Competing On Internet Time: Lessons From Netscape And Its Battle With Microsoft

From the Book: Preface The origins of this book go back to a casual lunch on the Stanford campus -- Thai food eaten outdoors, a sunny and pleasant afternoon -- in February 1996. Michael Cusumano, taking a break from classes at MIT's Sloan School of Management and pondering a sequel to Microsoft Secrets, had been visiting a few people at Sun Microsystems's JavaSoft Division in Palo Alto. He was asking about how the fast, unpredictable pace of the Internet might affect product planning and the process of product development at leading-edge software organizations, like JavaSoft, Microsoft, and Netscape. He called to chat with a colleague from back home, David Yoffie, who specialized in the strategy of high-technology companies and happened to be living temporarily on the West Coast. Yoffie was on sabbatical from Harvard Business School. He was visiting Stanford and doing research on Microsoft's ill-fated efforts to build its then-proprietary online network, MSN. He was also spending a day a week at Intel Corporation observing its internal operations, as both a director of the company and a researcher. At the time of the lunch with Cusumano, he had just completed Competing in the Age of Digital Convergence. For his next project, he was interested in learning how other companies were dealing with the maelstrom of technologies coming together in the era of superfast personal computers, broadband communication networks, and the rapidly expanding Internet. The two authors exchanged notes and decided to collaborate on a book if the right topic came along. They had known each other since 1985, when Cusumano was a postdoctoral fellow at Harvard Business School and Yoffie an assistant professor. A few years earlier, Yoffie had asked Cusumano to contribute a paper on software development at Microsoft to Competing in the Age of Digital Convergence, and Cusumano had asked Yoffie to be a reader and commentator for Microsoft Secrets. Meanwhile, Sun's JavaSoft was in the middle of a public relations boom, but the group was small and still very young. Java was important, but how important? There wasn't much strategy and process to analyze yet. The group was still figuring out what to do and how to do it. In addition, Sun executives did not seem to want to be put under a business school microscope. Cusumano went back to MIT and continued work on a book on product development in the auto industry. Yoffie, meanwhile, continued his stint at Stanford, completing a series of cases on Microsoft's MSN and Apple Computer, in addition to a number of articles on digital convergence. The next event that related directly to this book took place in November 1996. Marc Andreessen, one of Netscape's founders, gave a talk at MIT. Cusumano attended with some graduate students, and one of them brought a tape recorder. (The tape proved invaluable because Andreessen talks on Internet time.) Netscape was clearly a central piece of the Internet story. The company was inventing a big part of the future, growing at breathtaking speed, and trying all the while to build complex software products and fight off an awakening giant -- Microsoft. Cusumano wrote Andreessen a letter in February 1997 and suggested that he and Netscape might be interested in participating in a book project. This would be like Microsoft Secrets but would focus more on how Internet time was affecting the company's approach to product development. Andreessen's office passed the letter on to Suzanne Anthony, Netscape's manager for publishing relations. She liked the idea. Her boss, Rosanne Siino, also liked the idea. Netscape executives approved. Cusumano and Yoffie talked again and expanded the project to include Netscape's strategy and the issues it faced in scaling its organization. The idea went forward. The next step was a rendezvous at Netscape's Mountain View headquarters in July 1997. One of the first meetings was with president and CEO Jim Barksdale. Cusumano and Yoffie still had to convince him that the book was a good thing to do. He had read Microsoft Secrets and wasn't sure he wanted to reveal so much about his company to the competition. They argued that Netscape was really attacking the enterprise software market. To do that, the company had to have credibility. If Netscape really had its act together in terms of strategy, technology, and operations, then it would be good -- not bad -- for the company to get this message out. In addition, Cusumano and Yoffie pointed out that companies usually learn as much as the authors do when they undergo an in-depth study. They learn a lot about what they are doing well and where they are making mistakes. So, if Netscape was not doing all things right, it might learn something. In any case, the authors maintained that everybody should be interested in learning more about whether "Internet time" was a real phenomenon or not. Barksdale agreed and, to the authors' relief, the interview continued. The first question they asked, though, was perhaps too direct and caught him a bit off guard: "Why will Netscape still be around when we finish this book about a year and a half from now? " This is part of the answer that Barksdale gave: Why will? Excuse me.Would y'all like some coffee or something? Well, that's a question you always have with a smaller company. How did Microsoft compete with IBM when they got started? How did DEC compete with IBM when they got started? How did FedEx compete with the Airbornes and UPSs when they got started? The small company has disadvantages and it has advantages. How did the British defeat the Spanish Armada? Because they had smaller, faster, more flexible ships. You depend a little bit on the passion, a little bit on promotion. The fact is that we got our brand known quicker than any other company in history, which was our first strategy. We used the Internet to do that, so now everybody knows who we are. The first and most important reason most companies disappear is they never get invited to the dance. They can't get in to make the sale. We're now invited to every serious bid for Internet software, which is our market. The rest of this book builds on in-depth interviews with Jim Barksdale, Marc Andreessen, and another 40 or so current and former Netscape executives, managers, engineers, and other employees between July 1997 and September 1998. (See the table of interviews at the end of the book for specific people and dates.) The authors also interviewed another dozen executives, managers, and engineers from other companies, including Microsoft, Intel, Dell, and CNET. Most interviews lasted an hour, though the authors interviewed several people twice, including Barksdale and Andreessen. They recorded and transcribed the interviews and have included as many quotations as seemed reasonable in this book to give the reader a good sense of the conversations and evidence. In addition, the authors reviewed perhaps a thousand pages or more of documents on Netscape's products and policies available through the company Web site. The authors also made extensive use of publications on the company and the industry, as cited in the endnotes. Netscape required Cusumano and Yoffie to sign a nondisclosure agreement. This gave the company the right to prevent the authors from revealing confidential information that they might have heard in the interviews or while visiting Netscape offices. It also encouraged people to be frank, because they knew they would have a chance to see and approve the use of their quotes. Netscape people then reviewed the final manuscript before the authors sent it off to the publisher. Nearly all the comments received from Netscape were to correct chronological or other factual information or make minor refinements of quotations. Netscape's reviewers mostly agreed with the interpretations in the book. As one senior manager told the authors, "You were tough, but fair. " Netscape people did not try to exert any editorial control over the book, even though there were some parts they probably wished were not in the book. The authors wrote this book because they found themselves drawn to the same topic: competing on Internet time. Anyone who wants to know about successful and unconventional companies, technological innovation, and the challenges that high-tech markets pose for managers, engineers, and entrepreneurs probably shares this interest. Readers do not have to know much about computers and software to understand the arguments in this book. The chapters focus more on strategic, managerial, and organizational issues than on the technology, though some familiarity with the Internet will surely help readers appreciate the pace of change and the kinds of technical and strategic issues that companies competing and living on Internet time face every day. Technical terms that might be unfamiliar to general readers are explained in the chapters where appropriate. Readers can also refer to the index to locate definitions or the meaning of acronyms. Readers should also be aware that the book does not always tell the story of the battle between Netscape and Microsoft chronologically. Each chapter has a different thematic focus. Chapters 2 and 3 deal with Netscape's start-up and efforts to practice the techniques of what we call "judo strategy," which involved competing with Microsoft on several fronts. Chapters 4 and 5 delve deeper into implementing judo techniques through efforts in product design and software development aimed at increasing leverage versus the competition, as well as making the engineering organization faster and more flexible. Chapter 6, the conclusion, draws lessons from the story for general readers. Copyright © 1998 by Michael A. Cusumano and David B. Yoffie