Fri, 04 Jan 2002 13:22:01 -0600
Dave Long wrote:
> Pretend for a moment that creation
> of new markets by innovation is a
> risky endeavor, with many ways to
> go broke, and only a few outcomes
> with huge returns.
I'm with ya. In fact, this is a reasonably accurate description of the real world.
> And for exploitation of the status
> quo? While we are fantasizing, we
> may as well imagine that such an
> activity might, at least for large
> players, be predictable enough to
> provide a dividend stream.
Still with ya. Again, a reasonably accurate description of the real world.
> Now, what are the reactions of an
> established player and an outsider,
> both provided with identical copies
> of an innovative strategy?
Here's where we diverge. Many if not most significant innovations challenge the
status quo; that's why refer to them as "disruptive" technologies. Dominant players
will always engage in a series of particular behaviors; it's kind of like the old
Gandhi quote "first they laugh at you, then they ignore you, then they fight you. And
then you win." Except in this case it's "first they ignore you, then they laugh at
you, then they copy you, then you go out of business." If you're lucky, maybe they
buy instead of copy you. If you're really, really lucky, maybe you get to a critical
self-sustainable mass first. The number of companies that have managed that is very,
In a world with no secrecy, they can go straight from ignore to copy, and there's no
way for the innovator to profit.
> The outsider might as well pursue
> it; what have they got to lose?
Time and money.
> The established player probably
> shouldn't pursue it with large
> (let alone larger) amounts of
> resources; the opportunity cost
> of not putting those resources
> in their core business is great.
But that's just it; defending against innovation (DISCREDIT / COPY /
BUY-AS-LAST-RESORT) is a valid investment --- it's *protecting* the core business.
It's true that the status quo player shouldn't *invest* in innovation --- and they
don't, the last thing Microsoft innovated was a Basic interpreter. Even that was
> Perfect corporate transparency
> may even encourage innovation:
Non-sequiter. Nothing you've said demonstrates this, and everything about real-world
experience and simple logic argues against it.
> Why might investors prefer to
> have large established players
> stick with innovation buying,
> instead of in-house creating?