Who trapped VMWare in the innovators dilemma …and how do they get out

A great post on techcrunch by Ben Kepes highlighted just how trapped by their business model incumbents can become.

Who trapped VMWare? To me the answer is 3 fold.

  • Bad buyers

IT departments within large organization – are, generally speaking, paying little more than lip-service to the growing calls of a new generation of technology

Buyers, traditionally the IT department are rewarded to maintain the status quo, particularly with Cloud computing – a form of outsourcing.  This response is due to cludge of drivers….Reliability demands – any change pretty much leads to outages, having kit means having a job, arrogance – we know better than you, and fear or comfort with a current technology set, there is also some pretty nefarious stuff that goes on.  People with specific technology skills have made a lifelong career in being the only person who can make an app work…

The problem with lagard IT, is it reinforces to vendors not to change, and in some instances they will actively come out and sell against the new paradigm (Oracle anyone?). HT to Simon Wardley on the above adoption cycle

Unfortunately this leaves gaps in the market for new entrants…and this leads to disruption.

  • Bad management

Listening blindly to your customer, using dated strategy or financial models to new situations or simply telling your bosses what they want to hear, not what they need to hear all lead to reinforcing the incumbent business model.  Listening to the customer, particularly the ones above creates a false sense of security.  Eventually even the IT dept will adopt the new, with cloud its because they will eventually end up at a financial disadvantage, and then you are stuffed… and in the mean time, your mid-level managers have been vetting out any ‘radical’ new business idea, so by the time you need them, well its too late.  If you look at your bench-strength and its full of MBA’s…you are screwed. They are indoctrinated with the same playbook as everyone else (there is no differentiation when its the same)…. instead you should look for outliers, rogue elements because they are the ones who will create something truely new

Senior management is also guilty of not being true stewards of their companies.

“CEO’s are doing the best they can under the circumstances, but there are units in their organization that need to be protected, prices that need to be supported, sacred cows that can’t be touched …….Which is great, unless your competition doesn’t agree. …. When you are competing against someone who doesn’t have to worry about an existing business, they will almost always defeat you.” Seth Godin

Taking a short term view, protecting the old… taking the overt or covert approach of ‘walking back slowly’ you are ceding the future market and opening yourself to disruption…. true leaders stand up, make hard calls and do the right thing for the company long term….

Apple CEO, Tablets will canabalise PC‘s

SAP has said the same, Amazon has done it.    Get the point, great companies bite the bullet

  • The sharemarket

The incessant demands of the sharemarket to protect or grow existing revenues is idiotic.  The analysts community can’t deal with new business lines … “hard to value that new thing, not used to it”.  Shares slide on news that companies are investing in non-core business.  You guys need to take a look at yourself,  the GFC (which I hold shareholders at least partially culpable) proved the point that incessant demands for more drives bad behavior… and then if you don’t like what the CEO is doing, you agitate to reinforce the status quo… numpties.

  • How can they get out?
  1. Start planning for the future – look for the areas that are commoditising and build an ecosystem on top of it.  Get a lot of developers to innovate on top of that (cos you DO NOT have the skills to build the new thing) and watch for the winners. Cloudfoundry looks like a winner to me
  2. Stop listening to your customers…. start WATCHING your non-customers. They are likely already using precursor’s of the thing that will be your death nell
  3. Get an innovation program in place – agree to the incremental risk and potentially spend (not always), and distribute your effort across core, adjacent and transformational innovations
  4. Get different people with different skills working on this different initiatives. Your rogue elements are probably already leading the way, just give them direction and focus
  5. Capture ideas from the source, and get them unvetted.  This is normally the front line helpdesk.
  6. Allocate resources to innovation, stay the course – its a long game,  and don’t compromise. If it is annoying people you are on the right track
  7. Get to grips with canabalisation, internally and externally. The alternative is extinction.
  8. Be prepared to fail, don’t encourage it but do not penalize it either.  When you do, get another group of smart folks to look at the remnants, dollars to doughnuts there is something there, maybe they can make it work



A funny thing happened when Apple and Google built their app stores…

They unwittingly built a massive new revenue stream for Microsoft….

According to Microsoft, OneNote had something like 15 million downloads from  Apple ‘s app store to the iPad.

Think this thru. If you are MS, someone else has solved the riddle of how do you get your apps on more devices and to more people. And what is more, you don’t really have to go thru the massive change this disruption has driven, because depending on how much you squint, you are litterally just cutting application code just like you aways did.

Imagine if you could buy one instance of Word, ppt or Excel instead the deplorable bundle that we’ve had for the last 20 years…. Micro payment based growth….

Weird, what the world does sometimes

Integrated proposition or trapping

I’ve had several debates with people about vertically integrated, proprietary stacks lately, both at work and personally.

These can be good or evil, but the defining line between this to me at least is whether you the customer are getting a great customer experience AND could move if you want too.

Some examples:

There is an emerging proposition for remote security (door locks)
that some providers are launching. Now taHr intent here is to make you sticky to the service provider..but they are doing this by making it really hard for the average person to move , that is trapping people. This is the evil side.

Another example is apple. I am about to buy another iPhone, I’m doing this knowing that there are now better mobiles coming,
phones with NFC, better battery life etc…. But I have all the apps, I have my house nearly appleified and frankly my kids love the
games… So am I trapped? A little, but happily so because the experience is great.

The proprietary debates comes back to life

There seems to be a constant debate in cloud computing and media as a service circles about proprietary systems. Sinclair Schuller today asks if the future is cloud is proprietary silos, while Bob Warfield and others wade into the Apple Adobe dabate.

This whole phenomenon is a balance between controlling the user experience and operating a free market to deliver choice.  It’s a question of timing…

Here is an anology based on an observation…. Societies that don’t know when their next meal is coming don’t worry about animal welfare or organic food. That’s a luxury, something you can only do when all your basic needs are being met.

Technology is the same.  When you are building disruptive services that are in the early phase of their adoption (which cloud still is), the user experience across all facets of the value chain is normally below the good enough line for the majority. That is they are still worrying about the basics.  The only way to bring that ‘good enough” experience to the majority is for the developers to control most aspects of the delivery. 

To do that you vertically integrate and write proprietary code to ensure that you can control the experience. 

This is why Apply closely tied the proprietary iTunes to the proprietary hardware (iPhone).  DRM wasn’t working, so they took a different approach and locked down and integrated the hardware with the content platform. Philosophical reservations aside, the iTunes to hardware experience as a consumer is great….Again, the only people griping about that proprietary ecosystem are those who are more technically savvy, past the “good enough” , line and demanding greater choice.

Cloud will be the same. Private clouds are becoming vertically integrated. WAN’s, compute, storage and management are all being delivered by one proprietary stack (take VBlock). The providers can control the every aspect and deliver on the user experience…

But this will change,  but only when technology matures enough and the ‘good enough experience is delivered to the majority…. When that happens users will demand choice, far greater choice than a single vendor with a proprietary vertically integrated stack can deliver. The kind of choice that only comes from open standards…

This pattern has happened time after time in every industry, shipping, electricity, Telecommunications, it will happen for Cloud.

I don’t get Apple

I don't get why their users are so rabidly supportive. I don't get why they don't cop more abuse for their blatant proprietary practices, I don't get it.

Their products (the small amount i've used) are … elegant, yes i think that is the best word. Functionally maybe no better or worse than competing products overall. But just damn nice to use.
But they have a re-appearing evil side at Apple it seems. They continually try it on, and seem to get away with really draconian practices. Sarah Perez on R/WW details the latest where an app that competes with iTunes podcast was rejected from the [i'm guessing] iPhone approved apps list. The developer then found a way around this and is happily reeping the PR bonanza that this has created.
They've also attempted to use an auto update feature to push their other applications out too.
Why do they do this? Why not more backlash about it? Why the continued sucess? As some of the comments on the R/WW blog suggest, people can vote with their feet… but the never seem too. I just don't get it