Competition is Becoming Increasingly Distributed

When you think about who might topple a software giant like a Microsoft or a Google, you might be inclined to think of Goliaths like, well Google and Microsoft. The same is true of any industry, you probably think of a company of similar size or larger as being the type of company that would win a battle, or a war.

Actual battles and wars end up being an interesting analogy. If you think if big battles like World War I and World War II, that’s exactly what happened – giants fighting giants from big, knowable centralized points of command. But there are some other wars that have been fought where the little guy won (or hasn’t lost in the case of one ongoing war) and there’s a common element in all of them. No centralized physical location to “take out” to win. When everything is dispersed and there isn’t any one thing to take out, it’s hard to really know how big or how small opposing force is, and they can be substantially more agile. In this situation, an organization of any size can pose a major threat to an enormous organization. The war on terror is an ongoing war that fits this profile – it’s virtually impossible to know how big or small the opposition is, or where they are at any given time, so it’s very hard to be ready for an attack from them. Viet Nam was a tough one for the US to really stand a chance in because it was in unfamiliar territory and there was no central location to take out to declare victory. One could even make the same argument (at a high level) for why the British lost the American revolution.

So if you don’t know who Rovio or CCP are, I have already made significant progress on the path of making my point.

Rovio is a tiny software company out of Finland that makes a game called Angry Birds. Angry Birds is one of those products/games that sounds so strange and so not-fun, it is a little amazing to me that it ever even became a game, but as someone who has lost many hours of my life to that game, I have to say, it’s a lot of fun and incredibly addictive. As an aside, the TV show Spongebob Square Pants falls into the same category – I would have loved to have been in the room when that show got pitched to see what caused the network to green light that nutty idea. It is a global phenomenon, and the only thing that puzzles me is that the company hasn’t made more money from it, though I expect that will change soon. But it’s a tiny little company of fewer than 20 people based in Helsinki and they made they #1 most downloaded iPhone application last year. Number one in the world. Not Microsoft, not Google, not Oracle or any other software giant you can name. Little tiny Rovio.

On to CCP.

Staying in cold Northern European countries, let’s move over to Iceland, a tiny country of about 300,000 people. How likely are they to have a company that creates some of the most popular software in the world? Well, that’s CCP. Now they are bigger than Rovio, but their software is a LOT more sophisticated than Angry Birds, but in their own category (I am sure they will come up with a better category name, but for now it’s MMORPG), they are huge and growing. Their Eve Online game boasts over 300,000 monthly subscribers (I realize an improbable coincidence with the population of Iceland) and they say their next game, which won’t cannibalize Eve customers, is going to blow people’s minds. I visited the CCP offices in November and I haven’t been so impressed by a company, their culture, their energy, and their products in a very long time. And I meet with a lot of companies.

The point is that especially now that the use of the internet is starting to mature, a company of any size can become a global phenomenon, though that’s not huge news. The bigger news that I haven’t heard a lot of people talking about, is that when people think about who the Goliath’s like Microsoft, Oracle, Google, Amazon, VM Ware, etc. compete against, the number of “David’s” out there are becoming a pretty big foe in their own right, and the kind of warfare the Goliath’s are going to have to wage is very different from traditional World War I kinds of battles. Lots of little (comparably) tiny rivals that are very agile. Sure it will make sense to buy some of them up, but that won’t change the fact that the kinds of battles and wars the Goliath’s are in are different and they need to think that through.

So the answer to the question of whether Rovio or CCP will kill Microsoft or Google? It’s the wrong question. It’s the aggregation of all of the little CCPs and Rovios of the world that represent the new face of competition for the giants. Not centralized, not entirely knowable, dispersed all over the world, and very agile.

While this is true in the big software companies, because software is every where – I think this type of changing battlefield will touch most industries.

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Ric Merrifield is known at the “Business Scientist” at Microsoft Corporation in Redmond, WA and is the author of Rethink and the upcoming Surviving Business Earthquakes. He blogs about ways to rethink through getting out of what he calls “the ‘how’ trap”.