It feels like the world is getting faster. It’s become a cliche to refer to the “exponential progress” of technology, but between Moore’s Law and similar (if less easily measured) trends in software development, exponential progress is a reality. This reality is reflected in the history of tech leaders as well. IBM dominated the computer industry from the release of System/360 in 1964 until the commodization of PC hardware thanks to Microsoft, which consolidated its position with the release of Windows 3.1 in 1992. Microsoft was the industry king and Wall Street darling until it became clear that the web was the new desktop, catapulting Google (almost by default) to the top of the industry circa 20041. Sometime in the next decade – the timeline is unavoidably fuzzy, because the transition isn’t over – it began to feel like Facebook has a greater claim to the title of sector leader.
In today’s environment it’s difficult to imagine an upstart challenging and even surpassing the incumbent tech titans, but it has to happen someday. And based on the accelerating timeline leading up to this point, it’s likely to happen much sooner than we think.
All of those transitions were prompted because the playing field changed out from under the incumbent. IBM wasn’t built for software, Microsoft wasn’t built for the web, and Google wasn’t built for social2.
This shifting playing field is great news for the top tier of startups gunning for the incumbent tech giants. Every time the world changes, the lean, hypercompetitive machine developed by an effective incumbent can become a liability because it’s (1) now pointed in the wrong direction, (2) extremely difficult to turn around – even if you know what has to change3 – and (3) expensive to maintain.
What’s less obvious is that this reality is also phenomenal news for the class of startups that will never be true tier-1 competitors. Each new paradigm not only clears out the top of the market, but has the same disruptive effect on the ecosystem as a whole. I’ve seen this vicariously in my father’s career. His first job out of college was with a modestly successful manufacturer of peripherals for Acorn Computers in the early 1980’s. Seeing the writing on the wall for the quickly-commoditizing hardware ecosystem, he went on to form a startup in the then-nanscent field of PC graphics, and eventually ended up at Microsoft working on Windows. The transition of the primary point of economic leverage from hardware to software churned over a whole generation of tech startups, ploughing the field for new entrants. For a more recent example, think of how many successful B2B companies from the last ten years are essentially replicating existing desktop functionality from the 80’s and 90’s, but adding a layer of collaboration and hosting it on the web. Every one of those companies, from Gusto to Salesforce, benefitted from the incumbents in their field being hit with a huge secular transition from local to remote computing.
Assuming we haven’t reached the pinnacle of human technology – which feels like a very safe assumption – new opportunities are likely to continue being created at an ever-increasing rate. Time to go work the field.
Purists may argue that Google’s market cap didn’t exceed that of Microsoft until 2012, but the zeitgeist was with Google long before that. ↩
Often due to internal politics and power struggles by departments that would lose influence in a reorg. In Microsoft’s case, the Windows division was able to veto a cross-platform feature-parity Office suite for far too long. ↩