CIS 3-2

I.         General issues:

            A.        Psychological: emphasis on personality.

                        1.         See it in terms of vision; business strategy, business model.

            B.        Not documentary: compresses, dramatizes.

            C.        Cringely’s three points, how illustrated

                        1.         Accident, amateurs

                        2.         Each main character has metaphor

                        3.         Hippies and nerds: what are motivations?

            D.        Quotes:

                        1.         Good artists copy, great artists steal. Is it stealing?

                        2.         Great artists ship

                        3.         Ethics of innovation

                                    a.         MS monopoly, how different?

                        4.         We have better stuff. That doesn’t matter. Why did MS win?

                                    a.         Closed, open, open but owned

            E.        “Theft.” No real theft here: too many lawyers.

            F.        Job’s vision: the cool idea for the rest of us.

            G.        Both had access to PARC inventions; innovation involved business model: how to realize the vision of the personal computer on a mass scale.

                        1.         This is where Gates proved the greater innovator.

            H.        Windows: “theft” on a grand scale

                        1.         Netscape example, many others

II.        Sets stage for birth of Wintelism:

            A.        Spinoff product of 8086: the 8088.

                        1.         1980: Earl Whetstone, desperate to meet sales goal, tried IBM. Ended up selling to PC group in Boca Raton.

                        2.         Encounters “Project Chess.”

                        3.         PC project was in a real hurry, needed products off the shelf.

                        4.         Later, enter into negotiation with Bill Gates, leading to decision to allow Gates to license DOS to IBM.

                        5.         IBM’s “classic bad business decision.” Leads to rise of Wintelism.

III.       IBM Story

            A.        The third event took place when IBM lost its stranglehold over the industry along with its short-lived domination of the rapid growth segment of computing, PC s and networking, due to a mix of government policy (the anti-trust atmosphere that hung over IBM) and one of the world's classic bad business decisions. After Apple in the late 1970s created the Personal Computer market using a quite traditional proprietary system strategy, IBM rushed a competing product to market. IBM pieced together the first open-but-owned PC using its proprietary BIOS (basic input-output system), and a variety of components and software from numerous third party vendors. These included, famously, an operating system from a small firm now called Microsoft and a processor from the merchant semi-conductor producer, Intel. It invited cloning to establish the market. IBM expected that it would bring the product back in-house and make it increasingly proprietary through a strategy of scale (and, to give the benefit of the doubt, it could have been afraid of anti-trust) Whatever the motive, IBM legitimized Wintelism, as only IBM then could: competition among specialized producers to set and dominate standards, anywhere in the production chain, for products that function together (hopefully!) with seamless interoperability from the users perspective.

                        1.         In 1980, IBM developers were in a hurry, put the PC together from parts off the rack, not made in-house

                                    a.         Intel 8088

                                    b.         MS-DOS OS

                        2.         Only truly proprietary aspect of PC was the ROM-BIOS

                                    a.         Summer of 1981: Houston House of Pies, Compaq is born. Reverse engineering.

IV.      Wintelism

            A.        Nature of PC market, almost of IBM's mistakes was that the PC ended up with an open system product architecture in which interchangeable components can be easily assembled.

                        1.         This leads to “plug and play” as key functional feature.

            B.        PC market becomes, in essence, a commodities market, in which price is overwhelming consideration. Brand means little, unless tied to issues like reliability, service. Dell is pioneer here.

            C.        Nature of PC market: what is Wintelism? Hi-value added is in control of standards of key components

                        1.         “Open but owned” system. How did this happen?

                        2.         Simply stated, success flows to the company that manages to establish proprietary architectural control over a broad, fast-moving, competitive space.

V.        Microsoft, Apple, different business models.

            A.        Wintel: open but owned, maximum “backward compatibility.” Emphasis on possessing key intellectual property.

            B.        Apple: closed, proprietary system. Little licensing, emphasis on control of entire process of manufacturing.

                        1.         Gates tried to convince Jobs to switch.

            C.        “We’re better.” “That doesn’t matter.”

                        1.         Network effect, path dependency: QWERTY keyboard.

                        2.         Gates understood this.

                        3.         Netscape example

                        4.         Why did Microsoft bail out Apple in 1997?

            D.        M & F's argument: proprietary control of key components of architecture is essential to guarantee both:

                        1.         Architectural coherence by providing a defacto standard

                        2.         Continued technological dynamism, as competition continues to drive innovation and improvement.

                        3.         Contrast with no standards, de jure standards.

                        4.         Make chart on board

VI.      Non-proprietary standards lead to slow rates of technological change and commodities markets

            A.        There are many examples of nonproprietary architectures, like the CCITT fax standard or the NTSC television standard, most of them established by government bodies or industry groups.

            B.        Proprietary architectures, by contrast, because they are such extremely valuable franchises, are under constant competitive attack and must be vigorously defended. It is this dynamic that compels a very rapid pace of technological improvement.