In December 2005, I was invited by Oxford University to deliver the 2009 Clarendon Lectures in Management Studies and then to produce a book based on those lectures. We decided that I should try to synthesize my research, consulting, and other experiences going back to 1985 with companies ranging from Toyota, Intel, and Microsoft to Google and Apple, described in nine books and nearly one hundred articles. The result is my latest book, Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World (Oxford University Press, 2010, and 2012 paperback). This article is a summary of the key ideas.1
Innovation and Commoditization
As I was going back over my studies of automobiles, software, computers, and consumer electronics, I realized that we had entered a new age – that of simultaneous “innovation and commoditization.” What I mean by this term is that knowledge of how to produce many different kinds of innovative products has become widespread around the world, but many of these products have already become commodities. Prices have fallen to low levels and sometimes to zero, as in the case of software. At the same time, customers are usually not content to buy the same old products. They demand new products, as well as new features and services. So companies have to deliver innovation, but in a very efficient way because it is hard to make money from products by themselves.
In computers and consumer electronics, there is a history stretching back to the 1960s and 1970s of hardware prices dropping continuously while functionality rises due to innovations in microprocessors from Intel and other companies. We are all familiar with this phenomenon in hardware but we have seen it in software as well, beginning with PC products in the 1970s and 1980s, led by companies such as Microsoft and Lotus. Then, in the 1990s, led by companies such as Netscape and then Yahoo and Google, we saw lots of Internet-based software and functionality delivered for free as what we now call “cloud computing.” And then we have the broader global phenomenon today that China can manufacture nearly any machine or consumer product very cheaply, so their prices become the world’s prices for manufactured goods. India can also deliver nearly any kind of high-technology service very cheaply as well – such as product engineering, custom software development, or back-office operations – so their prices become the world’s prices for high-tech services.