Parallels

Why patterns in tech companies aren’t necessarily indicators of an upcoming downfall.

In a recent article on The Verge, Nilay Patil drew parallels between some of the largest tech companies now and in the 90s. According to her, “Google is the new Microsoft”, “Apple is the new Sony” and “Facebook is the new AOL”. She states that the broad outlines of tech in 2015 look remarkably like those in the late 90s, and from that draws the conclusion that the aforementioned companies will “almost certainly” make the same mistake their counterparts from the past made. In other words, because the ideas and/or strategies are similar to those from the past, the results will also be similar.

It seems to me that it is a little early to assume that the occurring patterns are somehow inherently a bad thing. Just because people have tried and failed in a certain way doesn’t mean that other people, with newer and arguably better technology and knowledge of the past, will also fail just because the underlying idea is the same. On the contrary, what I think this indicates is that, for each and every one of those ideas, there are good reasons for the patterns that occur.

In most of these cases, I think the parallels are simply the result of inherent market tendencies.

Microsoft & Google

For many a person, Microsoft and Google form(ed) the backbone of their daily computer usage, which is caused partially by brand extension: they both leveraged their popularity from original popular products to spread out their business into multiple related areas, thereby continuously strengthening their grasp on the industry. This has happened often enough outside of the tech industry to be considered strange. Companies like the Coca-Cola Company and Nestlé did it in the food and beverages industries, News Corporation and Disney in traditional media… Nothing remarkable about the same thing happening in various areas of technology.

Facebook & AOL

Facebook and AOL appear more monolithic, providing services that cater(ed) to some of the foremost reasons people use computers: communication with other people, and (relatively) passively consumable content (news, funny images, videos and games — in other words: procrastination). It isn’t possible to point out a single reason why those platforms specifically reached such immense popularity, but their massive size at their peek popularity can mostly be explained by viral marketing. The idea resurfaces because many people would prefer to have a single hub where they can access everything they need all at once as opposed to a long list of websites they need to go through. Their acquisitions of other successful companies are made with brand extension and diversification in mind: more services cater to more people and keep more people inside their network. Their core model isn’t that different from Google and Microsoft, but part of their products are more integrated, making it appear as if they offer only a couple of very large services.

Intel & Qualcomm

Intel and Qualcomm dominate mostly because of how hard it is to break into their industry and how tightly integrated hardware products often are: they were there at the right time, managing to get their products used by the right companies. As a result of that, those companies commit to using their chips not specifically because there isn’t anything else out there, but because it would often be difficult and/or expensive to switch to another manufacturer, not in hardware but also in software. Sticking to one method because the cost of switching outweighs the gains of the new method is a frequent occurrence, and the fact that this pattern exists in the integrated circuit industry is a natural consequence of the “integrated” part: incompatible black boxes aren’t easily swapped out.

Apple & Sony, Buzzfeed & Yahoo

The Apple — Sony and Buzzfeed — Yahoo parallels are relatively weak ones: while they look similar on the surface (Apple and Sony being gadget companies and Buzzfeed and Yahoo popular news websites) but the comparisons that are made boil down to the predecessors not being able to keep up technology-wise, which really has very little to do with any kind of industry crash.

Of course, not every single one of the patterns is the result of a consumer tendency in and of itself. Sometimes, the technology in the 90s just wasn’t ready for successful implementation of the idea, but arguably is ready now — this is the case with virtual reality — and sometimes the concept has never really left, but just adapted to current technology — IoT is pretty much the digital hub redesigned for the smartphone workflow, and arguably VR hasn’t resurfaced but gradually improved to the point where it might be marketed to consumers.

The real parallel

Concludingly, I do not believe that in any of these cases the commonality with a previous idea means that the current company implementing it will necessarily fail. The patterns of failure of these 90s companies do not flow from the ideas they were built on.

I am, however, not saying that this is the case for all companies from the 90s that failed. Some ideas were too bad to be repeated, yet a few of those have also resurfaced in recent times. The key difference, however, is that in those cases, the demise of the original company does flow from the idea it was built on, and it is unlikely that it ever reached the kind of success the large companies mentioned above did.

Also, there is one commonality between all the aforementioned 90s companies that failed: while the idea the companies was built on might not have been inherently bad ones, their failures can all be traced back to one huge mistake: failure to innovate and evolve as time goes on. Directly tied to this is that all of their modern counterparts, while being built on the same ideas, did not inherit the implementation but instead built something modern. This, however, was also the case with all of those 90s companies when they first started, so the real message in this is not that old ideas aren’t worth retrying, but that doing so in a way that stands the test of time requires continous innovation. In other words, don’t look back and try to point out what your predecessors did wrong, but instead on how they arrived there, and try to avoid taking the path to similar mistakes.