Is it alive? LO16504

RMTomasko (
Mon, 12 Jan 1998 19:43:46 EST

Replying to LO16488 --

In LO16488 T.J. Elliott wrote:

>I wonder. Is a bad end for MS preordained? By hubris? By inattention to
>the environment in ways other than finances, regulation, etc.... I'd like to
>if anyone is reading Gibbon or Heller At MS?

I'm not sure what people at Microsoft are reading, but I think it's more
likely than not that Microsoft will eventually have a less dominant
position in its markets.

In a book I wrote two years ago ("Go For Growth" published by John Wiley)
I characterized Microsoft as a Rule Maker - a company that excels at
determining the basis of competition by controlling the behavior of many
of those in its business environment. It has a lot in common with many
current, and former Rule Makers such as IBM, Intel, Coca-Cola, Disney,
McKinsey, AT&T, and Kodak.

In their prime Rule Makers are the dominant players in their industries.
They set the standards for others in their ecosystem. They make money
through the fly-wheel effect of increasing returns. They are often seen
as an elite, self-contained, a-breed-apart in their industries. One-time
Rule Makers in the travel industry included Pan Am Airways, Pennsylvania
RR, Wagon-Lits, Cunard, Pullman and the Railway Express Agency. Pre-AT&T,
Communications in the US were once dominated by the Rule Maker, Western

Looking at the histories of ex-Rule Makers, most seem to eventually
succumb to threats from abrupt shifts in the surrounding environment, more
adaptive competitors, and self inflicted wounds. Usually the dangers from
inside are the most damaging - the learning inabilities that result from
smugness, hubris, and paranoia-driven over control. This triple threat
also did in the dinosaurs of pre history.

What can Rule Makers do to lengthen their life cycle? Here are a couple
of thoughts: share the wealth, go into markets where others are not,
cultivate humility (believe you are great because of what you do, rather
than who you are), become really dangerous by taking regular
risks/stumbling/and learning from it all, avoid valuing loyalty over
competence, loosen up on the socialization, find honest mirrors, get into
markets where you aren't number one, and manage people flow to continually
enrich the gene pool with outsiders.

Bob Tomasko


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