Think hard before taking on established competitors

Google makes the world’s most popular mobile operating system, Android. Nearly two billion mobile devices are powered by this ubiquitous system. Not content with this, Google looked askew at rival Apple some years back and felt envious about the ability to make both software and hardware and to fuse the user experience. Google has the most customers, but Apple has the most valuable ones.

Enter Google Pixel phones: flagship hardware made to show that Google can also play the hardware game. Pixel 2 phones were released recently. They look the part, and have a slew of great new features, including a camera that deploys artificial intelligence. But… user complaints are mounting: about the display quality; and grouses about poor audio recording quality. To cap it all, some units have reportedly shipped without the operating system installed. Ahem.

Apple played this game in reverse some years back: it looked at the power Google gets from its Maps app, and created its own Apple Maps. It was initially an unmitigated disaster and needed an apology from the CEO. Years later, it is a better product; but it has never matched Google’s prowess in mapping.

Google is learning that handset quality control and partner relationships are key in the hardware game. It bought out a chunk of ailing smartphone maker HTC’s team to help it cope, but it is finding out that there are many lessons to be learned in developing, launching and marketing hardware products – and handset giants Apple and Samsung have already learned those aplenty. It is also remarkably difficult to make customers switch from their existing preferences. The Pixel has not managed to cross even 1 per cent market share in the home US market, a year after launch.

Netflix and Disney are partners, but uneasy ones. Disney makes great, compelling, content; Netflix is the world’s premier video streaming service. They’re about to part company. Disney wants to send its unique content straight to users through its own streaming channels; Netflix is going big on creating original content and merchandising it à la Disney. Can either of the very accomplished giants will really make this work?

There is something called a learning curve in business; we get better by doing things repeatedly, and those who have been doing it for years and years build a huge advantage. If you want to enter alien territory, simply matching competitors doesn’t cut the mustard. Experienced incumbents can play that game way better than you can. You can only unseat them if you have a whole new approach to the way the game is played.

Take Netflix’s video business. You may have noticed that Netflix provides the most stable streaming, even at lower broadband speeds. There is less buffering than you find in rival offerings. It combines hundreds of microservices, independent programs working together, to provide stability. It converts content to fit your screen size. Its multitude of global servers deliver your chosen content to your screen as locally as possible.

If Disney wants to match the user experience in streaming, not just in great content, it will have to learn to play the technology game pretty fast, and it will have to buy in more than just its own content to create a viable channel.

Equally, Netflix will be spending a reported $8 billion on original content from next year. This is a warning shot to producers that it will simply make its own shows if they don’t play ball. But content production is also about way more than money. It needs deep relationships with scarce talent. Content creators may come for the money, but they will only stay if they like the incentives and working style. Netflix may find expensive original content is a huge burn when it bombs.

There are many strategic reasons to encroach on others’ territory. Often it is more about negotiation ploys and signalling, rather than real incursions. But we should be circumspect. Merely matching the prowess of incumbents never works. You have to have a whole new way of building or delivering or serving in mind. Flying blind, fuelled by boardroom hubris, often leads good companies into many embarrassing crash landings.

Always ask: what does it take to play that game? Do we have those competencies, or can we buy or develop them quickly? And can we leapfrog those already in the fray with a fresh new way of doing things? If your answers are not clear, stop to think.

(Sunday Nation, 19 November 2017)

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