Asymmetric Competition

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Asymmetric Competition = competition between entities that do not follow the same logic.

Used in the context of competition between traditional for-profit driven companies, with for example Purpose-driven Media, who follow the logic of Quarternary Economics.


Description

Umair Haque:

"Yesterday, the majority of competition was symmetrical: between players with relatively evenly matched resources and capabilities. Think Ford vs GM, P&G vs Unilever, or K-Mart vs Sears: the long march of the oligopolists.

That’s reflected in industrial era assumptions about competition that are still with us – King Kong sized competitors are who boardrooms should worry about most; pint-sized ones aren’t much of a threat.

Right? Wrong.

Today, its time for boardrooms to consider a troubling proposition. Competition is increasingly asymmetrical: pint-sized revolutionaries are able to pop seemingly out of nowhere and topple yesterday’s giants – fast.

Players playing by radically new rules are rewriting the rules of strategy. And I think the Obama campaign is one of the best examples of the rise of asymmetrical competition.

Yes, startups have always challenged incumbents. So what makes asymmetrical competition different? First, rarely before new and lateral entrants been able to upset incumbents so decisively – to actually put them out of commission. Second, rarely have they been able to dominate entire industries with such speed. Third, almost never before have so many revolutionaries threatened so many incumbents across a broad sweep of industries. Fourth, in asymmetrical contests, yesterday’s sources of advantage become today’s sources of disadvantage.

Let’s discuss just two aspects of asymmetrical competition that challenge orthodox approaches to strategy: how resources are built, and how important DNA is.

Obama’s campaign didn’t have any of the resources Hillary’s did, to begin with – not cash, not experience, not a brand, not relationships, not Bill. Yet, he was able to accumulate these resources at light-speed.

How? By learning to leverage resources at the edges, instead of the core." (http://discussionleader.hbsp.com/haque/2008/06/the_rise_of_asymmetrical_compe.html)



Case Study

Microsoft vs. Mozilla, by Frank Hecker, at http://www.hecker.org/mozilla/asymmetric-competition

"In the next sections I make an initial attempt to apply this approach to the competition between the Mozilla project and Microsoft in general, and between Firefox and IE in particular.


Resources, processes and values


Christensen et.al. define resources, processes, and values as follows (Seeing What's Next, Table 2-1, p. 33):


  • resources: "things a company has access to", including both tangible and intangible assets
  • processes: "ways of doing business (skills)", and in particular, ways an organization has developed to solve difficult problems it has faced in the past
  • values: "prioritization determinant (motivation)", or more simply, what business model an organization relies on and how it decides to devote resources to particular initiatives


Resources


For example, key resources for the Mozilla project include

  • an accumulated body of open source code
  • the technical infrastructure supporting a public development project for that code
  • the core group of developers, testers, technical writers, and others working directly for the Mozilla Corporation and key corporate contributors to the Mozilla project
  • the larger group of developers, testers, technical writers, evangelists, and others who contribute to the project, build applications and add-ons leveraging the project's code, and/or promote the project in various ways
  • the Firefox and other brands and (more important) the massive goodwill that many feel towards those brands


By contrast Microsoft commands the following resources, among others:


  • insanely large amounts of money and thousands of employees
  • control of the dominant OS platform (i.e., Windows) and key dominant applications on that platform (e.g., Office)
  • an extensive distribution network over which it exerts considerable control
  • a large and effective network of developers and business partners
  • massive PR resources and a great deal of influence with the technology press, industry analysts, and other media
  • an extensive and growing set of web applications for search, email, blogging, and so on


Clearly, if measured by resources alone Microsoft is a formidable competitor for any new entrant into a market where Microsoft competes or might compete. Processes


What about processes? What problems have either the Mozilla project or Microsoft had to solve?


The Mozilla project has had to develop processes to solve the following problems:


  • how to coordinate a large group of individuals and organizations in the context of a complex development project
  • how to develop, release, and maintain software products across a wide range of OS and hardware platforms
  • how to promote adoption of its products with minimal marketing resources, leveraging word of mouth marketing and volunteer evangelists


By contrast Microsoft has successfully solved a somewhat different set of problems:


  • how to leverage control of a software platform to overcome competitors, e.g., by continually moving more and more functionality into the OS as a bundled component with zero incremental cost to users
  • how to leverage network effects and control of key data formats (e.g., for Microsoft Word) to overcome competitors
  • how to keep users on a continuous upgrade path through both major upgrades (what Christensen would call "radical sustaining innovations") and minor upgrades (e.g., through the Windows update mechanism)


Values


What about values? On what basis do the various participants in the Mozilla project make decisions on where and how to invest their attention and resources?

  • A major priority driving the Mozilla project as a whole is promoting adoption of Mozilla-based products, especially Firefox. A larger user base for Firefox, Thunderbird, etc., increases public interest in the project; this in turn leads to more potential volunteers considering joining the project, increasing the flow of volunteer talent on which the project depends for key functions such as testing, bug fixing, evangelism, etc. A larger user base also increases the overall economic value of the Mozilla commercial "ecosystem"; some of this value leads corporate contributors to hire full-time developers and others to do Mozilla-related work, and some of it can be leveraged by the Mozilla Corporation (through its business relationships) to build a core group of project participants, not just developers but other people whose talents, knowledge, and skills are necessary to create and distribute compelling products.
  • Following from the preceding point, the Mozilla project is motivated to port Firefox (and Mozilla-based products in general) to any hardware and operating system platform capable of running them; more platforms mean more users (or at least potential users) and (even more important) more developers (especially given that many "leading edge" developers use non-Windows platforms like Linux and OS X). In some cases the core Mozilla project participants support OS platforms directly (i.e., for Windows, Linux, and OS X); in other cases they encourage others to do this, and the project provides these others a basic level of support for their efforts (e.g., access to CVS, Bugzilla, etc.).
  • Finally, the Mozilla project is motivated to leverage existing standards and standards-based technologies wherever possible, and to do so in cooperation with others, including potential competitors. The project cannot do everything itself, and from its point of view the more people using standards-based technologies (even using competing products) the better the chance of widespread Firefox adoption: More developers using standards-based technologies means more compelling standards-based applications usable with Firefox, which both increases the value of Firefox to potential users and lowers the barriers to their switching to Firefox.


On what basis does Microsoft make decisions on where it should devote its energy and resources?


  • Microsoft's major priority is to gain and retain a dominant (ideally, a monopoly or near-monopoly) position in markets that are very large or likely to become so. Microsoft's economic engine is dependent on its ability to control the value network in a given market and generate ongoing high-margin revenue from certain participants in that network (e.g., PC vendors and enterprises in the operating systems market, and businesses of all sizes in the desktop office applications market).
  • Microsoft is most motivated to compete in markets where it exercises (or might be able to exercise) "bottom up" control, i.e., beginning with the underlying operating system or other base platform, and can subsequently leverage that control to achieve control at higher levels in the application stack and other points in the overall value network.


Asymmetric motivation and skills


Microsoft had "overshot" the needs of its perceived users and had no real reason to improve Internet Explorer further, especially since IE did not produce any revenue directly. On the other hand, the Mozilla project was serving a somewhat different set of users (as discussed in my post on the Firefox value network), and was motivated to keep improving its products, both incrementally and through the introduction of new products like Firefox and Thunderbird. Eventually the combination of good products, grass roots marketing, and Microsoft's inattention resulted in the "Firefox explosion".

That "under the radar" phase has now ended, and Microsoft is now motivated to try to counter the perceived competitive threat from Firefox and (to a lesser extent) other competing browsers such as Opera.


Co-opting the Web 2.0


Why would Microsoft care about Firefox, Opera, etc., given that IE is still by far the most dominant browser?


First, losing a significant (though still relatively small) amount of market share in any market damages the perception of Microsoft among investors, who have historically been willing to pay high prices for Microsoft shares based primarily on Microsoft's perceived ability to completely dominate any markets it chose to enter and subsequently build very high margin businesses in those markets.

Second, control of the browser market in particular is key for two major Microsoft initiatives, its move into the general web applications market and its upcoming rollout of Windows Vista (formerly Longhorn).

In the web consumer space Microsoft must provide compelling alternatives to existing web-based applications and services from Google, Yahoo, and others. One straightforward way to do this is for Microsoft to tightly integrate IE and Windows itself with Microsoft's web services, in an attempt to provide a user experience that is richer and more functional than that available from others. Success in this strategy depends on there being as many people as possible actually running IE, and in particular the most up-to-date IE versions. (Others could of course use the same Windows/IE features to enhance their own services, but then they would be dependent on Microsoft's APIs and data formats, with all that that implies.)

Microsoft also needs to persuade customers, including in particular enterprise customers, to move to Windows Vista and stay on the continuing Windows upgrade cycle. Here again new features in IE and Vista offer the promise of rich network-based applications based on new APIs and data formats (e.g., Avalon and XAML). Some of these applications will be developed by enterprise IT staffs, others will be developed by third parties such as ISVs and providers of web-based applications (particularly applications targeted at enterprise users), and of course key applications will be developed by Microsoft itself.


Microsoft's likely strategy is thus relatively straightforward, and leverages Microsoft's traditional strengths:


  • Enhance IE to match and (if possible) exceed Firefox in both feature set (e.g., tabbed browsing) and other attributes important to users such as ease of use and security, with the goal of countering the defection of Windows users to Firefox and other alternative browsers. This leverages Microsoft's traditional strengths in incrementally improving its products and effectively promoting them.
  • Use IE's end user features (e.g., integrated search) and developer features to promote and enhance use of Microsoft's own web-based services, with the goal of countering the growth of Microsoft's competitors in this space. This leverages Microsoft's traditional strengths in using control of a dominant platform to pursue competitive advantage.
  • Use new developer-oriented features of IE and Windows Vista to promote creation and adoption of new Microsoft-centric applications, particularly in the enterprise, with the goal of speeding adoption of Windows Vista and driving upgrade revenue for Windows and related applications (e.g., Office, Exchange, etc.). This leverages Microsoft's traditional strengths in supporting a robust community of developers and business partners.

The ultimate goal for Microsoft, as it was in "Web 1.0", is to co-opt new and potentially disruptive innovations associated with the web and web-based applications, and put them in the service of Microsoft's primarily Windows-centric business model.

What would be an appropriate response to this strategy? My full thoughts on that subject will have to wait until my next post; however I'll note here that in my opinion the best approach to creating such a strategy is one that takes into account the purpose, nature, and strengths of the Mozilla project, as opposed to simply trying to react to the actions of others, whether it be Microsoft or anyone else." (http://www.hecker.org/mozilla/asymmetric-competition)


Key Books to Read

Seeing What's Next: Using Theories of Innovation to Predict Industry Change. by Clayton M. Christensen et al. Harvard Business School Press, 2004