2015|Case No.E409| Length 17 pgs.
Launched in 2007, SeaMicro developed one of the most innovative server products to hit the market in over a decade. The SM10000 consumed one-quarter the power and space of conventional server products, thereby addressing a significant and growing pain point, particularly among Web 2.0 companies. As these companies increased their computer power through the addition of tens of thousands of servers, their data centers expanded as well, creating major issues around the availability and costs associated with electricity, cooling and physical space. Though SeaMicro’s founders were confident that their product would address this significant market need, they faced initial resistance from the investment community based largely on the recent failures of a handful of newly emergent server companies, combined with the oligopoly structure of the server market dominated by HP, Dell and IBM. The case profiles SeaMicro’s voyage navigating through these obstacles and highlights the challenges that lay ahead after its initial product commercialization.
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The learning objective of the case is several-fold. First, the case highlights how SeaMicro has leveraged the opportunities which arise from various discontinuities to create a revolutionary business. These discontinuities include a complete change in the nature of the work as a result of the emergence of Web 2.0. Specifically, ever increasing server capacity demanded by conventional firms (represented prototypically by financial services firms) is being replaced by a need for lower-power, high volume capacity. Other discontinuities occur in the component market as well as in the investment community, all of which combine to create a massive opportunity for technological innovation.
A second learning objective is to expose students to Clayton Christensen’s “Innovator’s Dilemma”, the dynamic where established players in the market have a disincentive to innovate due to the risk that innovation will disrupt their lucrative business model. The tendency to hold the status quo thereby opens up chinks for disruptive technologies to enter the market. The multibillion dollar server market profiled in the case provides the perfect example of the established players’ unwillingness to innovate, allowing students to contemplate the implications for players both large and small when a startup company lands on a revolutionary new idea.