Can Big Companies Innovate ?

Neil McAllister raises Bill Gates question – can Open Source developers innovate ? And to save you having to goto Neils article here is Bill Gates words for the record:
“I dont think that someone who completely gives up license fees is ever going to have a substantial R&D budget and do the hard things, the things too hard to do in a university environment.”
This is curiously enough, the same argument that the drug companies make for their need to charge very high prices for drugs – higher in the US than any other place in the World. This makes US companies like GM, Ford, Delta, IBM, Dow and many US Fortune 1000 companies less competitive in an increasingly tough world economic market. Ditto for the high price of Windows and Office Software in the developed countries – versus the free lunch pirating and low prices being allowed in the developing world.

Lets for the moment not debate the notion that Open Source can or cannot innovate simply for the reason that the jury is still out because Open Source is relatively new and changing phenomenon in the IT and Computing world. Also lets also agree that innovation is not just proving and testing out a novel way of doing things but also consistently and successfully bring those ideas to market. Because if we considered just developing and proving out the novel but market shaping ideas – then Xerox and Bell should be the biggest IT and Computing/Communication vendors by far.

And its precisely the latter point, consistently and successfully bringing novel ideas to market, that is the stumbling block that makes Big Companies poor innovators. Look at Bell and Xerox. Or IBM and the PC – it was precisely IBMs limiting notion that the PC had to defer to the mainframe – that Bill and other PC innovators took advantage of.

But now Bill is big and his desktop OS and Office Suite are the huge source of revenues – revenue and profit streams that have to be protected in fierce zero-sum 90% monopoly Maginot lines of restricted interoperability like IBM mainframes of a decade ago. So as novel ideas spin around the ever cheaper software and hardware for the desktop, communications bandwidth, and disk storage capacity – major innovation is slipping outside 1 Microsoft Ways grasp:
Missed the Internet;
Missed taking advantage of Instant messaging and Presence;
Missed the packaging of multimedia for delivery with user chosen fidelity and security;
Missed the need for dumb, targetted smart devices like Palm and iPod;
Missed the importance of searching and locating like Google delivers;
Missing the the need for his own company to deliver lowest cost on-demand grid computing like Google and Yahoo can;
Missing the importance of ESB as pivotal role in SOA architectures; etc, etc.
All because like ancient astronomy, the IT Universe has to circle around the PC desktop world.

But Economist Joseph Schumpeter would not be surprised at all. He foresaw that organizations cannot easily forgo the products and processes that brought them great success. Every solution uses a Windows (c) hammer. So big companies with their vested interests and huge market investments will simply not be as agile as smaller maybe even Open Source companies in delivering new ideas to the market.

Now as for producing those new ideas – Bill still is standing on weak legs. Take Vista for example. Avalon/Windows Presentation Foundation is really a combo of MacOS GUI features, Mozilla XUL, and lots of Xerox Parc. .NET is Suns Java and Jini plus Bell Labs substantial language framework innovations. Expression Suite is bought innovation. Yukon/WinFS bares a striking resemblance in some parts to SQL Anywhere – proving that Microsoft is not adverse to “borrowing” major chunks of novel ideas and software from Sybase more than once. Finally, some of the key clustering technology – its Open Source.

In fact when I try to think of 5 major innovations in the IT world that Microsoft brought to market I can only think of 3:
1) Combine all tools for development in an IDE – Integrated Development Environ – editor, visual drag and drop designer, interactive visual debugger. Make that same tool work for all of the languages you support;
2)Bundle all programs in a product segment together in a Suite of products which are naturally complimentary tools and charge no more than 1/2 of the price of the separate tools;
3) Cut off the oxygen to your competitors by creating a free but for one bundle. Every product is free that your competitor sells but there is one extra product you charge for that competitors dont have and cant charge for. For example, charge for operating systems in the case of Netscape but make IIS and IE free; charge for SQL Server database in case of BI vendors while giving away free Reporting service, free OLAP services, free Data Mining Services, free ETL services, freeNotification services and free BI Studio Client Designer. Ohhh … make sure your lawyers and the DOJ lawyers vet that arrangement.
Now if readers can supply me two or more major IT innovations from Microsoft I will for sure add them to this list.

In the meantime like the question of who in the family knows best – which type of organization consistently innovates best is an open (source) sort of question. Steve – its all a question of reorganizing the thinking right at the top.

(c)JBSurveyer 2005