Hopefully the title of this post exaggerates the problem slightly, even in these recessionary times, but I am increasingly concerned by the extent to which the tech sector’s current and future behemoths squander finite effort on reinventing ‘context’ at the expense of excelling in delivery of their ‘core’ proposition.
The notions of core and context are, of course, most often associated with Geoffrey Moore, and one of his sites defines them, thus;
Core
“Any activity which creates sustainable differentiation in the target market resulting in premium prices or increased volume. Core management seeks to dramatically outperform all competitors within the domain of core. (Note this use of the term is unrelated to either core competence, which describes differentiated capability, or core business, which describes categories accounting for a high percentage of overall revenues.)”
Context
“Any activity which does not differentiate the company from the customers’ viewpoint in the target market. Context management seeks to meet (but not exceed) appropriate accepted standards in as productive a manner as possible.”
Writing in last weekend’s Financial Times, Gerrit Wiesmann tells us that;
“We’ve been waiting for trains since 1840, the year a British parliamentary committee invented mass transportation by ruling that rail traffic should be exclusively in the hands of the companies that owned the track. It’s an odd notion now, but in the years before that decision, a debate raged about how to use rails. In the 1820s, the British railway visionary Thomas Gray called for a national network for use by private vehicles. He reckoned traffic in and out of London could be handled by 12 parallel ‘rail-ways’.”
Here, as elsewhere, ideas given serious consideration at the birth of an industry are superseded as that industry matures and sustainable business models begin to emerge.
There will always be areas in which technology companies invest their own human capital rather than buying in services and products from third parties. The traditional view, largely captured in Moore’s terminology, holds that companies gain most by focussing their own efforts upon the differentiating aspects of their business whilst making use of supporting services from third parties to enable concentration upon those differentiators. It will tend to be cheaper and ‘easier’, so the argument goes, to pay for commodity services from a third party rather than develop everything in-house from scratch.
In the early stages of any technological wave, there is an understandable tendency to develop and control far more of the stack within a single organisation. Various players enter a nascent market, and attempt to shape it to their needs at the same time as laying the foundations for what they hope will be a successful product or service. Without agreement on standards and specifications, there is very little interoperability. With an emphasis upon attracting and growing a customer base, there is little incentive to make it easy for users to compare offerings with – or move to – the competition. With a fluid understanding of the final product and its differentiating features, there is little clear understanding of that which will be ‘core’ as opposed to that which will merely be ‘context.’ Internal and external pressures encourage, and almost require, an approach that is closed and all-encompassing.
The problem, it seems, is in making that move from a nascent market toward the point at which certain aspects of the technology stack are fit for commodification; the point at which a healthy and competitive ecosystem can begin to emerge that increases customer choice whilst lowering development and running costs. Looking at aspects of the Cloud Computing and SaaS arenas, we must surely be reaching the point at which numerous homegrown technology stacks become increasingly counterproductive? In the Semantic Web space, too, that early burst of innovation is becoming unnecessarily expensive to maintain as one company after another continues to concern themselves with segments of the problem space that might easily be made a commodity.
Look, for example, at the number of Semantic Technology companies continuing to pour effort into building, scaling and maintaining a basic ontology. The ontology is rarely the point of the company. It is simply something they need to have in order to get on with the business at hand. How many of them are ‘wasting’ time recording the fact that Gordon Brown is the UK Prime Minister, or that Beverley is in East Yorkshire, which is in England, which is in the United Kingdom, which is in Europe?
A recent conversation with Hapax CEO Mark Redgrave confirmed the extent to which they are having to focus upon ontology construction with Amplify. Refreshingly, though, he was extremely open to the notion of gaining value from a more open and generic ontology upon which Hapax and others could build, add value, and compete. In the SaaS space, too, Apprenda CEO Sinclair Schuller has some interesting ideas with regard to enabling others to build their own Software as a Service offerings on top of a common platform that begins to look increasingly like a commodity. It will be interesting to see the extent to which the reality of his company’s SaaSGrid is able to match that vision.
I have spent (too much!) time in the formal standards making process, and would be the last to even consider suggesting that freeform innovation and commercial creativity be snuffed out in favour of protracted and painful rounds of negotiation, specification and never-ending compromise.
However, it seems apparent that early innovators in a given market (Amazon with EC2, Salesforce, etc) often see little incentive to open up and behave less proprietarily. It is in their interests for every competitor to have to reinvent all the wheels that those early entrants first conceptualised. The shift needs to be driven by their competitors, some of whom will be sufficiently successful that they disrupt the market conditions in which incumbents dominate to such an extent that customers are incentivised to consider switching.
A little reinvention is a good thing. It encourages creative thinking, and probably leads to refinement, iteration, and further innovation. Perpetuated at the expense of opening up a nascent market, it becomes a tool of monopoly and ultimately counter-productive for all concerned.
Perhaps it is only at this point that those at the top of a market segment are able to realise the benefits of letting go a little, and of relegating much of what they do to the status of mere context.
Image of a bicycle with square wheels © Michael Vroegop 2007, and licensed with a Creative Commons Attribution License.
Article Tagged:
AWS,
Cloud computing,
commodification,
commoditisation,
Data Web,
differentiation,
EC2,
Geoffrey Moore,
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SaaS,
salesforce.com,
Semantic Web,
Software as a service,
Web 3.0,
Web of Data
Salesforce.com [CRM] is often held up as proof that the Software as a Service (SaaS) model works. Ten years old, and with over $1Bn in revenue last year, Marc Benioff‘s company certainly shows that SaaS isn’t just a passing fad.
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Paul Miller works at the interface between the worlds of Cloud Computing and the Semantic Web, providing the insights that enable you to exploit the next wave as we approach the World Wide Database.
