When going through the arduous process of selecting a name for my blog about a year and a half and ago when James and I subdivided our single eponymous RedMonk blog into our own individual spaces, I toyed with any number of different designations, discarding some as too cute, some as too obscure and some as just plain dumb. As is obvious, I ultimately settled on the somewhat problematic [1] (and possibly still dumb) tecosystems as a hybridization of technology – my industry, and ecosystems – what I increasingly view as the lifeblood of said industry. I chose the term ecosystem as a base rather than community not only because the alternative hybridization of ‘tecommunity’ doesn’t exactly roll off the toungue, but also because I think ecosystem is in some respects a more apt description for the complex web of interactions than the more general community, though I freely use the latter as well.
As a result, it was with interest – and mostly agreement – that I read John J. Sviokla’s piece in FastCompany entitled “In Praise of Ecosystems.” In the essay, Sviokla makes the argument that the iPod is doomed primarily because it’s a closed system – which we’ll come back to in a moment – and that it would ultimately be outdone not by a single competitor, but by an ecosystem of suppliers working on a common platform. I’m an iPod owner and fan, but I pretty much agree with that conclusion. The only reason, in fact, that I’m still comfortable owning an iPod and purchasing music through iTunes is the work that Jon Lech Johansen has done in providing me fair access to my music. Even if I don’t use it, knowing it’s there gives me a worst case option.
I actually ran across the FastCompany article via Charles Fitzgerald’s (of Microsoft) blog, when he linked to it and asked the logical question given the above:
The interesting question is whether you can plausibly make the transition from a closed/vertical industry model to an ecosystem/horizontal industry model. It is hard to think of examples of companies successfully making that transition (got any candidates?).
Great question, and off the top of my head I can’t think of a good example. I attribute this in part to the fact that such the prospect of such a transition – a voluntary and explicit or at least tacit ceding of a dominant or monopolistic position in favor of a smaller part in a more diverse, vibrant community – is anathema to many if not most software businesses. Run as they are by executives trained in a century of American business dominated by the likes of Carnegie and Rockefeller, that shouldn’t be a surprise. Technology businesses in general are ruthlessly, unrelentingly Darwinian in their competiton with one another, such that exceptions like Ludicorp not only are noteworthy, but shockingly so. Businesses are seemingly not designed simply to be meet customer needs’ anymore (assuming, of course, that they ever were), they’re constructed to eradicate and annihilate competition in the process.
But the point here isn’t to comment on the relative merits of the system that produces such businesses; it’s not only not my place, I’m not really equipped to do so. Instead, I’d like to return the focus to Fitzgerald’s question: who’s successfully made the transition from market leader to lesser player in more diverse (and possibly higher volume) market? As I admitted previously, I don’t have a case study to point to assure all those businesses facing such an issue. Given that I’m on the record as saying that I don’t believe Microsoft’s marketshare – or more importantly, profit margins – are indefinitely sustainable, however, you might not be surprised to hear that I don’t believe that the question matters much. I share Sviokla’s belief that closed systems such as Apple’s iPod are ecosystems with limited lifespans for reasons that are instinctively if not consciously grasped by most technologists. While I certainly would not put the Office or Windows franchises in the iPod category in terms of closed v open, they are in my mind more closed than some of their respective competitors (e.g. OpenOffice or Linux, or maybe even Google). Whether or not enterprises have successfully made the transition from market gorilla to mere market participant successfully, I think it’s possible, maybe even likely, that Microsoft will be forced to do so in at least one of their critical markets and should therefore plan accordingly. Innovator’s Dilemma indeed.
I believe this not only because dominance of any type is a temporary phenomenon, historically speaking (a fact that we in the US would do well to remember, as Stephenson alludes to in this interview), but because it’s a point proven out in other contexts. Consider the second law of thermodynamics, which states that “all work processes tend towards a greater entropy (disorder/lower energy density) over time.” In other words, energy in any given system runs out. As Wikipedia points out, though, this problem is more evident in closed systems than open ones.
And that’s where the Belgian mathematician (he was actually Russian born) comes in. While on vacation last week, I came across the following bit in a John D. MacDonald book I was reading:
“[Ilya Prigogine] used the analogy of the walled city and an open city. The walled city, isolated from its surroundings, will run down, decay, and die. The open city will have an exchange of material and energy with its surroundings and will become larger and more complex, capable of dissipating energy even as it grows.”
While MacDonald was himself stretching this oversimplified analogy and applying it to individual behavior, I think it’s equally applicable to questions of open versus closed when it comes to software. It’s fundamentally a question of how vibrant an ecosystem is or isn’t. That, in turn, is determined by the dynamics of interaction – primarily the ability to encourage new infusions of energy from parties outside the system in question. Open source is by no means a guarantee of energy and effort – witness the countless dead projects on Sourceforge – but it does ensure that a project will not succumb to because of the immutable laws of thermodynamics and entropy. [2] For that alone, it’s a methodology worth considering – and a methodology difficult to compete with on a long term basis (less so on the short term, however, and indeed I think we’ll see short term proprietary / long term open source become even more mainstream than it already is).
Anyhow, while I think Fitzgerald’s correct when he says, “the revenue hit when you move from owning the whole pie to accepting a smaller part of what you expect to be a much bigger pie is not a leap many companies are willing or able to make,” I do believe that the better long term viability of open ecosystems verus those that are closed – hyperaccelerated by the lowering of bandwidth and integration barriers – will lead to more companies actively contemplating just such a move than ever before. Call it the Long Tail of marketshare dynamics – where mass markets become masses of markets, but I’ll settle for better and more diverse choices at buy time.
Update: Corrected sentence (struck) above and added footnote.
[1] I’ve been told several times – most recently at JavaOne – that the introduction of a name like tecosystems introduces some significant branding issues as it sounds too much like a company name in its own right. For the record, this is because I’m not a marketer and just plain didn’t think of it.
[2] In the comments on this point, Anthony dissents and points out that open systems are by no means immune to entropy. This is a fair criticism, though I would contend they are less prone to it.
