Co-Opetition - Adam M. Brandenburger [54]
IBM reckoned that if Intel would no longer have to create its own competition, it would have to create some competition for Intel. In a partnership with Apple and Motorola, IBM created its own competitor chip to Intel, the Power PC chip.
Bringing in Competitors
1. License your technology both to make money and to avoid complacency.
2. Create second sources to encourage buyers to adopt your technology.
3. Do it yourself: promote internal competition across teams.
That’s enough on bringing in more competitors. Most of the time, companies don’t complain that they face too few competitors; they think they face too many. Sometimes they even look for ways to have a little less company.
Derailing the Competition Historian Stephen Goddard tells the story of how cars replaced trolleys.34 In the early days of the car, the 1920s and ’30s, Detroit was having trouble breaking into the urban market. In suburban and rural areas, cars and buses had caught on, but downtown the electric trolley was an all-too-effective competitor. It was cheap and convenient. Even worse, trolleys literally stood in the way of the automobile, their tracks taking up the middle of the road.
General Motors, together with Firestone, Mack Trucks, Phillips Petroleum, and Standard Oil, decided to take control. They turned to one Roy Fitzgerald and his four brothers to set up the Range Rapid Transit Company. The mission of this company was to go around the country, buy up local trolley franchises, and shut them down. It was a little more subtle than that, but not much. In towns ranging from Montgomery, Alabama, to Los Angeles, Fitzgerald bought the franchise, took down the electric transmission lines, removed the trolley track, repaved the streets, and junked the electric cars. The deal with the city was that Fitzgerald would replace trolley service with buses. Of course, this was only an intermediate step in moving people toward cars.
Although effective, the strategy was also highly illegal. It was a clear violation of the Sherman Act. The courts fined GM and its coconspirators $5,000 each; for his role, Roy Fitzgerald was fined $1.
So a mere slap on the wrist for GM and its fellow conspirators. Today the U.S. courts take a much more serious view of antitrust violations. But there are some circumstances—a declining industry, for example—in which it’s both appropriate and legal to acquire competitors in order to rationalize industry capacity.35
When he took over as CEO of defense contractor General Dynamics in 1991, William Anders saw his mission as finding a way to rationalize the company’s businesses in light of the defense cutbacks following the end of the cold war. As a former U.S. Air Force fighter pilot and Apollo 8 astronaut, Anders held the company’s F-16 fighter jet program near and dear to his heart. But with Lockheed also in the fighter business, there was one player too many. Anders tried on more than one occasion to buy Lockheed’s F-22 fighter jet program and bring it under his wing. But Lockheed wouldn’t sell.
Anders realized that if he couldn’t buy out his competitor, he might have to let his competitor buy him out. One of them had to go. If Lockheed wouldn’t sell, perhaps it would buy. Although Anders would have preferred to have General Dynamics acquire Lockheed’s fighter program than vice versa, he bit the bullet and sold the F-16 business to Lockheed.
3. Changing the Players
Before you enter a game, assess your added value. If you have a high added value, you’ll make money in the game; so go ahead and play. But if you don’t have much added value, you won’t be able to make much money in the game. What then?
Even if you can’t make money in a game, you may still be able to make money by changing the game. Ask Cicero’s question: Cui bono? Figure out who stands to gain from your entry. Those