Open Innovation series – Platform case: INTEL
Intel is considered a platforms leader in the technology industry to which, Intel contributes to a core hardware product, the microprocessor, and determines or at least heavily influences the evolution of the PC, laptops and other devices.
When Intel started to develop microprocessors for PCs in the mid-1980s, either for IBM and for IBM compatible clones, it was in no way an architect of the overall system platform, but only a critical small piece of hardware that relied on many other hardware components not to mention the operating system and other basic software. By architecture, we mean the partitioning of the system into components of a given scope and related to each other functionally and physically through given interfaces.
By late 1980s, the then-current PC architecture had become obsolete. The ability to use standard Intel components increased the volume of PCs being made. But this modular approach did not help evolve the platform design which biggest problem was the speed of the bus, the internal highway within the PC for the transmission of data. The original ISA (Industry Standard Architecture) bus was very slow and so, anything connected to the bus such as hard disk, graphics, and software ran very slowly. In mid-1980s, IBM proposed the MCA (Microchannel Architecture) to improve the performance of its PS/2 PC line. Compaq Computers proposed EISA (Extended ISA). This battle which nobody actually much cared, just lead to confusion and most manufacturers stayed with the cheaper ISA bus resulting the PC industry to be stuck with a slow bus for years.
This lack of platform leadership in the industry restricted innovation at the system level, concluding that the PC platform itself was not moving as fast as the speed at which Intel was able to develop more processor power.
IBM unsuccessfully attempted to evolve the PC architecture into a split or fragmented architecture and proprietary approach with the MCA bus to maintain a vertical industry where highly integrated firms compete on proprietary distinction. But industry players opposed such an over attempt to introduce a proprietary technology.
Unlike IBM, Intel did not try to benefit from proprietary architecture interfaces, but Intel made sure the new PCI bus specification was free and open to everyone. It was good not only for self-best interest but also for all PC manufactures and developers of complementary products to plug their products together in the same way to make the development as easy and as cheap as possible.
In mid- to late 1990s Intel faced again the problem of performance interfaces in the PC, so the PCI initiative set the tone to other series of initiatives led by Intel, and the rest of the industry learned from that leadership determination.
The USB initiative began in mid-1990s when Intel found out that other platform bottlenecks were slowing down the overall PC performance like the limited bandwidth between the PC and the peripheral devices: printers, scanners, joysticks, digital cameras, keyboard, mouse that were not possible to be connected into one plug due to the existing architecture limitation. The USB removed this limitation as a plug-and-play approach breaking the one-to-one correspondence between the number of connectors in the back of the PC and the number of devices that could be plugged into it, letting users to connect up to 127 peripheral and working at 12 Mbps.
Intel vision of the USB not only reinforced the modular design of the PC while adding to its value by stimulating external innovation on existing products or other hardware products yet to be invented, thus the rest of the industry could create new peripherals that would increase the usefulness of any PC with a USB interface. This win-win approach created attractive business possibilities of the ecosystem around it. Intel no only integrated the needed logic into PC chip-sets, but also encouraged other manufacturers to do likewise. By late 1990s, all PCs shipped in the world had a USB interface. However, it was not all the way easy. Intel had to enlist an entire industry to take advantage of the USB, had to get an operating system to support it and had to get the device drivers written, and had to put the required support into the chip-set from every manufacturer. Intel drew up a five-year implementation plan for getting integral groups and outside partners to line up.
These were the key activities Intel coordinated to ensure adoption of its new standards:
- IP: It was a key piece of its strategy. Intel did not require potential adopters of the PCI, AGP or USB interface specifications to pay any fees for use of the technology unlike standardization bodies who usually encouraged to charge reasonable prices for licensing standard technologies. Some Intel interfaces were open and royalty-free so the industry could adopt them without concerns about infringing IP or having to pay royalties. However, instead, Intel usually required companies to agree to “reciprocal” licensing, which created a zone of free IP that covered technological areas in which several companies were involved, and also insisted on access to others’ patents that covered the same areas.
- Unlike Apple who wanted to charge royalties for its interconnect technology called “GeoPort”, Intel and Compaq thought royalties would deter many people from adopting the standard and reduce the number of complementary products that third parties might produce. This free and open approach prevent any one firm from exploiting standards technology for its own commercial advantage, and Intel ensured that it would benefit from the innovative activities at other firms.
- Public Forum: The next stage was to open up the discussion to larger public gatherings including Developers and Implementors Forums. These events create the momentum in the industry for whatever standard Intel wanted to promote, and the needed timeframe to open discussion and proposals to Intel and other firms to product the new standard.
- Compliance Workshops (“PlugFests”): About every three months, Intel held these events, which were attended by 100 to 200 companies sending two or three of their best engineers, often from design and quality, to come together and test prototypes in hand for the interoperability and compatibility with a newly evolving standard. This also helped create legitimacy and empathy to designing compatible product for a new standard and the grounds to build trustworthiness within the industry and outside it as an essential ingredient in platform leadership success.
- Enabling tools: Intel created and distributed technical tools that enabled companies to use the new technology in product development. The tools consisted mostly of software programs, libraries and components that helped engineers build other software programs, or process internet phone calls or streaming audio and video over the internet. The Forums were the place Intel used to distribute the tools in the forms of software and device development kits and to train people in how to use them. This modular logic for building software made these tools (SDK and DDK) increasingly essential building blocks for innovation and a common practice in the computer industry. By facilitating and channeling complementary innovation, these enabling tools reinforce the architectural leadership of the sponsoring firm.
Beyond the multifaceted activities Intel engaged at facilitating and stimulating the development of complementary innovation, Intel strategy had three aspects:
- Facilitate complementors’ innovation by disclosing information about the designs of its products (roadmaps) as well as computers containing prototypes of its upcoming chip.
- Intel sent skilled engineers and savvy marketers to transfer technical expertise and share knowledge about the market.
- Intel made equity investment in third parties, thus sharing the benefits but also committing for the risks associated.
Lessons from a Platform Leader:
Intel developed organizational capabilities that might be helpful to any company striving to achieve platform leadership.
- Ability to cultivate internally a “mindset” which requires managerial attention, technical expertise and resources at the level of the overall system or platform rather than limiting the focus to the inner details of the core product or piece of the system that is the firm’s speciality.
- Leadership, as one of the toughest challenge, to play multiple roles and at the same time, routinely face external and internal tensions and conflicts of interests since multiple goals were pursued.
- Ability to create external momentum:
- Communication of Intel’s vision
- Gradual consensus
- Enabling tools
- Business opportunities for potential complementors by supporting and funding them
- Facilitating external innovation
By early 2010s, Intel seems to have missed out the transition from a PC to a Mobile Device world even though it was trying to catch up Qualcomm who is actually leading the smartphone application chip processor market.