Thursday, April 1, 1999
Ask yourself this deceptively easy question: what is Microsoft’s primary identifying industry? Whatever your answer, compare it to the response you would have given two years or even 18 months ago, and one thing is sure: It has changed. And here’s a safe prediction: your answer will change again within the next 18 months.
Microsoft’s history provides a telling example of what we call Boston’s Law: high-tech industries re-invent themselves every 14 months, and the best companies — the voices of those industries — re-invent themselves at the same speed. Microsoft always has, right on schedule, too, and as a result, the trajectory of its stock price has been consistently in one direction: higher and higher.
Those who don’t re-invent themselves along with their industries eventually find themselves lagging behind the leader or even ceasing to exist. Netscape provides an example of how quickly this can happen. Netscape’s IPO in August of 1995 was one of the most successful in history. Starting out as a browser company, Netscape experienced a meteoric early rise. Soon enough, the company’s stock began to yo-yo. After a significant decline, Netscape eventually saw an upturn in its price. However, the company never recovered beyond half of its early high point, before the enterprise – still a browser company – was acquired by AOL.
In the high-tech industry, no matter what the size of the company, those that define and re-define their market win. Those that follow the market, or sit on the laurels they won even a year or two ago, lose.
High-tech Industry Leadership
So what differentiates these industry leaders from everybody else? How does a company become the voice of an industry, whether large or small?
Two activities require the time and attention of the CEO of an ambitious high-tech company. The CEO can make his or her primary focus the market-sharing battle, taking those actions that, at their most successful, can gain between two and five extra points of market share. The CEO might also focus primarily on the intellectual battle, which business thinker Gary Hamel describes as the battle to shape the future of an industry. Both demand the CEO’s attention, but it is instructive to see how recognized industry leaders – people like Bill Gates and Andy Grove – divide their time on these two focal points.
Waging the market-sharing battle is, of course, completely necessary; no company can do well without doing it. But it is absolutely not sufficient. We all know dozens of solid, well-run companies that started fast and faded fast, or that never got started at all. Or we could reconsider our Netscape example: it's not as if their stock prices rose and fell because they forgot how to make browsers. On the contrary: their browser-making skills only improved.
The industry leaders are defined by their ability to engage in and win the intellectual battle. These companies are far less worried about winning a few more points of current market share, than they are about creating and dominating whole new markets.
The Intellectual Battle
Every high-tech industry is defined by its intellectual battle, a battle to shape the future and perhaps even the existence of the industry: what it will look like, what its customers will expect, how services and products will be delivered and what those essential services and products will be. This is not “the vision thing,” – fantasizing about some distant, misty future; this is a debate about what your own company may face within the next year or so. The rules of the game and the physics of competition can change things so radically (and, in the high-tech industry, so quickly) that entirely new industries can emerge in that very short time.
A battle is raging right now in your industry whether you know it or not, whether you acknowledge it or not, whether you care or not. And if you aren’t winning it, you are losing it.
There was a period not so many years ago when the burning question of office IT was straightforward: should most office desktops be Macintoshes or PCs? That battle was waged and won, and whatever hope Macintosh still has of being a successful company depends not on piecing together the few available business users still out there, but on re-defining itself in a whole new market.
Today, at the beginning of 1999, a battle is raging for the future of networking. What will become the standard tool to access the Internet, and what will it contain? The traditional answer has been PCs, stuffed full of software and applications. “Everyone will continue to buy more and more powerful PCs, and continue to hook into PC-centric networks,” goes the traditional line. But will they? Those companies that are pioneering device-centric networking think differently, and are waging the battle for the future of their industry. Though the fight is still young, the smart money is not on PCs. There will come a day – and it is closer than many people care to admit – when a hardware company that succeeds only on its PC sales will be trying to draw water from a well that’s drying up. It will be an understandable mistake if they haven’t been paying attention to the intellectual battle, but it will be a fatal mistake. Two to five more points of a vanishing industry is no victory at all.
Right now, one can say this day is far off. One is never so optimistic as at the peak of one’s success. But remember: the peak is that moment where everything starts to change direction.
A CEO’s Challenge
The re-thinking of a company, the re-structuring of an industry, the creation and conquest of new markets and then the communication of these ideas: these are responsibilities and challenges for a company’s highest-level executives. They are not tasks to be delegated. They require creative thinking, deep analysis, intellectual stamina and real ambition. The truth is, not all companies are interested in this level of competition, and not all executives are cut from this cloth. But there can be no question that the world’s high-tech industry leaders all engage in precisely this form of thinking.
It’s not enough to have great thoughts in the boardroom. Winning the intellectual battle requires a company to communicate its thinking and to engage in the battle publicly. The battle should be plotted out in the boardroom, but is best won in full view of the public: in magazines, in speeches, at industry conferences, in analyst reports and in media interviews. Intellectual battles are won with communications.
A common misapplication of this theory is to assume that communications is in itself an answer. Communications comes second, behind knowing what to communicate. If you have nothing to say, saying it well won’t help — you’ll just end up with hot air and buzzwords.
Conversely, if you know what to say but delegate it to someone else to say it, you’re throwing away your victory. If you have something vital to communicate, if you understand your industry’s intellectual battle, and if you’ve thought out how to win it, then communications must be a company-wide campaign, led by the CEO. That is how industry leaders do it. The alternative is the inevitable dissipation of thought and effort as the message moves down too many company layers, it ages and stagnates before it is heard by the outside world. Speed is of the essence. The CEO must be in charge. It is no coincidence that today master communicator Bill Gates is the voice of his industry, and 14 months from now he will be the voice of a different industry.
Where will your company be?
