This week several seemingly unrelated news articles are actually talking about the same thing: a fundamental pattern of competition that reveals the underpinnings between Google’s and Microsoft’s emerging battle in online software.
The November 2008 edition of FastCompany quotes Sridhar Vembu, CEO of AdventNet, explaining his analysis of an emerging battle between Microsoft and Google in one business software business (i.e., Google Docs vs. Microsoft Live’s web-based office programs). Vembu says, "We simply don’t believe Google has the rational business incentive to go deep into the business/IT software category." His analysis shows that Google makes more profit per employee from its current services than it would likely make revenue per employee in business software.
So why is Google supporting Google Docs (the web-based word processing and spreadsheet software that is attempting to compete directly with Microsoft Office)? Vembu hypothesizes, "It is in it to put Microsoft on the defensive on its home turf, so that Microsoft’s offensive capability on the Internet is diminished." (see "Microsoft Puts Its Head in the Cloud" by Michael Fitzgerald)
In other words, Google is not attacking Microsoft Office because doing so would increase Google’s profitability, but rather it is doing so to damage Microsoft’s focus and capability to attack the businesses Google really cares about.
This exact pattern was first documented in 354 BC when the Chinese state of Wei laid siege to its enemy, the state of Zhao. Zhao was too weak to ward off its aggressor so it asked for help from a neighboring state, Chi.
Now Chi faced a critical strategic choice. It could make the obvious next move by supporting its ally with reinforcements. Or it could take a less-orthodox approach, one that Google seems be adopting against Microsoft.
Chi chose the less-orthodox option, and instead of supporting its ally directly, it led an assault on the attacker’s, Wei’s, home turf. This move forced the attacker into a no-win situation. The attacking army had left its home exposed as it led its army toward Zhao. It now had to decide: should it continue its campaign and risk losing its home or should it return home to protect its women and children?
Naturally Zhao called off its attack and returned home to defend itself.
Chi’s attack never actually needed to happen. It achieved its goal – saving Zhao – without requiring even the bending of a bow. This is what I mean by "strategic innovation" — doing something that forces your competitors to fall in on themselves and that removes resistance and creates an opening in which you can grow uncontested.
This is the same strategic maneuver that enabled Richard Branson to found the first U.K. airline to survive against British Airways. And decades ago Goodyear used the same move to protect its home turf, the U.S., against an attack by Michelin Tires.
To apply the strategy innovation Google is attempting against Microsoft and to benefit from this 2,400-year-old pattern of competition, ask yourself two questions:
• Where is your competitor’s home turf?
• Is there an inexpensive attack you could launch against this home turf to force them onto the defensive?
These two questions could put into play one of the most powerful patterns of strategic innovation. This is the same pattern that has lions fight in pairs (they can thereby fluster their opponents). This is the same pattern that led to Virgin Atlantic Airways, the survival of Goodyear, and the disruption of numerous once-dominant firms.
Of course this works best when the person you wish to innovate against does not fully calculate the end outcome of its evolution. I think, in Google’s case, Microsoft knows what is happening. Microsoft has, after all, been playing such moves for decades.