<<Please point me to the page numbers of TRFM and/or a URL of Mauboussin's writing explaining that.>>
Mike - here are a few passages to get us started.
The effect of luck or timing…
Inside the Tornado, Page 69 – “Thus from the population seeking nomination, once the winning candidate has been identified, it is easy to see how it outstrips its fellow competitors quickly. But how does it get picked in the first place and not some other vendor destined to become a chimp? Simply put, it had the right market momentum and leadership position at the right time. The previous year it might have been someone else who was in the lead, and if the tornado had started that year, then that company would have been the Gorilla. In sum, although there are a number of things a company can do to increase its attractiveness as a Gorilla candidate, and still more things it can do to ensure it can meet the demands of a Gorilla-elect, there is still an element of timing and luck in the equation.
Frontiers of Strategy, Volume 2, Page 7 – “Path dependence occurs when positive feedback loops cause self-reinforcing patterns to emerge. These patterns are set by initial conditions and are often influenced by random or chance events – which means the outcome of such a process may be indeterminate.
How a tornado may form without a Gorilla…
Gorilla Game, Page 36 - Unfortunately, because the market is just taking off, there are no such standards, nor in the midst of hypergrowth is there time to deliberate upon them. So the market makes do with de facto standards, basing these on the product architecture of the market leading vendor.
Gorilla Game, Page 62 – While there is no such thing as a gorilla without a tornado, there are tornados without gorillas. These are mass markets that come into existence around non-proprietary standards.
(Note: see quote below where Moore continues with examples which include open proprietary architectures where the vendor could not maintain control. IMHO, this is an example where Moore is either loose or inconsistent in his definitions.)
Conversion of a game from primate to royalty structure…
Gorilla Game, Page 62 – The problem for an investor is, at the outset of a market’s formulation, as it heads into the tornado, it is not always clear whether or not any gorilla candidate will actually achieve the goal of architectural control. As a result, you can end up with investments in two different types of market leaders, both having the same market share, but having very different competitive advantage positions. To describe the difference, a parallel set of terms to gorilla, chimp, and monkey are needed. We have chosen king, prince, and serf.
Examples of how loss of control over OPAs could lead to shift from primate to royalty structure…
Gorilla Game, Page 62 – Fax machines, monitors, keyboards, disk drives, mice, DRAM memories, scanners, PCMCIA cards, modems – all either began as or developed into markets where no one vendor controls the technical standards.
Gorilla Game, Page 63 – Kings enjoy a number of gorilla-like benefits, including economies of scale, favorable distribution terms, enhanced access to customers and partners, and favorable public relations. But because they lack architectural control, and because switching costs are low, they cannot force their competitors onto the defensive the way Microsoft, Intel or Cisco can.
Potential gorilla losing control during tornado…
Inside the Tornado, Page 75 – The answer is that the market expects the gorilla company to not just excel but to dominate – indeed it is required to do so. If the gorilla shows weakness, if the market waivers in its confidence, if the third parties hedge their alliances, then the whole point of having a gorilla, which is to set and extend de facto standards as the market moves forward is undermined.
Inside the Tornado, Page 80 – What made the victory so startling was that HP's major competitor, Canon, was not only Japanese but also owned or shared in the rights to all the core technology! What made HP so successful in the tornado? 1. Just ship. 2. Extend distribution channels. 3. Drive to the next lower price point.
Inside the Tornado, Page 91 – Whatever product architecture you take into the tornado you must stick with for the duration regardless of its limitations. The fate of WordStar demonstrates the consequences.
Process of crying foul to derail a Gorilla Game…
Gorilla Game, Page 30 – The new technology’s success in the early market has attracted the attention of the established vendors, who have a vested interest in maintaining the status quo. They now unite to expel the intruder, sowing seeds of doubt about the new company’s financial viability and ridiculing the immaturity of its product and the incompleteness of its integration. If the innovator cannot secure a market position for itself relatively quickly, it will die in the chasm.
Gorilla Game, Page 36 – Vendors, of course are very much aware of this process, and very much aware of the consequences, so they do all kinds of marketing communications work to try and influence the outcome.
Gorilla Game, Page 64 – In an attempt to reassert architectural control, U.S. Robotics in 1997 has challenged the entire modem industry to a standards war over the future architecture of 56 KB modems, all in an effort to convert itself from king to gorilla. For now, it is enough to note that everyone else in the market is shocked and appalled that U.S. Robotics would even consider such a thing – which normally means they wish they had though of the idea first. |
