Gorillas, chimps and monkeys

Attracting long-term support from the investment community - be it market analyst, institutional investor or the press - is very dependent on whether your company has been classified by this community as being a gorilla, a chimp or monkey.

So what is the analogy between these primates and is there one to be found for your company?

Where the monkeys have scale but no barriers to entry, the chimps have business to entry but no market scale.

Banners to entry

Well, it`s quite simple: Market leaders (gorillas) can go where they want and do what they want because they control the de facto architecture in a horizontal market. Chimps, on the other hand, are the marketers of the alternative strategy but with vertical leadership. Monkeys are known for their agility and offer 100% compatible alternatives to the standard architect at a much lower cost.

Real money is only made during the tornado phase of the technology adoption lifecycle. During a product tornado (a metaphor for hyper-growth) one product is chosen by the market as the de facto standard. This creates a massive updraft in demand, creating a tornado-like effect that can deliver growth not untypically of 300% per year in the early stages slowing down to a 100% over a long period. For example, Oracle maintained a 100% growth each year throughout the 1980s.

The marketplace`s need for a standard architecture leads it to fixate on the market leader and confer upon it "Gorilla Powers" and financial rewards.

So what then does the marketplace expect from the other companies in the category?

Basically, it offers these companies the opportunity to play alternative roles to the gorilla: the chimp and the monkey. The monkey role emerges later in the history of the market than does the chimp.

Monkeys are simply companies that clone the gorilla architecture and offer products 100% compatible with the gorilla products at a discount.

Monkeys live and die purely based on execution. If one monkey falters, another will be there to take its place. They do not have permission to change standards, and therefore they cannot create new markets. The factor of which brand will win between Mustek`s Mecer (local brand) and Siltek`s Xylo (clone) will be determined by execution. In other words, will Siltek be able to erode Mustek`s installed base through better execution?

Monkeys follow gorillas, wherever the gorilla makes any change to its de facto standard architecture, monkeys must stop what they are doing and re-engineer their offers to restore 100% compatibility. As such, they are inherently committed to a "read and react" strategy, never able to plan beyond a horizon that is dictated by a gorilla.

As investments, monkeys are attractive primarily to opportunistic investors. Having no architecture commitments of their own, they can move swiftly to take advantage of the huge markets created by the gorilla, allowing for tremendous revenue opportunities. The bad news is that monkeys cannot create sustainable barriers to entry. That is, their market share is always an illusion. During the life of the hyper-growth period these companies can create great revenues and profits, making them attractive as short-term investments. For private investors, however, they present a poor choice for those who should be buying infrequently and holding for the long-term. For the smart institutional or technology-fund investor these are some real opportunities for the wide-awake stock-picker.

Chimps, on the other hand, are companies that attempted to become gorillas but just didn`t get picked. As such, they have already invested heavily in their own product architecture - one they had hoped would become the gorilla standard, and one that is thoroughly incompatible with the gorilla`s.

This fact of incompatibility is the shaping element for their future business strategy, for it gives the chimp the exact opposite marketing problem from that of the monkeys. Where the monkeys have scale but no barriers to entry, the chimps have business to entry but no market scale. That is, whatever customers they win, they can keep, because like the gorilla, they too have proprietary control of architecture. However, since the market has standardised on the gorilla`s standards chimps have a problem. Customers are wary not to go with the standard and partners do not want the added expense of supporting a second architecture. This leaves the chimp with two options:

1. Continue to attack the gorilla in an attempt to wrestle mass-market control away from it.

2. Retreat into one or more niche markets to become a "local gorilla" inside the niche, similar to Sybase`s strategy in financial services.

Attacking the gorilla is in nobody`s interest, so customers and partners alike will turn on the chimp.

The best strategy for the alternative standard chimps is to turn their focus on niche markets whose special needs are being ignored by the gorilla`s mass-market approach. Chimps must enter and dominate those markets as fast as possible because as soon as mass-markets mature gorillas will attempt to spawn into these niche opportunities in search of growth.

Chimps should look for new tornadoes like HP did as the chimp in the proprietary mini computer market when the market shifted to Unix. HP became the gorilla in the printer market building a $10 billion dollar business in 10 years. Chimp companies will only attract investment when they show up as gorilla candidates in new product tornado market.

While there is no such thing as a gorilla without a tornado, tornadoes without gorillas do exist - namely, the mass-markets that come into existence around non-proprietary standards, ie monitors, keyboards, disk drives, scanners, modems and application software. Next time the players in this specific market, aptly named by my colleagues at the Chasm Group as the kings, princes and serfs, will be discussed.