dutky's Journal: A Rising Tide Sinks All Boats

I read this comment on Friday and was completely blown away by it (as, aparantly, were other folks, based on the Score:5, Insightful rating).

The essence of the comment is that when a market is threatened by a new, vigorous, competitor, the existing market competitors fold in order of financial strength (poorest to richest). As the poorer competitors exit the market, the richer competitors receive a portion of the orphaned customers. The result is that the richest competitors in a market can appear to do very well while their primary market is collapsing beneath them. Unfortunately, when all the poorer competitors have exited the market, the richest competitor must duke it out with the new, vigorous, competitor: often, the result is not good for the rich competitor.

The comment's author, jimfrost, uses DEC and Sun as examples of the pattern. He posits a law he calls Jim's Law: "The cheapest thing that gets the job done, wins." A corollary to Jim's Law is that trying to retreat up-market when faced with tough competition for comodity products is a losing strategy: By moving the more expensive, higher margin, smaller market products, you are moving away from the winning position.

I think the analysis is absolutely fascinating, even if Jim's prognostication is off the mark (I'm not saying it is off the mark, only that it might be).