What Google can learn from John Sculley: How technology companies fail by placing their strategy burden on technology decisions

And so we come to the question of Chrome and H.264. First off, it should be clear that video codecs are infrastructural technology[1]. They are commodity algorithms which are generally invisible to users. They are ubiquitous and are “shared” in the sense that they are available for licensing often without much in terms of cost.

So they don’t really offer strategic advantage to the adopter. Some may end up adding slightly more to a cost structure than others, but not in a way that determines strategy.

Flash on the other hand is not infrastructural. It is not shared, it is not invisible to users, it is a brand, it has a significant business model and market value. It is sustaining to Adobe.

So the argument I’ve heard against Google’s decision is that they are using an infrastructural technology decision (a new video codec) to placate or sustain Adobe Flash, at the expense of Apple, a potential or perceived rival.

If this was the plan, it would be a strategic mistake.

The reason is that Flash will live or die on the basis of whether the business model is sustainable. That is decided by whether an integrated, proprietary technology is over-shooting and unable to adapt to a mobile computing future that demands modularity from components. If Flash is doomed, then its fate is inevitable.

In other words, you cannot use an infrastructural technology to defend a sustaining, possibly over-serving technology.

Which is why I don’t think this was the motivation.

I rather think that Google’s decision is a misguided emphasis on technical details in lieu of engaging in a deep strategic re-evaluation.

A RISCY BET

To illustrate the way technology companies fail by placing their strategy burden on technology decisions, here is how John Sculley made a decision to go with PowerPC and how he lived to regret it.

[Our best technologists] came back and they said it doesn’t make any difference which  RISC architecture you pick, just pick the one that you think you can get the best business deal with. But don’t use CISC. CISC is complex instructions set. RISC is reduced instruction set.

So Intel lobbied heavily to get us to stay with them… (but) we went with IBM and Motorola with the PowerPC. And that was a terrible decision in hindsight.

…

we totally missed the boat. Intel would spend 11 billion dollars and evolve the Intel processor to do graphics… and it was a terrible technical decision. I wasn’t technically qualified, unfortunately, so I went along with the recommendation.

I would argue it wasn’t a failure of technical knowledge–the technicians were right about the architectural advantages. It was a failure of strategy and understanding of innovation dynamics[2]. Sculley asked the wrong question. The question to be asked is not “CISC vs. RISC”. Rather, it should have been: Is the architecture the relevant decision point or is it the choice of partner? The technologists put the architecture choice above the more strategically important question of whether Intel had the fuel to continue getting better even if saddled with sub-optimal architecture.

That decision sounds very similar to what is being done today at Google. Increasingly, technology decisions are leading strategy. The question should not be “H.264 vs. WebM” or “HTML5 vs. Flash”. Google should be asking itself if mobile computing will allow browsing to remain the predominant interface for internet consumption. If, as I suspect, it won’t then no amount of browser tweaking will help. The browser is already infrastructural. It can’t be the object of strategic focus.

To get an idea of how this would work consider Flipboard. Flipboard turns the entire browsing paradigm inside-out. Instead of consuming social media inside a browser, the app presents it in a more natural magazine-like format.

What will happen when that media becomes predominantly video? Flipboard will be far more influential to content producers and their decision on which codecs to support will lead adoption.

By focusing on threats and byzantine standards machinations, rather than on broad, experiential learning, Google missed (yet another) next big thing.

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Notes:

1. In  IT does not matter. Nicholas Carr introduced the concept of infrastructural technologies. Becoming Infrastructural is what happens after a technology overshoots the market and stabilizes into a commoditized ubiquity. It ends up being “shared” in the sense of being openly and sometimes freely licensed.
2. To be fair to Sculley, the research on innovation theory that would have helped him had not yet been published.