A Corporate Rivalry Strategy Lesson from the Cold War Era

By Kumar Singh, Research Director, Automation and Analytics, SAPinsider

 

A lesson from the collapse of U.S.S.R

Among many other factors that led to the collapse of former Soviet Union, a key one in my perspective was the economic strain on the erstwhile Soviet Union’s economy. Regan, very strategically, led U.S.S.R into the game of matching nuclear arsenal and programs like star wars. The then U.S.S.R did not have the economic foundation to sustain that.

But the key question is – what was the end objective that U.S.S.R had in mind when it took those not so prudent steps ? The simple objective was that it wanted to match the capabilities of its rival. Now there were two aspects to it in my opinion. One was, that it actually was anxious about U.S developing an edge, in terms of military capabilitis. Second aspect was, it did not want the world, and its allies, to see it as lagging behind U.S in military capabilities.

And to address both of these, it did not need to actually spend like crazy. Military might is not always about the number of WMDs. It can also be about how many you have, where you have them, what is your tactical execution plan (we hope it never comes to that again) when the time  comes to execute. If the goal eventually was that the capability has to be enough for MAD (Mutually Assured Destruction), U.S.S.R could have done it with very little stockpile. And the same goes for “Nuclear Deterrent” aspect. For U.S, it did not matter if U.S.S.R had equal or more warheads. What was critical was if the damage they could do would be substantial.

That maks me think that U.S.S.R trying to match the exact number was more cosmetic. They being the leader of the “other world block”, did not want to be seen as lagging. Now, this is not the aspect we are going to explore here, but  my take on this is that they could have created this “mirage” without actually spending, by clever “marketing”.

But our lesson is in the first part- that U.S.S.R did not need to match U.S, warehead for warehead, if the end objective was to have a nuclear deterrent and MAD. The end goal was to outcompete. It could have been achieved without matching U.S warhead for warhead, or program for program. And herein lies a corporate lesson. When two corporate giants compete, an important strategy is accquisitions. But that strategy need not be focussed on “We need to match their portfolio or capabilities, product by product”.

Example: Salesforce vs Microsoft

The theme of this article originated when I was doing my weekend reading this morning. I came across an old article about Salesforce’s accquisition of Slack and how it “matches” a product in Microsoft’s portfolio, MS Teams. The amount that Salesforce paid for Slack was steep. And that made me think- rather than investing that amount to “match” a capability that Microsoft had, could Salesforce have used that to make certain accquisitions that could have actually helped it build capabilities Microsoft did not have ? Agreed that messaging platform is a required component in a portfolio but is it a strategic component ? With that money, Salesforce could have bought a couple of companies that come to my mind, which, when combined with their existing products (and Tableau), would have helped build a unique “solution” offering. The “matching” game, in my opinion, specifically due to the price paid to accquire Slack, was not prudent. Salesforce could have developed a messaging product, for the purpose it needed to serve, at a fraction of that.

But the earlier accquisition of Tableau was a masterstroke. I believe Salesforce can use that product to do many amazing things, and combined with some addition product development and few strategic accquisitions, it can build new market segments as well. The fact is, Tableau needs to be the central element of their strategy in this rivalry. Tableau is seen as a visualization tool or a BI tool by many. I see tools like Tableau having much more potential with some additional development and integrations.

The difference with U.S.S.R analogy however is that in the corporate world, the goal is not to match, but to develop an edge. Size, in today’s digital world, does not matter, if you can generate unique solutions and capabilities. I always insist that when you want to compete with companies larger and stronger than you, the goal should not be to compete on their turf. Build your own turf and draw them in.

Now looking at this from Microsoft’s perspective, it sits on much more cash than Salesforce. There are few key investments it can make to thwart any attempts by Salesforce to create additional turfs where MS does not have expertise. That is always a better step since once the turf (new capability, practice or solution area) has been developed, you then get drawn into the “matching” game.

The key is – avoid the “matching” or “catch-up” game.

I am pretty sure that much smarter folks at both these companies already have much smarter plans than those suggested in this article. From the perspective of SAPinsiders community, these rivalries are always benefitial to the end user community, as it means better, innovative and unique products will be available for them, which will help them run their organizations more efficiently and strategically.

 

Kumar Singh is a Research Director with SAPinsider and can be reached on kumar.singh@wispubs.com