You would think that a company like Intel, which in 2001 provided nearly 85% of the microprocessors for personal computers, would feel relatively secure. But companies holding the keys to popular technology don’t live in a vacuum. In many cases, they are dependent not only on economic forces in the wider world but also on the research-and-development activities of partners. David Johnson, one of the directors of the Intel Architecture Labs (IAL) in Hillsboro, Oregon, goes so far as to call that reality desperate. “We are tied to innovations by others to make our innovation valuable. If we do innovation in the processor, and Microsoft or independent software parties don’t do a corresponding innovation, our innovation will be worthless. So it really is a desperate situation for us.”1
The Desperation of Being on Top
Although leading companies from all industries know that business in our interconnected world has become too complex for complacency, the issues are particularly clear in the information-technology industry. There, platform leaders (companies that drive industrywide innovation for an evolving system of separately developed pieces of technology) are navigating more frequent challenges from wannabes (companies that want to be platform leaders) and complementors (companies that make ancillary products that expand the platform’s market). To put their organizations in the best competitive position, managers need to master two tricks: coordinating internal units that play one or more of those roles and interacting effectively with outsiders playing those roles.
Intel and its computer on a chip, the microprocessor, illustrate the issues. In 2000, Intel had revenues of nearly $34 billion and net profits of more than $10.5 billion. Even after the economic downturn, with microprocessors still the core hardware component of the personal computer and increasingly in demand for new programmable devices, Intel should feel on top of the world.
But a microprocessor can do little or nothing useful by itself. It’s a component in a broader platform or system. Even the PC has no value without other companies’ products: operating systems, software applications, software-development tools and hardware (monitors, keyboards, storage devices, memory chips and the like). Those complementary products fueled the growth of the PC market. But Intel considers its situation desperate because it cannot be certain that its own key complementors will continue to produce market-expanding innovations as fast as Intel does.