Computer Industry

Introduction

In molecular biology, the term double helix refers to the structure formed by double-stranded molecules of nucleic acids such as DNA and RNA. James D. Watson and Francis Crick discovered this molecular structure of DNA and the mechanism of genetic replication. They termed it as the secret of life. Similarly, by examining the "molecular" structure of companies- their capability chains-business genetics helps us to understand their mutation, evolution, and eventual survival or demise. The business double helix illuminates how these vertical and horizontal epochs determine the fate of companies, industries, and sometimes the economic fortunes of nations

The Double Helix in the computer industry

Early Years

In the 1970s and the early 1980s the computer industry's structure was mainly vertical. The three largest companies were IBM, Digital equipment competition & Hewlett & Packard. There were some second tier computer makers as well. Companies tended to provide most of the key elements of their own computer systems, from the operating system and applications software to the peripherals and electronic hardware, rather than sourcing bundles of subsystem modules acquired from third parties. Products of that time exhibited integral architectures – hardly there existed interchangeability across different companies' systems. For example, IBM components did not work in HP computers & vice versa. So, each company maintained technological competence across a large list of elements in their chain.

IBM had significant market power during that time. So, they could keep their hostage as any competing machine would be incompatible with IBM's. But, the storms were on the horizon. The task of maintaining such a long list of technologies & capabilities was already daunting.

Transition from Vertical to Horizontal

In the late 1970's, Apple computer appeared in the horizon. Apple sensed the increase in demand of more sophisticated computers & matched the imagination of more sophisticated buyers. So, IBM brought a change in their strategy of manufacturing computers. It opted for modular product architecture, outsourcing the microprocessor to Intel and the operating system to Microsoft. IBM's mutation catalyzed a dramatic change throughout the industry, which quickly moved from a vertical to a horizontal structure. The dominant product was no longer the IBM computer, but the IBM-compatible computer. The modular architecture encouraged companies large and, small to enter the fray and supply subsystems for the industry: semiconductors, circuit boards, applications software, peripherals, network services, and PC design and assembly.

A single product/supply chain decision