MySQL OS-DB in 2006 & How to beat your most powerful competitors?

Ameya, Arifuddin, Aakashdeep, Goutham, Kumaresan, Obulesu, Umesh, Emilia, Morten, Tobias, Gerhard

Agenda
PART I: Case study Open source How MySQL roughed up the industry PART II: Article How can we beat our most powerful competitors?

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How is MySQLs open source model different from Linux OSS model, and what are the implications of this?
MySQ L Linu x

Relational database system Owned by a single profit firm (MySQL AB) Dual licensing (GPL & proprietary)
Revenues through proprietary license and support service
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Computer operating system Control is fully in hand of the users (75% written by emnployees of large companies) GPL licensing

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Industry architecture and appropriability regimes Character of open source

Knowledg e assets

Complementar y assets

Intellectual property assets

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Market situation Disruptive vs. sustainable innovation strategy

MySQL open source company Tradional closed source companies

New player, open sourced and low cost structure Targeting small companies & startups searching for a basic product Free Disruptive strategy
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Established companies with high brand reputation Targeting big companies searching for a sophisticated product Premium price Sustainable strategy
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In 2006, how has the market changed? Does this favor MySQL or its competitors?
MySQ L Favored player for larger

companies Serious competitor of close sourced companies Monetarization of business model through support service
Traditional companies
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Oracle tried to handle the upcoming open source threat: Acquire important complementary assets (e.g. InnoDB, Sleepycat) Failed to acquire MySQL Cooperate with MySQL
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Forced to reduce prices

What could MySQL do to fend off its most powerful competitor, Oracle?
Ensure that the whole value chain stays open source
Search for a substitute supplier instead of Innobase Foster backward integration to be independent

Intensify open source networks and establish agreements with other open source companies

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The future of MySQL (after Oracle acquired SUN Microsystems, which owns MySQL)
Probably MySQL will remain, but most likely not within Oracle. Since MySQL is highly depended on its skilled developers, whose philosophy was to fight Oracles software license charges and life the idea of open source, many talented developers will leave the company. Nevertheless MySQL will stay alive in form of new open source communities (since original developers move). An alternative would be that Oracle makes it to an totally independently spin off.
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How can we beat our most powerful competitors?

Clayton M. Christensen

The Disruptive Innovation Model

Sustaining situation Selling better products for more money to attractive customers Incumbents always prevail

Disruptive situations Selling simpler, more convenient product for less money to unattractive customer set Entrants more likely to beat the incumbents 05.09.11

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3 critical elements of the disruption model

In every market there is a rate of improvement that customers can utilize or absorb e.g. Powerful engines underutilized by the average customer Innovating companies introduce new, improved products at rates that outstrip customer utilization rates e.g. More and more powerful CPUs introduced by the chip industry Distinction between sustaining and disruptive innovation

3
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The Disruptive Innovation Model (2)

Performance

Pace of technological progress

Sustaining innovations Performance that customers can utilize or absorb

Time
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Asymmetric motivation
Disruptions have paralyzing effects on Industry leaders

Processes designed and perfected to support sustaining innovations

They are always motivated to go up-market, and not defend the new or low-end market that disruptors find attractive

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DISRUPTION AT WORK: HOW MINIMILLS UPENDED INTEGRATED STEEL COMPANIES

Integrated Mill vs Minimill

Better profit margins drove Minimills entry into new businesses

Cost reductions mean survival but not necessarily profitability. Greater competition led to higher efficiency but also reduction in Group 5 profit margins

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DISRUPTION AT WORK: HOW MINIMILLS UPENDED INTEGRATED STEEL COMPANIES (2)

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IS REWARD OF VICTORY THE END OF PROFIT ?

INNOVATORS DILEMMA : Should the investment be in least profitable part of business to retain least loyal price-sensitive customers ? OR Should the investment be to strengthen the competitive position in the most profitable tiers of business ?

Shaping a business idea into disruption is an effective strategy as incumbents are motivated to flee than fight when faced with disruption and it then becomes much easier to beat competition
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Role of sustaining Innovation

Very best sustaining companies systematically ignore disruptive threats and opportunities until game is over Entrepreneurs should build and sell Sustaining innovations to industry leaders
Eg: healthcare , Cisco

Sustaining technology strategy is not a viable way to build new growth businesses
IBM and Kodak couldnt beat Xerox but Canon did with disruptive innovation
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 Disruptive is a relative term

an innovation could be disruptive to some incumbents and sustaining to others Eg: Internet ; Dell vs entrant Internet computer retailers

Disruptive business model is essential to grow at the low end products

Established high cost business model cannot profitably serve low end market

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Types of Disruptions
Two Types of Disruption
Low end disruptions Address over served customers with a lower cost business model. Eg: Korean Auto Makers , Amazon, Wal-Mart New market disruptions Competing against non-consumption ( non consumers or non consuming occasions) Eg: Sony Transistor Radios,Palm Pilot, Black Berry ,

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Sustaining Strategy

Performance

Low end Disruptions

erent measure performance Time New Market Disruption Non Consumers or Non Consuming occasions
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Time
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Shaping Ideas to become Disruptive

3 Litmus Tests
1. Potential for New Market disruption
Is there a large population of people who historically have not had the money, equipment, or skill to do this thing for themselves and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them? To use the product or service, do customers need to go to an inconvenient, centralized location? Enablers: Developing Technology to reach the less affluent people

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3 Litmus Tests
1. Potential for a Low-end disruption
Are there customers at the low end of the market who would be happy to purchase a product with less performance if they could get it at a lower price? Can we create a business model that enables us to earn attractive profits at the discount prices required to win the business of these over served customers at the lower end? Enablers: Improvements in Manufacturing, service, or business processes Lower gross profit margins Higher asset utilization
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3 Litmus Tests
3. Sustaining innovations
Is the innovation disruptive to all the significant incumbent firms in the industry?

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Characteristics of 3 strategies
Dimension Targeted performance of the product or service Targeted customers or market application Sustaining Innovations Attributes most valued by the industrys mainstream customers Most attractive or profitable customers in mainstream markets willing to pay for improved performance Improve profit margins on existing processes and making better use of current comp. adv. Low-end disruptions Technology yields good enough products at the Low end of the mainstream market Over-served customers in the low end of the mainstream market New market disruptions Improved performance in new attributes typically simplicity and convenience Non-consumption customers who lacked money or skill to buy and use the product Business model must make money at lower price per unit sold and at unit production volumes in small emerging market 05.09.11

Impact of the required business model (processes & cost structure)

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Lower gross profit margins & Higher asset utilization to get attractive returns @ discount prices

Could Xerox disrupt Hewlett-Packard?

Strategy Sustaining technology Possibility 1 Make better printer than HP for the existing market? Not viable against HP with superior resources Low-end disruption Whether customers in the Possible to define a business lowest market tier be willing to model to generate attractive buy good enough printer at a returns at discounted prices? cheaper price? Possible only with faster asset Yes turnover Is there a large untapped population of computer owners with no money or skill to buy & use printer? No
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Possibility 2 -

New market disruption

Creating lightweight inexpensive printers for Notebooks? Possible

Could GE disrupt AC giants like Carrier & Whirlpool?

Strategy Sustaining technology Possibility Make better product with more features and better energy efficiency? Are there over-served customers at the low end of the existing market who are unwilling to pay premium prices? Are there non-consumers of residential air conditioning in China who have been blocked due to expensive machines and small size apartments? Reason Not viable against the giants with superior resources and more expertise Yes, they signal by opting for least expensive models. Possible by setting up manufacturing operations in China Possible provided they design a low cost product that could fit into the small windows of their apartments

Low-end disruption

New market disruption

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Potential for Internet Banking?

Strategy Low-end disruption Possibility Are there current bank customers at the low end who would be happy to accept a bank account with few features at a lower price? Reason Customers available but difficult to design a business model that would give attractive profits at discount prices as the cost of money is similar for all banks

New market disruption

Is there a large population of No as the existing banks people who have been unable penetration of this market is to open and maintain a bank high account due to lack of money or skill?

Sustaining innovation

Possibility of innovation in the existing market by the established banks?

Yes

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Thank You

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