Does Big Tech Enable Or Impede Innovation?

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There’s growing concern about “kill-zones” that exist around huge technology companies, making it impossible for startup challengers to survive.

Online search, social media, mobile and e-commerce, and business software are just some of the industries in which new ideas are likely to get crushed (or bought and then crushed, or at least robbed of their souls) by big companies with large amounts of cash, according to this recent story in The Economist.

This tends to stifle innovation.

It’s not a new phenomenon; markets usually consolidate down to a handful of competitors, like the American car industry did in the early 1900s (more than 300 manufacturers were reduced to what would become the Big Three). Companies that can operate efficiently at scale tend to grow, and the resulting skills, revenues and profits, and command of supply chains and distribution tend to create momentum that’s hard for competitors to beat.

Interestingly, in the early days of automobiles, over half of them ran on alternative fuels, such as ethanol, steam, or electricity. An early Benz used on peanut oil, and Henry Ford’s first car burned hooch. But, once the discovery of massive oil reserves provided a powerful and reliable fuel (even though it had been considered dangerous), combustion engines became the norm.

Thereafter, big company innovation amounted to incremental performance improvements and changing the size of tail fins.

This evolution doesn’t happen without the benign neglect of government, if not its active support. The US government did much to help big auto, such as creating a national highway system and dragging its feet on pollution and safety laws (it’s hoping to loosen enviro rules with now). Big Energy benefited similarly.

The “kill zones” around Big Tech are worse because of the nature of their business models; collecting data is a race for variety and volume, which drive insights for everything from consumer preferences in shoes to AI, so the barriers to competitors get even wider as they get higher.

Imagine if the first student driver to qualify for a driver’s license would always be the bestdriver. Ditto goes for home assistants and industrial robots.

Government has enabled these activities, as have we all generally, in part because Big Tech likes to talk in the language of competition and individual empowerment. Facebook has many competitors, according to Mark Zuckerberg’s testimony before Congress, though in truth it has few to none. Sure, it could be losing users to Instagram but, wait a minute, Facebook ownsInstagram.

Google can give away online services for free, not to mention provide easy navigation across the Internet, but none of it is actually free since its monetizing every click (and thereby, like other Big Tech players, manipulating what people see and do). You could argue that users are collateral damage near those kill zones, if not their unwitting sponsors.

Big Tech innovates, certainly, but only within the confines of what companies can sell, and that help build further barriers to competitors.

Wherefore art thou innovation?

My money’s on disruptive innovation…not the buzzword used to promote the latest VC-funded digital darling, but real, out-of-left-field innovation that takes the model on which Big Tech depends, and turns it on its head.

Teleportation that puts travel by any type of vehicle unnecessary, or quantum improvements in virtuality that make it rare. Organic 3D printing that puts Star Trek replicators in every kitchen, thereby obviating the need to shop online for home delivery. Breakthroughs in the physics of acoustics and medicine that let us socialize simply by thinking of one another and then talking via thin air.

Government could help foster such innovation, in part by recognizing some simple truths — the Internet is a utility, not a set of private domains, for instance — and by incentivizing the type of basic research on which today’s Big Tech companies rely (ARPANET, TCP/IP, and early wireless technology were made possible by government largesse).

OK, that’s not likely.

But, even though Big Tech will do its best to impede change, and government will be unlikely to encourage it, disruptive innovation is inevitable. Kill zones are nothing new, and they’re never impenetrable. Startups will start up.

Today’s digital platforms are tomorrow’s VHS cassettes, only we don’t know it yet.