Saturday, June 10, 2006

Are our friends at OVO right about innovation vs. fast followers?

Jeff Phillips, VP of Marketing and Sales with OVO, was a presenter at InnoVenture 2006. Jeff keeps a blog called Innovate on Purpose. It's pretty good, and you ought to subscribe if you're into such things.

In a recent blog entry Jeffrey was criticizing Microsoft for being a fast follower with its Zune MP-3 player.
I was driving between meetings on Tuesday listening to NPR story about whether or not Microsoft would be successful with the Zune, given it's late arrival and the fact that Apple already controls much of the MP-3 market and mindshare.

For any firm, there are going to be products and markets where the firm chooses to be an innovator, a fast follower or a "me too" player. These are perfectly valid strategies and should be considered as part of the business strategy. No firm, no matter how smart or strong, can differentiate only on innovation.
Well, the obvious initial reaction to that is Apple was a leader in capturing market and mind share thirty years ago, and that turned out OK for Microsoft.

I guess more than that though, I question Jeff's differentiation between being an "innovator" and being a "fast follower." Microsoft has often not chosen to be first to market with new software applications. But as a product matures, the game shifts to being able to integrate that product with other applications. That is where Microsoft has been extremely good at taking new applications that gain traction and bundling them together into a whole product. Some of you with gray hair will remember has-been market leaders Lotus 1-2-3 and WordPerfect. Most of you will remember the market lead that Netscape once had.

Microsoft's business is bundling products together into the best whole product solution, so, for example, you can cut and paste relatively effortlessly between Excel and Word and PowerPoint. It's in Microsoft's interest to let other horses run the races early, and then jump in the middle of the race when they have the horsepower to overwhelm whoever the winner happens to be. (Isn't that precisely what the antitrust case was all about?) Does this mean that Microsoft isn't innovative, or that it is just smart.

The biggest threat to Microsoft isn't Apple and the iPod, which doesn't keep Bill Gates up at night much more than the Macintosh does. What has to give Bill Gates serious heartburn, though, is Google. I have found myself using Google documents and spreadsheets more and more lately because they are a convenient way to collaborate with others. Google also now owns my desktop as a practical matter not Microsoft. My home page is Goggle, with a search bar and then a whole series of tabs for various things I use regularly. I switched my email to gmail, and basically use Outlook as an email archive every few days. More and more of what I depend on every day does not require me to use any licensed software from Microsoft, except for the Windows operating system. And so far with Google applications, because I'm willing to put up with a little highly targeted advertising, the price is right.

Google's threat to Microsoft is not that it launched a new licensed software application, which Microsoft could have handled, but that Google changed the rules of the game in a way that Microsoft was unprepared to deal with.

Just like Microsoft did to IBM.

Just like our intrepid hero, the Swamp Fox, did to the British.

When you can do that, change the rules of the game, now that's real innovation.

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