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The Technology Stack Fallacy

In 2016, Agile, Disruptive product, Innovation, Lean, Product Management, Product Owner, Product Teams, Scrum, Strategy, Take Charge Product Management, Uncategorized, User Experience, Voice of the Customer by Leave a Comment

Over the weekend I was catching up on some reading material that had been piling up during the week. One of the articles, written by Christopher Mims of the WSJ, caught my eye. Christopher was discussing a theory, the technology stack fallacy, held by Anshu Sharma, a venture capitalist at Storm Ventures, who has an idea which addresses a problem, or at least an unanswered question, in Clayton Christiansen’s “The Innovator’s Dilemma.”

What Exactly is the Technology Stack Fallacy?

The theory attempts to explain why so many firms that should have the resources to build the next “big thing” often fail to do so and fall prey to nimbler competitors. This question gets at the heart of both innovation and disruption, a topic that matters to product managers and product organizations.

Anshu Sharma proposes an answer to this with his technology stack fallacy theory. At its essence the stack fallacy is the “mistaken belief that it is trivial to build the layer above yours.” By way of example Mr. Sharma points to Oracle and Salesforce.com. From Oracle’s perspective Salesforce.com is a “hosted database app” and yet after spending millions of dollars Oracle has been unable to beat Salesforce.com at Saleforce’s core competency customer-relations management.

The stack in the theory is the layer cake of technology. Each layer sitting on top of the other which ultimately delivers a product to the user. E.g. the server through the operating system running on it, through the cloud and then the apps running atop the stack.

In the tech industry companies commonly violate the stack fallacy by attempting to move up the stack with mixed results. Here are three that struggled:

Samsung – started by making components for Apple. Then tried to move up the stack by creating its own cellphones. Initially it has enjoyed great success. However, competitors are challenging it aggressively with the commoditization of Android smartphones.

IBM – moved up the stack from making things that compute to selling computation services. The result? Shrinking revenue over the last 15 quarters.

Google – tried to move up the stack from search to social networking and the result was Google+.

The Technology Stack: Easier to Move Down Than Up

The reason companies fail to move up the stack is simple says Mr. Sharma. They lack first-hand empathy for what customers of one product level above theirs in the stack actually want! For example, database engineers at Oracle don’t fully understand what Fortune 500 supply chain managers want.

Interestingly, while moving up the stack often leads to problems, that is not the case for moving down the stack. Take the case of Apple where product team members know exactly what they want in a mobile chip. Google also moved down the stack very effectively creating its own servers and datacenters. The same can be said of Tesla current move into batteries.

While this theory explains many organizational failures and struggles at the product level it is not 100% predictive. There are ways around it. The key comes down to product managers, teams and organizations having true first-hand empathy for customer needs and means of effectively capturing them.

In other words, it all boils down to who understands the customer better!

 

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