The financial analysts. An analyst’s favorable report on a new product can significantly improve the product’s chances of success. Where do financial analysts get their information? Some comes from the manufacturers themselves. But more comes from dealers and independent suppliers and luminaries.
The business and trade press, in turn, rely heavily on comments and recommendations of the financial analysts. I once went through a long Business Week article with a yellow marker and highlighted all the quotes from financial analysts and luminaries. When I was finished, nearly the entire article was yellow.
The spreading enthusiasm bounces up and down the infrastructure. When an influential luminary like Ben Rosen tags a product as a future leader in the marketplace, still more software companies begin writing programs for the computer. Eventually, the word reaches the top of the pyramid and the customers begin buying. It’s like a massive game of whispering down the lane, with more and more people involved at each level. Each part of the infrastructure validates the others.
The situation is similar with microprocessors. If a new microprocessor is supported with development tools, peripheral chips, and software, other semiconductor companies are more eager to act as second sources-that is, to make microprocessors based on the same design. This is very important, as few customers want to rely on a chip manufactured by a single company. Second-sourcing agreements attract the attention of industry luminaries and financial analysts, and the word continues to flow up the pyramid toward the customer.
If a company is missing any levels of the infrastructure, the whole pyramid can come tumbling down. National Semiconductor has run into this problem with its 32-bit microprocessor. The product is excellent, superior to some of its better-selling competitors. But the microprocessor has had little in the way of peripheral chips and software support.
As a result, National has not been able to build a reputation as a major force in the market. I recently attended a board meeting at a manufacturing company deciding which micropro¬cessor to use in its next-generation products. Fully three-quarters of the discussion focused on qualitative factors. Board members were looking for a microprocessor maker they could count on for new products and support in the future. National, despite its highly advanced product, was quickly knocked out of consideration. Why? It had no history of success in the microprocessor business and little support from the infrastructure.
The infrastructure tends to be particularly important in rapidly changing industries with complex products. In these industries, there is so much going on that it is difficult for even knowledgeable people to sort out all the details. To understand the significance of new developments, people rely on what they hear from the infrastructure. No dealer is going to open shelf space for a new product without speaking to other dealers or third-party software vendors, or reading trade magazines and financial analysts’ reports.
