21 Şubat 2008 Perşembe

Beating Your Competitors

A great product does not necessarily mean you'll even make enough money with it because your competitors with not-so-great products can sell more of theirs if they use certain marketing strategies that you're not. We can learn some of the strategies and tactics used by some of the Master Marketers of not-so-great products and apply them to our great products to:

1. Beat our competitors to a pulp; or 2. Create an impenetrable barrier for new competitors; or 3. Ensure our survival where competition is fierce; or 4. All of the above.

An excellent case in point is Microsoft's dominant Operating System (OS) software for computers. It started off as MS-DOS over a quarter of a century ago, and eventually became Windows XP today, with the next version called "Vista" on the way.

Microsoft's OS is generally felt to be inferior to Apple's Operating System in many ways, even to this day - but yet it became and remains the dominant OS, powering over 90% of the world's computers at this very moment. Over the years, I've had my fair share of Microsoft OS crashes, "Illegal Operation" messages, security problems, viruses and so on - yet I still buy computers with the Microsoft OS installed, despite Apple's best efforts to get me to switch over.

How then did Microsoft become an 800-pound gorilla with such an inferior product, and Apple such a minnow although it has a vastly superior product for so many years? The answer lies in Bill Gates' vision, software pirates (you have no idea how much of a debt Bill Gates owe them), some lucky breaks and Microsoft's competitors' vital missteps.

Here's what happened, in a nutshell. It started with IBM and its huge ambitions. The first computer for the consumer were created in 1974/75. They were the Scelbi, Mark-8 Altair and IBM 5100 Computers. IBM, the largest IT company in the world, failed to capture any significant market share through the IBM 5100. The Apple II appeared on the scene in 1977. It looked like an oversized calculator with too many buttons. Apple's legendary design sense were not yet evident then.

The demand for home computers was growing steadily leading into 1980. In 1980, IBM wanted to create a new computer for the masses called the "Personal Computer" (PC) to give itself another shot at the growing market. It wanted to do this quickly since Apple and a few other brands were already dominating the market. Because of this urgency, instead of building the entire hardware on their own like they usually would do, its engineers bought off-the-shelf computer parts to put them together to create their PC. However, it didn't have an Operating System to run their PC.

IBM officials looked for Bill Gates of Microsoft Corporation, who suggested that they looked for a Gary Kildall of Digital Research to write an OS for the PC. Gary had written the most successful operating system for computers of that time called "CP/M". IBM officials went to Gary's office to meet him, but he was out for the day. They met Mrs. Kildall instead, who refused to sign a non-disclosure agreement with them. They left.

They then returned to Bill Gates and awarded Microsoft the contract to write the OS. It was called the "PC-DOS". Bill Gates managed to get IBM to agree to let Microsoft retain the rights to the OS. Microsoft called their OS "MS-DOS".

IBM released the IBM PC in 1981 which became a hit. But because IBM put together its PC using off-the-shelf parts, it meant others could easily put together a PC clone, if they could reverse-engineer the computing code in the ROM chip found in IBM computers. And they could. ROM chips control the various hardware components of a PC.

And because Microsoft Corporation held the rights to the OS, it could license the OS to the PC clone manufacturers too. This was also beneficial to the latter because rather than investing tens of thousands of dollars of their own money and many months writing their own OS (an area they had no expertise in), the PC clone manufacturers would simply install a ready OS on every machine they produced! PCs and clone PCs (labelled "PC-Compatibles" by their manufacturers) all running on MS-DOS swept the entire world.

Each PC running on MS-DOS meant license fees for Microsoft Corporation. There are millions and millions of PCs in existence in the world, with millions more being bought every day and another huge number upgrading their old OS to the latest version. This is how Microsoft became the world's largest software company and Bill Gates the richest man in the world.

Elsewhere in the world, clone PCs running pirated MS-DOS appeared on the scene. This added to the PC's dominance in a short period of time. The pirates certainly fueled this development and Microsoft truly benefited from it many years later even as it was losing millions in revenue to the pirates then!

In the meantime, Apple continued with its development of its own line of computers running on its own superior OS, leading to the ground-breaking Macintosh computer. Apple tried to implement a Mac cloning program to tackle the PC's dominance in 1995 but was unsuccessful. It was already too late to make any difference, and the cloning program was cancelled in 1997.

"WordPerfect" from WordPerfect Corporation became the dominant Word Processing Program running on PCs in the late 1980s and early 1990s. Microsoft's own "Word" word processing program wasn't doing very well, as it was very buggy and lacked the powerful features WordPerfect version 5 had.

"Lotus 1-2-3" from Lotus Corporation was the dominant spreadsheet software in 1983. Microsoft developed the Excel spreadsheet program in 1985 and by 1988, outsold Lotus 1-2-3. The electronic spreadsheet was the killer application for the PC then (word processing wasn't) and Microsoft scored big with it. It was the only software of quality that Microsoft had ever created that captured a market on its own merits.

Microsoft then created the Office Suite of applications in 1993 containing a word processor (Word), spreadsheet (Excel), database (Access) and a presentation software (PowerPoint). Every PC running Windows had the MS Office Suite out of the box so everybody could become productive immediately. This enabled MS Word to gain market share on WordPerfect as there's no need for the buyer to buy a separate word processing program like WordPerfect anymore.

Pirated versions of Microsoft's Office Suite ended up in clone PCs running pirated versions of Microsoft's Windows OS all over the world. This resulted in even more users of Microsoft's products at a much quicker pace which then created a "trap" for its users that very few managed to get out of. They wouldn't want to use any other word processing, spreadsheet, database or presentation program because it would mean re-training themselves. There was no reason to do this, and very few people were using the other competing programs anyway.

As a result, Microsoft's Access became the dominant database program for the PC. Microsoft's Powerpoint became the dominant presentation program for the PC. Microsoft's Word became the dominant word processing program for the PC. Microsoft's Excel remains the dominant spreadsheet program for the PC.

Netscape Navigator was the dominant browser in 1994 with millions of downloads. It had a spectacular IPO in 1995 - the first for an Internet company. Netscape started charging for its browser which was a big mistake because Microsoft bundled its inferior browser, Internet Explorer with its OS for free. Internet Explorer (IE) became the dominant browser within a few years, effectively killing off Netscape completely. It remains the dominant browser today despite stiff competition from Mozilla's Firefox.

Because the IE browser starts by displaying the MSN web site, the MSN Search Engine is a major player in the search business, ranking at No.3 behind Google and Yahoo. This is because most users will not bother or don't know how to change the Start Page of their Internet Explorer browsers.

Outlook became the dominant e-mail program because it is another component of MS Office. Sun Microsystems' software Suite called OpenOffice that is free to anybody who cares to use it is barely being noticed.

Today, we'll likely have to buy the MS Office Suite separately when we buy a PC as it is no longer bundled together with the OS. And we will gladly fork out more money for it, because we're trapped by our need for familiarity and low tolerance for re-learning competing software that isn't necessary for us to achieve our objectives. If you were forced to use a Mac computer, you wouldn't know what to do to start a word processing program, or even open a window - and you'll be begging to be given a PC to use in no time.

To be fair to Microsoft, they have used their business advantage to improve their products significantly over the years. However, there is another aspect to it - more money in newer versions. But that's another story.

Anyway, here are the lessons that we can learn:

1. Inferior products can still be marketed and outsell superior competing products, but you can't outsell superior products on your inferior products' merits alone; 2. Superior products can lose out to inferior products if the latter have a Trapping Mechanism to assist it; 3. Therefore you must set up your own Trapping Mechanism even if you have a great product!; 4. Microsoft's Trapping Mechanism is its OS that powers over 90% of the world's computers, and its bundling software with its OS when necessary; and 5. Trapping Mechanisms need not necessarily be hated by your customers. In fact, the reverse can be true, where your customers welcome them!

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