Partnerships and Innovation

Microsoft won the PC wars partly because they developed partnerships with everyone who was making PC hardware. This spread them through the market and created a compatibility fueled monopoly. It did not, however, fuel innovation. The PC of 2010 is essentially a faster 2005 PC with more storage and features. The innovations have mostly fallen in the sustaining/evolutionary category. The same partnerships that gave Microsoft a monopoly also limited their ability to make big change. They could only run as fast as their partners would let them. And they were unable to do things that would kill a partner.

I get the feeling this is the case with non-tech industries that are innovation starved. Consider car tires. In case you haven’t noticed, basically nothing has changed about tires since the ’60s

Cars with tires are lame. Any one who has done a side-of-the-freeway tire change will tell you that. But car makers can’t release a car that eliminates the hassle because they can only run as fast as their partners, the tire companies. The tire companies have little incentive to disrupt their own industry. The tweel was announced in 2005, yet in 2011, they still do not have a market-ready product.

Sometimes having partners can reduce your ability to innovate.

Apple has been classic in their infrequent use of partnerships, probably for this very reason. CPU chip manufactures have been about the only company that Steve Jobs’ Apple has ever had a restrictive partnership with. New MacBooks can only have speed improvements when Intel makes them. Every other partner (Yahoo! weather on the iPhone for example) is not restrictive. Either one could break it off with little to no harm done.

To be clear, a mutually beneficial relationship is not the same thing as a partnership. Apple and Adobe have long benefited from each others products.¹ But when Apple released the iPhone without Flash, Adobe got pretty upset. But because Adobe wasn’t a partner, Apple got to do whatever they wanted.

So when considering a new partnership, be sure to ask “Does the partnership lock me into a situation that would limit my ability to innovate?”

¹During the dark times, small market segments kept the Mac alive, including design and publishing. Its a good bet that with out Adobe’s powerful authoring tools, Apple might not have made it.

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