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Innovation imperative trumps advantages of specialization?

Vertical integration has been a no-no. The advantages of specialization (sticking to one’s knitting) have been emphasized. And now, Microsoft moves into hardware.

That, in turn, has limited their ability to take the kinds of risks on hardware innovation that have helped define the iPad. Furthermore, with the iPad, Apple has proved that there are significant advantages to designing hardware and software together. When separate companies, each with its own priorities, handle those chores, integrating hardware and software can be more challenging.

“You’ve got this sclerotic partnership structure where the partners don’t have any oxygen to be innovative,” said Lou Mazzucchelli, an entrepreneur in residence for a venture capital fund backed by the state of Rhode Island and a former technology analyst. “I believe Microsoft was painted into a corner. If they’ve didn’t move soon, Apple would have so much of a lead, it would be almost impossible to catch them.”

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