Christopher Mims' article in the Wall Street Journal today on why big companies get disrupted by others doesn't make a lot of sense to me.
He discusses the "Stack Fallacy" of Anshu Sharma a venture capitalist that it "is the mistaken belief that it is trivial to build the layers above yours."
Mims explains that the stack is like a "layer cake of technology"--where one layer is built on another.
Similar to the OSI technology model where there are architecture layers for physical, data, network, application and so on.
Basically, Mims explains that tech companies can only invent at a single layer of technology (or below).
But when companies try to invent up the stack, they fail.
Mims says that companies despite their size and resources can't innovate up the stack because they don't understand the users there.
But this doesn't stack up to me.
Companies can and do use their resources to study and understand what users want up the food chain and what they can't easily build, they can acquire.
Apple successfully went from a iPod and iTunes music player and song store to producing a highly sophisticated and integrated iPhone and Apps store where music is just an afterthought.
Similarly, IBM went from being primarily a mainframe and desktop company to being a top-tier consulting firm with expertise in cloud, mobile, social, artificial intelligence, and analytics computing.
But it isn't easy for a company to change.
And to me, it's not because they can't understand what users want and need.
Rather, it is because of something we've all heard of called specialization.
Like human beings, even extraordinary ones, companies are specialized and good at what they are good at, but they aren't good at everything.
A great example of this was when NBA superstar, Michael Jordan, tried to take his basketball talents and apply it to baseball...he was "bobbling easy flies and swatting at bad pitches" in the minor leagues.
As even kindergarteners are taught that "Everyone is good at something, but no one is good at everything."
Companies have a specific culture, a specific niche, a specific specialization and expertise.
And to go beyond that is very, very difficult...as IBM learned, it requires nothing less than a transformation of epic proportions.
So I think Mims is wrong that companies can't understand what users want in areas up the innovation stack, but rather it's a monumental change management challenge for companies that are specialized in one thing and not another.
So welcome to the world of Apple after Steve Jobs and his iPhone and to the the recent 25% decline in their stock price with investors and customers anxiously waiting for the possible but not certain next move up the technology stack. ;-)
(Source Photo: Andy Blumenthal)