Comments on: Vertical Quality And McNealy: Why Apple, Sun and Google Have It Right. http://www.brandonwerner.com/2006/04/24/vertical-quality-and-mcnealy-why-apple-sun-google-have-it-right/ Brandon Werner writes about business, leadership and technology with special emphasis on cloud computing, webservices, scalability, virtualization, architecture, Microsoft Online and other things extending the magic of software to the internet. Fri, 05 Dec 2008 09:36:54 +0000 http://wordpress.org/?v=2.6.5 By: Horace http://www.brandonwerner.com/2006/04/24/vertical-quality-and-mcnealy-why-apple-sun-google-have-it-right/#comment-91 Horace Mon, 01 May 2006 07:02:27 +0000 http://www.brandonwerner.com/2006/04/24/vertical-quality-and-mcnealy-why-apple-sun-google-have-it-right/#comment-91 It's not a question of horizontal vs. vertical. It's a question of which one when. Industries evolve and value chains don't preserve their profit allocations. Vertical solutions are successful when they are not good enough for the job they are hired to do (in Clayton Christensen parlance). Horizontal models are successful when over-service forces the basis of competition to price and customization. GM, AT&T, IBM, Nokia, all became giants on the basis of vertical integration. They only failed when they had to shift to horizontal models once their products were over-serving. Had they started with a horizontal approach they would have failed. Microsoft has the opposite problem since it started by providing a component to a solution. It cannot innovate or solve any problem until solutions to that problem have already reached over-service and can be addressed with a horizontal approach. They could afford to wait in most cases. The exception has been Xbox, a division that was initially based on modular, semi-horizontal approach, but, due to market demands, moved to a completely vertically integrated approach (from sourcing the CPU design to writing the games). Apple, Google have become "in vogue" only because the job they are solving has just emerged as a mainstream need: media/content creation and management, search, etc. Had these jobs not emerged we would still be buying computers for word processing and spreadsheets (i.e. productivity, not creativity). The fact that in media and search Microsoft chose to address a *new* job with a horizontal model designed for *old* over-serving solutions is the reason they failed. It’s not a question of horizontal vs. vertical. It’s a question of which one when. Industries evolve and value chains don’t preserve their profit allocations. Vertical solutions are successful when they are not good enough for the job they are hired to do (in Clayton Christensen parlance). Horizontal models are successful when over-service forces the basis of competition to price and customization.

GM, AT&T, IBM, Nokia, all became giants on the basis of vertical integration. They only failed when they had to shift to horizontal models once their products were over-serving. Had they started with a horizontal approach they would have failed.

Microsoft has the opposite problem since it started by providing a component to a solution. It cannot innovate or solve any problem until solutions to that problem have already reached over-service and can be addressed with a horizontal approach. They could afford to wait in most cases. The exception has been Xbox, a division that was initially based on modular, semi-horizontal approach, but, due to market demands, moved to a completely vertically integrated approach (from sourcing the CPU design to writing the games).

Apple, Google have become “in vogue” only because the job they are solving has just emerged as a mainstream need: media/content creation and management, search, etc. Had these jobs not emerged we would still be buying computers for word processing and spreadsheets (i.e. productivity, not creativity). The fact that in media and search Microsoft chose to address a *new* job with a horizontal model designed for *old* over-serving solutions is the reason they failed.

]]> By: Damien http://www.brandonwerner.com/2006/04/24/vertical-quality-and-mcnealy-why-apple-sun-google-have-it-right/#comment-90 Damien Sun, 30 Apr 2006 23:59:24 +0000 http://www.brandonwerner.com/2006/04/24/vertical-quality-and-mcnealy-why-apple-sun-google-have-it-right/#comment-90 Nice to hear there's still some sense in the world. I couldn't agree more and I think in the next few years we'll see more and more from Apple whilst Mediocresoft, Dell etc flounder. One thing I learned in business when I was involved in the flooring market is, its a lot easier to go down than up, whether you're referring to price or quality and generally once you've offered something for a cheap price regardless of the fact it may have been a cheaper product to suit the requirement, it is instantly virtually impossible to 'sell-up'. Todays consumers have been trained to buy on price and seldom look at other factors - but then they're welcome to their viruses, worms, spyware, need I go on? Nice to hear there’s still some sense in the world. I couldn’t agree more and I think in the next few years we’ll see more and more from Apple whilst Mediocresoft, Dell etc flounder. One thing I learned in business when I was involved in the flooring market is, its a lot easier to go down than up, whether you’re referring to price or quality and generally once you’ve offered something for a cheap price regardless of the fact it may have been a cheaper product to suit the requirement, it is instantly virtually impossible to ’sell-up’. Todays consumers have been trained to buy on price and seldom look at other factors - but then they’re welcome to their viruses, worms, spyware, need I go on?

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