I live a stone's throw from Apple headquarters in Cupertino, in the heart of Silicon Valley. Apple is hiring.

But it's not the Apples, Oracles, Intels or Ciscos that make the economy hum here. "Historically, it is start-ups, not established companies, that create the bulk of new jobs here," says the San Jose Mercury News this past Sunday.

And there's lots of venture capital money flowing into innovative start-ups (far higher than any year before 1999). Yet the question remains, "So Why Isn't the Valley Booming?" (San Jose Mercury News, August 7, 2005).

A big part of the answer: "Now to start an Internet software company, you don't need to hire 500 people and build a direct sales force," says Andrew Anker at SixApart (bootstrapped by husband-and-wife team Ben and Mena Trott at home).

Excite's employee count was 570 (and post-acquisition Excite@Home's headcount rose to 1,775). Nowadays, Joe Kraus, one of Excite's founders, as of last fall was doing just fine with seven folks at his new company, JotSpot. Kraus outlines JotSpot's disruptive strategy here. (Another relevant meme: long tail.)

The Valley today does attest to the small meme that Brian summarized yesterday in "Get Small Fast". I see even more start-ups preferring to remain private and forego venture capital money altogether.

As Clayton Christensen says in Seeing What's Next?, "Managers can either dictate strategy from above in a deliberate fashion or allow strategy to bubble up from below in an emergent fashion... Large, up-front investments tend to force firms to seek large or mass-market customers to support their fixed costs. Smaller upfront investments give firms more flexibility."

Ironically, Christensen's landmark "The Innovator's Dilemma" (honed in a Motel 6 in San Jose) "helped fuel both the euphoria and the paranoia of the Internet boom... Aspiring disruptors excerpted passages of the book verbatim in their business plans." (Fast Company, "The Industrialized Revolution", November 2003)

But Christensen never advocated big. He advocated disruptive. I like small, but small alone isn't a strategy.

"Developing completely new products is hard. Finding new markets is harder. Identifying large, existing markets is easy... Trying to reach these [large, existing market] customers involves following sustaining, not disruptive strategies." -- Clayton Christensen, Seeing What's Next

Christensen devotes a lot of time explaining how going after an incumbent's sweet spot -- their huge market and especially their high-end, high-margin business -- is asking for a long sustained fight. And one in which the big boys are at a distinct advantage.

However, the beautiful part is that time and again, they'll just let you walk away with "nonconsumers" and their "overshot" customers. For instance, Kodak missed the boat and allowed others to chip at the inexpensive digital imaging market because it was focused on coming up with "high-priced, performance-competitive product that could replace silver halide film."

You can glimpse now how traditional print ceded the classifieds to Craigslist and eBay.

Find a disruptive market: "Disruptive markets start among customers that appear to the incumbent to be either undesirable or nonexistent. The initial absolute size of a disruptive opportunity is generally too small to justify any substantial amount of investment or even management attention [from established, large companies]."

An example: University of Phoenix "creates opportunies for thousands of previously nonconsuming adult learners to obtain degrees in their spare time." It's a market that traditional university educators missed because they thought to offer an inferior product - online distance learning - to their existing core market rather than to nonconsumers. Christensen points out there are nonconsuming contexts as well: "When people can't consume when and where they want." Corporate training and executive education has arised to offer short-term, just-in-time education to busy managers that couldn't afford two or three semesters to learn a specific topic.

P.S. If you're wondering (see also Tara's "Big Brands Need Not Apply"), yeah, conversational media such as blogs are disruptive to both traditional media and marketing. "Instead of embracing the innovative product's inherently disruptive nature, the incumbent inevitably tries to morph the product to fit into its existing processes and values... [I]t changes the innovation in ways that obviate its inherent disruptive energy."

More: Unattributed quotes are from Seeing What's Next. Read or skim Christensen's books, or brief yourself at "The Industrialized Revolution", Fast Company, November 2003.