August 3rd, 2008

Memo from the past: Don’t fight city hall

in: Competition, Create, Startups

Sometimes, the benefits of a new product are so awesomely, amazingly, tremendously good that people are willing to change their behaviors.

It’s not going to happen for you. Most of the time, people won’t work to try and understand a new approach. And no amount of education is going to change that.

This is a fundamental challenge for entrepreneurs. We’re deep in the product, conjuring up reasons why it will win in order to attract investment and keep our employees motivated. But just because the rank and file is drinking the Kool-Aid doesn’t mean the rest of the world will.

There’s a great example of this, and it’s not just a small company example. It happened to the word processing industry.

Back in university, I worked in the school’s computer lab to pay for some of my beer.^*

The curriculum for non-comp sci students included three products: DBaseIII for databases, Lotus 1-2-3 for spreadsheets, and Wordperfect for word processing. Of these, the one I had the hardest time explaining to people was, surprisingly, Wordperfect.

People would type their documents out using the monospaced, 80-characters-per-line screen. Then they’d print the document out on our fancy new laser printer in proportional, Times Roman font and everything would look wrong. They’d type a line of text and hit [enter]. Sometimes, when the line of text was nearly 80 characters, they wouldn’t hit [enter]. The result was a ragged printout, wasted paper, and a confused look on their faces. Try as I might, it was abundantly clear that people simply weren’t able to grasp the concept.

Remember, these are mostly commerce students. And they were stumped more by text formatting than by building and managing desktop databases. Not understanding proportional fonts was a common point of confusion, and there are lots of pages devoted to explaining it. The concept of hitting [enter] at the end of a line was so ingrained, so obvious, that they couldn’t grok it. We’d tell them, “only hit enter at the end of a paragraph.” Nothing.

Today, this isn’t a problem. It’s not because we all understand monospaced fonts and paragraph markup. It’s because Microsoft came along and decided we shouldn’t need to learn about all that. And in doing so, they came to dominate the word processing market.

Microsoft had a word processor, too. And while very early versions used monospaced fonts, they were quick to embrace graphics mode (albeit without the right fonts) even prior to Windows. Word was What You See Is What You Get (WYSIWYG.) No more wondering if what you’ve typed will come out right: You can just see it.

“Word was the first application with such features as the ability to display bold and italics text on an IBM PC … Although MS-DOS was a character-based system, Microsoft Word was the first word processor for the IBM PC that showed actual line breaks and typeface markups such as bold and italics directly on the screen while editing, although this was not a true WYSIWYG system because available displays did not have the resolution to show actual typefaces. Other DOS word processors, such as WordStar and WordPerfect, used simple text only display with markup codes on the screen or sometimes, at the most, alternative colors.” (Wikipedia)

Using graphics for text seemed like a silly idea to many people at the time. Remember that word processing wasn’t a common skill back then; often, it was the domain of secretaries and administrators. Microsoft’s graphics-based word processor was sluggish, often taking seconds to catch up with fast typists. Professional typists, trained on Wordstar, considered word processing a “trade secret”: If you knew how to tweak a document’s arcane “Reveal codes” mode (analogous to editing HTML directly) then you were the wizard of the new steno pool.

But WYSIWYG dramatically increased the total addressable market for word processing. Instead of forcing customers to learn new paradigms that contradicted with what they already knew, Microsoft did the hard work for them. Graphics caught up, Word became more usable, and Microsoft won. They didn’t just make it easy to grasp: They actively courted Wordperfect users with a “wordperfect mode” blue screen and key mappings.

A great overview of the Microsoft and Apple battle talks about this:

In 1991 Word Perfect released Word Perfect 5.1 for DOS and Word Perfect 5.1 for Windows. Word Perfect was the biggest application of its day, but the company failed to adapt quickly enough to the popularity of the GUI … the famous but complicated ‘Reveal Codes’ feature which was rendered essentially obsolete by WYSIWYG editing.

Within a few years, Microsoft crushed everyone else. Here’s a chart from UT Dallas that shows the dominance of Word for Windows and how Word for DOS paved the way:

You may be thinking this just proves Microsoft’s monopolistic tendencies, but the UT Dallas piece does a good job of refuting this.

Microsoft Word was a superior product at a time when consumers were rethinking their adoptions  …

In 1994, Novell bought Wordperfect for $1.4B. Two years later, it was sold to Corel for roughly $124M (some components were kept and some sold, making the actual amount hard to value.) Today, Corel’s entire market cap is $237M, less than one time annual revenues and just 64% of its estimated value.

Ouch.

Clearly, you want to be Word, not Wordperfect. Opinions vary on why Word was able to overtake the incumbent. But I have a few ideas that apply to any new venture:

• Hang your hopes on a disruption. Microsoft realized that a new technology, the graphical user interface and mouse, would be a disruptor for the word processing market that would help average users produce complex documents that rivaled professional design applications.
• Don’t fight city hall. By making the product accommodate users, rather than trying to educate users about the complexities of layout and Reveal Codes, Word had a less steep learning curve and less explaining to do. When you’re explaining something, it means the benefits aren’t self-evident. And that’s bad. Your startup doesn’t have the time or the money to change the way people behave.
• Make it easy for people to move. Microsoft has always been able to import others’ file formats, and offers conversion tools. Sometimes they’ve been nasty about this (not letting people save back into imported formats.) But by making the screen background blue, or supporting Lotus’ “/” commands, people felt comfortable trying out the new product.
• Identify the barriers to adoption that limit your target market. The printing thing was such a headache that word processing seemed like a profession. Today, it’s just something we do. Microsoft has consistently tried to make its products appealing to everyone, giving them the largest possible markets.

* I have another way of paying for beers, but you’ll have to get some in me before you see that.

Tags: differentiation, product design, total addressable market, word, wordperfect

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