6 ms·

I've seen descriptions of this strategy before, but this particular article lists way more concrete examples than I've seen before, which makes me wonder if it

I've seen descriptions of this strategy before, but this particular article lists way more concrete examples than I've seen before, which makes me wonder if it is now the default across the entire tech industry at all times. Also: the strategy seems to depend upon a "greater fool," or just high risk-takers to fill in the complement with what is ultimately low or zero profit product. How can we guard against being that high-risk fool? I mean, from the article, IBM tried to commoditize all of the peripheral makers by publishing standard interface documents. But then they ultimately lost out when Microsoft commoditized the entire PC by licensing their OS to other PC manufacturers. IBM didn't quite see this coming. They were out commoditized. OTOH, you look at the way Microsoft was paying app developers cold hard cash out of pocket for listing apps in the MS mobile app store (which ultimately failed) and you see that MS was out-commoditized by Google/Android/Play Store. So how can anyone be smart enough to spot the loser(s) in advance?

JamesBarney 8y ago
I don't really see how Microsoft was out commoditized on the phone. It seems like the causes for Microsoft's loss were more straightforward, it was late to the party, it was hampered by an existing product that wasn't great, and they mismanaged the hell out of the app store.
- cheriot 8y ago
  Iirc, they were charging for their mobile OS while Android was given away (only requiring the gsuite). MS was also later to launch an app store. So the mobile OS layer is where MS use to make money and it's what Android commoditized.
  - noir_lord 8y ago
    Indeed, Microsoft already had the monopoly on desktop PC's when Linux took off so they could continue to hold it. Trying to compete in a new market against free was a much harder prospect (and they where not the only one, I had a Blackberry Playbook, it was for it's time an excellent device and the OS was intuitive and solid...it got murdered in the market). In fact unless you invent the category (iphone) you would be hard pressed to own it via the OS anymore.
    - zozbot123 8y ago
      Ultimately, it's commodities all the way down anyway. The only real "moat" that Apple's OS, MS's Windows desktop, Google services, etc. have is first-mover advantage, and that's not going to last very long.
  - JamesBarney 8y ago
    Are you arguing that MS lost the smart phone race because they were too expensive? I don't know anyone who didn't buy a Windows Phone because of cost. They lost because finding good Windows Phone apps was difficult. This is why I stopped using a Windows Phone, and why everyone I know stopped using a Windows Phone. I could pick up a performant Windows Phone for $40, and I wasn't happy with my Android until I spent $200+. Not to mention one of the largest companies in the world right now makes most of it's money off of selling a mobile OS's.
    - around_here 8y ago
      I loved Windows Phone 8.1 Handset was cheap, performant, the OS was gorgeous and easy to use, typing was great. It's weird though. The apps are totally what did it, but I've found that I really don't use many apps on phones. My phone is littered with the, but my usage statistics say that I'm a slack ass when it comes to them. Basically just language applications.
- HillaryBriss 8y ago
  > it was late to the party But Windows Mobile was on phones well before Google got ahold of Android and got the Google Play Store up and running: In Q1 2003, Windows Mobile was the third largest operating system in the smart handheld market, behind Symbian and Palm OS. https://en.wikipedia.org/wiki/Windows_Mobile#Market_share https://en.wikipedia.org/wiki/Windows_Mobile#Market_share The earliest version of the Google Play Store was made available in 2008. https://en.wikipedia.org/wiki/Google_Play#History https://en.wikipedia.org/wiki/Google_Play#History
  - JamesBarney 8y ago
    Late to the party with a good smart phone. I used windows mobile and it didn't compare to Windows Phone or Android.
gwern 8y ago
> I've seen descriptions of this strategy before, but this particular article lists way more concrete examples than I've seen before, which makes me wonder if it is now the default across the entire tech industry at all times. If I missed any, I'm always happy to add more. (Sometimes the only way to really nail down an abstract pattern for people is to provide an enormous list of examples.)
- HillaryBriss 8y ago
  well done. thank you. after i read it, i started to wonder if there are an equal or greater number of examples where companies tried this strategy but completely failed.
- 40acres 8y ago
  I recently finished S1 of Netflix's Narcos: Mexico, after reading your post the organization at the heart of the story comes to mind. A drug dealer who works for a single organization among many in Mexico unites (commoditize) the other organizations to distribute marijuana across the U.S border. The distribution network becomes so large that when the organization branches out to distribute a new product (cocaine) and tries to set up a deal w/ one of two large manufacturers in Colombia the other one immediately lobbies for a distribution deal as well. Without the services of Mexican distribution the other Colombian organization would've gone bankrupt.
zozbot123 8y ago
> Also: the strategy seems to depend upon a "greater fool," or just high risk-takers to fill in the complement with what is ultimately low or zero profit product. It's the other way around; the commoditizing actor is that "greater fool", and others can then join in commoditizing the market out of pure self interest as consumers of the good. The agent which is commoditizing its complements is most important as a first-mover and solver of coordination problems.
- HillaryBriss 8y ago
  trying to apply this, but not quite seeing how it fits. if i'm an indie developer who thinks he can make money by selling apps on the Google Play Store, i put in a ton of work and then see little or no financial reward. i've made Google's Android platform a bit more attractive (because it now lists my incredibly beautiful tip calculator for free to all Android users). who is the greatest fool here?
  - ebcode 8y ago
    > who is the greatest fool here? Not sure if this is a rhetorical question or not; it does sound like one. In the case of a single indie developer making an app for a single app store, it seems the developer is the greater fool, since they are turning their work into a commodity, when they should be turning their complement --- the app store --- into one. Perhaps the route for the indie developer to actually see the financial reward is to make sure their app is available on every app store. ... or maybe they need to skip the app stores entirely to keep 100% of the sales.
    - HillaryBriss 8y ago
      it's me. i'm the greater fool. (that's always the correct answer, btw. somehow it always turns out to be me.)
      - ebcode 8y ago
        i wouldn't be so sure. it might be me. we might need to have some sort of "fool-off" to determine the greatest fool.

JamesBarney 8y ago

I don't really see how Microsoft was out commoditized on the phone. It seems like the causes for Microsoft's loss were more straightforward, it was late to the party, it was hampered by an existing product that wasn't great, and they mismanaged the hell out of the app store.

cheriot 8y ago
Iirc, they were charging for their mobile OS while Android was given away (only requiring the gsuite). MS was also later to launch an app store. So the mobile OS layer is where MS use to make money and it's what Android commoditized.
- noir_lord 8y ago
  Indeed, Microsoft already had the monopoly on desktop PC's when Linux took off so they could continue to hold it. Trying to compete in a new market against free was a much harder prospect (and they where not the only one, I had a Blackberry Playbook, it was for it's time an excellent device and the OS was intuitive and solid...it got murdered in the market). In fact unless you invent the category (iphone) you would be hard pressed to own it via the OS anymore.
  - zozbot123 8y ago
    Ultimately, it's commodities all the way down anyway. The only real "moat" that Apple's OS, MS's Windows desktop, Google services, etc. have is first-mover advantage, and that's not going to last very long.
- JamesBarney 8y ago
  Are you arguing that MS lost the smart phone race because they were too expensive? I don't know anyone who didn't buy a Windows Phone because of cost. They lost because finding good Windows Phone apps was difficult. This is why I stopped using a Windows Phone, and why everyone I know stopped using a Windows Phone. I could pick up a performant Windows Phone for $40, and I wasn't happy with my Android until I spent $200+. Not to mention one of the largest companies in the world right now makes most of it's money off of selling a mobile OS's.
  - around_here 8y ago
    I loved Windows Phone 8.1 Handset was cheap, performant, the OS was gorgeous and easy to use, typing was great. It's weird though. The apps are totally what did it, but I've found that I really don't use many apps on phones. My phone is littered with the, but my usage statistics say that I'm a slack ass when it comes to them. Basically just language applications.
HillaryBriss 8y ago
> it was late to the party But Windows Mobile was on phones well before Google got ahold of Android and got the Google Play Store up and running: In Q1 2003, Windows Mobile was the third largest operating system in the smart handheld market, behind Symbian and Palm OS. https://en.wikipedia.org/wiki/Windows_Mobile#Market_share https://en.wikipedia.org/wiki/Windows_Mobile#Market_share The earliest version of the Google Play Store was made available in 2008. https://en.wikipedia.org/wiki/Google_Play#History https://en.wikipedia.org/wiki/Google_Play#History
- JamesBarney 8y ago
  Late to the party with a good smart phone. I used windows mobile and it didn't compare to Windows Phone or Android.

gwern 8y ago

> I've seen descriptions of this strategy before, but this particular article lists way more concrete examples than I've seen before, which makes me wonder if it is now the default across the entire tech industry at all times. If I missed any, I'm always happy to add more. (Sometimes the only way to really nail down an abstract pattern for people is to provide an enormous list of examples.)

HillaryBriss 8y ago
well done. thank you. after i read it, i started to wonder if there are an equal or greater number of examples where companies tried this strategy but completely failed.
40acres 8y ago
I recently finished S1 of Netflix's Narcos: Mexico, after reading your post the organization at the heart of the story comes to mind. A drug dealer who works for a single organization among many in Mexico unites (commoditize) the other organizations to distribute marijuana across the U.S border. The distribution network becomes so large that when the organization branches out to distribute a new product (cocaine) and tries to set up a deal w/ one of two large manufacturers in Colombia the other one immediately lobbies for a distribution deal as well. Without the services of Mexican distribution the other Colombian organization would've gone bankrupt.

zozbot123 8y ago

> Also: the strategy seems to depend upon a "greater fool," or just high risk-takers to fill in the complement with what is ultimately low or zero profit product. It's the other way around; the commoditizing actor is that "greater fool", and others can then join in commoditizing the market out of pure self interest as consumers of the good. The agent which is commoditizing its complements is most important as a first-mover and solver of coordination problems.

HillaryBriss 8y ago
trying to apply this, but not quite seeing how it fits. if i'm an indie developer who thinks he can make money by selling apps on the Google Play Store, i put in a ton of work and then see little or no financial reward. i've made Google's Android platform a bit more attractive (because it now lists my incredibly beautiful tip calculator for free to all Android users). who is the greatest fool here?
- ebcode 8y ago
  > who is the greatest fool here? Not sure if this is a rhetorical question or not; it does sound like one. In the case of a single indie developer making an app for a single app store, it seems the developer is the greater fool, since they are turning their work into a commodity, when they should be turning their complement --- the app store --- into one. Perhaps the route for the indie developer to actually see the financial reward is to make sure their app is available on every app store. ... or maybe they need to skip the app stores entirely to keep 100% of the sales.
  - HillaryBriss 8y ago
    it's me. i'm the greater fool. (that's always the correct answer, btw. somehow it always turns out to be me.)
    - ebcode 8y ago
      i wouldn't be so sure. it might be me. we might need to have some sort of "fool-off" to determine the greatest fool.