Lessons in Hardball

Earlier this year, I read the book "Hardball, Are You Playing to Play or Playing to Win?” by George Stalk and Rob Lachenauer published by HBS Press. The authors cite numerous case studies and reveal explicit boardroom strategies of companies (Frito Lay, Dell, Citibank among others) who use their dominant market position to block or, in some cases, crush would-be competitors. Having worked for two companies that held dominant positions in their respective markets, I can speak from first hand experience how maintaining a hardball focus provides winning results. Conversely, I've also been part of two companies who held, and then lost, their dominant position, because they lost the hardball edge.

Watching this week's events unfold with the announcement of Yahoo!'s new Unlimited Music subscription service, let's take a look at some effective hardball strategies at work:

1) Leveraging dominant market position as world's # 1 digital media portal: Yahoo! is unequaled in its market position. Some will argue that whether or not Yahoo! makes money from music subscription fees (and I'm sure they will), the recently announced music service will retain and draw even more qualified and targeted traffic for Yahoo! to sell to its advertisers and partners and THAT's ultimately what drives Yahoo!'s business. This strategy is analogous to what many successful retailers do in aggressively discounting certain products (described as "impulse purchases" -- low price music CDs are often deployed in this fashion) that in turn attract customers, then make them linger in the store longer to the consider the purchase of the more expensive-high margin products where the retailers really make their money.

2) Market leaders use price to their advantage: While lower price is an obvious tactic, market leaders who have profitable businesses can completely undermine and obliterate nascent competitors by using low price to buy market share. This is a page right out of Wal-Mart and Costco's playbook and a strategy that virtually pre-clude competitors from entering their space. Moreover, it will force the hand of current competitors to respond if they are to survive.

3) Hardball players move markets: Just take a look at how Napster's stock price got hammered after the Yahoo! announcement. Lower stock price means less capital and resources to respond to the hardball tactic. And to think, just 4 months ago on SuperBowl Sunday Napster-to-Go literally swept both Apple and Real off the headlines and had analysts and columnists everywhere lauding their brilliant strategy.

Hardball? You bet. Yahoo!'s move this week qualifies them for the Cy Young.