Skip to content

The idea of "The Laws of Disruption" came to me when I noticed how news stories about information technology were increasingly stories about the interference of law and regulation with information technology.

A nice example from yesterday's Wall Street Journal is Andrew LaVallee's story, "For Tech Sector, It's an Antitrust Year."

Leading technology companies are faced with life-or-death decisions on products, services, operations and even their very existence based on the arcane rules of legal systems forged in the Industrial Revolution.

At the very least, doesn't this suggest the need for better integration of the legal department with the rest of the executive team? Today, general counsel is the last great bastion of disconnection in most organizations.

Ten years ago, when the Information Revolution reached its tipping point, CIOs learned how to work directly on strategy and operations with their fellow executives. It was painful for everyone, but entirely necessary.

Now it's time for the lawyers...

nytlogo

The thesis of "The Laws of Disruption" is that the accelerating pace of digital life increases the conflicts between innovation and the much-slower paced legal system.

On The New York Times website yesterday, all three "Technology" headlines were in fact stories about the conflict:

Government Urges Changes to Google Books Deal
Skype Founders Escalate Legal Fight Over Sale
F.C.C. Seeks to Protect Free Flow of Internet Data

The first story continues Miguel Helft's excellent coverage of the Google Books class action settlement, about which see earlier posts.

The third story concerns the resurrection of the Net Neutrality debate, about which I will post on Monday after the FCC announces its proposed new rules for ISPs.

The Skype story is a nice example of how legal proceedings are now a standard part of complicated business deals--a cautionary tale for executives who think they can leave legal matters entirely to lawyers.

When IP telephone start-up Skype sold a majority of its business to eBay (a deal that never made any sense), the company retained ownership of the actual software that is at the core of its service. Over the last several days, Skype's former owners have filed various lawsuits aimed at stopping the sale of Skype, which the former owners wanted to buy back. EBay is planning to sell 65% of their interest, instead, to outside investors, including former friends of Skype's original owners.

The various lawsuits claim that eBay and the potential new owners have infringed copyrights in the Skype software, and that a former board member of Joost, which is owned by the former Skype owners, misused his position at Joost to get information that helped his investment company's successful bid for Skype.

Brad Stone cites an unnamed source who nicely sums up the role played by law in this business negotiation:

“This is emotional,” this person said. “This is, ‘You stole my baby,’ ” the person continued. “They have staying power. They know how the legal system works, and they are not wimps.”

Knowing how the legal system works is, increasingly, a critical business skill for technology enterprises. Do you have it?

A new report just out from Forrester confirms my long-standing view that the migration of American households to a digital life is accelerating, the leading side-effect of the Law of Disruption.

A summary of the report in The New York Times on Sept. 2, 2009 notes that the speed with which consumers are adopting disruptive technologies is increasing. Where earlier disruptive technologies such as railroads and telephones took decades to achieve mainstream status, digital technologies follow a much shorter cycle--getting shorter still all the time.

According to Charles S. Golvin, co-author of the report, "The digitization of our daily lives has been steadily ramping up over the past decade." For example, HDTV will reach 70% penetration within five years. Sixty-three percent already have broadband access.

Most technology followers are familiar with the technology adoption curve shown below.

technology-adoption-curve

The curve suggests that the majority of consumers wait until innovators and early adopters have already embraced new technologies, working out the bugs and building up enough base to drive prices down. In Geoffrey Moore's famous adaptation of the curve, technology marketing requires an early focus on the gadget geeks, but requires a critical shift to the later-stage adopters at just the right moment, or what Moore referred to as "the chasm."

The Forrester report does not challenge the shape of the curve, only the timeframe with which digital technologies move through it.

As I argue in "The Laws of Disruption," the increase in speed causes increased conflict with social, economic and legal systems that adapt much more slowly to change than do today's consumers.

As a simple but representative example, consider a story from CNET's Stephen Shankland on the same day. Photo hosting service Flickr announced a change in its policy for handling claims of copyright infringement, based on outrage over the removal of parody images of President Obama photoshopped to look like the Joker from "Batman: The Dark Knight." Where the company used to simply remove an image whenever it received a notification that it violated copyright, the company announced it will now temporarily replace the image but allow comments about it to remain in place pending investigation.

According to CNET, none of the likely owners of relevant copyrights (the original photo, DC comics, etc.) had complained about the Obama photo. But under the 1998 Digital Millennium Copyright Act, Internet hosts that do not respond to notices (even those that may be overbroad or outright fakes) risk losing their immunity for what can be very expensive damages. As digital images can flow freely and any home computer user can make modifications to them, keeping up with copyright's outdated sense of "ownership" becomes a razor's edge for companies like Flickr.