Subject: Re: Successful FSBs
From: "Benjamin J. Tilly " <ben_tilly@operamail.com>
Date: Tue, 29 Oct 2002 23:30:07 +0500

"Tim O'Reilly" <tim@oreilly.com> wrote:
> You're right.  I overstated the case.  But I stand by my point.  It's
> extremely unlikely that IBM *could* have managed to become either Microsoft
> or Dell, for the reasons you outline.  But to take these counterexamples to
> mean that it's impossible for a company or individual who understands what
> they've got to realize the fruits of their innovations is equally
> overstated.

Agreed.  In fact IBM's approach to the PC business is
cited by Christensen as an example of a *good* response
to disruptive technology.

> Rick Adams *did* come up with the right business model for his free software
> (B News), while Paul Vixie (Bind) did not.  IBM has integrated free software
> into its business model, while rivals have not.  (I was recently talking to
> an SAP executive, and it was really clear how envious and impressed they are
> with IBM's strategy for its internet software stack.  While SAP contributes
> 1/3 of rival Oracle's revenue, the software that IBM doesn't own is
> commodity free software that provides no advantage to competitors.)

Agreed.  Free software is really good for infrastructure,
and IBM has done a good job of figuring out how to be
customers of free software projects.  (Even if they have
to jumpstart the projects in question.)  This is a very
good response to the dynamic that the advantages of OSS
are easier to profit from for customers than vendors.

A few other incidents lead me to suspect that IBM came
to the table with a good understanding of when it was
appropriate for them to try to do something themselves,
and when they wanted to work with a supplier.  That
skill transfers very well here...

> So yes, it's unlikely that a large company can benefit from its own
> disruptive innovations as well as more nimble rivals, but it's also true
> that a company that understands the disruptive landscape can do a better job
> than one that doesn't.  Even a marginally better deal (for IBM) between IBM
> and Microsoft might have had very different outcomes for the computer
> industry.
> 
Striking a deal with virtually anyone other than Bill
Gates would have had profound implications on the future
of the computer industry.  Sure, many others were driven
to establish monopolies, but Bill seems particularly
adept at it.
> 
> On 10/28/02 6:25 AM, "Benjamin J. Tilly" <ben_tilly@operamail.com> wrote:
> 
> > First of all that is like asking Linus Torvalds whether
> > he wishes that he had kept Linux proprietary and made
> > money from it.  In hindsight the project was a success.
> > But it would never have succeeded if he had maintained
> > control.  And likewise the commodity dynamics that made
> > the PC what it is wouldn't have worked if IBM had tried
> > to drive all sides of the bargain at once.
> 
> Right.  We see that fallacy played out over the past seven years with Sun
> and Java.

You can see it played out on a smaller scale in
virtually any office today.  Pick up Peopleware and one
of the best lessons is that people react far better to
the right social and environmental dynamics than they
do to control.  Yet how many managers have absorbed this
lesson?

> > Secondly you are ignoring an important point that
> > Christensen made, which is probably a standard piece of
> > knowledge from some business classic that I don't know
> > about but should.  (References appreciated, I have seen
> > similar points elsewhere.)  And that point is that the
> > structure of an organization defines both its abilities
> > AND disabilities.  The kind of corporate culture and
> > organization that drives Dell's commodity model also
> > makes it incompetent at taking routing big long-term
> > risks.  Conversely Microsoft can take that long-term
> > view, but could never compete with Dell in a
> > cost-concious cookie-cutter environment.  These need to
> > be separate organizations with radically different
> > structures to succeed.  It is therefore disingenuous to
> > say that if only IBM knew better they could have taken
> > advantage of every opportunity arising out of the PC
> > when what you have to do to take advantage of one option
> > necessarily makes you incompetent at taking advantage of
> > the third.
> 
> Not necessarily.  Some companies recognize that different businesses have
> different dynamics, and are able to adapt accordingly.  Heck, just look at
> IBM's success at the service business as well as the hardware business vs.
> the struggles of some of their competitors to adapt to that model.

IBM seems to have learned that to succeed at many
different things you need to have different divisions
operate differently.  We joke that IBM comes down on
both sides of any given technological bet, but that is
a strategy in and of itself.  So different arms of IBM
can function as appropriate for their problem space.

> And take a look at Microsoft's success in building online services (Expedia,
> MSN, etc.)  The jury's still out, but I think that they are going to be long
> term winners in a lot of the spaces they are competing in there, as well as
> in their original core business.

Given how many opportunities they are going after, and
how much resources they have available to pursue them,
it would take a bloody miracle to keep them from being
able to win in at least some.  Others (*ahem*xbox*ahem*)
will be bloodbaths.

As for their core business, I would bet that they will
have lost big chunks of it by the end of this decade.

> > And last, but not least, for each winner that we know
> > about there are many losers.  [...]
> 
> Agreed.  There's a great book called The Roots of Coincidence by Arthur
> Koestler, which explains why hindsight makes a lot of things look more
> significant than they actually were.

I have had very good luck with things that you recommend,
so I probably won't be able to resist reading that for
long.  But I haven't read it yet.

However there are 3 thoughts that immediately come to my
mind from that title.  The first is that humans tend to
find patterns in things, whether or not they are there.
We have a hard time telling how realistic the ones that
we see are.  The second is an observation about how bad
chessplayers misunderstand their losses to good ones -
more on that in a second.  The third is that hindsight
isn't 20/20, it is speculation with the benefit that you
won't be proven wrong.

More about chess.  Sometimes after a game players will go
through it and try to understand better what happened.
Many good players report that when they play someone who
is much weaker, the players typically disagree on what
events are significant.  Weaker players identify as
critical the point where winning tactics became visible.
They go back there and try to figure out whether "if
only" they had done things differently, it would have
worked out better.  Even when they have no idea how to
get things to work out from there, the conviction
remains that things were fine until that spot.

The stronger player looks at the same board and sees a
lost game.  Details can take care of themselves, the
outcome is obvious.  Instead the stronger player goes
back to points where possibilities were opened up,
closed off, or actions did and did not work along the
natural "fault lines" of how inherent possibilities
should work out.

I have no interest in becoming a good chess player, but
that strikes me as generally true.  The visible actions
that are easy to see are backed by knowledge of the
underlying forces and how they will play out.  If you
are not aware of them, then you don't even see where
you lost because you don't know how to see.  Play
through history 20 times and you will lose every time,
because you cannot even see what was important.

This is why I liked The Innovator's Dilemma, it gives
me a sense about an important dynamic that I would have
otherwise never seen.

> And that makes me think of the time Jon Orwant was asked by the NY Times to
> debunk the bestselling book The Bible Code (which claimed to find all kinds
> of revelations hidden in the Bible.)  Jon wrote a perl program that would
> taken any desired text, analyze the bible's text, and generate an algorithm
> to find one in the other.  For the Times, he developed an algorithm to find
> the cast of Melrose Place hidden in the Bible.

Jon Orwant is definitely on my list of "interesting
people" to learn more about some time. :-)

Cheers,
Ben
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