Thursday, January 15, 2009

E-Summit 09: Day 1: What NeXT? (Part-IX)

A major mistake made by NeXT was in understanding the market. You can upload/view the relevant slides  which may need to be referred.

The Computer Industry Circa 1980 was Vertically integrated – Value Proposition: ”The Best Computer”

In this vertically integrated model, the objective was to come up with the “best” computer: best own chips, best own computer, best own operating system, best applications (Visicalc was the killer app that gave its fame to the Mac).

This proprietary model produced tremendous stickiness as it was difficult and costly to switch vendor.

However, things were bound to change with time. The scenario in 1995:

The microprocessor appeared and combined several previously proprietary chips.
Then IBM made the mistake to rely on DOS then Windows from Microsoft.
Then the whole industry switched to mass production of interchangeable parts, hence lowering the cost of each.

In this horizontal model, no one company can afford its own stack. Each company picks one microprocessor from the chip bar, one OS from the OS bar, one manufacturer from the hardware bar, a set of apps from the apps bar.

Tremendous economics of scale and lower price for the customer. A $10,000 PC now costs $2,000 and keeps decreasing in price and increasing in features/functions.
Competition is horizontal as well as vertical.

So maybe NeXT was just too ahead of its time. But it’s still a mistake then. It’s all a matter of correct timing... and luck, or crossing the chasm, as Dominique puts it. This is inspired by “Crossing the chasm” be Jeff Moore, which Dominique recommends as a must-read. The chasm being talked about is the apparent “ditch” between the early adopters and the mainstream adopters (the biggest market-share holders) of technology. Making the leap across this chasm is what the real challenge is.

There is also every chance of the danger of thinking “inside the box”. The markets are dynamic, and like never before. What holds today may not hold true tomorrow. Hence, there is a need to constantly change and grow. There is a need for constant innovation. Any extrapolation made from past success is an illusion. It’s just invalid. This can be also seen as another example of 20/20 hindsight. Thus, the key is to innovate, and “truly remarkable innovation is driven by talent and freedom to think [very] different.”

Speaking of talent and freedom, how can we forget the power of the DUO. (Something I’d been waiting all evening for!)


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