In 1996 when Clayton Christensen (Author of The Innovator’s Dilemma, a book that deals with his seminal theory of Disruption) was researching on why the best firm fails, his Professor gave a sage advice “Those who study genetics avoid studying humans, because new generations come along only every thirty years or so, it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because they are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see”
This has been very true for a long time in the storage industry particularly the disk drive industry where changes in technology, market structure, global scope and vertical integration have been very prevalent. There has been more than 200 companies in the past in manufacturing of disk drives and today that number is only 2, Seagate and Western Digital after lot of acquisitions and bankruptcy. The disk drive technology is matured and has really reached its potential in terms of density and speeds. I am no expert but probably disk drive technology deals with physical movements and mechanical heads and that is why it is reaching sort of its limits. What used to be size of a room for a few MB of memory size has been reduced to size of human palm for 1TB of memory size which is tremendous growth in less than 50 years of timespan. It is said that the disk drive companies uses around 25 elements of periodic table and manufacture drives which is quite amazing. The disk drive industry has changed from a thriving industry with lot of investment in R&D by multiple big and small players to a duopoly of two companies Seagate and Western Digital and both of the facing the heat of stagnating market growth & technology, commodotization as well as threat from technologies like solid state drives that have very different players like Intel, Samsung, Sandisk,Micron and others who have either divested their disk drive or were never into storage. With Western Digital acquisition of Sandisk that are into Solid State memory there is every possibility that the R&D dollars going into Disk Drive will definitely go down further bringing down innovation.
Lets see now Clayton’s theory that was a result of analyzing disk drive companies applied to today’s disk drive industry that is way different from what it used to be.
The basic tenets of Clayton’s theory is that the incumbents are always winner in sustaining innovation whereas entrants are always winner in disruptive innovation. Idea is incumbents like Seagate or Western digital will be doing sustaining innovation for their customer, charging premium and increasing their margins, the possibility of a new player taking a great market share by doing sustaining innovation is quite remote. Disruptive innovation has the characteristics atleast initially lower gross margins, smaller target markets and simpler products and services that may not be attractive with traditional performance metrics and hence the incumbents are not interested to play in this lower margin business creating space for new disruptive competitors to emerge.
Solid state drives aren’t as complex as the disk drive technology as it uses NAND Flash Memories and a controller that provides access to these bunch of NAND Flashes and does other housekeeping tasks like wear leveling, command execution. Both Seagate and Western Digital have put stakes on solid state memories and as of now the SSD aren’t simpler than disk drives and comparatively higher costs. Accordingly it doesn’t looks like a disruptive technology rather a sustaining innovation where incumbents have possibility of successfully tapping the market as well.
With the performance metrics in terms of IOPS much better for Solid State memories than that of disk drives their usage from client based system to enterprise systems would happen only when these drives meet the reliability with the performance enhancement. The industry standard NVME drives that are going to make all the solid state drives compatible will also make their usage easy.
The disk drive industry has come full circle and the two companies surviving the competition are the ones who were pioneers in the development of the technology and it will be interesting to see how these companies sustain themselves with their core technology in danger.