Why Nothing — Not Even Software — Can Eat the World

Joseph Schumpeter — Eat your heart out!

We are living in an era of "creative destruction" at a scale you could have never imagined. Hell, we can’t even imagine it! Everything is being vacuumed up into the universe of Digital where software engines transform our atoms into bits, collapsing distance and time into new states of being we can only call virtual. So, yes, it does feel like software is eating the world.

Such amorphous fears need to find a home in more concrete targets, so to make this software threat more tangible we might call it Google, or Apple, or Amazon, just as in prior decades we might have called it IBM, or Oracle, or Microsoft, or Cisco. These are all companies who at one time or another enjoyed market caps far in excess of their peers — a testimony to their investors believing that they might indeed be able to eat the world. We like to call these companies gorillas, but our real fear is that one of them might actually be King Kong.

But here’s the thing. Whenever the power of a gorilla exceeds some unspecified boundary (“I can’t define it, but I know it when I see it” sort of thing), the world self-organizes to curtail any further expansion. It did this to IBM and AT&T in the 1980s, largely through governmental intervention, it did it to Microsoft less formally in the 1990s, and arguably to Cisco at the beginning of this century, and it is currently mobilizing to curtail both Google and Apple, while keeping a close eye on Amazon. (By the way, this phenomenon is not specific to tech, as US Steel, Big Labor, Walmart, and the current investment banks will all testify.)

What does this curtailment look like? Interestingly enough, it begins with capitulation. That is, the world cedes to the gorilla all the territory it has already captured, making it clear to any remaining competitors that they can expect no future support for any attempted coups.These guys are the de facto standard, we have organized around them, so do not disrupt this domain. At the same time, the world identifies a perimeter to that territory and self-organizes to prevent the gorilla from operating outside it. Thus IBM could never get a real purchase in networking anything but its own computers, AT&T could never really get a purchase on computing, nor could Microsoft get any support for its mobile or set-top box initiatives. It was not that these companies did not have credible offerings in these spaces. It was that the ecosystems in place simply refused to cooperate.

All long-term success depends on eliciting the voluntary support of an ecosystem. As the African proverb says, "If you want to go fast, go alone; if you want to go far, go with others." To sustain their growth gorillas must bring their ecosystems along with them, in part by refraining from extracting an excessive amount of profit from the marketplace, even when their de facto monopolies give them the power to do so. Instead they should periodically relax their grip and perform what we like to call “strategic acts of generosity,” thereby renewing the good will they need to lead (and be followed) during the next stage of the journey. Such acts were cornerstones of America’s success in the 20 century, and gorilla enterprises around the world would do well to learn from her example.

That's what I think. What do you think?

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Geoffrey Moore | Escape Velocity | Geoffrey Moore Twitter | Geoffrey Moore YouTube

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