Eugene is an independent consultant and writer, and author of an upcoming book on the history of free software. He can be reached at [email protected]
Netscape Time: The Making of a Billion-Dollar Start-Up That Took on Microsoft
Jim Clark with Owen Edwards
St. Martin's Press, 1999
276 pp., $24.95
Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft
Michael E. Cusumano
and David B. Yoffie
The Free Press, 1998
360 pp., $26.00
GO Corporation was revolutionary in many ways. As one of Silicon Valley's most exciting ventures in the late 1980s and early 1990s, GO created the pen-computing market and became one of the Valley's most spectacular failures. In typical Silicon Valley fashion, founder Jerry Kaplan turned failure into success by writing an exciting first-person account of his experiences. His book, Startup: A Silicon Valley Adventure (Penguin, 1996, ISBN 0-14-025-731-4), remains one of the most compelling portrayals of the Silicon Valley startup experience, and quickly became a best seller. Additionally, like all successful ventures in Silicon Valley, Startup spawned a number of mostly inferior imitators.
The most recent tell-all book comes from Jim Clark, who holds the distinction of being the only person to found three separate billion dollar companies -- Silicon Graphics Inc. (SGI), Netscape Communications Corp., and Healtheon Corp. Clark's book, Netscape Time: The Making of a Billion-Dollar Start-Up That Took on Microsoft, is a behind-the-scenes account of Netscape's five-year history.
The parallels between Netscape and GO are striking. Both Silicon Valley startups were at the forefront of new and revolutionary technological paradigms, both had to fight off feisty competitors, and both were eventually acquired by much larger firms (GO by AT&T and Netscape by AOL). Some familiar faces from Startup even appear in Netscape Time, including venture capitalist John Doerr, Mike Homer (who served as vice president of marketing at both companies), and, of course, Microsoft -- the foe to end all foes.
The similarities end there, however. While it is difficult today to rate Netscape's overall success, the company was most definitely not a failure. In 1995, Netscape had one of the most successful IPOs in Wall Street history, with the stock price more than doubling after one day of trading, giving the company a valuation of $2.2 billion after 15 months of unprofitability. Two years later, Netscape became the fastest growing software company ever, earning revenues of over $500 million dollars, a feat that took Microsoft more than 14 years to accomplish. Most of all, Netscape was the embodiment of a company adapting to Internet time, morphing from a consumer software company to an enterprise software company, and finally to an Internet portal company -- all over the course of five years.
Netscape Time is a brief, readable narrative of Clark's experiences at Netscape (beginning with his decision to leave SGI) and focusing largely on the creation of the Navigator browser and Netscape's legal battles with the University of Illinois Urbana-Champagne's NCSA, where Andreessen and others had created the Mosaic browser. As you'd expect from a book of this nature, Netscape Time has its share of humorous anecdotes and no-holds-barred characterizations of well-known figures.
Clark reveals, for example, that Jamie Zawinski, an early employee and one of the major developers of the open source xemacs editor, invented Mozilla, Netscape's unofficial lizard mascot. Clark later describes a Fourth of July party where Ari Lutonen, another early hire and creator of the CERN web server, shed his swimsuit and went skinny dipping in Clark's pool to the dismay of others present. Clark doesn't limit the gossip to programmers, however. Clark establishes the frank tone that pervades the rest of his book with his description of Ed McCracken, then the CEO of SGI:
Ed almost completely lacked a sense of humor, however, which is a quirk I've always considered enough of a handicap to justify special parking places. Business magazines have termed him "introspective," which is a diplomatic way of describing someone you couldn't see yourself having a few beers with.
And of course, the book takes its requisite pot-shots at Bill Gates, who Clark manages to compare with Caligula, the bloodthirsty Roman emperor, and Lord Sauron, the evil and powerful sorcerer from J.R.R. Tolkien's Lord of the Ring trilogy.
Clark's portrayal of his engineers as largely nonconformist, highly motivated, and mostly brilliant is one of the book's strengths. He doesn't merely contribute to the stereotype of the hacker surviving on pizza and little sleep -- although Netscape certainly had its share of both. Instead, he reveals the breadth of personality types among his software developers and the difficulties of managing a mix of experienced, mostly older engineers and his younger hackers. Clark leaves no doubt as to the importance of his people -- especially his engineers -- and his account of developing software at a startup ring true. Clark is even honest about the technical novelty of Netscape's work, at one point, noting that while he felt his engineers' work was brilliant, "there really wasn't an enormous amount of technology in what Netscape eventually accomplished."
Shedding some light on how Netscape accomplished what it did is where the real value of this book lies. How did a company that essentially gave away its flagship product become the fastest growing software company, revenue-wise, of all time? Clark confesses that when he first agreed to start a company with Marc Andreessen, the company "had no name, no mission, no business plan, and definitely no business." Andreessen, bitter about his treatment at NCSA, had even made it clear that he did not want to do anything related to the popular Mosaic browser that he had helped create. When the two of them eventually agreed to develop a "Mosaic killer," they still were unsure of how they would make money. Clark was sure that the Internet was the next great communications medium, and that if Netscape became the universal tool for accessing the Internet, the revenues would come from somewhere.
Clark's candidness about his company's early strategy, or lack thereof, helps relieve the reader of some wariness over Clark's biases. First person memoirs often contain some historical revisionism -- sometimes intentional, sometimes not. Clark clearly thinks that Netscape was important and revolutionary -- and it was. To Clark's credit, he does a good job of identifying his own mistakes and of giving credit where credit is due. At times, however, Clark not-so-subtly goes overboard in identifying Netscape's cultural impact. For example, he invents the term "Netscape time" to describe what the rest of the universe calls "Internet time." When describing how the Linux operating system is downloaded from the Internet by millions of users, he enthuses, "The Netscape paradigm strikes again!," even though Linux and many other software applications -- including Netscape's predecessor, Mosaic -- had established and been successfully using this distribution method well before Netscape.
The biggest surprise of the book, which is ostensibly about a "startup that took on Microsoft," is that Clark spends relatively little time discussing Microsoft. Instead, Clark devotes several chapters to Netscape's early legal battles with NCSA, which claimed that Netscape violated NCSA's intellectual property rights to Mosaic. Clark's perspective is particularly instructive, as both Netscape and SGI were essentially university spin-offs, although Netscape less directly so. The legal battle reveals the lack of understanding that NCSA, whose specialty was supercomputer research, had in the relationship between universities and commercial spin-offs, a deficiency that resulted in much bitterness between the parties involved and that probably cost the University of Illinois millions of dollars in potential donations. Clark's message is clear: NCSA failed to realize that its most valuable commodity was not the source code to Mosaic, but the people who developed it. These people, Clark emphasizes, were ultimately responsible for Netscape's success.
Judo and Software Engineering
In Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft, business school professors Michael Cusumano and David Yoffie pick up where Clark leaves off. Cusumano and Yoffie attempt to address one major question: How has the Internet and Internet (not "Netscape") time affected business practices? While the authors analyze Netscape's overall practices, they devote much of the book to Netscape's competition with Microsoft.
The Amazing Randi, noted magician and skeptic, once described an experiment where students in a classroom were each given a horoscope. Almost all of the students exclaimed that their horoscopes applied to them, at which point the students were asked to exchange horoscopes with the students behind them. To their surprise and amusement, all of the horoscopes were the same.
Randi's anecdote is eerily familiar to anyone who has read more than one business book: They generally make sense, but they're all the same. This book is no exception. Many of the practices described in the book are simply common business strategies, many of which are not exclusive to Internet or even technology companies. As was Clark in his book, the authors are frank. Early in the book, they note, "After more than a year of intensive investigation, we are inclined to agree with some (but not all) of the hype." Toward the end, they state, "Overall, we cannot say that Netscape was unique or particularly refined in its development practices."
With such predictable conclusions, why bother reading this book? First and foremost is its in-depth account of Netscape's business history. As stated earlier, Netscape was a unique and important company, and the authors use their access to company information and substantial excerpts of interviews with key Netscape executives and employees to provide a detailed and insightful analysis as to why Netscape did what it did, and why those actions were and were not successful. Second, the authors devote a large section of the book to Netscape's software engineering practice, an unexpected bonus for the more technical reader.
The book's thesis centers around the concept of "judo strategy," which the authors feel is a crucial strategy for competing on Internet time. Based on a concept first introduced by economists Judith Gelman and Steven Salop known as "judo economics," judo strategy emphasizes three basic principles: avoidance, flexibility, and the use of the opponent's weight against itself. Judo strategy minimizes the importance of size and strength, such that a smaller company can survive and even thrive against larger companies.
Judo strategy explains how Netscape could get away with its short-sightedness regarding revenues. Noting that Clark had once said, "We don't know how in the hell we're going to make money, but I'll put money behind it, and we'll figure out a way to make money," the authors argue that Netscape not only overcame this short-sightedness, it required it. While Netscape did not start off with a specific business strategy, it had a broad mission statement: providing universal access to large networks using open standards. This vision was narrow enough to guide the company, yet broad enough to allow the company to move rapidly from business plan to business plan, essentially chasing revenue sources while avoiding head-on competition with much larger firms. This movement is a central principle of judo strategy, and allowed Netscape to evolve.
The analogy is especially apt when discussing the browser wars between Netscape and Microsoft. Although there were already several web browsers available by the time Netscape was formed, Netscape quickly overtook the market by essentially giving away its browser, and by 1996, held approximately 90 percent of the browser market. By focusing on a market with no major players, Netscape had accomplished the first goal of the judo strategy: Avoid the big guy. By 1996, however, Bill Gates had recognized both the importance of the Internet and the fabulous success of Netscape, setting the stage for a hard fought judo-style battle.
Netscape's embracing of open standards and its commitment to cross-platform software embodied the notion of leveraging an opponent's weight against itself. Microsoft's core business was selling operating systems, and supporting cross-platform versions of Internet Explorer would have undermined its commitment to the Windows platform. Netscape essentially converted Microsoft's operating systems monopoly from a strength to a weakness, albeit a minor one.
However, Netscape was not always an effective judo fighter, and was sometimes surpassed by Microsoft at its own game. Rather than defend itself from Netscape's commitment to open standards by stubbornly advocating the proprietary standards that it had already developed, Microsoft chose to embrace and extend, creating a browser that was as compliant as Netscape's while advocating competing, "open" technologies such as ActiveX. Additionally, Microsoft recognized Netscape's reluctance to sacrifice revenues from corporate customers of its browser, and leveraged that against Netscape by giving away Internet Explorer to everyone for free.
Here, Netscape made its most crucial error by deciding to take Microsoft on directly, a mentality the authors called the "sumo strategy," where the bigger, stronger opponent always wins. Netscape chose not to give its browser away to everyone for free, and at the same time, competed against Microsoft for software distribution channels, a battle it could not win. As a result, Microsoft gradually chipped away at and eventually overcame Netscape's browser market share.
Cusumano and Yoffie's chapters on Netscape's software design and development techniques are less about judo strategy and more about developing software on compressed timelines. As noted earlier, the authors conclude that Netscape's development practices were not much different than companies producing software under lesser time pressures (if such companies exist anymore). Everything from the division of labor to the creation of functional specifications were essentially analogous to other large software development firms. The primary difference was in testing, which not surprisingly suffered from lack of time and people.
As with other organizations, Netscape dealt with this lack of testing resources by trying to increase its use of automated testing and by forcing developers to incorporate testing into their responsibilities. Its biggest innovation was in its use of beta tests. While other companies, including Microsoft, had been major proponents of beta tests in the past, these companies had been hamstrung by the resources required to do these tests, including the distribution of diskettes containing the beta software. Thanks to the Internet, Netscape was able to release beta versions of its software early and often, allowing Netscape to have larger numbers of testers and decreasing turnaround time between the reporting and fixing of bugs.
What Could Have Been
Clark's book is a highly readable complement to Cusumano and Yoffie's work, which, while thorough, is at times stuffy and repetitive. Clark describes how he hired Rosanne Siino very early as Netscape's head of public relations, and how she made a conscious decision to turn Andreessen into the company's rock star. Clark later explains that publicity was one of the reasons he argued for Netscape to go public after just 15 months, even though the company had never turned a profit. Cusumano and Yoffie subsequently explain how these events allowed Netscape to generate free publicity, essentially turning the press into its own virtual public relations organization.
Most intriguing of all is the lingering question implicitly posed by both books of what might have been. Cusumano and Yoffie point out that Netscape's broad vision statement placed Netscape in the category of an Internet company; however, at times, Netscape acted too much like a software company, to its own detriment. Its "free but not free" browser distribution strategy reflects this contradiction. Clark points out that both he and Andreessen knew from the outset the importance of browser ubiquity, and yet, had difficulty abandoning the substantial amount of revenue that corporate browser customers generated even in the face of the freely available Internet Explorer.
Cusumano and Yoffie further explain that Netscape not only failed to recognize the revenue potential of Internet portals, it botched its relationships with potential partners by prioritizing revenues from its Internet site over market share of its web site. While neither book mentions that Netscape was an early supporter of Yahoo, Clark notes that Netscape considered hiring David Filo and Jerry Yang, Yahoo's founders, before deciding against it. With its large browser share, Netscape could have been the biggest Internet portal of them all.
Copyright © 1999, Dr. Dobb's Journal