Legacy Leverage

What’s it called when something old still exerts influence even when it’s not that good anymore? Ben Thompson called it “legacy leverage.” He was talking about Microsoft and Windows, but its lots of other places too once we start looking for it.

Anywhere we see customer lock-in based on old rules, old systems, and old mindsets, we have legacy leverage. To start to understand Thompson’s work, just think of the Windows system and its dominance in corporate life. That’s hard to “disrupt,” largely thanks to their legacy leverage.

Legacy leverage does go away, it just can last longer than anyone thinks. The most dangerous aspect of how long it can linger is that some people mistake lingering for durability, when in actuality it’s just a slow death while the opposition builds momentum.

For the disrupted legacy business, death usually seems to have come out of nowhere at first, but on deeper reflection, we can see the traces of steady decay. Many a business book has been written on this topic.

Old rules, old systems, and old mindsets eventually can be upset by new rules, new systems, and new mindsets.

If we are part of a legacy business, we want to constantly be looking for the new rules that might lead us to the next chapter. It’s hard to build a second business, let alone a third and a fourth, but that’s how survival works: evolution.

We have to be OK with killing stuff off. Per Thompson, Satya Nadella is very publicly trying to figure that out in real time for Microsoft (see also Nadella’s book, Hit Refresh).

We don’t just need the old playbooks either, we need to look around us now for the stories that will be written about – because there’s a lot of this going on (hello AT&T / Time Warner, etc.).

Leverage is always a sign of comfort with risk, and complacency is a sign of blindness to risk. If we’re not thinking about how someone else will use this against us, we should know that they are.

If we are part of a new business, we want to constantly be looking for customer frustration with the old rules. If we write the next chapter, and the customer’s like it, well that’s the equivalent of the meteor meeting the dinosaurs.

The more leveraged you are, the harder and farther you fall. The same efforts that fortify a base, also can be used by others to chisel away at one.

If we understand legacy leverage, we can understand both its power and its weaknesses. Once we recognize that most people stop with just one or the other (they see all power, or all weakness, without the cross-relationship), then we can start to see just how many opportunities actually exist in the world around us.