1st, 2nd, or 3rd is great, everything else is irrelevant

We all play to win. We want the gold medal, first place, the championship. And even if we come up short, we never quit, and always have our sights set on first place. However, in business second place is great. Even third place can be incredibly profitable. Cnet says "Google Rises at Yahoo's Expense" Bloggers declare this company is dead or that company is history. Hyperbole for catchy headlines.

Yahoo is an incredibly successful web media company. They are doing about $6.4 Billion in revenue and $1.5B in profit. Yahoo is not dead, dying, or irrelevant. Yahoo is growing, profitable, and highly relevant in their market space.

The press and bloggers like to compare Yahoo to Google and declare them dead. Google is a search advertising company while Yahoo is a web media company that also sells advertising. They are different businesses with the same revenue model. Yahoo is a distant second to Google in search traffic and advertising revenue, but it is still a great business. The stock market is adjusting to this reality.

Apple is a very successful consumer hardware company that did $19 Billion in sales and $2.7B in profits. Three years ago Apple did just $6 billion and $138M in profit. Apple has less than 5% of the desktop computer market. Should they just fold up their tent and go home? No. Apple was profitable being the number two desktop computer platform. And, they leveraged that into the iPod consumer hardware bonanza.

Geoffrey Moore wrote Inside The Tornado, a fascinating book about technology marketing. Mr. Moore breaks down the competition into three classes; Gorillas, Chimps, and Monkeys...catchy names for first, second, and third. The key message of the book is that all markets shake out this way. A Gorilla always emerges...and they make the rules. A Chimp (2nd place) and Monkey (3rd place) can do really well too but must play by different rules.

Another powerful lesson is if you are not first, second, or third...life can be very difficult. They get the crumbs left behind by the leaders. A few companies can make money here, but it isn't a platform to launch you to the next level.

If you find your company in fifth or 7th place in any market it might be a good idea to find a new market where you can earn a place in the top three. Sometimes that is all it takes. Take the same company, same technology, but direct it at a new problem in a different market. Then you can charge higher prices and gain market leadership. It is all about positioning.

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Comments

[rhhfla]

Most academics, McKinsey and Jack Welch all agree that the top two market shares in an industry produce the best returns for shareholders. Third position usually struggles to maintain a competitive long term strategy. Of course, a viable third position may really be first in a better defined segment.

[Mark Alan Effinger]

Hi Don,

I landed on your page tonight preparing a proposal for a client, and looking for The HP Way.

I believe it was David Packard who evangelized this within his company from the early days.

In one of our companies, we defined it as Fun, Fame & Fortune. The Fame denotes being 1, 2 or 3 in a given market.

Excellent post, and I actually added the link to my proposal. Thanks for the additional credibility in working toward a lead-dog position.

One more thing: yes, changing markets or strategy in order to get into that position is a very powerful position. Rather than fighting tooth and nail, you can often find a rich, new field just waiting.

We recently launched a company that, had status quo remained, would be just another one of the bunch.

We made a bet that Google, Yahoo, MSN and Ask.com would begin to include rich content in their front-page search results.

We made that bet 18 months ago. In May Google announced Universal Search results. July Yahoo!, Ask.com and MSN announced 3D Search, their response. Both include images, video, blog posts and audio in front page search results.

Today we're #1. Let's see what we need to do to maintain that lead.

Thanks again for the enduring post.

Mark Alan Effinger
www.RichContent.com
www.RichContent.tv