How is Innovation in Computer industry different?

The PC industry has introduced many innovations in its 25 year history.  Product innovation includes the creation of new product categories such as notebook PCs and PDAs, as well as the creation of new product platforms such as multimedia PCs and wireless “mobility” notebooks. The scope and outcome of product innovation in PCs is shaped by the presence of global architectural standards set originally by IBM and now
largely controlled by Microsoft and Intel.  Common interface standards enable innovators to reach a global market with standard product lines; thus economies of scale can be achieved to support investments in product development and manufacturing capacity.  This is different from industries such as mobile phones or video games, in which multiple incompatible standards exist.  An example of the benefits of standardization is the acceptance of 802.11 as a common standard which spurred the introduction of wireless networking as a standard feature on notebook PCs.  On the other hand, standardization battles can constrain innovation as PC makers are reluctant to incorporate technologies before a standard is set, as is the case with second generation DVD technology.

When PC makers do innovate, they face hard choices in trying to capture profits from their innovations.  One alternative is to incorporate the innovation only in their own products to differentiate their PCs from those of competitors, but there is a question of  whether they can convince customers to pay for the differentiation and also whether customers will want to adopt a non-standard technology.  Another is to license the technology broadly, which might bring in license fees and even establish the technology as an industry standard, but will eliminate product differentiation.
Despite these challenges, which may discourage radical innovation, PC makers are pushed to incremental innovation by component makers who introduce frequent changes in their products (faster speed, greater capacity, smaller form factor, longer life) in efforts to gain greater market share within their industry sector such as semiconductors, storage or power supply.  PC makers feel they have to adopt these changes rather than risk being left behind by a competitor that does adopt.  One PC maker expressed the view that it would be better for everyone if the pace of innovation were slower, but no one is willing to take the risk of such a slowdown. Thus, competition and innovation in the supply chain tends to push PC makers into incremental changes that do little to differentiate products.

As a result, PC makers have tended to concentrate on operational efficiency, marketing, and distribution, rather than trying to use product differentiation as a source of sustainable competitive advantage.  Product innovation at the system level tends to be incremental and emphasizes developing slightly different products for
narrowly defined market niches, such as PC gamers who demand high performance or business travelers who desire ultra-light notebooks, rather than more distinctively innovative products.  Instead, most product innovation occurs upstream in components and software, which are then incorporated by PC makers.