Understanding IBM

Part 1. Tiddlywinks

To understand IBM, one must first understand how IBM perceives the computer marketplace. IBM is so large that their perspective is totally different from our individual view. For example, suppose IBM was a seller of sports equipment instead of computers. IBM would own the contracts for many professional sports teams in a variety of sports. IBM would then view a new entry into the sporting goods marketplace as something of a flea on the dog's back.

To continue this analogy, imagine if that new entry into sporting goods was Microsoft. By starting from the PC and working its way upward through the chain, IBM sees no threat. After all, this is just a bunch of tiddlywinks that this guy is selling, right? Who plays tiddlywinks, especially for keeps!!

However, Microsoft succeeds with a new tiddlywink called Winkos<tm>. Winkos becomes such a hit, tiddlywinks start appearing in a lot of unusual places, like offices and stores. Winkos even become prominent in some sporting goods stores, where people begin to forget the IBM brand sporting equipment. Everybody spends all their time playing tiddlywinks, but IBM doesn't worry. After all, professional teams don't play tiddlywinks!

Then a new form of gamepiece appears, a version of Winkos called New Tiddly<tm>. New Tiddly doesn't sell well at first, because it is only for serious game players. However, many of the players on pro sports teams start playing with New Tiddly and they actually like it! Soon some of the major sports teams begin considering a complete change of focus. They might actually quit buying IBM sports equipment, leave their previous sports, and set up a league of professional New Tiddly teams!

IBM can't believe it. Here they have the finest athletes in the world, with the finest sports equipment, and people want to spend all their free time playing Winkos and New Tiddly! It just doesn't seem logical. How can people waste all their time with tiddlywinks, when there's real sports to be played? Tiddlywinks doesn't even work up a sweat!

IBM is thus viewing the situation from the vantage point of someone who is so large and dominant that they believe they can ignore what the individual person does with his or her spare time. But it is how spare time is spent that is really the issue in the market for sporting equipment, or for computers. People don't want to work up a sweat, to be challenged, to play classic sports, if they can get the same kind of thrills and chills with tiddlywinks. Because IBM's vantage point is from the top of the pyramid instead of where the players are, they sometimes lose track of the score. To IBM it's just tiddlywinks, but to each individual it's a wonderful new way of wasting time.

And what should we expect to be IBM's response to the growth of "tiddlywinks" as competition? In light of the recent Department of Justice activity, which of the following makes the most sense?
1. Spend $100 million marketing its own tiddly to prove that Microsoft does not have a monopoly on tiddlywinks.
2. Ignore the growth of tiddlywinks, since it's just a fad.
3. Develop a cheaper, better form of gamepiece but don't compete directly with the tiddlywinks market.

The correct answer is #3, and that is what the NC is all about.

Most recent revision: December 16, 1997
Copyright © 1997, Tom Nadeau
All Rights Reserved.

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