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Can You Compete On Internet Time?

Two leading business-school professors explore what the battle between Netscape and Microsoft means for the rest of us — and manage to deliver substance, rather than subpoenas.

Book: Competing on Internet Time: Lessons from Netscape and its Battle with Microsoft
Authors: Michael A. Cusumano and David B. Yoffie
Publisher: Free Press
Price: $26

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The epic battle between Netscape and Microsoft means different things to different people. In Washington, it’s a legal laboratory for the future of antitrust policy. On the Net, it’s the world’s most closely watched cybersoap. But for Michael A. Cusumano and David B. Yoffie, the coauthors of “Competing on Internet Time,” it’s a case study on the future of business — a battle that’s produced lots of great software, more than a few fortunes, and plenty of rich clues about the logic of competition in the new economy.

The book explores the successes and setbacks of Netscape, the Web’s first real company — and it explains how Microsoft, a once-invulnerable giant, lost ground to the fast-moving upstart and then battled back. The book itself is almost as surprising as Netscape’s out-of-nowhere rise to power. It’s a rarity: a serious book by serious professors that is timely, engaging, and fun to read. (The book is so serious that it is playing a role in the Justice Department’s antitrust suit against Microsoft: The company has subpoenaed the authors’ research notes and interview tapes.)

What’s not surprising is that the book is smart. Cusumano, a professor at MIT’s Sloan School of Management, knows how Microsoft competes: He’s a coauthor of “Microsoft Secrets: How the World’s Most Powerful Software Company Creates Technology, Shapes Markets, and Manages People” (Free Press, 1995). Yoffie, a professor at Harvard Business School, is a member of the board at Intel and the editor of “Competing in the Age of Digital Convergence” (Harvard Business School Press, 1997).

Cusumano and Yoffie build their book around reflections by more than 40 Netscape executives, managers, and engineers. There’s Marc Andreessen, of course, the boy wonder behind Mosaic, the first Web browser for the masses. There’s Jim Barksdale, the no-nonsense executive who held top jobs at FedEx and McCaw Cellular before he became the startup’s designated adult. And there are coders and testers — people whom you don’t see on “Moneyline” but who do real work.

Cusumano and Yoffie used their access to those people to probe some basic questions: How does Netscape set strategy and manage product development? How does its approach compare with the “Microsoft Way”? And what do these issues have to do with the rest of us? Here are some of the authors’ answers.

Your company may be small, but it’s a big world out there.

Early on, Netscape was a master at compensating for its lack of internal resources by tapping external resources. Its original decision to give away its Web browser turned millions of Net users into a “virtual testing organization.”

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Andreessen is emphatic about the advantages of that model: “Kick the product out the door as quickly as possible,” he argues. Why is faster better? The sooner software is out the door — and on the Web — the sooner Netscape’s developers can start processing the feedback. Netscape’s engineers say that they usually identify a program’s major bugs within six hours of its release — compared with the six-week beta cycle that is typical of packaged software.

Size matters — but not the way you think it does.

The big strategic insight in the book is what Cusumano and Yoffie call “judo strategy.” It’s suicide to go head-to-head against a big company, because a smaller company can’t compete on clout. But if you can create a field on which speed and flexibility count — then you can turn your opponent’s size into a point of vulnerability.

That’s why Netscape was able to mount itits inial challenge to Microsoft, whose source of strength was (and is) its dominance of the desktop. Microsoft’s commitment to Windows allowed Netscape to position Navigator as a “cross-platform” alternative. And since Microsoft’s business model relied on coaxing users into regular upgrades of Windows, the company had no incentive to develop its browser for older versions of its operating system. Netscape was in the odd but profitable position of doing better than Microsoft at serving the majority of Microsoft’s customers — because those customers were still running Windows 3.1 or DOS. Over time, of course, the corporate heavyweight learned some judo as well — and Netscape learned some rough lessons about sustaining a counterattack.

Internet time doesn’t last forever.

Lots of companies have lots to learn from the rise of Netscape — no matter how its battle with Microsoft ends. But Cusumano and Yoffie remind us that we don’t live on “Internet time” all the time. Faster may be better for a while. But ultimately, better is better still.

Microsoft’s Steve Ballmer says that his company spends 75% of its time on testing, and that it usually employs one quality-assurance person for every developer on its staff. “At some point,” Cusumano and Yoffie argue, “companies must invest as much in improving product architectures, testing, and process control as they do in generating new features, sales, and additions to the product portfolio.”

That’s the point at which a startup grows up — when it figures out whether it can maintain the can-do spirit that gave it birth, while also instilling enough discipline to meet the expectations of its market.

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Sidebar: Cheat Sheet

If you’re competing on Internet time, you may not have time to read this book. Here’s some brain food for your next beer bust.

Best Example of Internet Time: It took Netscape (“one of the fastest growing startups ever”) slightly more than three years to exceed annual sales of $500 million. It took Microsoft almost 14 years to reach that plateau.

The New FAQs of Life: Between 1993 and 1998, Web commerce grew from next to nothing to become a $22 billion business.

Most Memorable One-Liner: “By the middle of the next decade, today’s Internet will feel like an old black and white television without a remote.”

Best New Buzzword: Judo strategy: rapid movement into new markets; extreme flexibility; and leveraging the weight of your competitors against them.

Best Barksdale-ism: “If Microsoft is a shark, we strive to be a bear and make sure the battle takes place not in the ocean but in the jungle.”

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Most Telling Job Description: “Defender of the Faith” — found on the business card of Michael Toy, a Netscape engineering manager.

Crystal Ball: Netscape may lose the browser war. But that outcome won’t necessarily signal the company’s demise.

Sidebar: FC Recommends

Big Picture: “The Future and Its Enemies: The Growing Conflict Over Creativity, Enterprise, and Progress” by Virginia Postrel (Free Press, 1998).

“We hate not knowing the future,” writes Postrel, the talented and provocative editor of Reason magazine. That aversion makes for some strange bedfellows: reactionaries who prefer to shut down what they can’t control, and technocrats who want to plan the future. There’s a better way: a spirit of experimentation. That spirit is everywhere — from Cambodian-owned doughnut shops in California to the culture at Southwest Airlines.

Best Practice: “Net Future: The 7 Cyber Trends That Will Drive Your Business, Create New Wealth, and Define Your Future” by Chuck Martin (McGraw-Hill, 1998).

Martin, the founder of Interactive Age magazine, breaks down all of the major trends now driving the “Netting” of the value chain. The book is worth picking up for Chapter 9 alone, which maps the Net in a book-of-lists style.

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Sleeper: “doFuture” produced by the KesselsKramer Agency (I-D Books, 1998).

This pamphlet-size book from the “brains” at an ad agency in Amsterdam is gimmicky (it starts on page 1998), self-consciously hip (it’s written in prose-poem style), and self-referential. It is also a mind-blowing compilation of street-level evidence about how brands behave. Think Tom Peters meets Ken Kesey.

Keeper: “Open Boundaries: Creating Business Innovation Through Complexity” by Howard J. Sherman and Ron Schultz (Perseus Books, 1998).

Sherman, a managing director at the Santa Fe Center for Emergent Strategies, and Schultz, a consultant, offer a readable primer on complexity and adaptive systems. “Why is complexity theory important to business?” they ask. Their answer amounts to a powerful and pragmatic set of exercises for exploring how we think, how we create the world around us, and how we can change it.

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