CONTEMPLATING NETSCAPE'S FUNERAL
ALSOP'S FABLES
STEWART ALSOP
REPORTER ASSOCIATE ALICIA HILLS MOORE
Netscape has only itself to blame. Just remember that a year or two from now, when the funeral is held for the once promising Internet startup. By then, the line on
Netscape will be that it is the latest victim of Microsoft's rapacious and insidious competitive techniques, its hardball approach to software. That will not be true.
Lots of folks, especially investors, still believe Netscape will survive the Microsoft onslaught. The company is valued at about $3 billion on second-quarter sales of
$75 million and profits of $906,000. While down from last December's stratospheric valuation of some $7 billion, that valuation is still an indication of investor
confidence.
Netscape, after all, is supposed to prove that Microsoft can be outrun. The idea is that a company exploiting a technology that Microsoft is slow to recognize can
leapfrog the leader. Netscape's technology is the World Wide Web, a big phenomenon indeed. Netscape certainly has looked and felt like that one smart
company.
Netscape knows its technology. It provides customers with products they are willing to pay for even when offered similar Microsoft products for free. Netscape
has built strong relationships with a long list of major corporate customers, many of whom think the industry can survive only if Microsoft has real competition.
Netscape has really smart nerds who have so far shown that they can keep up with the tons of very smart nerds Microsoft has thrown at this Internet problem.
And Netscape is expert at marketing on the Web.
But computer industry insiders now believe that Netscape is dead meat. Worse, they are beginning to believe it is just not possible, even for the smartest and best
financed companies, to compete with Microsoft. (For an in-depth analysis of this battle, see Brent Schlender's feature story.)
There is a way that Netscape could survive--but the company's future rests in the hands of CEO Jim Barksdale, and that may be a problem. Barksdale hasn't
worked in the industry since the 1970s, when he was in sales at IBM. He came to Netscape in 1995 after jobs as CEO of AT&T Wireless Services (formerly
McCaw Cellular) and, before that, COO of Federal Express. He clearly deserves his reputation as a top executive and a literate and engaging human being. But he
arrived at Netscape with a hole in his resume: He had never competed in an industry like today's computer business, where alliances with other
companies--including competitors--are often more important than good relationships with customers.
To fend off Microsoft, Barksdale must accomplish three objectives in the next six months:
No. 1: Barksdale must learn to engage the computer industry. Imagine this: Netscape is perceived as arrogant and out of touch with the industry! Little
Netscape, barely two years old and just about one-thirtieth the size of Microsoft, has managed to position itself as the self-interested standard-setter of the World
Wide Web. In other words, it has enabled a dominant company with around $7 billion in cash to position itself as underdog. Of course, this adds to Microsoft's
competitive mystique: The company continues to form productive relationships with Webmasters, customers, and rival software developers, even though all those
people know they're dealing with a voracious competitor that never leaves an extra dime on the table.
Barksdale's failure to position his company as the likable underdog can only be attributed to lack of experience. At McCaw and FedEx, spending time with
customers was the key to establishing a foundation for growth. In the computer industry, on the other hand, customers are important but not critical. They jump
from vendor to vendor without compunction. Relationships with competitors are often a more important indicator of success.
Indeed, Netscape's early success was due in part to the fact that virtually every Website you visited proudly announced that it was tuned to work with Netscape
Navigator. Now many sites proclaim that they work with both Netscape and Microsoft browsers--and some favor Microsoft's. Netscape alleges that Microsoft
has been making "clandestine payments" to get support for some Internet products. Nobody really cares whether that's true--the point is that many key people
now think Microsoft has the more interesting browser.
No. 2: Barksdale must focus on execution. To justify its positioning as a leading company on the Web, Netscape must compete in every Internet product area.
It must be able to deliver a major new browser every six months and a new Web server every year; it must develop a complete suite of Web servers for security,
commerce, mail, and other functions.
So far, Netscape has delivered browsers and servers at about the same rate as Microsoft, even though Microsoft has perhaps ten times as many people working
on such products. But that parity may not last. Netscape seems to be falling behind. Just last month, Microsoft delivered the third major revision of its Internet
Explorer a week before Netscape got out the third version of Navigator. That's largely symbolic, but it hints at a truth--in just two years Microsoft has eliminated
Netscape's lead in browser design.
Many people would conclude that Netscape is pursuing too many goals to reach any one. Instead, the fact is that Barksdale is too nice to Netscape's management
team. He needs ferocious technical managers with an obsessive focus on delivering great products on time, people who live and sleep the problem of beating
Microsoft's engineers.
Unfortunately, his team is more a mixed bag. The pool available to Netscape consists mostly of Silicon Valley talent exiting Apple Computer and Silicon Graphics,
neither of which is exactly famous for its ruthless development environment, and both of which have squandered major technical advantages over Microsoft. Some
of the sloppy development that has plagued those organizations has begun to surface at Netscape.
Again, this is a mark of Barksdale's inexperience at managing a computer company, where failing to recognize the difference between a great technical manager
and a merely good one is often a fatal error.
No. 3: Barksdale must choose his battles more carefully. Even if it does have to compete on several fronts, Netscape is overextended. Recently, for
instance, it announced it would spin out a company, Navio Communications, to promote the development of consumer devices based on Netscape Navigator. If
Netscape believes Navigator can serve as the basis of a whole set of devices, it clearly sees Navigator as a competitor to existing operating systems, especially
Windows 95. This is a naive and dangerous belief. In operating systems, Microsoft has steamrolled everyone, including IBM--still a $72-billion-a-year worldwide
power--and Apple. For Netscape to compete in operating systems is dumb, especially when it still has a chance to beat Microsoft with servers and with browsers
that are, well, just browsers.
More important, Netscape has launched a tactical effort to get the U.S. Department of Justice to once again investigate Microsoft's competitive tactics. This is a
serious issue, and the government shouldn't need Netscape's prodding. But seeking justice in Washington will drain resources from what should be Netscape's
primary focus--making better products than Microsoft.
The future is in Jim Barksdale's hands. He still can save Netscape if he ruthlessly focuses it on the correct issues. If he fails to get the company into competitive trim
so that it can fend off Microsoft's attempt to dominate the Internet, we will be stuck with Microsoft as the only company in charge of technology in our society. No
pressure, Jim. |
