Key Points

“If you examine high tech companies, only one factor seems to constantly distinguish the failures from the successes. This factor is stupidity. More successful companies are less stupid than the opposition more of the time.”
“Markets are swampy, Escheresque lumps of chaos studded with redoubts and obstacles that disappear and reappear from any direction, studded with over and under ramparts onto which confused invaders stumble and then stagger off from view.”
It is usually impossible to predict and plan success due to the incertainties of the marketplace. “Microsoft’s success with Windows … is as much a result of good luck and stupidity on the part of its competition as much as any vision on the part of Microsoft”.

Summary

This book is about stupidity, and how it continues to manifest itself in various interesting and entertaining ways in the high tech industry, with the result that the winners tend not to be brilliant strategic masterminds, but those that simply are less stupid than the others. Starting from the 1980’s, and the first personal computers, it pauses to discuss the IBM PC Junior, then continues with the “office ” market (spreadsheets, word processors, etc…) and the follies that eventually led to the competition falling by the wayside and eventual dominance of Microsoft. The rise and fall of dBase and Siebel systems are covered, followed by a chapter on IBM’s successfully “snatching defeat from the jaws of success” with the OS/2 operating system. Another chapter is reserved for Borland, continuing the long decline of dBase, which they bought for an absurd price. The branding woes of Intel, Motorola and Google are center stage, with guest appearances by Intel’s bunny men, the pentium bug, a flubbed Motorola branding campaign, and a frank discussion of Google and “doing evil”. Of course, everyone in the high tech world knows that Novell must have a chapter all its own in a book like this, and the author provides, detailing their “long, slow decline”. Public relations and its pitfalls are the highlight of a chapter on Microsoft and Novell. Bill Gates’ carefully managed transformation from nerdling to “elder statesman of technology” to hated star of the antitrust trial, and subsequent rehabilitation as a philanthropist is written up in detail. In the Netscape corner, Marc Andreessen makes up for being “good looking … literate and very intelligent” with a complete lack of common sense by attacking Microsoft head on in the press. Next up is the dot com boom and bust. A caricature of the open source movement is provided, contrasted with Microsoft’s digital rights bumbling.

Avoiding Stupidity

Companies typically fail for these reasons:

Based on fraud and illegal business practices (Enron).
Built around unrealistic or ridiculous assumptions (pets.com).
No strategic vision and plan for success.
Failure to execute.

As companies grow, their capacity to plan strategically diminishes - IBM and Microsoft are prime examples of this. Unfortunately, no one ever does the sensible thing and splits themselves up.

Study the past - it will make you less stupid. An example is Intel’s mishandling of its Pentium bug, where they at first tried to ignore and downplay the problem, and only grudgingly offered to help their customers. This is contrasted with Johnson and Johnson’s handling of the Tylenol poisoning scare in the early 80’s, when they immediately faced up to the problem, actually publicizing it in order to warn people of the danger, withdrew their stock from the market, and because of their openness and honesty, bounced back to retain their lead in the market, instead of ceasing to exist, as many observers predicted at the time.

Firms must also analyze themselves and decide what sort of firm they are:

Technology driven company - development takes a leading role, with a potential negative that the developers build the product they want to see, rather than what the market wants.
Sales driven companies are driven by sales and regard the rest as secondary, which can eventually cause problems when evolving marketplace needs clash with the desire to SELL SELL SELL.
Market driven companies are “motivated by the needs and desires of its customer base”. Easy to declare, but difficult to practice, this type of company can become too much of a follower, rather than occasionally striking out in a bold new direction and creating a new product or market.
Finance driven companies are rare in the high tech world, and are centered around the idea of making a profit by saving money, because they are typically run by accountants.

The author also takes aim at a particularly prevalent problem in the high tech industry - a hiring bias towards people under 30, which too often excludes people who have “been there, done that” and can provide some of the wisdom that age provides.

Well run companies also hire top notch people, of course, but also management that is well rounded and “diverse”, in the sense of being individuals who bring a unique point of view and are not simply clones of the founders/CEO. In particular:

A good communicator, adept at getting the CEO’s message across to the company.
Someone with the business skills of the CEO who could credibly take over for the leader should anything happen, but who is also willing to take orders.
An individual who is unafraid to challenge the management when it’s called for.
An expert in the logistics of the company.

Analyzing stupidity

Lessons to learn from the anecdotes:

Arrogance is destructive.
Don’t differentiate by taking away features from the standard product - people don’t like to feel like they’re buying a cheap, crappy version of something. Instead, add features to the standard and sell that as a ‘pro’ version.
Successful positioning requires a clear, consistent approach with brief, strong statements that comunicate the desired idea to potential buyers.
Understand when you are simply building a product, and when you are building an “ecosystem”. Like the situation with Ashton-Tate’s dBase that is described in the book, if you have created an environment, don’t antogonize your developers and others who create complements to your product by competing unfairly with your ecosystem (don’t announce products that will never ship, for example). Competing with your ecosystem is ok, but going to war with it is a guaranteed way to lose.
Don’t choose a product name that hurts its positioning.
Choose a product name that can’t be confused with a competitor.
Is the product’s name defensible (can you trademark it?).
Can you purchase the domain name that corresponds to your product’s name?
People like to see a story arc when a problem happens. Even if you created the problem yourself, by acknowledging it and resolving it, you can gain points with your customers.
Disruptive technologies don’t have a shot at success without the following conditions:
- The kernel of a new idea.
- A market for the new idea.
- An significant advantage to entice people to switch.
- An infrastructure to support the new technology.
- A means of distribution.
- A reasonable price for the new technology.
- An acceptable level of quality - maybe not great, but good enough.

Squeezed Book Summary Revision History

Revision #7

In Search of Stupidity: Over Twenty Years of High Tech Marketing Disasters, Second Edition

Key Points

Summary

Avoiding Stupidity

Analyzing stupidity

Links