Edge Economy Strategy in Action – Microsoft vs. Google

In the beginning of April, I attempted to summarize some of the strategic guiding principles of the emerging Edge Economy (or edgeconomy) and their implications on the enterprise.    The start of the list looked like:

  1. Advantage begins in the DNA
  2. Talk less, Listen more
  3. Invert orthodox strategy decisions
  4. Open > Closed
  5. Good > Evil
  6. Edge > Core
  7. Flow > Data

So the list is interesting… but what do these principles really mean… and how do they appear in the tangible strategic choices of enterprise and consumer apps providers today?

In his most recent post, Umair offers a great example of # 4 ( Open > Closed ) and #5 ( Good > Evil ) when comparing the opposing views of how Microsoft and Google intend to create new value based on recent strategic choices by each player.

First, Umair looks at Microsoft’s strategy and the latest rumor that they are moving to buy Yahoo’s Search business and to buy Facebook in a one-two punch against Google:

"Now, buying Yahoo’s search business is just a grab for market share in online advertising. It’s the second part of the rumour that’s more interesting.

What happens if Microsoft buys Facebook and keeps it closed? Not much – because, as I’ve pointed out recently, there are tremendous structural pressures for openness.

Unfortunately for Steve Ballmer, this ain’t your grandpa’s "platform war”. It’s the reverse: only openness can maximize the value of network effects in this space, because there are no hard technological switching costs creating lock-in. For example, yesterday, it was massively costly to recode applications across operating systems, or for consumers to switch all their applications to a new platform – but that’s distinctly not true on the www: in fact, much of the point of the www is to vaporize those tired, obsolete scale economics and switching costs.

That’s why it’s a (massive) fallacy to argue that any value has been “created”. Value might be created when connected consumers can share and trade preference information or applications across social nets. But value is actually foregone if Microsoft acquires a closed Facebook, because opportunities for consumers, developers, and advertisers alike to meaningfully interact are destroyed. That’s what evil really means: coercing others into accepting value destruction."

Next, his take on Google’s strategy to open Adwords up:

Google is letting third parties access letting third parties access one of its most valuable assets: it’s ad network.

What’s really going on here? Microsoft is trying to shift from open to closed. Google is making exactly the opposite move: shifting from closed to open.

Contrast < Microsoft’s strategy – my edit> with Google’s shift to openness – can you see how it unlocks value for everyone? That’s why Microsoft’s move is a textbook example of how not to think strategically at the edge. It’s yet another example why Google is in a class of its own – across the economy – when it comes to next-generation strategy. Google opening up its ad networks is strategic greatness at work.

It would be interesting to re-think the implications of Microsoft buying Yahoo’s Search business and Facebook… but instead of pursuing last decade’s "core (platform) strategy" from the 90’s industrial information age playbook, Microsoft pulled a page from the "edge strategy" playbook emerging in today’s networked information economy.   

What happens if Microsoft moves from owning (and the closed behavior that implies) a layer of the on-premise enterprise software stack, to stewardship (and the resulting open behavior) of a valuable node of the on-demand open cloud?

Said differently, if Microsoft were to pursue an "Open" and "Good" strategy by opening up Facebook after acquisition, how much new value could be created and what would it mean in the battle for competitive advantage between Google and Microsoft in the emerging Edge Economy?

The future state of enterprise software will increasingly be "edge-centric" where on-demand, social, device-agnostic, prosumer-driven, flow-based and visual-voice-centric applications and features unlock new value at the edge of the enterprise for both enterprise and consumer (prosumer)users. 

Just how "open" the Enterprise Edge will be remains an important and valuable question.

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