(4) Or at least the end of a layered IT industry. From the Economist’s story on Oracle’s purchase of Sun:  “Since the early 1990s the industry has resembled a cake made of horizontal layers of technology, with each layer dominated by a few companies… This structure is now collapsing as the industry’s heavyweights move into each other’s layers.”

http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=13527430&subjectID=348909&fsrc=nwl
Pierre de Vries

(5) Pierre,

Please, read our discussion of systems integration models!

Peter Cowhey

(6) If I understand your argument, it is that players will offer integration of the deltas away from their core offerings as a way of undermining competitors.
A key assumption is that they will all succeed in holding on to their core businesses.  If that assumption holds, there will indeed be more competition than before. For example, in your discussion the unspoken assumption is that Google, Microsoft and IBM have unassailable beach heads in cloud search, the desktop, and mainframes, respectively. But if one or more of the beach heads isn’t secure, the competition you promise will dwindle in the face of the successful integrator.

Pierre

(7) The  argument is as follows:
1. traditional ICT layer cake and winner take all dynamics at individual layer of the stack characterize ICT landscape.
2. modularity breaks this down to some degree – enables competitors from neighboring stacks to enter new layers. for example – possible to enter productivity software suite – which is adjacent to the desktop – in a way today that simply wasn’t possible 5 years ago.
3. this means that incumbent ICT firms with leadership positions in a given stack (a) face greater challenges than ever before and (b) have greater incentives and abilities to move to neighboring layers.
4. hence we see what we see in terms of large, established incumbents with leadership positions in one layer of the traditional layer cake looking for growth via entry into neighboring/new layers of the proverbial stack.

John Richards

Advertising is of interest to everyone, not just marketers. After all, it’s advertising that pays for much of the content that many of us see (including this newspaper). But it also tells us about new products and spurs companies to improve their products and services. Of course, there’s good advertising and bad advertising (and good and bad products).

Fortunately, advertising will (and must) change in a way that will accentuate the good and reduce the bad – because advertisers will increasingly need consumers’ help in getting the word out, and consumers won’t support bad products. (That’s a slightly Utopian overstatement, but there is some truth in it.)

Of course, sometimes I have a hard time explaining what I mean when I say that advertising must change. It needs to move from sending “messages” to passive consumers to sponsorship, product placement and conversations with active consumers. The traditional skills of advertising will give way to those of public relations.

Advertisers often look at me with a blank expression when I try to explain this.

So I use metaphors: imagine you sell sports shoes (are you listening, Nike?). You’re not going to intrude on people having dinner in a restaurant, but you might well show up at a ball game, handing out free sneakers to the coolest-looking kids and joining in the festive atmosphere. Or think of all the marketers whose brands are popular: people actually pay to wear their branded T-shirts – especially if the marketer is sponsoring a cause they believe in.

Now I have a practical example. Last week, I met Suzanne Xie, a recent graduate in economics from the University of Chicago. Her parents, Chinese immigrants, were engineers, and they encouraged her to go into a safe, prestigious career, so she joined a New York investment bank after graduation. But little more than a year later, just before the financial meltdown, she and co-founder Richard Tong took an even riskier route – a start-up.

They recently moved from New York to Palo Alto, California, to see if they could make a go of their start-up idea – a style-oriented photo-sharing site with a twist. But just shoving some ads and affiliate links onto the page didn’t make much sense to these 24-year-olds, so they applied a little bit of business-model smarts rather than technical innovation, and looked for ways to involve clothing vendors in their community.

Thus was born Weardrobe. Call it Netflix-meets-fashion-show-meets-Flickr: Young women post photos of themselves and their “looks” and get style inspiration from others. It’s real people wearing real clothing. The most influential users get a direct line to the brands, and starting next week will be able to borrow the latest fashion releases from the Weardrobe closet. Some vendors, such as American Apparel, have already seen the value of their clothes being modeled by real people, and have started showcasing their products by linking to photos of Weardrobe users.

In a few weeks, Xie and Tong hope to announce a retail partnership. The most trusted and active members will get to borrow, wear, and pose in clothing from this brand. The sooner they return the items, they sooner they get a new item.   Of course, this will add complexity and logistical challenges to the business, but it’s also likely to add revenue to the bottom line.

And for brands, it’s an opportunity to place product directly in the hands of fashion influencers. Product placement has traditionally been seen as a way to get celebrities and models to wear branded clothing, but Weardrobe believes in the power of what Xie calls “micro product placement.”  She says, “This sort of micro product placement takes the success of Dove’s Campaign for Real Beauty a step further, allowing clothing companies to reach young women whom others follow. Imagine having a bunch of real girls who like a brand so much that they wear and style it for free!”

And, of course, aspiring models and stylists will see Weardrobe as a place to be discovered (just as MySpace and YouTube have become such places for performers).

My point here is not to predict Weardrobe’s success, but to show the kind of creativity and experimentation that makes California such a great place to visit after six months in Russia and a week in New York.

Each marketer needs to think of a message and a platform appropriate to its niche.

Financial firms are sponsoring sites such as Wesabe and Mint.com, where users supply their own financial data and get relevant, extremely targeted advice from vendors. RealAge does the same for consumers. Its advertising base is a little heavy on vitamin supplements, since pharmaceutical companies are extremely constrained in how they can advertise.

And it needn’t be just online. The companies that are sponsoring power outlets in airports are another example of this kind of creativity. They are sponsoring something of value and something relevant to their core customer base.  Meetup (I should disclose that I am on its board) is a company that lets marketers sponsor face-to-face get-togethers of like-minded people: Huggies (diapers) sponsors stay-at-home Meetups and offers free diapers; American Express sponsors small-business Meetups and helps covers members’ fees.

Of course, it’s neither easy nor obvious.  Advertisers are looking for one big idea. But that’s the point. Media are fragmenting, and so are advertising and marketing platforms.  Advertisers will need to work harder to get the attention of their core audience.  What they still don’t understand is that consumers don’t want just to give attention; they want to get attention. In these new communities sponsored by brands, it’s possible for them to get attention from other members while reflecting a little glory onto the brands that sponsor them.

Esther Dyson, chairman of EDventure Holdings, is an active investor in a variety of start-ups around the world.  Her interests include information technology, health care and private aviation and space travel.

Copyright: Project Syndicate, 2009.
http://www.project-syndicate.org

(1) From: Pierre de Vries
Subject: The beginning of the end of modularity?

Or at least the end of a layered IT industry. From the Economist’s story on Oracle’s purchase of Sun:

“Since the early 1990s the industry has resembled a cake made of horizontal layers of technology, with each layer dominated by a few companies… This structure is now collapsing as the industry’s heavyweights move into each other’s layers.”

http://www.economist.com/research/articlesBySubject/displayStory.cfm?story_id=13527430&subjectID=348909&fsrc=nwl

____________________________________________________________________________________________________________________________

(2) From: John Richards
Subject: RE: The beginning of the end of modularity?

Thanks for sending pierre – yes this was a very interesting purchase.

My gut is that oracle will (a) go hard on appliances for the SMB market and to drive greater penetration at the department level within their existing customer base and (b) could potentially erode MySQL OR try to get some open source cred. personally i think they will erode MySQL – i don’t see much logic in oracle getting open source cred.

IBM was a much more natural buyer.

On the layer cake – lots going on here – cisco buying flip camera maker (going big from the core backbone to the consumer edge!), hp etc. etc.

In the book we talk about this primarily in the context of the biggest of these “movements from one layer to another” which is ms and google. in effect- we say that this will begin to look much more like competitors attacking other layers of the value stack to erode margin and/or gain share in neighboring stack layers. so in the book we talk primarily around google attacking ms in it’s core businesses and ms attacking Google in their core businesses. this is just an extension of this generic principle.

More broadly – it’s not clear to me that the oracle example is the best one – per my views above on what i think they will do with the sun assets. i think the best example of this trend.

John has this right.  Our point is that modularity both allows new combinations and makes it harder to leverage them.  But we try to identify some conditions when systems integration may work as a strategy.

The following was an email received by Jonathan Aronson:

Dear Dr. Aronson and Dr. Cowhey,

I have recently finished your book and liked it a great deal.  My own work looks at the history of computers in the White House during the 1970’s. In that context I would like to direct your attention to an origin point for policy that is not mentioned in your book. During the Ford Administration, Ford and his NSC are deliberately crafting federal telecommunications security policy to prevent Soviet eavesdropping without informing Congress or the FCC. This is a conscious choice on their part because the Ford Administration, wary of public reaction following Watergate did not want to tell the public about this threat to communications and privacy.

The current debate over the Department of Commerce’s oversight authority over ICANN and by extension the Internet falls into much the same category. Executive authority to make far reaching policy decisions are not always visible to the public nor is the scope of presidential authority. Take for instance the full ground stop ordered for air traffic by President Bush on 9/11.  There have been no constitutional challenges to this order and likely will not be as executive authority and control over commercial byways and infrastructure in times of emergency are quite strong. Similarly, if a large scale cyber attack to occur in the future, a president might order that international data connections be temporarily terminated under the very same mandate. The Department of Commerce’s and hence the executive branch’s ongoing resolve not to devolve their oversight over ICANN might be considered in this light. Moreover the current administration’s renewed concerns about cyber security create large, unseen impediments for any kind of global Internet governance.

Taking a page from Paul Kennedy, the Royal Navy and Great Britain was unwilling to countenance any other nation’s concept of maritime control policy until Britain’s maritime dominance had been eclipsed. Maritime law during the Pax Britannica was written to maintain British naval dominance. The US, as your book points out enjoys a similar position in global information and communication markets and seems to be pursuing a similar position. The policy for this however is not emanating from the groups of entities addressed by in the book.

John Laprise
Doctoral Candidate
Media, Technology, and Society Program
School of Communication
Northwestern University