Chapter 2. Customer Migration

The Epic Voyage of Microsoft Word

Remember WordStar? (Well at least, my spellchecker remembers it). WordPerfect, anyone?

What about Microsoft Word?

In its quest to dominate every important Product Category on the desktop, Microsoft has had the superlative advantage all along; they owned the platform. Still, deft strategy, relationship management, bundling, packaging and marketing all played a role in how Microsoft eventually came to own the desktop word processor program Product Category that included Word, WordPerfect and WordStar. As of the year 2006, the feature set and price tag have been decided for this Product Category. It is woven so well into the fabric of customers that most Word users probably do not know how much it costs.

Most people will agree that while Microsoft Word has its faults, and I would struggle to list the improvements the product has delivered over the past half-decade, it is good enough.

I remember being introduced to WordStar in the mid-1980s. At first I was suspicious of the product, having relied on a previous-generation, minicomputer-based word processing program called Nixdorf DETAS (my spellchecker has never heard of that one) for years. It was, however, a quick customer conversion to this new way of creating documents. WordPerfect was soon available, but Microsoft Word came with the $10,000 laptop (luggable) my company had supplied. I have to say the sexiness of WYSIWYG[1] in Winword (as Microsoft Word was called at first) was at the time fresher looking to me than WordStar. Whatever my opinion was, the market embraced Word in the package of Microsoft Office[2], Windows and everything else, blazing a trail for Microsoft into history.

WordPerfect and a few other lesser-known word processing programs still nibble at the edges of this Product Category. Clearly, Word will be around for many years to come, but over the past few years, new technology has empowered a few potential challengers to Microsoft Word’s dominance, not necessarily in the same Product Category but rather from an emerging one. Remember that a significant indicator of Product Category is price. Sun Microsystems has been giving away a competitor in the form of OpenOffice for several years. There are also several open source alternatives available of late.

God said “And I think Writely”

Recently, Google acquired a product called “Writely,” an online word processor that supports many Microsoft Word standards, targeting Microsoft Word users directly. Google also recently released a free, online spreadsheet package. Clearly, they have Microsoft’s customer base squarely in their crosshairs. Google will be successful not by making their software “better” than Microsoft’s but by keeping the battle outside the existing Product Category (desktop word processing programs), where they would have no chance of success, and inside the embryonic Product Category (free, online word processing programs[3]), where Microsoft is loath to compete.

Figure 4 – Google competes from outside the Product Category

Sometimes one Product Category reaches the end of its life as a different one moves in over time to solve essentially the same problem. Remember, products rarely move from one Product Category to another.

Microsoft is not about to give away its Office products for free to compete with OpenOffice or any other software. It may do so in the future, but it will happen only when a new Product Category has already stolen its customer base. A product with a price of zero exists, by definition, in a different Product Category than a product with a price that is not zero. For Microsoft to give away Microsoft Word would be an attempt to migrate its product from one Product Category to another. I do not know of a single example of such a move that has been successful.

• More often than not, a company is unable or unwilling to address a threat coming from a different Product Category.

In the normal course of business, a certain segment of a customer base shifts its reliance back and forth from one product to another within a Product Category. One year you buy a Toyota Corolla, a few years later, you buy a Ford Focus. Shifting to a new Product Category is different. Once a customer moves to a new Product Category to solve their problem, they rarely revisit the old Product Category again. The third car you buy is an SUV or a minivan because you now have two kids, and an SUV meets your transportation needs better than a compact sedan.

As the members of the new Product Category improve, more and more customers shift over to it. The loss of the customer base “creeps up on you” as Al Ries and Jack Trout note in The 22 Immutable Laws of Marketing, referring to the gradual nature of how customers shift from one Product Category to another. By the time the established vendor realizes it has a problem, it is usually far too late to respond effectively. Of course, there is no reason a vendor cannot have products in the old and the new Product Category. Toyota has done a fine job of delivering competitive products in the compact sedan, small SUV, large SUV and minivan Product Categories.

I am typing these words using Microsoft Word 2003. Every week or so, I open this same document in OpenOffice[4] and then use that application’s Export-to-PDF feature to create a working copy for my editor. To my knowledge, Microsoft Word does not have an export-to-PDF feature. While I was using OpenOffice, I noticed it had strong handling of word wrapping, which I have been struggling with in Word. For that reason, I moved a few of my other documents over to OpenOffice. I am still a lot more familiar with Microsoft Word than I am with OpenOffice, and I will use both for some time, but I have become, for Microsoft, a customer at risk. I have also started using Google’s word processor.

Sometimes, a company’s very presence in one Product Category precludes them from making a play in a different Product Category, even with a new product.

In 1999, my friend Cory Bear and I left Legato Systems to start Bocada. Our product was BackupReport, which supported Legato Systems’ own NetWorker product and five of Legato’s closest competitors. Legato NetWorker belonged to the networked data backup program Product Category. BackupReport belonged to an embryonic multi-vendor data protection information Product Category. They solved completely different problems.

At the heart of our product offering was the ability to support multiple vendors’ products. One could argue (and often was) that BackupReport was just an improvement on Legato’s product in their Product Category. This argument was wrong. For years, Legato, with greater resources at their disposal, tried to compete with us by improving their NetWorker product to support reporting for their own product. So too did Veritas, whose NetBackup product we also supported. Other companies did likewise to various degrees. It was imperative that our BackupReport product remained steadfastly true to its cross-vendor character, not setting so much as a toe outside the perimeters of our embryonic Product Category. To move away from it would mean exposure, with significant risk, to a different Product Category. Without going into excruciating detail, the essence of this story is this:

• It is difficult for a product to compete outside its Product Category.

Worth repeating: know your Product Category.

A product, to the degree that it is established in a Product Category, grows “roots” in it, making it more and more difficult to transplant. For it to become established in the first place, it needs those roots.

Any experienced horticulturist will tell you: the bigger the tree, the riskier it is to transplant.

• A product quickly becomes confined to its Product Category.

Albert Einstein often used “thought experiments” to help his audience understand what could happen in a given situation, without having to perform an actual physical experiment. He would begin with some easily understood and accepted facts; he would ask everyone to imagine something happening, and to hypothesize what the result would be.

McDonalds’ serves the fast food Product Category; the company is synonymous with the burger. Subway, another company joined at the hip with its product: the sandwich, belongs to the deli sandwich Product Category.

McDonalds has been around for a long time. Recently, Subway has tried, successfully I might add, to woo McDonalds’ customer out of the fast food category into the deli sandwich category. Products competing with each other within the same Product Category present a completely different challenge to that of products competing from two different categories. The former is a “We do it better than they do” approach and the latter is a “What we do is better than what they do” approach. A subtlety, but one that can make a big difference. When Subway set about to compete with McDonalds, it challenged the very value proposition of the fast food Product Category with the claim that, “You shouldn’t eat burgers.’ If effective, such cross-category challenges can do serious damage to the challenged Product Category. Quiznos, on the other hand, says its sandwiches are better than Subway’s. With this more benign strategy, Quiznos, with its premium prices, is trying to slice off (no pun intended) the high end of the price range within the deli sandwich Product Category.

It must be fun to switch

Customers will give a product in a new Product Category a chance just for the fun of it, even if the new product offers less functionality. Google Writely (or whatever they choose to call it) has a fraction of the functionality of Microsoft Word, but it is a fun new way to create and store documents. That is the biggest reason I use it.

SUVs of one type or another have been around since World War II, but when they became popular in the 1980s, they were more difficult to maneuver, had worse fuel economy, and were a lot more expensive. Customers buy SUVs because they are fun.

If you want to steal customers from an old Product Category and bring them into your new one, you would do well to make your new product fun to use, even if it has a fraction of the functionality of products in the old Product Category.

• Products in a new Product Categories have a much better chance if they are fun to use.

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[1] WYSIWYG – What You See Is What You Get – It was the first time I saw an onscreen representation of a document that closely matched what the document would look like when printed.

[2] I proffer that Microsoft Office is not a Product Category. It is a group of Product Categories. Each product within Office solves a different problem, has a well-understood price-range and can be bought separately. Microsoft Word, however, won its own is a comprehensive entry in a Product Category.

[3] As the Product Category matures, it will become better defined

[4] Sun Microsystems’ OpenOffice suite