Fire From the Gods
Can lightning strike the same place twice? Can we get some more angels to dance on this pin? How about re-creating the PC demand explosion on another hardware platform, hopefully resulting in the same wealth creation that coincided with the PC revolution?
Hm. I think I’ll take the angels. Looks easier.
The 90′s was filled with venture capital firms looking for someone to be the next Microsoft. The effect of that particular tornado was so wide and so long lived that most people lost sight of what an anomaly it was. People kept making business plays based on creating an equivalent to the PC explosion, while glossing over the fact that the odds of doing so were quite a bit worse than winning a lottery. In a lottery, at least someone is guaranteed to be the winner. It could be a long time before something like a new hardware platform explosion occurs again.
Let’s look at the forces that combined to create the original Intel-based IBM PC Clone + MS Windows market explosion:
- Rapid standardization of business on an open platform (which was open by accident: it was based on the PC reference specification put out by Intel)
- A proprietary product (MS Windows) was attached to the explosion, but only because it was a significantly undervalued part of the supply chain. No one had thought seriously about an operating system for a computer as the high ground in technology before then.
- A radically open platform for application development. For a retail-level offering, there was a remarkable lack of centralized control over what you could run on top of it. You didn’t need Microsoft’s, IBM’s, or anyone’s permission to write an app.
Alone these factors would have been significant, but together they created a firestorm that is extremely rare. In fact, a firestorm that is practically impossible to re-create. What everyone now knows is that IBM screwed up. To let these factors coincide is against the basic instinct of business, and it wouldn’t have occurred in this case if IBM had understood properly what was happening, and had executed properly.
So in an environment where key players in an industry are not massively screwing up, the conditions to create the firestorm just don’t happen. Fire does not get stolen from the gods.
In the business world, people keep wanting to use the razor blade model. They catch the customer and then extract recurring fees. This is the way that game consoles, cell phones, cable tv and so many other things work. This can be a great way for a business to make money, but it essentially guarantees that the firestorm and the associated wealth explosion will not occur.
I started thinking about this topic when I was speaking with a co-worker here about his Zune. (Yes he has a Zune. He’s the only person I’ve ever met in person with a Zune. Actually he owns two of them, a black one and a coveted brown Zune.)
Initially Microsoft’s response to the iPod was to initiate Plays For Sure – an attempt to re-create the firestorm. The idea was Plays For Sure was a program in which Microsoft supplied the software and independent manufacturers supplied the hardware. The plan was that they would displace the iPod just as they had the original Macintosh.
But relying on re-creating the firestorm is a weak bet. Not surprisingly, it didn’t pan out, and Microsoft abandoned the strategy (screwing their Plays For Sure partners in the process) and released the Zune instead. An integrated, closed, offering instead. The Gods continued to keep fire to themselves.