Tag Archives: ecosystems

Be careful what you wish for

It’s the great challenge of any career: do you tie your future to evolution, or revolution?

The risk:reward ratio for revolution — opening up whole new markets with new products — is profoundly interesting to many. It’s also a path fraught with dangers of failure, and, paradoxically, even more dangers if successful.

Here’s why: succeeding at revolution makes others want you to reprise that success.

Yet successful revolutions generally can’t get too far in front of the potential buyers. You may recall the old Panasonic tag line: “just slightly ahead of our times”. Getting too far out in front of the buyers can mean being very lonely, indeed.

That’s why, in fact, it’s not generally the pioneer who reaps the big rewards, but the one who comes along and refines the product once the pioneering effort creates awareness of a need.

Yet companies do, from time to time, need revolutions (whether anyone likes that or not).

Markets follow classic S-curves: at the tail end of the S, the market is effectively saturated. The number of players left standing shrinks due to market consolidation even as the “long tail” effect creates many product “slices” designed to mop up what buying is left, before stabilizing in a classic “mature” framework of a dominant player, an also-ran “second choice” and a sedate continuing product cycle based on replacements, with “just enough innovation” to create the urge to replace on the depreciation cycle.

Think about music players. That’s where they’re at, and it’s why the Microsoft Zune failed to take off: it neither redefined a mature market to start a new S-curve nor gave enough reason to buy early in the replacement cycle. (Zune, on the other hand, has strongly influenced other Microsoft products, like the new Windows phone and Windows 8 operating system and Surface tablet. They may yet make a dollar on it with those.)

Even in a market that hasn’t matured — smart phones are still climbing the S-curve, although they’re well up it now — a revolution may be required where the market actually requires an ecosystem (ecosystem demands drive the S-curve faster toward its conclusion) and your ecosystem isn’t keeping up. (This is the challenge for Windows phones and Blackberry phones going forward.) Either the market has to be redefined, or the fundamentals of the ecosystem have to change, or consolidation around players one and two in the market will continue, no matter how good a new product is.

So staying with an employer can periodically require the risk of taking on a revolution rather than staying with a career plan that evolves one product generation at a time.

For those who successfully do pull off a revolution, the challenge becomes resisting the blandishments of organizations that want the results of revolution without the internal work required to make one possible. The kind of organization that, for instance, wants to keep all its processes and procedures in place, maintain its existing product lines and the power of their leaders, etc., yet get the “leap forward” as well — so they wave a boatload of money at a successful “revolutionary” then leave them to spin in place and fail.

There are those of us who are naturally revolutionary in nature, who see opportunities and know how to “cook” exposure, design, good enterpreneurial management and opinion together to jump into a new market and take off. The really good ones here often become “serial entrepreneurs”, if they recognize that the shift to evolution isn’t for them.

There are also those of us who do better in evolutionary environments, and find revolutions frightening. If you’re one of them, watch your S-curve: it may make sense to move to a different market category that’s earlier on its curve than to stay where you are and ride up into revolution country.

These are the sorts of considerations that should be part of your own personal due diligence to know if you should be looking for opportunity inside — or out — and what fits you best when you do.

How good is your ecosystem?

Back in the late 1970s, IBM reigned nearly supreme in the computer industry. It had seen off the BUNCH (Burroughs, Univac, NCR, Control Data and Honeywell), its competitors in the early mainframe days. New players had sought footholds in the midrange and emerging microcomputer spaces, but it was expected that the process of leveraging increasing returns from increasing share that had worked before would work again.

Meanwhile, at the margins of the mainframe business, companies were emerging to use the ecology created by standardization around IBM. Manufacturers of plug-compatible tape drives, disk drives and even replacement processors were starting up and shipping their first products, competing on price. Other companies were supplying software that filled gaps in IBM’s offerings, starting the whole software industry as we know it today.

As an IBMer in the late 1970s, I dared to ask my managers about this burgeoning competition based on an ecosystem rather than by demanding that purchasers junk everything they owned and start again (the traditional computing model). The question was laughed away: “we’re supreme; no one can compete with us”.

I left shortly thereafter, on the grounds that the world was changing and ignorance and laughing the problem off wouldn’t work. (It took until 1992 for IBM to be forced to admit that it wasn’t the world they were used to.)

Today almost every business works in an ecosystem of complementary and replacement suppliers. Companies are often simultaneously partners and competitors. Understanding the risks and potentials of your career with a firm, or of the business itself, begins with understanding the ecosystem it works within.

This matters far more than does customer satisfaction, or perceived lock-ins.

The previous two posts have talked about the smartphone market, and this point can be seen there clearly.

What matters in the smartphone market — whether or not your position as someone whose income derives from a manufacturer in it, say — is the ecosystem built around you.

Apple is routinely criticized for its “closed garden” approach. Apps have to be procured from the Apple-run App Store. If you’re a developer, you must submit your product to Apple for approval. They can withhold that — and do.

But look at what it means to Apple’s customers: every product in the App Store is confirmed to work on the device you own, and to work as expected with no work required on your part to configure it. That same “closed garden” that seemed so limiting actually enhances the most important thing for a developer: being paid.

Unsurprisingly, users of the Apple ecosystem are the ones most likely to buy an app rather than simply use free ones: their risk on the purchase has been dramatically lowered.

Likewise, Apple’s tight control over hardware and system software means the ecosystem of developers have a very limited number of targets to work with and test. Apple’s tight control over carriers (for the iPhone and iPad products) means as well that system software updates are not held hostage to the carriers, as other vendors experience. Therefore, most Apple customers run current software, giving developers opportunity.

The Android market is larger, but fragmented into a multiplicity of device architectures, manufacturer changes to the base Android world, and carrier restrictions. So, if you were an HTC employee, for instance, you’d have to look at how HTC’s piece of the overall picture is being changed.

A player like RIM, with its Blackberry product, is in the same position IBM was as the 1980s drew to a close: still resisting (in many ways) the notion of having to be an ecosystem player (for all the attempts to deliver developers to the platform now going on). Still building incompatible products requiring developers to build for multiple fragmented targets.

A comparison of personal risks and rewards would suggest that that would make for a more risk-laden future than a Samsung within the Android space — and a highly risky future relative to Apple’s ecosystem.

This doesn’t mean, of course, that leadership lost is irretrievable. It does mean that the game that got you there isn’t the one that keeps you there. It also probably means that a firm where leadership remains locked into a way of seeing the market, and whose Board is subservient to that leadership, is likely rolling the dice on your future.

That’s a bit of personal due diligence you owe it to yourself to understand — and act upon.