Author: JP

Smart companies try to commoditise their products’ complements.

So said Joel Spolsky in an article on the economics of open source four years ago; if you haven’t read it, you can find the article here; it can also be found in that excellent collection of articles published as Joel on Software.

I’ve been musing on stuff recently; stuff raked across the ashes in my head, raked as a result of spending time with Doc Searls in Copenhagen, revisiting Because of Rather Than With; raked as a result of re-reading Stewart Brand and Christopher Alexander (again!); raked as a result of the painful debates on Net Neutrality.

And the phrase “Smart companies try to commoditise their products’ complements” kept coming back to me. I’m getting older now, and it took me a few days to remember where I first came across it. And no, I didn’t feel like googling it, I wanted to remember all by myself :-)

And I began to wonder.

Smart companies have products with associated complements. As long as they can drive the cost of the complements down, they can raise the price of their products. But to do this, they must ensure that the complements remain complements.

They have power only so long as complements are With. When complements become Because Of, they are no longer complements, and the power erodes. This is scary for “content owners” and for their complements, the owners of distribution mechanisms. Which may explain the behaviour of studios and publishers and telcos and cablecos.

For many years they were comfortable with the prices of their complements dropping as a result of Moore and Metcalfe and Gilder. It helped them sustain profitable prices and margins for their products. But they needed the complements to remain With.

What they didn’t realise is what happens when the cost of the complements starts tending towards zero, when the commoditisation is so vast that With becomes Because Of.

Then people find out that the Emperor has No Clothes.

At a recent conference in Las Vegas, Cisco President John Chambers is quoted as saying “I’m proud to be a plumber“. I wasn’t there to hear what he said, and I haven’t seen any complete transcripts, so I will restrict my comments.

Chambers is also quoted as saying that 40-50% per cent of future productivity gains will come from collaboration, that Cisco is moving from transactional communications to collaboration, and that “the future will be about any time, place, screen, service, device and network”.

So let me get this right. A Because Of company that is comfortable with being a Because Of company. Proud to be plumbers. A company that sees itself as moving from transactional to relational. And a company that sees a high level of agnosticism and freedom in the layers above.

It’s easy to be cynical about large companies. I’m going to give Cisco the benefit of the doubt here, and see what happens. I’m going to believe that they want to be, and to stay, a Because Of company, and that they’re happy selling to everyone in the layers “above”.

Which makes me think about monopolies at the infrastructure level. There is some evidence that monopolies are actually good for you (or at least near-monopolies) when operating as infrastructure. There is some evidence that problems manifest themselves only when the infrastructure player gets bored with being an infrastructure player, yielding one of three bad outcomes:

• Monopoly Choice: Any colour you like as long as it’s mine. This is where the incumbent provides some facility and prevents the use of competing facilities. Examples would be if Vista blocked the use of iTunes and insisted on WMP only. Or the other way round. Called Choice because it is usually sold as a means of increasing consumer choice. I have never understood that, how they could call it choice.
• Monopoly Magic: Any colour you like, but mine’s faster. This is where the incumbent provides a facility that always appears to work faster or better than others. In the past I used to understand and tolerate this, muttering to myself “oh well, of course native always works better”. Now I am far more intolerant. Examples would be if Safari worked better than Firefox on OSX. Or MSN Messenger worked well only on Windows family. I used to be able to understand that, but today it gives me a reason to walk away.
• Monopoly Money: Any colour you like, he who pays the most wins. This is where the incumbent provides tools that allow firms to push the layer of lock-in up a level, such as what was rumoured with the ViiV chip. It is where the monopolist is happy to have a monopolist customer who does not believe in the same principles of platform agnosticism.

I think it’s OK to be a monopoly player in infrastructure, provided none of these three common corruptions are allowed to exist. What Cisco needs to be careful about is Monopoly Money.

In a strange kind of way, this mirrors the opensource movement, and needs to follow the same principles:

• Concentrate on commoditisation of the infrastructure
• Move this commoditisation up the stack organically
• Provide tools to help others continue this movement
• Ensure that when others use these tools, they have to follow the same principles, akin to GPL

Mr Chambers and Cisco have a real opportunity. I have to believe that they will be looking at tools to do with identity, with authentication and permissioning, with digital rights management. If Cisco can avoid the lock-in minefield and provide tools for these that cannot be used to create lock-in, they would have done the industry and the world a real service.

More later.

Ron Silliman recently linked to me and stated in his blog: One technology blogroll I like a lot – because it focuses to a surprising degree on the social implications of technology – belongs to J.P. Rangaswami, whose blog is Confused in Calcutta.

Ron, I appreciate the feedback. But it made me think. Am I unusual in this? I think not, except perhaps as a result of the extent my thoughts are influenced by the following books: The Social Life Of Information, The Cluetrain Manifesto, Emergence, The Tipping Point, The Future of Work, The Modern Firm , Open Sources 2.0 , Technological Revolutions and Financial Capital, Community Building On The Web, How Buildings Learn, 109 Ideas for Virtual Learning, The Cathedral and the Bazaar, Maverick, The Borderless World and Blink.

I could have made the list bigger, but this is enough to make my point. These are some of the most important books ever written about how information flows within an organisation, how to make the flow better, how to organise around it, how to get the best value out of people.

IT is about Information and Technology. ICT is about Information and Communications and Technology. Enterprises and markets are made up of people. If we don’t concentrate on the social aspects of what we do, we don’t do our jobs.

If only I had the data to defend the statements, I would say:

• 90% of the cost of implementing systems is about the social aspects
• 90% of the reason projects succeed or fail is to be found in the social aspects
• 90% of the value to be derived from ICT comes from the social aspects
• 90% of the joy of working in ICT comes from the social aspects
• 90% of the challenges in ICT come from the social aspects.

Well, I’ve said it anyway. So I might as well go further. If ICT was a new discipline today, it would (and should) be classified as a social science.

I’ve been listening to a panel debating More Than Just a Game at Supernova this afternoon. And on the panel we had some very interesting people, including Philip Rosedale (Linden Labs), Amy Jo Kim (Shufflebrain), Michael Zyda (USC Gamepipe Lab), moderated by Dan Hunter of The Wharton School.

And I thought to myself, is it time to take the Net Neutrality debate into Second Life? That way, old fogeys like me will learn about some aspects of Generation M while working on something I feel passionate about.
Anyone else care to join me? Let me know by commenting.

We’re in for a real shock as Generation M waltz into the workplace.

[I have no real idea where the kernel for this particular snowball comes from, I read voraciously and converse with many people. To someone out there, thanks.]

I think we’ve built a strange ritual in the workplace. We start using something new and unfamiliar, which is not wrong. Quite often, it is designed to be as unintuitive as possible, slowing us down, making us do odd things. Which is wrong. QWERTY’s ghost.

But we are human and clever and we persevere and we adapt and we learn.

And so, after a while, we “master” this thing. And we’re almost proud of the effort we expended. Scratch “almost”. We’re proud of what we did.

It becomes an initiation rite. When someone new comes along, and the head-scratching and puzzlement and McEnroe moments begin, we nod wisely. And smugly. Sometimes we’re kinder, we patronisingly take them through the initiation rite.

After all, we went through all that pain, that’s what got us where we got to. And now it’s their turn.

This protection of unworkable software then becomes an enshrining of the bad. And we pay homage and tribute to the bad. We’ve got used to it, so who cares?

Generation M cares. And they won’t put up with it. Their next job is one click away. Maybe closer, as the war for talent bites.

Wake up. Simplicity and convenience, respect for the individual, device and platform independence, software that works, all these are no longer nice-to-haves.