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Making Technologies Useful to End Users Can Be Hard



Sharma's theory sounds somewhat similar to that of Bhidé in his The Venturesome Economy.


(p. B4) Anshu​ Sharma,​ a venture capitalist at Storm Ventures, thinks he knows why so many companies that should have all the resources and brainpower required to build the next big thing so often fail to. He calls his thesis the "stack fallacy," and though he sketched its outline in a recent essay, I found it so compelling that I thought it worth a more thorough exploration of the implications of his theory. What follows is the result of that conversation.

"Stack fallacy is the mistaken belief that it is trivial to build the layer above yours," Mr. Sharma wrote. And as someone who worked at both Oracle and Salesforce, his exhibit A is these two companies. To Oracle, which is primarily a database company, Salesforce is just a "hosted database app," he wrote. and yet despite spending millions on it, Oracle has been unable to beat Salesforce in Salesforce's core competency, notably customer-relations management software.

It helps to understand that in tech, the "stack" is the layer cake of technology, one level of abstraction sitting atop the next, that ultimately delivers a product or service to the user. On the Internet, for example, there is a stack of technologies stretching from the server through the operating system running on it through a cloud abstraction layer and then the apps running atop that, until you reach the user. Even the electricity grid required to power the data center in which the server lives could be considered part of the technology "stack" of, say, your favorite email service.


. . .


The reason that companies fail when they try to move up the stack is simple, argues Mr. Sharma: They don't have firsthand empathy for what customers of the product one level above theirs in the stack actually want. Database engineers at Oracle don't know what supply-chain managers at Fortune 500 companies want out of an enterprise resource-planning system like SAP, but that hasn't stopped Oracle from trying to compete in that space.



For the full commentary, see:

CHRISTOPHER MIMS. "Why Companies Are Being Disrupted." The Wall Street Journal (Mon., Jan. 25, 2016): B4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the title "Why Big Companies Keep Getting Disrupted." The last sentence quoted above appears in the online, but not the print, version of the article.)


Sharma's blog essay mentioned above, is:

Sharma, Anshu. "Why Big Companies Keep Failing: The Stack Fallacy." On Crunch Network blog, Posted Jan. 18, 2016.


The Bhidé book that I mention way above, is:

Bhidé, Amar. The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World. Princeton, NJ: Princeton University Press, 2008.


A briefer version of Bhidé's theory can be found in:

Bhidé, Amar. "The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World." Journal of Applied Corporate Finance 21, no. 1 (Winter 2009): 8-23.






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