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Full article should be free:
http://hbsworkingknowledge.hbs.edu/item.jhtml?id=4834&t=technology
By
- Pankaj Ghemawat is the Jaime and Josefina Chua Tiampo Professor of
Business Administration at Harvard Business School, and head of the
Strategy Unit.
- Ramon Casadesus-Masanell is an assistant professor at Harvard Business
School. He is currently on leave of absence.
Key section
Q: From your modelling, what can Microsoft do strategically to remain
competitive against a product that is argued to be of better quality, is
updated more frequently, and is free?
A: A few actions that the model suggests Microsoft could do to remain
competitive are:
A.Increase its own demand-side learning. [defined as "users can modify the code
directly (as they encounter problems or have new ideas on how to improve
it), the development cycle is significantly shorter"]
a.Listen to the demands of the user community to better exploit the
benefits of demand-side learning. Microsoft must facilitate
communication between the user base and the company to have prompt
feedback on the performance of its products.
b.Make an effort to incorporate improvements in the code (fix bugs and
introduce new features) as soon as possible.
c.Reward those who propose improvements for the code. At the very least,
Microsoft could publicly acknowledge those who proposed new features or
discovered bugs.
B.Feed its direct and indirect network effects.
a.Support as much as possible the independent software vendor community
so that the quantity and quality of complements is substantially above
that of Linux.
b.Encourage competition between the different ISVs. The lower the prices
of applications, the more appealing the Microsoft system will be.
c.Price discriminate. Give Windows and applications away to schools and
universities so that users build their file libraries on Microsoft, not
Linux.
C.Minimize the number of strategic buyers.
a.Let governments access the source code and give guarantees that
sensitive data is treated confidentially.
b.Price discriminate. Give binary away to organizations and individuals
who are not willing to spend money on Windows but who would be willing
to use Linux because it is free.
D.Reduce costs to be able to sustain long periods of time with low
prices.
E.Decrease Linux's demand-side learning.
a.Because the way to do this involves some questionable (from a legal
point of view) actions, we will refrain from suggesting specifics.
F.Lessen Linux's direct and indirect network effects.
a.Make it as hard as possible for Windows applications to work on Linux.
b.Same for MS Office documents.
c."Promote" Linux's code forking.
G.Infuse fear, uncertainty, and doubt into the Linux user community. For
this to work, the statements must be perceived as credible. Credibility
requires some past FUD announcements to be realized.
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