Ask the IT Consultant

Jun 17 2009   12:00PM GMT

Part 2: Consumer Driven Business Innovation

Beth Cohen Beth Cohen Profile: Beth Cohen

Question:  Recently you wrote how the consumer market is the major driver of innovation.  How can you say that when IBM and HP are constantly developing new products for the enterprise?

Last time, I talked about how the consumer markets are driving innovation.  This week I will follow up on those ideas and look into the reasons for this continued trend.  In a nutshell it can be summarized as available resources and reduced risk tolerance by businesses.

Since 2001, the business market has bifurcated into two very divergent directions, the large enterprise sector and everyone else.  The usual suspects, IBM, HP, Oracle, etc. continue to cater to the large enterprise, profiting on million dollar contracts and cozy deals.  None of these companies make money on revolutionary products.  They are best at creating better, more feature-rich versions of existing products that appeal to their generally risk-adverse enterprise customers.

Revolution and true innovation rarely, if ever, comes out of established companies.  They have so much invested in their existing products; they cannot afford to jeopardize their enterprise customer base comfortable with the status quo, in the risky pursuit of something revolutionary. No, the most fertile ground for true innovation is going to remain with companies that have nothing to begin with and therefore nothing to lose.  Look to the well documented history of the development of the computer hard-drive for a perfect example of how companies selling better products with more storage and features lost the marketing war to emerging companies with cheaper, smaller alternatives with fewer features.

Apple Computer is the rare exception that proves the rule; and their famously wild relationship with Wall Street is well-known. Apple has clearly bet heavily on the consumer market as their future direction.  The only company that seems to be able to defy my predictions and successfully develop their products to the entire spectrum of the business market, while maintaining a large consumer base at the same time, is Microsoft.  Starting with their brilliant idea to package a common set of desktop automation tools into Microsoft Office, which has now been installed in over 800 million systems worldwide, and continuing with their latest office productivity tools, SharePoint and Communicator, Microsoft remains very much in command of the business desktop.  Their products uniquely appeal to consumers, small business and the enterprise alike, yet, I would argue that most of their innovation – such as it is, is focused on the broad mid-sized business market, rather than the consumer (with the exception of Xbox) or the enterprise.

Ironically, the smart IT vendors, such as Cisco, HP and Microsoft, figured out long ago where the innovation was coming from and regularly snap up promising startups with the intention of incorporating their ideas into their product offerings.  Despite this understanding, these companies continue to struggle to translate all the great intellectual property they purchase into products that appeal to their risk adverse enterprise customers.

Beth Cohen, Luth Computer Specialists, Inc.  IT infrastructure consulting services.

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