Economic value gets locked up in vulnerabilities that exist in all products and services. Find a way to release it and you can have a powerful, and profitable, new business. Traditionally the ways to master and control vulnerabilities took one of two paths, closed systems via Apple or Sony or open systems such as we see with Linux and the World Wide Web. Which approach is better? Neither.
Understanding why and understanding where value is hidden can help you understand why platform companies like Microsoft and Google are successful and help you understand about how new technology APIs and designer and developer tools from a myriad of providers are game changers in software development.
In the winter edition of Strategy+Business, (Disclosure, Microsoft is a sponsor of this journal) a quarterly journal put out by Booz Allen Hamilton. Nicholas Carr writes about the phenomena of the reverse salient in The Weakest Link (registration required). Simply put, if you want to succeed in business the identification of a product's vulnerabilities can point to new business opportunities and markets.
Carr defined the term 'reverse salient' as having its roots in the military where it referred to a section of an advancing military force that had fallen behind the rest of an attack. Typically, this section was referred to as the weakest point of the attack, a lagging element that could prevent the rest of the force from accomplishing its mission. Until a reverse salient could be corrected, the force's progress came to a halt.
Carr illustrates this scenario in a number of fashions, such as how the invention of the rubber o-ring enabled an innovation in commercial aviation that forced it into the mainstream--and how the dominant forces of the day missed the innovation. He also referenced how Westinghouse, by buying the patents to Nikola Tesla's alternating current was able to capitalize on the dominant standard for electricity over Thomas Edison's (at the time) more prevalent standard of direct current. This was primarily due to the fact that alternating current could be transmitted over much greater distances. Edison’s advances were revolutionary at the time, but that one reverse salient prevented his standard from succeeding.
Obvious current parallels can be seen with the advent of the iPod and the iTunes music servce and its simplicity in facilitating the mainstream adoption of MP3 players but we've also seen reverse salients in software. In the case of Microsoft there were some huge reverse salients that challenged the company. One was the advent of the internet in the mid-nineties and the new relevance of a piece of software called the browser.
However, in addressing one reverse salient many new ones often crop us. In the case of the internet many of the solutions developed by Microsoft created new reverse salients around security. The ubiquity of Windows and the area of surface that was vulnerable to these security threats evolved this reserve salient into the principal challenge that Microsoft focused most of its efforts and resource on in the early 2000’s.
There are some challenges here in software that are specifically pertinent. One, how do you catch reserve salients (often the hardest part is realizing that you have one--case in point, look at what Tivo, Replay TV and the current crop of digital video recorders have done to broadcast market share). Two, once found, how do you fix them and three, how can you prevent or predict how new ones will impact you.
This is a constant battle that in the realm of software has been dealt with in two primary ways. One is with closed systems, such as tying an operating system or service to distinct hardware. The challenge with a closed system is that it's hard to pull off, it requires visionary leadership and there's always the risk that a team will overlook or miss something. Would Apple really be able to succeed today without Steve Job's singular and persistent vision? Would a company like Boeing be able to? BP Amoco?
Open systems rely on looking outside the walls of a specific group or enterprise. We see this most commonly in standards developed for the Web and via open-source software. We are already seeing a world where consumer generated media and Grand Challenges are changing the way we solve problems. But open systems can commoditize the value of intellectual property and be challenging to monetize, they also often cater to the lowest common denominator (ie if every technology is exceptional then no technology is exceptional--apologies to Syndrome and The Incredibles). This scenario commonly plays out with consumer electronics and can lead to a stifling of innovation or no innovation at all.
So, if you create software, what are the next, best, most probable reverse salients you should be looking for? How should you address them?
In software, perhaps the most obvious and high value reverse salient that can be addressed to release economic value is a renewed and aggressive focus on user experience. In fact Microsoft (one could argue belatedly) is staking its future on this with the new releases of Vista, Office, new user experienced focused APIs, designer tools and workflow integration efforts between designers and developers.
One of the advantages that Microsoft has in this space is we aren't focusing on solving these problems via the same models that have existed in the past (an evolution of design tools that has emerged from print and animation models).
But there's still that question about openness versus being closed. How does a consumer or user of software or services get the best value and the creator of technology get the best economic return? Are they mutually exclusive? I think the answer to that question might be that you need to be both closed and open at the same time--in fact I think this is more or less what Microsoft does and it's a key reason we are successful. We protect our intellectual capital but we care, feed and maintain an ecosystem that can add economic value to our offerings beyond what we've ever be able to do on our own. This becomes a critical issue for all companies as they need to grow and maintain value of intellectual capital but not diminish the choices or options of their customers. (A lesson that has admittedly been hard to learn at times).
This challenge will play out over the next year as companies wrestle with making ubiquitous, but less than optimal, experiences for customers in different channels and those that take a multi-channel approach that will develop premium experiences in specific channels that can support and enable them in the best fashion for a targeted audience.
The bottom line on reverse salients? Perhaps the biggest one in software right now is how the lack of a coherent user experience in software is bottling up economic value. If you're not thinking about the process and tools that you are going to use in 2007 to unleash user experience in your software and services it may already be too late.