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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: JAPG who wrote (38930)	2/5/2001 9:13:37 PM
From: John Stichnoth	Read Replies (2) \| Respond to of 54805

Still pondering over the difference between the two terms. I'll try these out on the thread-- Network effect: The phenomenon surrounding development of a value chain, in which development in one area related to a product leads to further development of the product offering as a "whole product". E.g., a large installed customer base encourages greater software development activity for the product. Value chain: The sum of the parts, surrounding a core product, that serve to add value to the product. E.g., a large installed customer base makes the product more valuable to third party vendors. The significant development activity surrounding the product, especially by third parties, adds value in the eyes of the customer base. The value chain surrounding WIND is to date centered on the development side--since it is invisible to the user side, and would include (1) the depth of WIND's offering, (2) the depth of expertise outside WIND of developers who are familiar with their user interfaces in preference to other embedded OS development environments. (There is a parallel here to Oracle's hegemony among databases--prospective database engineers prefer to learn Oracle first, since that is where the most jobs are; it remains to be seen whether that will translate to a similar ramp in revenues for WIND, though); and (3) the number of products into which WIND is already designed (including the DSL dialer in my desktop, by the way). OPWV's value chain is different, and would include, (1) the breadth of their product offerings, and (2) the breadth of their "wins" among service providers. Investors in OPWV are dependent of the company having superior management, and thus able to execute better than competitors; theirs is much more of King-potential than Gorilla-potential. Since little third-party development appears to be occurring in support of WAP and the wireless gateways, that is still not a part of their value chain. If third party development begins to occur in any mass, it would be a huge step up for the whole segment, and would certainly signal a probable tornado growth well above what we have seen to date, and might include a significant proprietary element, signalling a Gorilla game rather than a royalty game. (Proposition: A company cannot be a gorilla, even with open proprietary standards, if no third parties develop around the standard) Cisco's value chain notably includes their value added resellers. My neighbor (in sales) moved this year from Siemens to a Cisco VAR. Both addressing the same market, Cisco is the winner in that transaction--they get an additional salesman for "free" to continue their growth; Siemens has to go out and hire just to stay even with what they did last year. And Lucent can't possibly compete in large chunks of their markets against these specialty VAR's. All of these value chains have developed because of the network effects phenomenon.