Step 5: Compete Strategically with Other Catalysts

No matter how well a catalyst pursues its strategy, and no matter how innovative that strategy, it will almost always face competition sooner or later.

Competition may come from other similar catalysts, from existing businesses that themselves have been threatened by the catalyst, and from new ideas and technology that give rise to single-sided businesses or catalysts that can transform a market or industry.

Understanding potential competitors requires examining the special dynamics of catalyst competition that are relevant only in two- and multi-sided businesses.

• Understand the dynamics of catalyst competition
• Look for competition from different business models
• Leverage to attack
• Consider cooperation

» For more on competing strategically with other catalysts, visit Chapter 7.

Microsoft v. Open Source

Linux—the Windows alternative—is one of the best-known products of the open source movement. It is also based on a business model that clashes with the model followed by Microsoft, Symbian, Apple, and others that make software platforms for profit. Microsoft, for example, invests enormous amounts of money in writing code for its Windows software platform. Following a two-sided pricing strategy, it largely gives away the services of this platform to developers and earns profits from licensing its software to computer users and computer makers, which in turn make it available to computer users.

But the open source community gives its product away to both sides. That makes Linux and other open source software tough competitors for price-conscious customers. The “for-free” model also explains the enthusiasm that IBM and other hardware companies have for Linux. Their customers want hardware and software platforms and they can get a bigger profit on their hardware if they, or their customers, can get a cheaper software platform.