December 10th, 2004

Fight Goliath

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One of the common phrase we hear often in tech business is ‘Competitive Advantage’ which usually means some sort of technology/patents and/or cheaper pricing, perhaps due to new disruptive technology. Many worship the ‘disruptive technology’ story and how it would kill the market goliath eventually.

But I’m convienced we’re mixing up the cause-and-effect. A goliath in your industry have the strength to build whatever technology you have and have bigger buying power to negiotate better pricing and deeper pocket to go into a price war. It is a war you cannot win in the long run if they put their heart to it.The key in fighting a goliath is hence not ‘Competitive Advantage’ but rather how to stall your competitors in the market place long enough for you to crave your niche. Having a key patent and preventing them from entering the market is one of the cause. Having a cheaper pricing so that competitors don’t move due to fear of canniblization is another cause. While these sound like a controdiction to what I said above, the subtle difference is cause-and-effect – it is only a cause, not the effect.

The ultimate result you want is to ‘stall your market goliath’ or if possible paralyze it. And this may have nothing to do with disruptive/better technology or cheaper price.

Case in point: Starhub Mobile kicks Singtel Mobile butts in the last 6 months with its interesting mobile plan1 which provides free IDD calls to several countries. In reality, if you calculate the plans carefully, it aren’t cheaper by a lot (due to the high mobile charges in the first place). However, it does give a perspection of being cheaper to the consumer.

The real kicker is that Singtel Mobile is totally unable to response to this tactic because the Mobile division is different from the IDD division. For Singtel Mobile to provide a similar plan requires collobration across two huge and powerful division, where one gains is another lost.

Notice this tactic has nothing to do with any disruptive technology. It is just looking at your competitor organization chart and then do a simple tweak in product and bingo. And since large companies general have cross division politics, you are able to stall them to gain the time advantage.

It is also important to note that the same strategy would not work if it is a direct one to one competiton. For example, when Pacific Internet offers a cheaper broadband plan, Singtel Magix reacts and match it almost the next day.

This is why Microsoft is so scary because while they are large, they can be very agile, getting cross division to work together, if they want to. Regardless what ‘Competitive Advantage’ you have, in the long run, they will win out. Netscape learn this the hard way and very soon Google too.

I also wonder how long companies like Vonage and GlobalVoice who competes by ‘I-am-cheaper’ is substainable. Luckily, the ILEC aren’t well-known for their agility so maybe they stand a chance :-)

1 A friend told me Starhub Mobile hired a key executive from Singtel who come up with the idea. Smart guy!

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