Why Big Companies Keep Failing: The Stack Fallacy (2016)
4 months ago
- #business-strategy
- #innovation
- #technology
- Stack fallacy is the mistaken belief that building the layer above your current expertise is trivial.
- Examples include database companies thinking SaaS apps are easy or VM companies underestimating big data.
- Amazon dominates cloud IaaS despite VMware's core VM technology, and Oracle struggles against Salesforce in CRM SaaS.
- Apple succeeds in vertical integration (chips, languages) but struggles with apps like photo sharing and maps.
- IBM underestimated the software layer, allowing Microsoft to dominate the OS market.
- Oracle's Larry Ellison misjudged ERP as simple tables and workflows, leading to costly and mixed results.
- Stack fallacy stems from overvaluing what we know and underestimating customer needs in higher layers.
- Innovating down the stack is easier because you are a natural customer of lower layers (e.g., Apple with chips).
- Google, despite owning email and search data, struggled with social networks due to unclear product needs.
- Product management is key—knowing what to build is often harder than knowing how to build it.