I recently read an interesting book called Dogfight, about the war between Apple and Google over the cellphone market. If you haven’t read it, it covers some of the background behind the development of the iPhone and Android, and the strategies that both companies employed to fight each other.

The major IT companies have long been converging, in the sense that their offerings overlap more and more over time, and the strategic maneuvering of the past few years has gradually made way for something more like trench warfare – gradually improving their products in the hopes of outselling the rest, while relying on the entrenchment of their own platforms. Obtaining a new customer in this environment is zero-sum – the customer must be leveraged away somehow from a competing platform. This is one of the reasons why I wrote some while back that I was bearish on big tech companies in the immediate future. So far, the results of my predictions have been mixed, but I think we’ve already seen them start to play out.

The list of obvious strategies that one of these companies could use appears to be short, and full of pitfalls:

• Continue improving products, and hoping for the best (costly and uncertain)
• Race to the bottom in price (< zero-sum game, which ultimately hurts them all)
• Consolidation, which would likely run afoul of anti-trust legislation
• Switching markets to avoid competition (high risk, low potential payoff)

It occurs to me that this is an almost ideal scenario for a player that has been pushed out of the scrum (Microsoft, say) to use grand strategy in order to leap ahead of their competition.

MSFT has been relegated to minor player status in the cellphone market, despite spending heavily (and they’ve had similar problems in the search engine space, among others). This means that they’ve really got nothing much to lose by completely changing the rules of the game.

• Why not do something crazy like building a “phone” that doesn’t need a telco provider at all, that doesn’t even have a cellular chip in it (battery life would be great, for starters)? They own Skype, after all. That could be tightly integrated into a product that relied primarily on WiFi (there are large networks in place in almost all major cities now that are either very cheap or completely free). If they put in some integration effort around systems like ENUM, which theoretically allow people to register their phone numbers the same way they buy domain name,  the user wouldn’t even notice the difference (monthly savings aside). Or they could push to make mesh networks viable, so that people won’t even need WiFi.
• Why not completely obviate the need for search engines, by building something that anticipates our needs and fulfills then before we even need to search? Voice recognition is moving in that direction (which is why both Apple, Google and others have invested so heavily in it), but there’s no dominant player in this space yet (IBM perhaps?), and a killer app could deliver vast amounts of user-value (and precious targeted ads).
• Why not build out ubiquitous computing to the point where its silly for people to even have to lug pieces of technology around with them at all, because their environment will do it all for them without the cost or weight? I’ve written about this one before as well. Imagine not having to spend hundreds of dollars every other year to upgrade to the latest phone. Imagine not worrying about forgetting it somewhere, or having it stolen, or “bricking” it and losing your data. Just talk, and the tech around you responds, and sends back both visuals and sound so that only you can perceive them.