Eric et al.,
dribbling out bits of the new book will not make it easier to comprehend, because the bits will inevitably appear out of context. In the book, the list I copied is placed there simply to demonstrate that there have been several different discontinuous technological changes that have created new value chains; it is not the prelude to extended discussion of any of them. There is no real discussion of the wireless sector, and "gorilla leader" is not a separate term (it's probably just a sloppy combination of gorilla and market leader). There is nothing in the new book remotely comparable to the extended case studies in the Gorilla Game, although there are some occasional off-hand comments such as the following:
"...the super grand prize bonanza of tornado market development...[is] gaining value-chain power over the other vendors in the value chain. As noted, this occurs when a single vendor has monopoly control of a crucial element in the value chain, the way Microsoft and Intel each do for the personal computer, the way Cisco does for the Internet, the way Qualcomm appears to do for the future of wireless telephony." (pp. 169-70)
Also, Mike and BB please note, there's this:
"Throughout the 1990s, as value chains became more visibly important, supply-chain planning became a hot new category in enterprise software. Two companies, i2 and Manugistics, were the leaders in this category. Manugistics's customer base, however, was centered in consumer goods, whereas i2's was based in high tech. When the category took off, high tech adopted it much more aggressively, and thus i2's revenues skyrocketed past Manugistics's. It thus became established as the gorilla in the category, while its competitor lost its way, a victim, among other things, of market category GAP." (p. 130)
But see also:
"Amazon is clearly a retail gorilla of some sort" (p. 84)
On gorilla gaming in general, there's a short summary of the basics of the game in a middle chapter, but remember that this book (like Chasm and Tornado) is directed at businesses, not investors. One final tidbit and then no more until my book report.
"The single most powerful form of value-chain advantage occurs when one company gains proprietary architectural control over the future specifications of an entire end-to-end solution and thus over all the other members in its value chain. IBM gained this level of control over the main-frame server market and its AS/400 minicomputer market. It had it but lost it in the PC market, where Microsoft and Intel eventually came out the big winners. Today Cisco has this kind of control over the core infrastructure build-out of the Internet. We call all such companies gorillas.
"A gorilla company owns a proprietary technology that has become the de facto standard for its marketplace. no other company has the right to modify this technology going forward. As such, when new releases of its technology comes out, all the other partners in the value chain mjust adjust their forthcoming offers to maintain compatibility. This gives the gorilla enormous power to manipulate the system to its own advantage, punishing certain companies through deliberately introducing incompatibilities to stifle their new offers, rewarding others by deliberately designing them into the new standard. Over time, every company in the value chain becomes subordinated to the gorilla, an increasing share of the profit margins from the category migrate to the gorilla, and short of seceding from the market or garnering regulatory intervention, there is nothing that anybody can do about it.
"It should not be surprising, therefore, that the shareholder value of gorillas is huge. Their GAPs are tall because:
--They have no direct competition (the only market-acceptable solution is the one that is proprietary to them) so their price margins remain high.
--By manipulating the standards, they can migrate all the high-value-adding functions into their portion of the whole product and all the low-value-adding functions into one or another partner's piece, thereby further improving their margins.
At the same time, gorilla CAPs are long because:
--The market cannot find a substitute for them, and thus their competitive advantage period ends up being equivalent to the CAP for the entire category.
--Despite resenting them, their partners actually work to ensure they stay in power because the entire value chain depends upon them being able to continue to make the market from which each member makes its living.
Thus if your company has even a slight chance of becoming a gorilla, this must be an obsessive focus of the executive team. At the same time, however, executives must acknowledge this to be a low-probability event. There have been only a handful of gorillas in the history of high tech, and defenses against new ones emerging have never been stronger or more prevalent. To understand how one might become the next gorilla, then, one first has to appreciate what the market is doing to prevent that outcome...." (pp. 117-9)
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