Celestial Competition

For any student of management, the competition between XM and Sirius opens a window onto what works — and what doesn’t — when two teams race to launch an industry and drive for market share. Here are five key lessons.

[ First-mover advantage? Forget it ] When CEO Hugh Panero joined XM Satellite Radio in 1998, Sirius had more money and more than a year’s head start. That meant nothing. XM beat Sirius to market by nearly a year.

[ Spend smart ] Sirius based its headquarters in Rockefeller Center, among the priciest pieces of commercial real estate in New York. XM restored an abandoned warehouse in Washington, DC, and initially leased it for $14 per square foot.

[ Keep technology in-house . . . ] Sirius outsourced the development of the chip sets for its radios to a Lucent spin-off, which promptly ran into delays. XM kept its chip design in-house, allowing it to control costs and timing.

[ . . . but know when to go outside ] XM landed a $250 million deal with a consortium led by General Motors. GM’s halo effect on XM spurred other deals with carmakers. Today, XM is available in more than 100 new car models.

[ Execution is everything ] XM zigged when Sirius zagged, but that would have amounted to a mindless dance if XM hadn’t executed on its strategies. What’s more, XM found that execution is contagious: “GM was motivated to work with us because we made things work for them,” says XM chairman Gary Parsons.BB