USS Clueless - Warrior engineering and soldier marketing
     
     
 

Stardate 20020518.0716

(On Screen): I've written before about the difference between warriors and soldiers. Warriors are primarily interested in personal aggrandizement; they wave their swords in the air and scream loudly, and on the battlefield what they're mainly interested in is proving their bravery and their strength and competence. The Warrior ethic is that the side in a war whose warriors are the most brave is the one which should win.

Warriors get resentful when they run up against soldiers. Soldiers aren't flashy; they don't tend to impress. But the bastards keep winning. It's a bitch; the warriors stand around and scream and wave their swords, and the soldiers just stand and look at them. Then the soldiers kill the warriors; no fuss, no bother, just get the job done.

To a warrior, a soldier is dishonorable. To a soldier, a warrior is a fool.

Steve Jobs is a warrior. Bill Gates and Michael Dell are soldiers. You can see it in their styles: Jobs struts around on stage and talks about how insanely great his latest product announcement is, and how they're better than the competition. He (figuratively speaking) fires his AK-47 in the air, and the crowd cheers and chants his name. Then they all file out into the real world, where they are mystified by and resentful about the fact that they keep losing.

A common lament among Mac fans is that Microsoft "never innovates anything." They say the same thing about Dell; it's a running joke among Mac-fans that Michael Dell has "Steve-envy", and they point (almost desperately) at things that Dell does which resemble Apple and try to claim them as imitation. See, the soldiers are trying to become like our warrior. Only it's not like that.

Microsoft and Dell are the two most innovative companies in the computer business.

...We'll just stop for a moment and wait until the laughter dies down...

I'm quite serious about that. They are. But they are not engineering innovators, because neither company is an engineering company.

Dell is in the business of manufacturing and selling commodity computers. Their products are in all important regards interchangeable with those sold by their competitors, which means that like all commodity markets it is primarily driven by price and quality rather than by features.

Dell is not an engineering company; it's a manufacturing company. And it is so superbly innovative in manufacturing process that it can produce and sell computers for about 10% less than any of its competitors, despite the fact that it is buying from the same suppliers and producing the same product. At a price point where all of Dell's competitors are losing money on every unit they ship, Dell still makes a profit.

As you might imagine, Dell is eating its competitors alive. Their latest goal is 20% marketshare.

Microsoft, too, is not an engineering company. That sounds strange when talking about a place which has a higher R&D budget than nearly any other corporation on the planet, but it's true. Microsoft is a marketing company, and it is the best marketing company in the computer industry.

I use the term "marketing" here in a very expansive way: marketing is the science (or art) of selling products. It's not just advertising; it includes much, much more. It is the key to a successful business, and no-one does it better.

Microsoft was the first company to recognize the profound difference between software and any other kind of product: software costs essentially nothing to manufacture. Almost the entire expense is one-time; the cost-of-sales is negligible. What that means is that volume is key. With higher volume there's less amortized engineering expense per unit and prices can be lower. Nothing is more important in software than shipping huge numbers of units. If this is done, it is nearly impossible not to be hugely profitable.

Gates knew that from the very beginning; it shows in his very first important business decision, about DOS with IBM. IBM offered Microsoft a certain large amount of money for an exclusive license to DOS, but Gates turned it down. He took less money from IBM in exchange for a non-exclusive license to DOS, which left Microsoft free to sell DOS to any other company that came along.

From the very beginning, Gates wanted to make DOS (and later operating systems from Microsoft) into the standard OS in the industry, because that would guarantee immense volume, from which all other business blessings would flow.

One of the most important marketing innovations Microsoft has come up with is MSDN, the Microsoft Developers Network. It is both subtle and profound, and it has been spectacularly successful. Microsoft spends immense amounts of money producing documentation and source code which it gives to members of MSDN (who pay a token fee which doesn't even begin to reimburse Microsoft for its investment). Microsoft will even send consulting engineers to MSDN members to help them solve problems.

What does Microsoft get out of this? A huge installed base of applications which run on Microsoft operating systems, which help to lock in users. I, for instance, use CityDesk to maintain this web site. CityDesk runs only on Windows. Multiply that by ten thousand apps, and you have millions of customers who use Windows because nothing el

Captured by MemoWeb from http://denbeste.nu/cd_log_entries/2002/05/Warriorengineeringandsold.shtml on 9/16/2004