Tech Companies' Dutch Disease
Definition: Dutch Disease
After reading Alan Greenspan's book last year, one concept that's remained with me is Dutch Disease, which I (over-)simplify to mean: When you have one huge cash cow industry/revenue stream, then all your other industries suffer.
Combine that with this article on tech crunch.
I see a similarity there, in that tech companies that were formerly innovative latch onto a current upper-bound revenue source (Let's say MS Office) and short-change other opportunities, or (worse yet) view them in terms of the current technology.
It's interesting to look at one company that hasn't fallen prey to this: Amazon. Amazon survived the dot-com bubble, and looks to survive and thrive through the Great Recession, too. Why? To me, the answer is counter intuitive: They do the opposite of "focusing on [their] core competencies]". They do off-the-wall stuff.
Remember the first Kindle? Totally ahead of the market, and totally against their current business model. Amazon started out as a bookstore, yet here's a platform that will lead to fewer book sales. Why? They knew books would die, someday. "Someday" might just be Real Soon Now. Instead of sticking their heads in the sand, they innovated and introduced a new hardward and software platform to get them directly engaged (and sticky) with their customers.
The reason I thought of Dutch Disease is that current corporate thinking is quarter-to-quarter, and that gives you precious little leeway to destroy one business model in the birth of another. The obvious conclusion: Given an even playing field (no monopolies or anti-competitive practices), every company will be destroyed by a better, cheaper, faster competitor, unless that competitor is itself. Otherwise, the myopia of a current "95% of our revenue comes from X" view will blind them to whatever disruption has hit the market.
After reading Alan Greenspan's book last year, one concept that's remained with me is Dutch Disease, which I (over-)simplify to mean: When you have one huge cash cow industry/revenue stream, then all your other industries suffer.
Combine that with this article on tech crunch.
I see a similarity there, in that tech companies that were formerly innovative latch onto a current upper-bound revenue source (Let's say MS Office) and short-change other opportunities, or (worse yet) view them in terms of the current technology.
It's interesting to look at one company that hasn't fallen prey to this: Amazon. Amazon survived the dot-com bubble, and looks to survive and thrive through the Great Recession, too. Why? To me, the answer is counter intuitive: They do the opposite of "focusing on [their] core competencies]". They do off-the-wall stuff.
Remember the first Kindle? Totally ahead of the market, and totally against their current business model. Amazon started out as a bookstore, yet here's a platform that will lead to fewer book sales. Why? They knew books would die, someday. "Someday" might just be Real Soon Now. Instead of sticking their heads in the sand, they innovated and introduced a new hardward and software platform to get them directly engaged (and sticky) with their customers.
The reason I thought of Dutch Disease is that current corporate thinking is quarter-to-quarter, and that gives you precious little leeway to destroy one business model in the birth of another. The obvious conclusion: Given an even playing field (no monopolies or anti-competitive practices), every company will be destroyed by a better, cheaper, faster competitor, unless that competitor is itself. Otherwise, the myopia of a current "95% of our revenue comes from X" view will blind them to whatever disruption has hit the market.
Comments
Post a Comment