If you talked to almost anybody at Intel, they will tell you that Intel faced pricing pressures as a result of AMD. There was no discontinuous innovation that caused it. Before AMD was succesfull in putting a competitive product in the market, Intel was not pressed to upgrade their processors. In fact they would often withhold faster, better chips to milk the existing product line. Not so any more.
This subject has made me run to the FM. The manual refers to exactly this situation with Intel and AMD. From page 75, 1st paragraph:
"It does not free (Intel), however, from monkey competition. AMD and National Semiconductor, with its acquisition of Cyrix, both have successful cloning efforts under way. These challenge Intel's margins and force it to compete more like a king and less like a gorilla than it would like to..."
That brings up an interesting question: Let's assume that both Mike and Piyush are correct and that the combination of discontinuous innovations and aggressive attacks by monkeys are changing the fundamental nature of the game. Is it possible for a gorilla, through a combination of the technological landscape changing and effective primate attacks, to 'devolve' into a king?
The manual continues:
"However, it is all a matter of degree. The company still has massive market share advantage, and still secures premium margins for its latest products."
The sentence in bold seems to be an odd statement. The difference between a gorilla and a king, is NOT a matter of degree, in my understanding. Unless I'm misinterpreting, the authors seem to be waffling a little on this.
Intel's success, especially in their response to AMD, seems to rely at least in part on brilliant execution and effective branding. That sounds a bit more like royalty than a primate.
Which leads me to an idea that isn't very well thought out. Is it possible that my above statement isn't correct ("The difference between a gorilla and a king, is NOT a matter of degree), and that in fact in some instances the line between gorilla and king is nebulous? I'm thinking of Intel, but also of JDSU. What if head start, great execution and sheer prowess could create a king (JDSU) that has the same attributes as a gorilla, just achieved via different means? With my still-limited understanding of JDSU's competitive advantage, it seems they've come close to creating a sort-of 'virtual gorilla game'. That is, by taking a complex technology and doing it so much better, with such a huge head start and advantage in intellectual muscle that they control a market?
I'll put it a different way: (and this started as a response about Intel, and suddenly I've become a JDSU apologist...oh well) The manual says this:
The power of the gorilla is based on its control over a value chain.
The authors go on to describe how this comes about - proprietary open architecture along with high switching costs. But what if there is another means to the same end of control over the value chain? If a company controls the value chain, no matter how they achieve that end, would that qualify them for gorilla status? Granted, they haven't done it by the guidelines set forth by the authors. (But it seems that neither have the Q or Gemstar, who've both used patent portfolios as a key to achieve gorillahood.)
It's late and this has sort of wandered all over the place, and I'm probably wrong in so many ways that no one will know where to start in critiquing this post. But what the heck, it's been a couple of months since my last post here, and its the weekend anyway, so I may as well come back with a bang and put my foot directly in my esophagus.
Sam Johnson |
