Conjectures on a Conjecture

Randall Stross has an article in yesterday’s New York Times business section in which he advances the "Single-Era Conjecture, the invisible law that makes it impossible for a company in the computer business to enjoy pre-eminence that spans two technological eras." Stross applies this conjecture to Microsoft, detailing recent losses in its online businesses and Google’s continuing success, growth, and market share gains. He concludes that "… the Single-Era Conjecture dictates Microsoft’s eclipse…"

This conjecture applies to information technology-producing companies and industries. But what about those that only consume hardware, software, and networks? It doesn’t seem logical that the Single-Era Conjecture should also hold for them. Will the food distribution industry, for example, automatically be shaken up if Google unseats Microsoft as the king of the PC? Leather products manufacturing? Pipeline management? Seems unlikely, doesn’t it?

And yet evidence is mounting that many technology-consuming industries are also experiencing higher rates of turnover, or churn, or ‘creative destruction‘ than they used to. And as I’ve written before, IT seems somehow to be involved —  the industries that are seeing the greatest increases in their competitive intensity are, in general, those that spend the most on information technology. 

My colleagues Feng Zhu, Michael Sorell, and Erik Brynjolfsson and I believe that IT is driving the observed changes in the nature of competition in these industries. But the driving force is not generational changes in technology products. Instead, it’s constant change in technology-enabled processes. Erik and I have an article coming out on this topic in the July-August Harvard Business Review, and I’ll be blogging on this subject a lot more after the issue is in print. 

We didn’t include the Single-Era Conjecture in our article; Stross hadn’t articulated it before we finished writing. I don’t think, though, that it will have a direct equivalent in technology-consuming industries. It portrays the computer industry as subject to punctuated equilibria —  a sequence of relatively stable periods interrupted by big innovations, like client-server architectures or the Web, that engender competitve shakeups. I don’t believe the same pattern will hold in computer-using industries. Instead, I predict that these sectors will find themselves subject to constant change and innovation, steadily higher rates of churn among competitors, and a higher baseline level of creative destruction. Instead of a series of technology eras, there will be ongoing IT-facilitated skirmishing. Watch this space, and get a copy of the July-August HBR, for more discussion of why this will be the case, and what to do about it.