Book Summary Report Example


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Book Summary Report Example

  1. 1. Author : A former EMBS student Date : May the 1st 2009 Summary and critics of Winners, Losers & Microsoft Optional work for the course of Innovation and Innovation and Knowledge Knowledge Management of the University of Léon within Management the European Master in Business Studies 2007/2009.
  2. 2. Index Rules 3 Before starting 4 Summary 6 Personal point of view 11 Distribution of Microsoft products 12 Technology's awareness 14 Conclusion 17 2 A former EMBS student - European Master in Business Studies 2007/2009
  3. 3. Rules Optional reading. You can voluntarily make a report/Powerpoint presentation of the readings you choose. You can choose one or multiple papers and journal articles recommended by the instructors. Electronic copies of reports/presentations should be emailed to the instructor. 3 A former EMBS student - European Master in Business Studies 2007/2009
  4. 4. Before starting I read as well for this exercise the book called “Information Rules: A strategic guide to the network economy” which was in the list of the books suggested for the course of Innovation and Knowledge Management. I unfortunately did not make the summary for the following reasons: - This is a tremendous book very rich in term of contents. His analysis and understanding take a lot of time, practice and assimilation of many concepts; - A very good summary of it is already available at: ormation-rules-a-strategic-guide-to-the-network- economy made by people which are far more competent as I where the following issues are well tackled: Prices, Versioning, Intellectual Property, Lock-in, Network effects, Cooperation strategies, Standards Wars, Policy implications. However I clearly recommend people to read this book rather than Winners, Losers and Microsoft for the following reasons: - Information Rules is as well tackling the issue of Microsoft domination; - Its authors are analyzing Microsoft dominance in a more neutral way; - This book represents almost the bible or book of reference to understand the digital network economy and is then very appropriate as a starting point. 4 A former EMBS student - European Master in Business Studies 2007/2009
  5. 5. - Winners Losers & Microsoft is also speaking about topics included within Information Rules. However I would qualified more Winners losers & Microsoft as a complement to Information Rules rather than the other way around. By experience do not read “Information Rules” within ten days as I did because the content of the book is so huge that you cannot decipher the hidden sense of each words. 5 A former EMBS student - European Master in Business Studies 2007/2009
  6. 6. Summary Winners Losers & Microsoft This book is composed of ten parts but only 6 kept my attention. The reason is that the first 5 chapters are more or less the theory and the 5 next are the practical application of the theory. Here are the most important points divided by chapter which kept my attention. Chapter 1: This chapter is the almost the summary of the book you can get a copy of it at the following address: %20Winners%20Losers%20and%20Microsoft.pdf. The part which kept the most my attention is the issue related to the network effect. Network effect means that the success of a product or service is due to the fact that the majority is using such product or service. One assumption which is made is that free markets are not capable of making good choices among competing products. It is not a hazard if the following slogan "Build a better mousetrap and the world will beat a path to your door" is introducing this chapter. In order to illustrate this the author is using the case of the keyboard arrangement. According to some people the arrangement of the Qwerty keyboard is arbitrary but won the market whereas it seems that a better product was present at that time: “Dvorak Keyboard”. 'In the world of Qwerty, one cannot trust market to get it right". Chapter 2: 6 A former EMBS student - European Master in Business Studies 2007/2009
  7. 7. Chapter 2 is dealing with the case study of the Qwerty Keyboard against the Dvorak Keyboard. Here the author mainly focuses in proving that the Dvorak Keyboard was maybe not a better product and that many information are lacking in order to defend the Dvorak Keyboard. In any case he concludes here that a standard will always win even if it is not a good one and define then the concept of market failure. Opportunities for agents to profit from changing to a superior standard. Chapter 3: Chapter 3 is dealing mainly with “path dependency”, it means “we saved and invested last year and then we have assets today”. It must be possible for someone to have credible information that have a better allocation is available someone somewhere is likely to figure out how to move to this better path. Feasible and superior alternatives exist. Lock in is inevitable if people are passive. An equilibrium is defined as a condition such that no change will occur unless some outside events intrude. Chapter 4: When the value of a good changes because the number of people using the good changes, we call this a network effect. The knowledge share of total cost is not necessarily greater now that it was in the past. Chapter 5: 7 A former EMBS student - European Master in Business Studies 2007/2009
  8. 8. Chapter 5 explains that standards can be fixed or flexible. The competing standards are fixed. Owners of Proprietary software face a choice. "If an Operating System can accommodate new features, or an altered interface, or increased capacity, without making older versions obsolete, or making users' old skills obsolete, it is a flexible standard.” Sometimes there is a disagreement over a standard. Some people might prefer a language that is simple but limited; others might prefer one that is more versatile, though more complicated. Some might prefer a set of building practices that is extremely durable, though expensive; others might take cheap, but less durable. It is in such circumstances that the choice of standards presents a social problem. We now look at how individuals are affected by standards, how they choose among them, and how those choices play out in the market. No standard win, some standard emerge. Standards facilitate interaction among individuals. The eventual adoption of a standard often occurs simultaneously with improvements in technology. The government might wish to award natural-monopoly franchises, as it does for public utilities, but the history of publicly regulated utilities does not inspire confidence that technological advancement would be promoted, or that costs would be kept down. A single owner of a technology or standard is capable of internalizing the impact of consumer's behavior through prices. It is important to notice here that such pump-priming measures are likely to look predatory, especially after the fact. Actions to establish a standard may appear to be actions to defeat, kill, or destroy rivals, inasmuch as the goal of achieving a contemporaneous market share large enough to push the equilibrium to a favorable position for the firm may require temporary profit- losing actions. But they seemingly predatory actions are exactly the mechanisms that prevent lock-in to inferior standards. 8 A former EMBS student - European Master in Business Studies 2007/2009
  9. 9. Chapter 6: If everyone uses A, yet each individual regards B as better, but only when many other people also use B, then we might find ourselves stuck with A; We argued that although this trap is certainly possible, interested parties are likely to respond in ways to disable this trap if it is actually causing significant harm. The beta-VHS standards was is a rich example of a standards battle. It is not, however, a story of lock-in of the first product to market. Instead, it is a story of competing formats, consumers' switching when something better for them became available, and the coexistence of a minority standard that offers special benefits to a specialized group of users. Why has it failed? It can not be due to lock-in, for there is no compatibility issue and no differential network effects. Washington was aware that the French had gone overboard in their adoption of metric. The switch to metric time in France after the revolution is a fascinating example of a case where the costs of switching were far greater than the benefits The reason that metric time makes no sense is that is makes obsolete all clocks and provides no particular additional value. She found that the small coal car was in fact well suited to Brittain's geography and coal-distribution systems. Good products win when Microsoft products are inferior to its competitors they fail. Where products are differentiated and where consumers have similar preferences about products, a product that most consumers identify as "best" can quickly be offered in sufficient quantity to satisfy the entire market. Users communicate. They send messages and exchange files. They exchange information about what can be done and they teach each other. In addition, for software, there is less likelihood that decreasing returns in manufacturing could outweigh network effects, since software manufacturing itself may exhibit increasing returns. 9 A former EMBS student - European Master in Business Studies 2007/2009
  10. 10. The origin of the modern operating system took place at the Xerox Palo Alto Research Center (parc), which developed the idea of putting data in a resizable windowing interface controlled by a mouse. Xerox never derived much benefit from this work, but millions of computers users have. Microsoft wanted to convince consumers that switching to Windows would provide immediate benefits with useful products. The office suite provided this assurance, and did so at an extremely attractive price. Thus, if we want to assess quality in markets that are allegedly subjects to lock-in, we will have to measure quality in some other way. It seems to us reasonable to look at the quality assessments of experts writing (mainly) for computer magazines. The most natural interpretation of these results is that Microsoft is responsible for the price declines. Microsoft lower prices in market after it achieves large market shares. When we examine prices in individual markets, it will be useful to keep these overall results in mind as a benchmark. 10 A former EMBS student - European Master in Business Studies 2007/2009
  11. 11. Personal point of view I have been surprised by the following statements that Winners, Losers & Microsoft received as an award: "Henceforth, any judges, economists, pundits or journalists who discuss Microsoft or technology lock-in without first dealing with the Liebowitz-Margolis critique should have their wrists soundly slapped by." - The Wall Street Journal "This powerful and fascinating books shows with data and logic - not politically correct illogic - that the market, not the government, has been right." - T.J. Rodgers, chairman & CEO, Cypress Semiconductor Corp. I don't know if it is because I already have some knowledge in the field of Information Communication and Technology or if it is because that I read this book with a year-2009 perspective (the book being written in 1999) but I found some critical lacks and gaps of information in this book. I even find surprising that it has been written by two phds specialized in management. I would even say that I found this book a bit too much Microsoft friendly oriented. If I read properly this book (we have to take in account that I am not an English native speaker and that I did not analyze each page of this book in detail by making rereading) I clearly understood that the main argument of the authors is that Microsoft won the market properly because it was providing the best products. 11 A former EMBS student - European Master in Business Studies 2007/2009
  12. 12. That the condemnation they have been exposed to was unfair. Liebowitz and Margolis are raising some interesting points regarding this issue and this is for sure an interesting book in order to understand Microsoft's defense. I however would like to explain two points which are for me fundamentals and that the authors did not developed or at least did in a non explicit and non exploitable way whereas here is I think the heart of the Microsoft domination. Distribution of Microsoft products: In November 2008 I wrote a 20 pages report on Microsoft Distribution Channels http://moteurs-de-recherches- 0de%20Microsoft where I highlighted the bundling concept (the fact of selling several products within one without having the possibility of buying the products separately). Bundling has been developed in the book and this is not my point. My point is the following: customers are not and very few of them awarded that each time they are buying a computer (which is in almost all cases sold with a Microsoft Operating System) they are buying the Operating System as well. Here in the book they almost always speak about bundling the computer+the Operating System+Microsoft other software such as Excel ... whereas actually the main issue is based on the acquisition of the OS when buying the product. What is the most striking is that all the customers think that buying the computer with the Operating System is free of charge. How many times do we see advertisement saying that "include Microsoft Windows + hundreds of others software"?. Just take any advertisement you can find nowadays (19/03/2009): 12 A former EMBS student - European Master in Business Studies 2007/2009
  13. 13. Price (at time of review): $2,199 Processor: 2.8GHz Intel Core 2 Duo T9600 Memory: 6GB RAM Storage: 320GB hard drive Optical Drive: DVD+/-RW Screen: 18.4 inches (1,920x1,080) Graphics: Dual ATI Radeon HD4870 (Crossfire) 512MB Weight: 11.5 pounds Dimensions (HWD): 2.5x17.4x12.9 inches Operating System: Windows Vista Home Premium (64-bit) and you will never find an information telling you that the price of the hardware is $2,199 - (let's say $200 of OS) = $1,999 The only way today to get a computer free of Microsoft Operating when you buy a PC is to build it by yourself or to sue the distributor of the product as it is starting to be the case in France. Of course and this is always the polemic which is told to mass customers: " Why people should be interested in a PC without OS?", answers are numerous: - You want to use a pirated copy of Microsoft as it is the case on many computers (you are free to do illegal things until you get caught); - You may already have a license of Microsoft Operating System, which is the case when you change from a pc to another; - You may want to go for another Operating System such as Linux; - You may just want to buy the computer to take some pieces of hardware. 13 A former EMBS student - European Master in Business Studies 2007/2009
  14. 14. So as you can see there are some good senses reasons for not going for Microsoft Windows but what I really want to point out is the mass public exploitation of information. So before writing a book which is saying that Microsoft fairly won you should make people awarded that a huge part of the computer they are buying is the software. In the example of the computer I gave above price is not very relevant because the OS is representing 10% of the final price but have you think about the computer low cost market where computers are sold at 500 €. In that case the OS goes up to 20% or even more of the final price. So just make people aware of it and you may be see a raising army of people looking for alternative solutions to Microsoft Operating Systems. The authors of this book did not take it into consideration but can you imagine the mass public reaction if they learn and take conscience that since more than 20 years they have been charged for something that they were not aware of and that alternatives were possible. In order to conclude this first part I would say, yes as we want it or not we all gave money to Microsoft without knowing it... is it that fair? Technology's awareness: the Internet browsers market Here is one more time a part that I am writing taking in account that it may be possible that Liebowitz and Margolis did not write about this issue 10 years ago because those information and data were not existent yet. 14 A former EMBS student - European Master in Business Studies 2007/2009
  15. 15. However it may be possible as well that they had the information in front of their eyes and decided to not going further. In any case I really found this lack critical and I would like to share with you what I think is fundamental in Microsoft domination. The point that I want to make is technology's awareness, the fact that people are not aware of the existence of new technologies on the market. The best example I can find is the one of Mozilla Firefox which is a serious competitor to Microsoft Internet Explorer Browser. Firefox is in fact the continuous project of Netscape Navigator which according to the authors has been fairly defeated by Internet Explorer which was recognized as a better quality one. The market of Internet browsers is nowadays the following: February, 2009 Source: share.aspx?qprid=0 Microsoft Internet Explorer 67.44% Firefox 21.77% Safari 8.02% Chrome 1.15% Opera 0.71% Netscape 0.66% Mozilla 0.07% Opera Mini 0.07% Playstation 0.04% ACCESS NetFront 0.02% Blazer 0.02% Microsoft Pocket Internet Explorer 0.01% Look at any computers within an university and you will find Mozilla Firefox installed on in plus of Internet Explorer which is by default installed on all computers. What does it mean? it means that all universities have made the effort to install another Internet Web browser. I guess that places where 15 A former EMBS student - European Master in Business Studies 2007/2009
  16. 16. education is thought is the best one to judge what is the best solution to user needs because they have the knowledge and awareness of better solutions. I would not be surprised as well to come in any mere household which have a computer and to not see the presence of Firefox on computers. The reason is simple, information is not passing through the mass. Most of the mass are not technologies aficionados and then not aware of other technologies which are running around. They buy what they buy and they use what they bought. Which mean provide me a computer with Internet Explorer and I will logically use Internet Explorer. So here I am quite astonished that one more time the authors did not developed this argument deeply. For me here you have a pillar of Microsoft success, how to make people aware of different and various technologies. Moreover we should take in account the number of garbage computers which are still on the Internet. I call garbage computers some old computers which are not up to date and will never be but are still running around on the Internet because some people even do not know that computers have to be maintained and which of course are running under Internet Explorer. 16 A former EMBS student - European Master in Business Studies 2007/2009
  17. 17. Conclusion As an overall conclusion I would say that I am very surprised that such books can be published and received at the same time so many positive feedbacks. For me there are here two critical missing parts which can really reversed the context of this book. One thing is sure giving right to Microsoft and monopole to this company is a serious problem and diversity has to raise up. This is not by writing such favorable books which will help. The earlier change will be made the better it will be. The recent news published those weeks,39040745,39387636, m showed clearly that things are moving in this field (the deactivation of Internet Explorer will be possible on new computers) but I guess it is one more time a bit too much in favor of Microsoft. When will it be the time when going to your vendor you could choose "à la carte" what you want in your computer and that you do not want. 17 A former EMBS student - European Master in Business Studies 2007/2009