The intensity of competition, it can, you know, it can increase innovation like I
just said, it can, the speed of response there's a push for lower costs, and those
lower costs will actually cause us to we have to innovate to achieve them.
Alright, we have to become more efficient, we have to become more
quickly. However, some ways that we respond can
also constrain innovation. Because, as an organization in the
industry, we'd like to stabilize the market, we'd like to keep pricing at a
certain level, and we can do that in many different ways.
So, one way is to form alliances in order to form partnerships as we connect to
other organizations. And those organizations will allow us to
address the market, but do it without having to actually, run the risk of
innovation. To give you a concrete example, at one
point recently, AT&T, the, the mobile phone service in the United States was
going to acquire T-Mobile the T-Mobile, because T-Mobile had this 4G network that
AT&T didn't have. So AT&T was in a situation where they
could actually build a new 4G network or they could just buy it, because someone
already had one. And by forming of that alliance would
actually allow AT&T to get to a new place, right, a more innovative place,
but without actually doing the work of innovation.
Unfortunately, for those two companies, that deal was killed by the FTC, the
Federal Trade Commission, because it was deemed as anti-competitive.
And so, that kind innovation of, of, through alliances and partnerships or the
kind of squelching of innovation, the pushing down of innovation that would
happen that way was called out and said, you can't do it that way.
And so, there is something about this competition and about how it can cause us
to be more innovative, but at the same time cause us to not want to seek
competition. Think about it.
Perfect competition. In the, if you've taken an economics
class, perfect competition is what will lead to zero profits.
Competition can also be very distracting. That is, as we're fighting with someone,
as this, we're rivals in this, in this industry trying to get, to, to fill this
need that others may pop up and may come in from somewhere else.
Let me talk about new entrants into markets.
So there's one thing to have the existing rivalries, so that's, these are
organizations that we, we compete with, that are already there.
But what drives new entrants? What drives new competitors to come into
a market? Well, one thing in mature markets, we
have, let me just describe for a second, we have these performance standards.
So in a, in a mature market, we have an understanding of what price is, what kind
of performance we get for that certain price.
So these kinds of standards are what people have.
So if you're going to buy a computer, you know about how much it's going to cost,
because it, you know, they're all sort of the same, that what, what we call a
mature market. Mature markets also end up with
professional standards, right, they try to keep things so that, where, they're
are able to, to address the market, so the needs, the understanding what a need
is, like what does a person need in a phone, there's a very common
understanding of that. And so it's almost towards a performance
standing, but as a professional, we understand what those, as a professional
in that industry, we understand what the needs are.
We also have controls on knowledge, of how people can move knowledge around in
our industry. our value chains, our value chains are
really focused on derive, deriving high values of efficiency.
As, as we're mature, we become more efficient, we take waste out, we're able
to drive the price down. drive the cost down in that way, because
price will slowly erode also, but we'll be able to drive the cost down.
And then also, what we'll see then is new entrants coming in to our market.
And so, if you said, well, if there are all these things in place, all these
kinds of performance standards professional standards, value chains in
place. How are new entrants going to come in?
Well, they're going to come into places where there's low capital needs.
So think about it this way, that if there's a industry that's being
addressed, so for example Kodak, right? Kodak was, had this, this photography
industry in order to compete on Kodak's terms you would have to have a lot of
capital, right? You need all these machines all around,
you need all this chemistry all around, you need all these chemical companies,
you need all this knowledge, you need all these things in order to compete with
them head on. So, you're not going to do that, what
you're going to do is you're going to come in in a way that allows you to have
very low capital, means you're going to come in from the bottom, you're going to
come in the slow way. And that's going to be the pattern of
disruptive technology that we're going to talk about a little bit later, but for
now, let's just think about this as a competition issue.
So, for Kodak, they really had no competition.
They had these super efficient systems they had that which drove them to not
really push on any kind of platform innovation.
They would had something going on in the lab, they really didn't push to
commercialize it. And what they were using was basically
using old tests for new ideas. And so, when this digital camera came
out, they were saying, well, does it have the same quality, does it have the same
price, does it have the same performance, does it have the same output?
No. And so the tests showed this new
technology to be suboptimal. However, Sony, what they did, breaking
into a new market, was they broke, they came in and they tried to, ended up, not
tried, they ended up redefining the basis of competition.
They didn't build the entire system. They had other people building parts of
the system. We're going to talk about processors and
the hard disks and all those different pieces that came together.
And what's more, Sony had intense competition from others, Pentax was
working on a camera, Hitachi was working on one, Canon was working on one as well.
And so, Kodak had no competition, Sony had a very intense competition, and so we
can see who had more incentive to innovate in a way into this market.
