Model #92: The PC Branding Model

Complementary models: Hertz/Avis

When people buy personal computers, they have always relied to two key brand categories: the operating system (Microsoft Windows or Apple’s OS) and the CPU chip set (Intel, Motorola, or AMD). In recent years, with the graphics board wars, hardware computer vendors have come to recognize the power of this third brand category. For the consumer, the operating system, the CPU chip set, and—to a lesser degree—the graphics card (whose market is dominated by nVIDIA and ATI) define the personal computer. While most people ignore the third component, it is this component which defines the gaming PC.

What does this model represent for other industries?

Manufacturers of PCs—both name brand and generic—recognize the branding power of these three key components. Consumers want to know that they are buying the best, and choosing key name brands for these components does the trick, even when buying an “off brand” PC. Dell went from off-brand to name brand by riding on the strength of its key components, while cutting costs on the lesser components.

When consumers buy a PC, they have been trained to look for the appropriate logos on the front of the computer for these key components. Intel’s Andy Grove started the movement with his Intel Inside campaign for the Pentium chip. Microsoft—having long tried to brand the Microsoft components with certificates—quickly followed suit by likewise putting its logo on the PC case. The logos now no longer seem like heavyweight competitive gestures, but rather serve like a Good Housekeeping Seal of Approval.

What key partners can you brag about as your “seal of approval”? Think in terms of key components: Who does your customer care about?

Model #91: The Hertz/Avis Model

Complementary models: PC Branding

Thanks to the Avis “We Try Harder” campaign, Hertz and Avis now serve as the poster children for the relationship between the #1 and #2 contenders in a market. The “We Try Harder” campaign virtually boasted that Avis wasn’t #1, claiming that they were a better company for it.

It has been demonstrated that leadership position definitely matters: The second place company in a market gets about half the market share as the market leader. The third place company gets about one third as much as the market leader, the fourth place company gets about one fourth as much, and so on. The soundness of this phenomenon can even be demonstrated mathematically.

Nevertheless, when positioned against your competition, fighting to change your market share is not necessarily the most productive use of effort or budget. Typically the best approach is to identify your strengths relative to your competition and focus on those natural assets. Your competitor’s clients will come to you when they need those strengths, as will the rest of the market.

Let the story of Oracle and MySQL demonstrate how this works. Many analysts predicted the demise of MySQL when Oracle bought Sun, with its MySQL technology. However, Oracle management recognized the niche that MySQL dominated and wanted to remain strong in that niche as well. Both products live on, but—rather than compete with itself—Oracle shares development work between the Oracle and MySQL development teams. Indeed, there is really only one database team, with some members developing Oracle Database and other members developing the latest, most competitive version of MySQL. Of course, you can bet that the MySQL team is not going to do anything to rock the boat by stealing Oracle Database share. They each focus on dominating their niches. Once a client is in the Oracle fold with an open source MySQL database, the sales staff can speak of upgrading to Oracle, but even then, the Oracle Database team is not going to try to claim that Oracle Database is as lightweight and sprightly as MySQL. How could it? For now, the Oracle Database team even concedes that MySQL has a better SQL parser, using the former competitor’s parser rather than its own parser.

Foundational Widget: Cooperative and Competitive Coefficients

Readers of this work—or other works by this author—might conclude that the Living Widgets models ignore competitive forces. Closer inspection reveals that several Living Widgets models, such as the Hertz/Avis Model, clearly acknowledge competitive relationships. However, cooperative forces are generally stronger than competitive forces. You can magnify either set of forces, but the cooperative forces are easier to magnify. Customers cringe at competitive moves, while warming to gestures of cooperation. Customers want to know that—deep down—what you care about most is their success and happiness.

To help vendors better understand these competitive and cooperative forces, Living Widgets allows its vendors to compute and track several coefficients. Using p for positive forces (cooperative) and n for negative forces (competitive), vendors can track the competitive and cooperative influences on their playing field.

The principle forces are:

• p₁ – linear cooperative forces, which are magnified in a straight line: Double your efforts, and the effect of your cooperative force is doubled, for example from 100 to 200. This may be referred to also as direct cooperative forces.
• p₂ – quadratic cooperative forces, which are magnified at an accelerated rate: Double your efforts, and the effect of your cooperative force is multiplied by 4, or 2 × 2, for example from 100 to 400. This may be referred to also as interactional cooperative forces.
• p_x – exponential cooperative forces, which are magnified to the extreme: Double your efforts, and the effect of your cooperative force is squared, for example from 100 to 10,000 (100 × 100). This may be referred to also as growth-based cooperative forces.
• n₁ – linear competitive forces, which are magnified in a straight line: Double your efforts, and the effect of your competitive force is doubled, for example from 100 to 200. This may be referred to also as direct competitive forces.
• n₂ – quadratic competitive forces, which are magnified at an accelerated rate: Double your efforts, and the effect of your competitive force is multiplied by 4, or 2 × 2, for example from 100 to 400. This may be referred to also as interactional competitive forces.
• n_x – exponential competitive forces, which are magnified to the extreme: Double your efforts, and the effect of your competitive force is squared, for example from 100 to 10,000 (100 × 100). This may be referred to also as growth-based competitive forces.

In most environments, cooperative forces are stronger than competitive ones. They always have been, but this fact has been obscured by the plethora of companies deploying competitive models. However, with millennial tools like Living Widgets, the inherent strength of the cooperative forces becomes more obvious.

You can choose to magnify any and all of the above 6 forces, although it may not be easy to separate out individual forces. Effectively, the actions that you take can magnify these forces by different factors, which can be called your cooperative and competitive coefficients. There is a separate coefficient for each of the 6 forces, which we can label c_{p1, cp2, cpx, cn1, cn2, and cnx, respectively.}