Here’s a theory I’ve been working on: Multi-billion dollar tech startups (excluding healthcare) require one initial innovation to get the fire started underneath them, let’s call this the kindling, and a second major innovation that works hand-in-hand with the first to throw some real wood on the fire to turn them into companies that stick around for a decade or more. It also seems that each decade requires additional fuel on the fire. If a decade goes by without fuel, the fire turns to a smolder and may extinguish.

● Microsoft was just an OS that had some lock-in but not total, until they found Office. Office has been their behind the scenes showstopper that rakes in the cash and keeps Linux and OS X at bay and it wouldn’t have been possible without Windows. Windows got Microsoft from the mid-1980s to the mid-1990s and Office (aka Information Worker) from the mid-1990s to the mid-2000s. Since then Microsoft hasn’t had another major innovation and it’s fire has been throwing off less heat.

• Google was just a much better AltaVista that didn’t have a revenue model and, even worse, had one of its differentiators based on the idea they wouldn’t sell advertisements on their landing page. Google’s second great innovation, AdWords hit the scene in 2000 just a few years after the search engine launched and is responsible for the majority of the company’s revenues and profits. Of course, it would not have been possible without nearly every internet-connected individual on earth having used Google as their search engine of choice. AdSense carried Google from 2000-2010 and it seems that 2010 will be the year of Android-just in the nick of time to keep Google on top for a second decade.
• Apple had their first hit with the personal computer powered by a graphical OS in the 1980s but that idea alone slowly decayed for Apple over time as a competitive advantage. The personal computer carried Apple from the early 1980s until the early 1990s and then the company began its decline. It wasn’t until Steve Jobs returned with his vision of the Mac as a “media hub” which started coming together around 1997 that Apple’s fire was reignited for another ten years. Exactly ten years later Apple had their third epic innovation in iPhone OS which of course would not have been possible without the prior innovations.
• Adobe started off in 1982 with their awesome fonts and PostScript, but it wasn’t until 1989, seven years later, they gave Photoshop to the world, which ultimately put a halo around what became their Creative Suite. Creative Suite, like Microsoft Office, has been the rainmaker for Adobe. Photoshop carried Adobe on an unstoppable growth trajectory from 1989 until the early 2000s but then Adobe’s fortunes suddenly looked less bright and avenues for growth became less evident. In 2005 Adobe purchased Macromedia and their Flash technology. Adobe is clearly hoping to get another five years of dominance from Flash, hence why they are willing to battle Apple to the death to keep it around. Can Adobe innovate again?

The list of reinforcing examples could go on and on. There are surely examples of companies that have defied this logic, but not as many as you’d think. There are so many examples of companies that died because they never had a second innovation they are not even worth listing. We also have contemporary examples of companies caught somewhere in the middle.

• Facebook had their…online facebook (for lack of a better word) and that product was innovative enough to inspire what feels like half the world to go online and trust Facebook with their most sensitive information. But will Facebook have a second innovation, one where they invent a radically new and better way to monetize their information and turn those users into cold, hard cash? Will Facebook have an AdWords moment? That is the key question and I believe they won’t succeed unless they do.
• Twitter gave the world real-time access to the world’s eating habits, but like Facebook, the question is whether or not the young company can have an AdWords moment.

A few takeaways:

1. None of these companies knew what their second great innovation (and real money maker) would be when they launched.
2. The closer together the innovations come, the faster the growth. Hence Google’s AdWords was more akin to pouring gasoline on the fire than chucking on another bundle of wood. However, AdWords was probably more necessary too as Google had absolutely no way to become profitable beforehand and may have gone out of business before a full decade came to pass.
3. This framework can be used to analyze the fates of current companies such as Twitter and Facebook.