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Microsoft did not have first mover advantage. That advantage went to Netscape for the browser and to Sun for the networked computer. Still, Microsoft had overcome Apple’s first mover advantage in graphical user interfaces quite handily. A first mover advantage is only a competitive advantage if it can be defended. Unless patents protect the advantage, defending first mover advantage usually entails creating high switching costs for users or continuously innovating to make it impossible for the competitors to catch up.

Microsoft helped to lower the switching costs by making the Internet Explorer (IE) browser free to users. Anyone with a Microsoft operating system could download the browser anytime they were connected to the net. Microsoft used it’s dominance (legally or illegally –that is the question) to distribute IE with every new operating system, and since most new computers were delivered with Microsoft operating systems, this meant that most new computers were delivered with Internet Explorer. In a turn-about on first mover advantage, Microsoft even raised the costs of switching to Netscape by requiring manufacturers to preload IE with every computer they delivered with Windows on it. In order to switch to Netscape, users had to either remove or ignore IE and install Netscape. This clearly (legally or illegally –that is the question) raised the switching costs and encouraged use of IE.

Another way to lower switching costs from Netscape was to make IE a high quality browser that could do everything that Netscape could do.

Unbiased observers generally feel that Microsoft did an excellent job at that. IE usually released support for standards that came sooner and performed better. As Java emerged as a potential standard, Microsoft both licensed Java from Sun and released a Java Virtual Machine that was at least as powerful as the competitors.

Where Microsoft ran afoul of competitors was in its propensity for

“extending” standards with proprietary extensions that often took advantage of Windows specific functionality. This infuriated Sun, Netscape and other competitors since it often meant that developers would take advantage of these goodies and then tie their applications to Windows only environment in direct contradiction to the cross platform intent of the originators of the technologies.

3.2.1 Fear:

Businesses can feel fear for many reasons, including of all of the other items on this list, especially including:

ignorance, brand identity, cannibalization,

channel conflict, and so on.

Fear can be both rational and irrational. There are lots of things to fear when a company is about to change it’s business model and this is even worse when the outcome is far from certain. But, there is also

something about the Internet, that generates fears, particularly in those who matured before it existed.

Many executives have seen their colleagues careers ended and/or shortened by either denial or missteps in their Internet strategy. They are caught between the frying pan and the fire. If they try to sit it out, they risk being labeled “old guard.” If they jump in with both feet, they risk making a horrible mistake. It should be no surprise that some executives chose retirement over these alternatives.

For those executives that have worked in a hierarchical institution for most of their careers, the rise of the internet has broken down the perquisites of rank. Rank means nothing when technology discussions start! Technology is the great leveler that can favor the entry level employee over the long experienced executive.

3.2.2 Ignorance:

Ignorance is often the other face of fear. The generation of business leaders now in power did not come of age in the Internet generation.

They had to learn! And they often learned from their juniors and their children. Ignorance combined with fear often leads to bizarre and misguided efforts.

3.2.3 Denial:

Where ignorance and fear are found, denial cannot be far behind.

Denial is a timeless human strategy, and is often a successful defense mechanism against faddishness. A healthy dose of skepticism is a good thing for most executives. The hard part is knowing when skepticism ends and denial sets in. Skepticism mandates that the skeptic pay attention to the phenomenon but continue to test it in every way possible. Denial prefers to “avert one’s eyes” from the phenomenon rather than to have to deal with it. The skeptic is anxious to challenge the assertions of the “true believers.” Those in denial really don’t want to engage at that level.

Denial usually leads to delay and that often leads to managing from behind. As we have seen there are special challenges for those who are slow to “get it.” It is not impossible to be a fast follower, but you had better be pretty fast and a pretty good follower. Fall too far behind or let too many organizations get in front of you and recovery may not be possible.

3.2.4 Culture:

Culture can be either an obstacle to change or an enabler of change. It depends upon the particular culture of the organization. In the transportation industry change is a slower event.

Computing has also established itself as an element of culture in corporations and indifferent geographic regions. It was used by secretaries for Word Processing, and by junior accountants and bookkeepers for Accounting. Armies of semi skilled and often lowly paid workers were classified as data entry workers. In fact, a computer on your desk was often a sign of LOWER status. This has changed rapidly and severely in Nigeria. What self-respecting young executive would want to be without her Palm Pilot, cell phone, or laptop? In many circles, technology has become a badge of honor, but that is not true everywhere.

3.2.5 Bureaucracy:

Sometimes it is just the usual corporate inertia, characteristic of large bureaucracies, that is an obstacle to change. If you wanted to do something innovative, it would have taken far more bureaucratic wrangling than most executives would be willing to undertake. This often meant that innovation could only be done by those who were given the official job to innovate. History has shown that large bureaucracies are very bad at setting directions for innovation. Bureaucracy is the enemy of innovation.

3.2.6 Cannibalization:

One of the very toughest management decisions is the decision to do something that might take away sales and market from a successful product or service. Companies are loath to compete with themselves, and text books are full of stories about companies that would rather not, and then lived to regret that decision. As we saw in the section on

“Strategy,” many companies are vulnerable to “disruptive technologies”

that may be cheaper, simpler, and even less functional, but that can do the job for the customer.

One of the most important cases came when AMD and Cyrix introduced less costly chips for consumer and low cost business computers. They could not rival the power of the Pentium –at first. But they quickly moved into the low cost market and then began to drive improved performance into the more profitable sectors of computing. Ever the

paranoid, Intel countered with the Intel Celeron and used their awesome power to produce at scale and low cost to drive the prices down and make things uncomfortable for the competitors.

3.2.7 Channel conflict: If your business depends upon a channel for getting product to the customer, then any change to the business models means that you must consider the effect on the channel. If you won the channel, this is an easier thing to accomplish. If not, you have to be careful.

Examples of channel conflict abound. Dell Pioneered a direct aisles model that was far less expensive and far more responsive to customers.

When competitors such as Compaq tried to respond, they ran head on into their channel. Their dilemma was that if they competed directly with the channel, the channel would boycott Compaq and damage their revenue stream. If they did not compete with the channel, Dell would eat their lunch. Dell ate their lunch.

Automobile sales are a very special case. Independent automobile dealers have a long history as the channel, and possess great political and legal clout.

3.2.8 Brand Protection:

Brand identity can be a powerful asset for the established enterprise, but it can also be an obstacle to success in e-Business. Brand identity must be protected. As we saw with Victoria’s Secret, they had a reputation for a high quality visual experience for the purchasers. They could not afford to irritate the customer by providing less on the web. It was quite a challenge! In fact is was a challenge that they first failed, but

eventually overcame.