History shows the best time for startups to out-innovate incumbents in tech is when incumbents have achieved extreme product-market-fit and seem unassailable
One of the most interesting challenges in building an enterprise startup is navigating around, through, under, or over the big tech companies. Tweets: @rfflores , @stevesi , @mattrosoff , @timbeejones , @gassee , @jasonlk , @benedictevans , and @benedictevans Tweets: Rodrigo Flores / @rfflores : “The most important aspect of bundles never actually discussed is the steep decline in usage of modules from the anchor product through the long tail” That's where opportunity lies, but you need to survive at least 2 years of “good enough” http://twitter.com/... @stevesi : Wrote a year-end essay “Competing with BigCo: 2018 Edition” — about big companies, product market fit, competing as an enterprise startup, and more. Please have a look. http://medium.learningbyshipping.com/ ... Matt Rosoff / @mattrosoff : Good analysis of $AAPL's true genius — monetizing end points — deep in this post: http://medium.learningbyshipping.com/ ... Timothy Jones / @timbeejones : Agreed. Extreme product/mkt fit means that incubents will not see new entrant/lower end disruption; it's literally not going to be on their radar due to their level of focus. You still need capital and access to talent, which is NOT evenly distributed or meritocratic. http://twitter.com/... Jean-Louis Gasse / @gassee : Do have more than a look. Depth and breadth. The author “learned by shipping”. http://twitter.com/... Jason M. Lemkin / @jasonlk : At least, we all want to believe this, that's for sure http://twitter.com/... Benedict Evans / @benedictevans : The last time people were afraid of Microsoft and thought it could never be beaten was getting on for 18 years ago. Maybe that's why people think today's tech giants can never be beaten. Benedict Evans / @benedictevans : A common fallacy that comes up here - MSFT's revenue and share price are doing fine. Yes - and IBM's mainframe business did great in the 2000s. Its dominance of tech had still gone. Same for MSFT - PCs are not the center of tech today, any more than maninframes are
Context & Ripple Effects
Steve Sinofsky's year-end essay argues that the moment of maximum incumbent confidence is also the moment of maximum startup opportunity: bundles look unbeatable from the anchor product down, yet that same bundling drives a steep decline in long-tail module usage — the seam Rodrigo Flores flags as where entrants should live, if they can survive roughly two years of being merely 'good enough'. The Microsoft case anchors the argument: revenue and share price stayed strong even as the center of tech moved beyond PCs.
The surrounding coverage tests the thesis from both sides. Eric Feng's retrospective on the iPhone-era golden age of 2009-2012 shows how FAANG firms absorbed the aftermath of exactly such a window, while Quartz's critique of Blitzscaling warns that VC-fueled hypergrowth is no guarantee of surviving the 'good enough' years. Benedict Evans' later observation that software has faded into the background like electricity extends the arc: once the layer commoditizes, differentiation shifts elsewhere.
First-order effects
- Founders targeting enterprise markets get a concrete entry map: attack the declining-usage modules beneath an incumbent's anchor bundle rather than the bundle itself, accepting a multi-year stretch where the product is only 'good enough'.
- Incumbents with extreme product-market-fit — the Microsofts and IBMs of any given era — are structurally positioned to dismiss these low-end entrants, since their metrics (revenue, share price) keep improving while their strategic position erodes.
Second-order effects
- Capital allocation follows the thesis: the wave of large VC raises and multi-billion-dollar exits for open source startups shows investors explicitly funding challenger plays against entrenched software vendors.
- Incumbents' rational countermove — deeper bundling to defend the anchor product — accelerates the very module-usage decline that creates the next generation of entry points.
Third-order effects
- If the pattern holds, each platform transition relocates the industry's center away from the previous core (as it did beyond the PC for Microsoft), meaning today's unassailable bundles are tomorrow's legacy anchors.
- As software itself commoditizes into background infrastructure, per Evans, the locus of disruption shifts toward conventional industry-differentiation concerns — changing what 'out-innovating the incumbent' even means.
The trend: Startup disruption windows open widest when incumbent bundles appear most invulnerable, because peak product-market-fit is precisely when incumbents stop watching their own long tail.