systems played a key role in the evolution of this new value chain.

Who took advantage of the new opportunities? The simple answer starts with “outsiders,” who specialized a wide number of different activities. At first, most commercial actions came from outsiders with distinct points of view. As an example, consider dial-up Internet service providers, many of which had been in the business of offering bulletin board services (BBS) before the commercial Internet grew. For the most part, the core of the computing and communications industry had treated BBSs as peripheral players. Eventually thousands of such ISPs provided service for the U.S. landscape.

Another key outsider came from university research. Netscape played a key role as catalyst, and this firm combined the outlook of an outsider with the financial backing of insiders. Programmers from the University of Illinois at Urbana Champaign, who had developed a browser and server software, worked with Jim Clark, an experienced entrepreneur, and his ven-ture-capital backers, Kleiner, Perkins, Caufield, and Byers. This was just the first of many times that some commercial insiders remained open to the new outlook of outsiders and made mutually beneficial deals to develop new businesses.

 

Market-based Experiments

The latter part of the 1990s showed that the core architectural principles and engineering processes for operating the network could scale to a mass user base. As it turned out, the growth of investment and entrepreneurial entry persisted long after the initial rush diminished. In this case, once again, much of this commercial activity reflected economic archetypes for ven-ture-based businesses.

In this respect, the events described
illustrate another crucial lesson: Like
other deployments of major technolo-
gies, the Internet was not valuable
merely because it became available.
The invention had to be adapted to
many circumstances. Here, again,
many firms from outside the core of
the communications industry and
computing industry perceived many of
the opportunities for adaptation. For
example, a large and independent ISP
industry grew to cover many regions of
the country. So too did a large number
of independent contractors to provider
related services, such as Web-page de-
sign and development.
Once the prototypes for the entire
system were demonstrated, more com-
mercial firms began to explore innova-
tive applications in areas that employed
frontier computing, such as back-office
computing, or operations-enhancing
enterprise computing in financial trans-
actions, retailing and wholesaling, lo-
gistics, and media. The opportunities
appeared large to many entrepreneurs,
and while a few firms behind dot-com
boom got more attention, a large num-
ber of quieter firms developed the Inter-
net into something useful.
Established firms had to react to
entrepreneurs, as many thought the
entrants threatened to take leader-
ship positions. For example, old-line
firms such as IBM altered their array
of services, and fundamentally al-
tered their commercial focus. This
widespread reaction and competition
resembled another economic arche-
type, one of “creative destruction,”
yielding many new services for users,
and extending the deployment of the
technology to many new uses. Be-
cause the opportunities extended
widely, once unleashed, the phenom-
enon extended across virtually every
sector of the economy, and in virtually
every urban location in the U.S.
All this impatient investment en-
couraged a high tolerance for explor-
atory activity by commercial firms.
Part of that tolerance was unsurprising
in light of the scale of the new opportu-
There is nothing
inevitable about
the commercial
development
of technology and
that also holds
for innovation
from the edges.
nities and the need to adapt. In addi-
tion, many entrepreneurs came from
computing, where technological races
were common, and they did not find it
unusual to focus on exploratory activi-
ties that stretched the functionality of
software. Many such firms employed a
common strategy of “getting big fast.”

The experiments had a palpable effect on perceptions about the direction of technical change in communications technologies. In 1994, hardly a boardroom in the U.S. considered the Internet a priority, and, yet, very few held that attitude in 1998. Views that had been regarded as outside the mainstream only a short time earlier were taken seriously by some of the stodgiest firms in some of the slowest moving industries. Within a few years a view that would have been considered radical a half-decade earlier had become mainstream.

 

Contrasting Experiences

There is nothing inevitable about the commercial development of technology, and that also holds for innovation from the edges. As already stressed, government policy can encourage or hinder it. In parallel, established firms may or may not cooperate, and the behavior of large powerful firms matters most for this latter observation. The contrast between the experience at IBM and Microsoft can illustrate both points.

Both firms profited from the rise of the commercial Internet and Web. No government had to compel either firm to sell into growing demand for their core products and services. IBM eventually sold more services as a technological intermediary and consultant. The commercial Internet and Web also increased the total number of PCs sold, and Microsoft benefited handsomely from the rising volume of software sold.

Their similarities ended there. While IBM got over its initial reluctance, Microsoft made only a temporary peace with non-proprietary standards. It was part of a long-term strategy to resist the emergence of alternative platforms, such as Netscape’s. Microsoft also used its existing contracts to encumber many of its business partners. That earned it an antitrust charge from the U.S. Department of Justice.

The ideology of the time also played