Sometimes a Gorilla beats the Free Market

As I scanned my RSS feeds today, I came across one that I found absolutely astonishing.

It wasn’t astonishing because of the content of the story as much as for the context. The story is about cell phone chargers. The astonishing part is who’s showing leadership, and how they’re going to get away with it, and why nobody else was able to make this happen before.As I scanned my RSS feeds today, I came across one that I found absolutely astonishing.

It wasn’t astonishing because of the content of the story as much as for the context. The story is about cell phone chargers. The astonishing part is who’s showing leadership, and how they’re going to get away with it, and why nobody else was able to make this happen before.
As I scanned my RSS feeds today, I came across one that I found absolutely astonishing.

It wasn’t astonishing because of the content of the story as much as for the context. The story is about cell phone chargers. The astonishing part is who’s showing leadership, and how they’re going to get away with it, and why nobody else was able to make this happen before.As I scanned my RSS feeds today, I came across one that I found absolutely astonishing.

It wasn’t astonishing because of the content of the story as much as for the context. The story is about cell phone chargers. The astonishing part is who’s showing leadership, and how they’re going to get away with it, and why nobody else was able to make this happen before.

The article (China to Phone Makers: Get Your Chargers Straight) pretty short and to the point. In short, China is mandating that all cell phone switch to a USB connection for their chargers.

Shoot. That was easy, wasn’t it?

The really interesting part of the story, in my opinion, is the study in market forces this provides. Consider where this market has been. Proprietary networks, proprietary phones (not to mention locked phones), proprietary accessories and software. The closets of the world are testaments to the fragmentation of this market — everyone who’s old enough to have lived through a few cell phone contracts has a collection of gadgets and accessories, most of which don’t fit any phone they still own, but all of which are kept around “just in case”.

China comes along and says, “Rubbish. Fix it, or get out of our market.”

So how many manufacturers, exactly, do you think are going to punt on the largest market in the world? Is there really any question?

Why didn’t this happen earlier, either through market forces or by another country’s legislation? Here are some possibilities:

  • Self-interest. The cell phone manufacturers and providers probably like the status quo just fine, since these accessories are sold at an obscene markup. Why would they want to change?
  • The market is often sadly inefficient at settling such things. VHS vs. Betamax. Competing cellular technologies. WiFi (b / g / n / etc.). HD-DVD vs. Blu-ray.
  • Other governments just don’t seem to be in the business of legislating things that are this sensible. Ok, I guess that’s not fair. Truth be told, I’d rather have a government stand aside and let the market fix things than step in and get it wrong, which would surely happen a fair amount of the time.

When I read this story, I was really reminded of Wal-Mart’s recent moves to slash prescription drug costs. Here’s another example of a Gorilla making policy stick. Wal-Mart, of course, isn’t a government, but they’re close enough to make no practical difference. Again, the problem they addressed was one that we as Americans had every reason to expect our government to solve, but they couldn’t get the job done. Wal-Mart steps up the plate, and in a very short timeframe, they make a huge difference to millions of consumers directly by serving them, and indirectly by making every other pharmacy deal with this new market force.

Pretty amazing.

Anybody else? How about Microsoft in the early days of PC’s? Don’t get me wrong – I’m no fan of some of their recent moves, but make no mistake: the PC would never have taken off so quickly without a Gorilla leading the market. Wal-Mart made a market earlier with RFID — not as dramatic, but certainly no less impactful.

Failures? You bet. Take Sony and Betamax. Probably Sony and Blu-ray. If you don’t have enough chips to force the hand, don’t go all-in.

Most of us will never be in a position to “make” a market, nor to create a standard by declaring, “I deem it thus!” — so what are the implications of these dynamics for us little people?

  • Recognize when these moves happen. In most cases, this is hard to miss. Wal-Mart making a move on prescription drug prices was big news all over.
  • Recognize when someone’s trying to force an issue that they can’t sustain. This is trickier, but it can keep you from betting on a losing horse.
  • Watch for a market that’s ripe for someone to make a move like this. Look at health care records today. Quicken’s working on a product to open up these records for management and analysis by real people — will that start the revolution that this industry so badly needs?

Years ago, as I was swearing at the PL-SQL on my monitor, I declared that if I ever understood how Oracle managed to achieve market dominance, I’d know a lot more about how markets worked. This is another one of those moments.