Busting out
Smart companies will let the technology bust do what the U.S. Justice
Department would never allow--clear the field of competition.
By Geoffrey Moore
January 15, 2003
The wonderful thing about a downturn is it teaches us who we really are. The grittiness
of the actual takes precedence over the elegance of the possible. And as we dig into the
actual, we find all kinds of opportunities we never saw before.
Consider the startups funded during the boom. Those that are surviving have
redefined themselves as specific fixes to particular customer problems. Thus LendX
(now called Determine Software), which began as a marketplace to buy and sell leases,
now sells software that helps companies recover lease expenses. Pixim, which was
marketing technology to disrupt the next generation of digital photography, now
pushes security--its technology happens to be good at catching bad guys. Allocity,
which was a storage company, now helps companies manage Microsoft Exchange, a
huge corporate challenge.
Even well-established Agilent Technologies has refocused its business. Instead of
emphasizing fancy new optical-networking technologies, it is concentrating on an area
in which real money can be made: helping telecom companies upgrade their wireless
networks to third-generation wireless technology. It's all about focus, to be sure, but it's
the customer's fingers that are twisting the lens.
Downturns also teach us a whole different way to approach competition. During a
boom, many successful companies navigate primarily by watching their competitors and
then heading off their attacks. Think Microsoft. Think Oracle. Think AOL Time Warner.
But in a downturn, the customer rules, not the competitor. Indeed, chasing the
competition is a great way to go out of business.
When you look at your competitor, like it or not, you see yourself. You do battle to gain
bragging rights in the industry. But bragging rights aren't likely to create value for
customers in a downturn. Better to let your competitors continue on their way. Let them
even "get ahead" of you, for they are getting ahead in a lemming's race that will put
them out of business.
Consider Cisco Systems. At the height of the boom there was a brief moment when its
market capitalization topped $600 billion, making it the most highly valued company in
the world. At that time its market cap was equal to the sum of its top four competitors. In
2001, its market cap had been cut in half but was equal to the sum of its top ten
competitors. Fast forward to today, and its market cap has been halved again, and yet
now it is equal to five times the sum of its top ten competitors. (my bolding, larry)
All Cisco had to do, in other words, is let the technology bust do what the U.S. Justice
Department would never let any company do--clear the field of viable competition. To
be sure, if the competition wanted, it could turn itself around. But the inertia in such
sectors is so powerful that this is much easier said than done.
The downturn's ultimate lesson is, what does not kill us defines us. For some time, we
have needed such a lesson for the tech sector. We had gotten unreal. Now we have a
chance to reclaim our reality. It is painful, but then getting fit always is.
GEOFFREY MOORE is chairman and founder of the Chasm Group and a venture
partner at Mohr, Davidow Ventures. He has authored four books, all published by
Harper Business: Crossing the Chasm (1991), Inside the Tornado (1995), The Gorilla
Game (1998), and his latest, Living on the Fault Line (2000). |
