In Friday's Tech News Digest, I mentioned a great article by Farhad Manjoo of the New York Times in which he ponders a future dominated by five American-born tech giants: Apple, Amazon, Google, Facebook and Microsoft.
His net takeaway was that maybe it wouldn't be so bad if five huge corporations, rather than thousands of smaller companies, had the power to determine the course of technology evolution.
I've been thinking about the article over the weekend, and I must respectfully disagree with the author's conclusion. At least three major issues come to mind immediately:
- With great power comes great responsibility, and it's not clear that any of the five dominant tech firms sincerely believe they are responsible for steering the world toward a better future.
- If their dominance remains unchallenged, their pricing power would undoubtedly increase.
- In the absence of genuine competition, they might lose the will to innovate.
All three issues would have a dampening long-term impact on the information technology industry. But the innovation issue is perhaps the most troubling.
Much like organic species, corporations tend to evolve in response to external pressures. When external pressures are removed, there's no motivation to evolve or innovate.
Think of the original Bell Telephone Company, organized by Alexander Graham Bell in 1877. For many years, it was hugely successful and highly innovative. Gradually, however, it became resistant to innovation and change. As the saying goes, "If it ain't broke, why fix it?"
When the Bell System was broken up in 1982, many pundits and doomsayers predicted the end of free market capitalism.
As we all know, capitalism is alive and well. Instead of hurting the economy, the Bell breakup sparked an era of rapid innovation that generated thousands of new technologies and business models.
Can you imagine the stock market being where it is today without newer technologies such as mobile phones, software-defined networks, robotic assembly lines and high performance computing?
Would the old Bell System have embraced the internet? Or cloud computing? Or social media?
I think we can agree that in some situations, size can hinder innovation. I'm certainly not saying that any of the five tech giants are "too big," but their collective influence is something we need to keep an eye on, at least for the foreseeable future.
As companies like Xerox and IBM have demonstrated, relying primarily on size and scale to maintain competitive advantages is not an optimal strategy for the long haul. It's far better to lead, reimagine and reinvent to create an overarching culture of genius - that's the best strategy over time.