Does the emergence of the tech mega-vendor driven economy mean the end of innovation?

July 26, 2009
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I get asked this question a lot, especially since I’ve started talking more about the emerging mega-vendor economy that is now driving the tech industry. What is the current state of innovation in tech and how is this changing (or is it changing)?

The theory goes something like “the big vendors are really just interested in maintaining / growing their maintenance stream of high-margin revenue and are not interested in the risk involved in driving innovation in tech.” I was reading Mitch Joel’s Six Pixels of Separation blog today on reinvention, innovation and change, and that started me thinking about all the questions on innovation.

I think part of the issue is in the definition of innovation. There are two fundamental kinds of innovation that we see in technology: continuous innovation and discontinuous innovation (sometimes called linear and non-linear innovation). Continuous innovation is created in a steady stream over time. Think of it as incremental improvement of a product or service. In software it’s tied to the regular release cycle that offers incremental increase of capabilities and features with each subsequent release. Discontinuous innovation is quite different


I get asked this question a lot, especially since I’ve started talking more about the emerging mega-vendor economy that is now driving the tech industry. What is the current state of innovation in tech and how is this changing (or is it changing)?

The theory goes something like “the big vendors are really just interested in maintaining / growing their maintenance stream of high-margin revenue and are not interested in the risk involved in driving innovation in tech.”
I was reading Mitch Joel’s Six Pixels of Separation blog today on reinvention, innovation and change, and that started me thinking about all the questions on innovation.

I think part of the issue is in the definition of innovation. There are two fundamental kinds of innovation that we see in technology: continuous innovation and discontinuous innovation (sometimes called linear and non-linear innovation). Continuous innovation is created in a steady stream over time. Think of it as incremental improvement of a product or service. In software it’s tied to the regular release cycle that offers incremental increase of capabilities and features with each subsequent release. Discontinuous innovation is quite different and is represented by disruptive, radical change. It’s the new category killer product that leapfrogs the competition and drives significant change and opportunity.

Examples of continuous innovation are everywhere in tech but discontinuous innovation is rare. Discontinuous innovation has given us things like the PC, the CD and DVD, MP3 Players, SOA, relational databases, etc., and each of those innovations have themselves been improved on through continuous innovation. The MacBook Pro I’m typing this blog post on today is a product of continuous innovation. You get the idea… So when I say that the mega-vendors are in fact drivers of innovation, it’s continuous innovation for the most part, of course, but innovation none the less.

Continuous innovation is a part of their business model and an obligation to their customers. You can argue of course that vendor X doesn’t spend enough of maintenance on R&D and doesn’t release enough new features but not that they are never producing innovation in their product lines.
Discontinuous innovation is a very different thing.

I believe that, for the most part, discontinuous innovation has to be driven from the tech start ups. Investing in discontinuous innovation is important but the mega-vendors simply cannot use their resources in the long and painful process of driving this type of innovation. They owe their shareholders higher financial returns and their customers continuous improvement of the products, not disruptive technology. The mega-vendors may be in the position to buy and distribute these disruptive products in the future, but rarely will they be the source of the innovation.

Both kinds of innovation are important and necessary for business to advance. The types of innovation work together in most cases to drive business improvement. For example I think that the social web is a disruptive innovation that is now starting to benefit from continuous innovation. The concepts are disruptive but the technologies that are required to make them work are for now, improvements in what we have. Enterprise software that is social enabled will form the foundation of the initial business changes.

Don’t get me wrong: there are certainly some discontinuous innovations waiting around the corner (or probably sitting in the heads and products of some emerging start ups today) that will accelerate social business changes. But I don’t believe we can wait for those changes before we start the social business transformation process. There are things that businesses can do today that will provide great return using the tools and concepts we have available. Will the change accelerate and be more impactful with new innovations… I’m sure it will, but can we afford to wait?