A Book At The Center Of The Microsoft Case


Lessons from Netscape and Its Battle with Microsoft

By Michael A. Cusumano and David B. Yoffie

Free Press 361pp $25

A willingness to admit mistakes is one of the most impressive attributes of Silicon Valley entrepreneurs. In this bustling laboratory of business experimentation, a blunder is something to be learned from, not to be ashamed of. What's more, executives here discuss such missteps--as well as brilliant maneuvers--with reporters and college professors, allowing everything to get dissected. High-tech execs are the lab mice of Silicon Valley.

Such was the genesis of Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft, a book by Massachusetts Institute of Technology management professor Michael A. Cusumano and Harvard business school prof David B. Yoffie. The book made news when Microsoft Corp. tried unsuccessfully to get its hands on the authors' interview tapes and transcripts for its defense against the government's antitrust suit. In the suit, the feds accuse Microsoft of illegally attacking Netscape as the two fought for the Internet-browser-software market.

Microsoft wanted to use the professors' research during the trial to try to prove that its own improving products and Netscape's blunders--not anything Microsoft did wrong--drove the Internet pioneer's browser market share from 80% two years ago to about 42% today. Microsoft had already landed a manuscript copy of the book when it subpoenaed Netscape documents for the antitrust case. But its attempt to obtain supporting materials was successfully opposed in court by MIT and Harvard, which said it threatened the academic-research process.

The book was rushed into print to coincide with the Oct. 19 start of the trial. But it is a marvelously detailed account and analysis of Netscape's rocket-launch rise and mid-flight corrections.

Cusumano and Yoffie spent more than a year doing dozens of interviews with executives and engineers at Netscape, Microsoft, and other technology companies. They got unprecedented access within Netscape, and their book owes most of its charm to the candor they encountered there. Netscape Executive Vice-President Marc Andreessen, for instance, admits he missed the importance of turning the company's corporate Web site into a general-purpose portal for both consumers and business people. He told the authors: "I absolutely thought we were a software company--we build software and put it in boxes, and we sell it. Oops. Wrong." Engineer Michael Toy is brutally honest about flaws in Netscape's Communicator 4.0 browser, which was released in mid-1997. "This code should have been taken out and shot," Toy says.

While excerpts from the book may harm Netscape's already fragile reputation, the book isn't likely to play a decisive role in court. One comes away from this book with a healthy respect for Netscape executives and engineers. They made mistakes. But they operated in a maelstrom, so it's no wonder that they sometimes didn't plan well and some of their products had quality problems. Cusumano and Yoffie admire Netscape's leaders for spotting opportunities, shifting strategies deftly, learning quickly from goofs, and building a $500 million company in four years. Bottom line: "We believe that Netscape has transformed itself...into a company that can survive and potentially thrive, despite competition from Microsoft and IBM--to name just two determined opponents."

In fact, the Justice Dept. may find more to like here than Microsoft does. The book notes that Netscape's browsers began losing 1% of market share per month after Microsoft introduced its Internet Explorer 3.0 browser in August 1996. Reviewers ranked the two companies' products about even. So a reader may infer that it was Microsoft's free bundling of the browser with Windows and its monopoly-based influence over PC makers that chipped away at Netscape's lead--just as Justice alleges. Late in the book, the authors deliver their verdict on Microsoft's behavior--and it's thumbs down. "Gates and company were too greedy and too tough when it came to winning market share in the browser wars," they write.

That's the only time Yoffie and Cusumano take sides in the computer industry's religious war. Most of the book is a business-school analysis of Netscape's performance. The authors conclude that, indeed, the Internet has changed the rules for many businesses, requiring them to move very quickly and take extreme risks. But at the same time, they must continue to place a high value on strategic planning and product quality.

Most interesting is the authors' application of a judo metaphor to Netscape's early face-offs with Microsoft. Netscape was able to use the larger company's strengths against it by adopting open technology standards and designing products for a whole range of operating systems, not just Microsoft's Windows. It wasn't until Netscape tried sumo wrestling--matching strength against strength--that its strategies began to fail.

Now Netscape has learned from those mistakes and is focusing on contests where there isn't just one winner. It's also less willing to admit its missteps to prying authors. And Microsoft? Turns out sumo wrestling wasn't that great for the software giant, either. It's in a Washington (D.C.) courtroom right now, paying the price for throwing its weight around.

Before it's here, it's on the Bloomberg Terminal.