Co-Opetition - Adam M. Brandenburger [106]
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Here’s a summary of how you establish credibility for yourself and recognize it in others.
The Credibility Test
1. If you have the goods, put your money where your mouth is:
• Accept a pay-for-performance contract.
• Offer a guarantee.
• Give free trials.
• Advertise.
2. What you don’t do sends a signal, too.
3. Ask other people to demonstrate their credibility to you:
• Propose a pay-for-performance contract.
• Ask for a guarantee.
• Request a free trial.
2. Preserving the Fog
Once you’ve managed to convince people that you have the goods, now what? The next challenge is how to maintain this perception. You now have more to lose than gain if people should get new information that leads them to revise their view of your abilities. You have an incentive to prevent new information from coming out.
Hiding Information
We’ve already seen a little bit of why people might want to preserve a fog. An editor doesn’t want his judgment to be in doubt. If he can persuade the publisher to spend enough money promoting a book, the book isn’t given a chance to fail and the editor can’t be faulted for having acquired it in the first place. No one learns whether the book would have succeeded or failed in the absence of a big push. Recruiters have similar incentives to make their selections succeed and not have their judgments called into question.
Anytime you say yes to a project, you’ll be judged according to how well things turn out. Likewise, when you say no, you’ll also be judged, but only if someone else says yes.
E.T.—the Wrong Call In Hollywood, movie executives are known by their successes. For example, Jeff Katzenberg is famous for having developed Beauty and the Beast Aladdin, The Lion King, and other Disney hits. Robert Newmyer and Jeff Silver built a reputation for producing surprise hits such as sex, lies, and videotape and The Santa Clause.
Harder to gauge is how many good projects a movie executive has turned down. What were the missed opportunities? For the most part, Hollywood executives are masters at keeping this information hidden. They have nothing to gain and everything to lose by letting it out.
Hollywood mogul Frank Price has had many big successes. But he’ll be forever known as the person who gave away E.T. for $100,000. As the then-president of Columbia Pictures, Price owned the rights to both E.T. and Starman. His view was that there wasn’t space for two movies about extraterrestrials in one year. Price was right. But he made Starman and sold E.T. to Universal. Starman went on to gross $29 million, E.T. topped $400 million.14
The failure of Starman wasn’t the problem. No one bats a thousand. The problem was the stunning missed opportunity of E.T. Had E.T. never materialized, no one would have been the wiser. People already thought Price had good judgment, so he had nothing more to prove. But the astronomical success of E.T. proved that Price had made the wrong call.
Whenever you turn down a project, you have a reason to hope it never sees the light of day. Granted, if someone else picks up the project and fails, your decision is vindicated. But you seldom earn brownie points this way. When you turned down the project, you were probably given the benefit of the doubt, anyway. On the other hand, if someone picks up the project and makes a success of it, your judgment can now be faulted. Once you decide not to gamble on something, you have little to gain and much to lose from having people learn whether the bet would have paid off. You’re better off if the fog is preserved.
Following the Herd The fear of being proved wrong leads people to move in herds. The scene is a familiar one. First, all the pension funds buy IBM; then they all sell IBM.15 First, there’s a merger wave as every company scrambles to become