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Why a walled garden can out perform a free-for-all

I ran across this interesting post from Bob Cooper's blog over at the Kellogg site.  In it, he reprints some observations from pundits that calls into question the conventional wisdom that an open platform such as the original World Wide Web encourages more innovation.  I've actually never really bought that argument.  Instead, I believe that a 'walled garden' will always triumph over situations in which individual players try to put their own individual best feet forward, but the user has to create a complete experience themselves.  You can think about it this way:

In the beginning, stage one, companies thrive on product advantages or individual components, but users have to do their own integration of these into complete experiences.  Think of pharmaceuticals today – you win on the molecule, but the whole experience of having your illness treated is a fragmented mess.  Everything from the search for solution to the payment streams are not integrated and often quite dissatisfying.  You can think of open platforms on the Web in the same way – I might buy a piece of software, but the expeirence is not necessarily rich or useful to me.

In stage two, which is where Apple is being really clever, some player comes along who can address the gaps and deficiencies of the user experience by controlling and integrating it.  Vertically integrated players, who control all the user interfaces, can do much more for us than the scattershot approach of Phase I.  IBM in Mainframes, Nokia in many types of mobile phones, and the move by firms such as Oracle and HP to offer complete solutions reflect this sensibility.  We'll pay a LOT of money for a satisfying, bug and hassle free user experience.

Things don't stay the same, of course – in stage three, the interfaces get standardized and advantage goes to players who can dominate a horizontal layer – like Microsoft in operating systems or Intel in microprocessors. 

So we shouldn't be surprised that people are happy to innovate around a secure, well designed platform where a responsible adult is making sure we have a great experience.  This also explains why Apple and Adobe are at each others' throats – Apple doesn't want Adobe horizontalizing its platform space.  Smart strategy. 

 

Rethinking Gospel of the Web
By STEVEN JOHNSON
April 11, 2010

Under our banner of Ideas, we talked about the power of open platforms and “idea fairs” to stimulate innovation and growth. This article has a different slant and I think touches on important considerations of the classic make/buy, outsource/in source, control/leverage type decisions. I think the key in consumer markets and to a growing degree in B to B situations is that customer experiences are driving factors in influencing these decisions and how to best create and manage these experiences are determinative.

 

"For about a decade now, ever since it became clear that the jungle of the World Wide Web would triumph over the walled gardens of CompuServe, AOL and MSN, a general consensus has solidified……
….That unifying creed is this: Open platforms promote innovation and diversity more effectively than proprietary ones.

In the words of one of the Web’s brightest theorists, Jonathan Zittrain of Harvard, the Web displays the “generative” power of a platform where you don’t have to ask permission to create and share new ideas. If you want democratic media, where small, innovative start-ups can compete with giant multinationals, open platforms are the way to go…..

….Over the last two years, however, that story has grown far more complicated, thanks to the runaway success of the iPhone (and now iPad ) developers platform — known as the App Store to consumers.

The App Store must rank among the most carefully policed software platforms in history. Every single application has to be approved by Apple before it can be offered to consumers, and all software purchases are routed through Apple’s cash register. Most of the development tools are created inside Apple, in conditions of C.I.A. -level secrecy. Next to the iPhone platform, Microsoft’s Windows platform looks like a Berkeley commune from the late 60s.

And yet, by just about any measure, the iPhone software platform has been, out of the gate, the most innovative in the history of computing…..
…..Perhaps more impressively, the iPhone has been a boon for small developers. As of now, more than half the top-grossing iPad apps were created by small shops.
Those of us who have championed open platforms cannot ignore these facts. It’s conceivable that, had Apple loosened the restrictions surrounding the App Store, the iPhone ecosystem would have been even more innovative, even more democratic. But I suspect that this view is too simplistic. The more complicated reality is that the closed architecture of the iPhone platform has contributed to its generativity in important ways.

The decision to route all purchases through a single payment mechanism makes great sense for Apple, which takes 30 percent of all sales, but it has also helped nurture the ecosystem by making it easier for consumers to buy small apps impulsively with one-click ordering. People don’t want to thumb-type credit card information into their phones each time they download a game to distract the kids during a long drive in the car. One-click purchase also supports lightweight, inexpensive apps, the revenue from which can support small software teams.
Consumers are also willing to experiment with new apps because they know that they have been screened for viruses, malware and other stability problems as part of the App Store’s approval process.

The fact that the iPhone platform runs exclusively on Apple hardware helps developers innovate, because it means they have a finite number of hardware configurations to surmount…..
…..But whatever Apple chooses to do with its platform in the coming years, it has made one thing clear: sometimes, if you get the conditions right, a walled garden can turn into a rain forest."


Posted By Bob Cooper to Driving Organic Growth and Innovation at 6/14/2010 08:00:00 AM

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