the Sox. the team hired some of
the best analytical minds in the business and spared no expense in acquiring
' sophisticated scouting software, computerized video analysis and business-
intelligence tools for mining the stacks of statistics at its disposal. The goal
' is to identify the best available talent, get it before rival teams do, then figure
out how long to keep it before it stops producing.
W H O T H E Y A R E D I S R U P T I N G : These two teams have wounded
the New York Yankees, the Colorado Rockies and much of the AFC, but
regrettably not the Giants or the 7 2 Dolphins.,. yet.
INTEL
; A T I O N : Santa Clara, Calif.
REVENUES: $38,3 billion
WHAT THEY D O : Microprocessors, plain and simple
DISRUPTIVE QUALITIES: Think small, as in 32
nanometers, Intel is pushing the absolute boundaries of chip
production by threatening to stuff 4 million transistors in a
space roughly the size of the period that ends this sentence.
Already in the lead in 45nm chip production. Intel's insis-
tence on perpetuating Moore's Law could mean that by the
end of this decade, we'll be packing a data center's worth of
computing power onto a single chip that sips as much energy
asacommonlightbulb.
THE TECH THAT MAKES THEM TICiv Intel
says it improved innovation partly by setting its 100,000
employees free. The company embarked on one of the
world's largest mobile computing efforts, spending $25
million over five years to free 85 percent of its users from
the desktop. According to CIO Jobn Johnson, Intel gets
two more hours of productivity per week from each of its
85.000 laptop users, a 5 percent improvement over their
desk-bound colleagues.
i ï S R i i P T i N i î r Intel wrestles with
traditional competitors such as AMD, IBM and Sun, as well
as with any company delivering a device with a chip in it.
Read:everyone.

IROBOT
LOCi't'-. Burlington, Mass.
CEO: Colin Angle
REVENUES: $188.9 million
W H A T T H E y DO The company builds robotic devices that
perform a variety of military, commercial and domestic chores.
P T I V E OUALITKCS: The Roomba robotic vacuum
cleaner offers a completely new way to clean your home, but it's
iRobot's military applications that may prove its biggest game
changers. Earlier this year, the U.S. Army bought 3,000 "warbots"
for $286 million.
' • H f f i T M í í i w : » - « ' " í « - M ' " ' ' " • ¡Robot's
Create platform gives outside developers access to the Roomba
brain, allowing them to write programs for autonomous opera-
tions using C and C^^+, as well as through Microsoft's Robotics
Studio. The company is using all that innovative energy to
develop new bomb-sniffers, grass-cutters and the super-cool
Looj gutter-cleaner.
The main impact is felt
32 by maids, soldiers and M'A'S*H units.
w w w 8ASELINEMAG.COM
TESLA MOTORS
L O C A T I O N : San Carlos, Calf.
C E O : Ze'ev Drori
R E V E N U E S : N/A (private)
W H A T T H E Y D O : Makes high-performance electric cars.
D I S R U P T I V E Q U A U T I E S : The Tesia Roadster ain't a Prius. It's
a super-slinky sports car that rockets from 0 to 60 mph in less than
four seconds. And it doesn't have a gas tank. The heart of a Tesia car is
a battery bank made up of several thousand consumer-grade lithium-
ion cells constantly monitored by a proprietary electronic Vehicle Man-
agement System. The Power Electronics Module handles high-voltage
connections to the 115-pound AC motor. All of which means that without
stopping to recharge, you can go 200 miles... realty fast.
In addition to its
cars. Tesia is becoming known for running super-tight product life-
cycle management, based on Arena's PLM platform, which rigorously
reviews every engineering change order for accuracy, completeness
and adherence to company procedures. The firm's engineering con-
figuration management specialists work with design engineers, manu-
facturing engineers and supply chain managers to create a product
database that takes Tesia products from prototype and development to
production and post-release updates.
Tesia is rattling the cages of
big auto and big oil.
LG ELECTRONICS
i.iit;rtSI"..!••. Seoul, South Korea
C E O : YongNam
R E V E N U E S : $68.8 billion
W H A T T H E Y D O : Maker of mobile and desktop computing gear.
television and audio equipment, and home appliances
D I S R U P T I V E Q U A L I T I E S : Keyed on the company's "Life's
Good" slogan, the company once known as Lucky-Goldstar has
eclipsed its South Korean rivals when it comes to the little touches
that make everyday products just a little better, a little more desirable
and a whole lot more disruptive. The company rose from relative ob-
scurity by ditching its commoditized "me too" offerings such as VCRs
and CD players. After recasting the front-loading washer into the
must-have appliance of the decade, LG added steam technology that
kills allergens and reduces wrinkles to its clothes dryers. Devices
such as the Chocolate phone have helped make LG the world's fourth-
largest cell-phone maker, and plenty of pundits think LG's Prada
out-iPhones the iPhone. Stay tuned for MPH, LG's upcoming entry in
mobile television.
THE TECH THAT MAKES THEM TICK: LG's IT ties
together 77,000 employees in more than 120 locations. Suffering with
bandwidth and latency problems, the company recently opted for an
enterprisewide wide-area data service implementation. The move bol-
stered LG's innovation engine, making its Lotus-based eNet intranet
20 times faster and nearly 40 percent cheaper to operate. 8y the end
of this year, LG will also have one of the world's largest implementa-
tions of Oracle's platform, handling tasks such as human resources,
customer relationship management and supply chain management.
LG goes up against Samsung,
Apple, Nokia, Motorola, GE, Whirlpool and Kenmore.
IBM
' -uCATION: Armonk, N.Y.
CEO:SamPalmi5ano
REVENUES: $98.8 billion
W H A T T H E Y D O : IBM is the maker of all things computer (except
PCs, of course, as that product line is Lenovo's problem now) and a
business and technology services giant.
D I S R U P T I V E Q U A L I T I E S : IBM makes the list on reputation
alone. The company has been America's most prolific patent filer for 15
years running, with more than 3,100 logged last year. And its Innovation
Jam event is becoming an annual ritual for IBMers with big ideas. Big
Blue is also putting a lot of stock in 8ig Green, the company's effort to
make data centers more energy-efficient. Never one to shy away from
eating its own cooking, IBM consolidated 3,900 of its servers into just
33 by using a combination of configuration changes and technologies
such as virtuaiization. And IBM has become a leader in the service-ori-
ented architecture space.
ï-HE TECH THAT MAKES THEM TICK: IBM is using its
WebFountain, Business Insights Workbench and the analytics muscle of
its huge Global Services unit to power its Impact of Future Technology
(loFT) offering. loFT predicts disruptive technologies by developing sev-
eral market alternatives, then "backcasting" to determine the most likely
outcomes. With loFT. busi-
nesses can prioritize, estimate
costs and benefits, manage
technology investments and
look fairly far into the future
without being limited to one
future scenario, IBM says.
3ISRUPTING: With its
green efforts, IBM Is having
an impact on power and utility
companies and vendors dragging their feet into the eco-friendly market,
and. with its prognostications, professional services from the Big Four.
S I N G I N G T H E B I G B L U E S : Indian services players Tata and
WinPro have hurt IBM in the global services arms race. And Hewlett-
Packard CEO Mark Hurd recently made good on his promise to eclipse
Big Blue and become the world's largest technology company.
FACEBOOK
o c f l T i O N : Palo Alto, Calif.
; E O : Mark Zuckerberg
Ï1EVENUES: $100 million (est.)
VHAT THEY D O : Social networking
WHAT MAKES THEM DISRUPTIVE: Facebook offers an
addictive blend of silliness and serious tools to stay up on what your
friends and contacts are doing. It trumps other efforts with its func-
tionality and ease of use,
THE TECH THAT MAKES THEM TICK; Its REST-based
Open platform supports a robust ecosystem of third-party developers
creating sticky, if occasionally annoying applications that continue to
strengthen Facebook's grip on its user base.
W H O T H E Y A H E D I S R U 1 > T I N O . The main losers are e-mail, the
local bar and Saturday n i ^ t . If it isn't on your Facebook, it didn't happen.
WHY DIDN'T YOU THINK OF THAT?
An expert shares the secreis of his disruption meter.
By David Fazzina
i r s AN INCREASINGLY COMMON SCENARIO. EXTERNALLY,
a company wants to retain leadership in an industry segment
or product line. Internally, that means the innovation team
must try to influence business decisions through internal
product development. But almost all efforts are directed at
incremental improvements. Companies need bigger changes
from disruptive technology to make it over the hurdle.
A key to that effort is the ability to recognize and assess
emerging market-disrupting technologies long before they
reach the commercial stage. But there are hurdles in the way.
1 .YOU ARE UNAWARE of the potentially disruptive technology
because it is emerging from a very different discipline and your
industry is unlikely to apply it. When the new technology does
arrive, it comes from companies outside your industry with dif-
ferent business assumptions. This is the most ruinous case and
causes the most upheaval for the affected industry. The only
chance to spot this event is if someone outside your industry
tells you about it. Consider the impact of MP3 technology on
music CDs. CD makers did not develop MP3 technology, but
they are certainly dealing with the consequences,
2. YOU ARE AWARE Of the technology but do not understand its
capability and potential, in this case, the technology is emerging
from your industry, but it's rejected because it ffies in the face
of entrenched business assumptions. These assumptions have
created an industry-wide zone of stagnation. However, outside
that zone, the technology is weli-received. As an example, the
Swiss invented quartz timekeeping technology in the 1970s,
nearly wiping out its own watch industry.
3. YOU ARE AWARE Of the technology, but it's too late. The
looming threat is past the point where you can be proactive. A
'best response' is needed. Do you develop a similar technology
by chasing after the existing one, or do you find and deploy a
different technology? In either case, a good understanding of
the technology landscape would help that decision.
In response, Nerac has developed an Emerging Technology
Assessor to anticipate emerging technologies before they dis-
rupt business and while there's still time to gain a competitive
edge. The Technology Assessor Table tracks developments and
helps decide when the timing may be right to evaluate specific
applications or investments.
As an example of how the Emerging Technology Assessor
works, consider printable electronics, a means of using common
printing techniques to cheaply produce thin, flexible electronic
circuits that can be applied to RFID tags, e-paper displays and
photovoltaics, among other things. The concept was discussed
for years before reaching the point of commercialization today.
Dow, DuPont and 3M, as well as scores of smaller compa-
nies, have large investments in the technology. Organizations
in many industries should be paying closer attention to the
progress and extent of this technology's development.
David Fazzina is the technology solutions development manager
at Nerac. a Connecticut-based research and advisory firm for
companies developing innovative products and technologies.
V^Vi/W.BASELINEMAG.COM
 DISRUPTIVE
FORCES
MICROSOFT
L O C A T I O N : Redmond, Wash.
C E O : Steve Ballmer
R E V E N U E S : $51 billion
W H A T T H E Y D O : This maker of
Windows, Office, and a host of commer-
cial and enterprise software, game and
music systems has aspirations for Web
services, search and mass media.
'•'••> ^'^ <••.-••!'/V-f: C ' i i ' í . í í ' r > x ' s . : Just
when you think Microsoft has done ail ir
can to ruin any goodwili it had, the soft-
ware giant comes up with a winner. Xbox
and Zune were winners—even if they
were more stabilizing than disruptive.
Now Microsoft is engaged on multiple
fronts as it bids to acquire Yahoo and
Digg; churns out hosted applications for SMBs: retools its Great Plains
offerings, now called Dynamics, for enterprise resource planning, finan-
cial, customer relationship management and supply chain management
applications; and develops cutting-edge Surface touch-screen devices.
THE TECH THAT MAKES THEM TICK: Microsoft uses
IT very differently from most companies because it uses tech to
sell tech. As a result. The one thing you rarely find in Microsoft's
4,000-person global IT organization is sfability. The operation, which
famously serves as a test bed for the company's own products, has
been through four ClOs in four years. Earlier this year, Microsoft hired
Tony Scotf, the former Disney and General Mofors chief technology
SOUTHWEST AIRLINES
CEO: Gary Kelly
REVENUES: $9.0 billion
Dallas I IDEO
W H A T T H E Y DO.- Corrals discount Travelers in
and out of 737s for a reasonable fee.
DISRUPTIVE QUALITIES: SouThwesT bucks
every indusTry Trend and provides better value by
filling fights, using just one type of aircraft for iTs
limiTed and highly targeted hops, and restricting
ticket purchases to its own Web site.
THE TECH THAT MAKES THEM TICK:
Southwest pioneered Ticketiess travel in The '90s
and was way ahead of the curve in self-service
kiosks. The airline is now applying the same singular
focus that works with its 737 fleeT To its enterprise
software, deploying a single data archiTecTure across
fhe enterprise.
u r i a n n p u r v a n r m s m i f S f i M r : . - y^e
company causes grief to every airline wiTh more Than
a dozen planes whose name isn't Jet Blue.
34
WWW.BASELINEMAG.COM
"THE NEW CIO
WILL NOT ONLY BE
EXPECTED TO RUN
A WORLD-CLASS
IT DEPARTMENT
...HE'LL ALSO BE
ASKED TO CONNECT
AND COLLABORATE
WITH CIOs AROUND
THE WORLD."
Kevin Turner, chief operating efficer
officer who ran mixed-plafform shops and used his huge IT budget to
push Microsoft and Sun to improve interoperability. As Kevin Turner,
chief operating officer and Scott's boss, puts it: The new CID will not
only be expected "to run a world-class IT department [and] drive
our solutions and deployment throughout our enterprise." he'll also
be asked "fo connect and collaborate with CIDs around the world to
regularly share best practices with our customers and partners."
W H O T H E Y A R E D I S R U P T I N G : Microsoft is going after
search and media companies on the consumer end, plus, in the
enterprise arena, wannabes such as Google and established players
such as IBM, Oracle and SAP.
?'-Palo Alto, Calif.
C E O : Tim Brown
R E V E N U E S : N/A (private)
WHAT THEY D O : This design
consultancy delivers products, services,
environments and digitai experiences.
DISRUPTIVE QUALITIES: IDED
creates experiences, not simply products. As
founder David Kelly puts iT. "We are in The un-
derstanding people business." An innovator's
hallmark is Teaching others, and That's whaT IDEO is known as: a disruptors' evangelist.
T H E T E C H T H A T M A K E S T H E M T I C I t : For all iTs markeT analyTics and
automated design acumen, fhe company that crafted Apple's first mouse, the Palm
V and The world's firsT laptop sTill comes down to The human brain. "We manage a
constant sTream of experimenTal projects designed To expand our knowledge." says
Tim Brown. "We expect every experiment to produce an output we can communicate
or cxperienTially evaluate in some qualitative way."
IDEO threatens bicycle makers and
iieallh care providers, product packagers and online retailers. But The company
really disrupts from wiThin, Teaching thought leaders across industry boundaries
how To think and act like a change agenT.
REAL NETWORKS XEROX
• s Seattle Norwalk, Conn,
Hob Glaser Anne Muicahy
REVENUES: $395.2 million $17,2 billion

WHAT THEY OO: The pioneer of occasionally frustrating streaming WHAT THEY DO: Document man
downloads now serves up the popular music subscription service Rhapsody, agemenf, including printing, copying,
''!>ISRUPTIVE QUAL: Rhapsody offers access to millions digitizing and archiving
of songs. Moreover the company's technology is being embedded in an ÏUPTIVE QUALITIES:
impressive number of places like Facebook and MTV,com, as well as in Xerox is famously, if only slightly
devices such as cell phones and DVRs, unfairiy, known for churning out dis-
• " • •••• • r " ' .-:.••••- • . . • . ; " ,;:- Asuper-easy drag- ruptive technoiogies, then taking a
and-drop interface and a deft recommendation engine make the service pass on actually marketing them. The
simple for new users. mouse and the Windows-like GUI are
""!•> '^•r^'.' TTfir rïTfTTTT'T'T'rr ' The company is going head to head among the technologies Xerox de-
with Apple. Microsoft. Napster, iiatellite radio and your local record store. veloped, then dropped. But
the work at Xerox's famed
Palo Alto Research
Center, nowafor-profit
subsidiary, continues
ALIBABA innovating around
LOCATION: Hangzhou. China the company's core
CEO: Yun "Jack" Ma document manage-
REVENUES: $350 million ment business, as
well as in pervasive
WHAT THEY D O : The eBay of China computing,
DISRUPTIVE QUALITIES: Alihaba has found ways to connect with aspect-oriented
China's burgeoning Internet population: 210 million users and growing! programming and
Yun Ma has been fearless in the face of repeated missteps on the road to IPv6 technoiogies.
success and now reigns over an English-language B2B site for international THE TECH
buyers looking to contact Chinese sellers and a Chinese-language site THAT MAKES
focused on B2B trades inside China. THEM TICK:
Xerox is making a
Alibaba boasts a simple
comeback of sorts
e-commcrce front-end and the aijiiity to scale: it's current user base of
with new tools
25 million is just a tiny piece ol China's small and medium business market.
for IT to use to
The company is skirmishing with read, understand.
American interlopers such as eBay, which has taken a well-funded run at route and protect
the Chinese market. documents. Its latest
wares for lawyers, for
example, can scan millions
of pages and figure out who
was doing what when and
BAIDU where. The company is also
Beijing a leader in securing sensitive
CEO: Robin Li documents for the heath care
REVENUES: $[D7 million and financial industries. And
watch for Lean Document
WHAT THEY DO: The second of the twin dragons is the Google Production, which promises to
of China improve printing and reduce
DISRUPTIVE QUALITIES: Baidu is also closely tied fo the swell in costs, Xerox has 48 patents
China's Internet users. Through search and savvy social networking, Baidu pending on the methodology,
now boasts a 60 percent market share and a spot among the world's top 10 WHOTHEYARE
Web sites. -"•T5UPTINC: Xerox
THE TECH THAT MAKES T v r « T-fT"?- For Baidu. the secret threatens paper and printer
sauce is its vast data center assets coupled with algorithms that outperform consumable vendors, storage
Googie in Mandarin, allowing the company to introduce paid search in China, manufacturers, paper-shredder
:E DISRT':' Again, American companies such makers and librarians,
as Google, Yahoo and Apple are the main competitors. And with Baidu's
designs on music downloads, communications and e-commerce, it might
even try to muscle out domesti: brother Alibaba, Anne Muicahy, CEO, Xerox

WVyw,BASELINEMAG.COM