We often see signs of organizational competition in
the market turning into battles fought on multiple fronts. Apple and Samsung
have good-looking telephones that compete vigorously in the market, and their
lengthy Patent War is famous. Ride-sharing firms Lyft and Uber compete in the market
but have also accused each other of covertly placing fake orders and then
canceling them. They also fought in the media when Uber used taxi workers’
protest against the U.S. immigration ban as a business opportunity: Lyft struck
back with a strong stance against the morality of Uber’s efforts and made a
donation to the ACLU, which accelerated the trend of #DeleteUber across social
media.
Just how far will organizations go in such battles? A forthcoming article by Benjamin M. Cole and David Chandler in Administrative Science Quarterly looks at the famous War of the Currents between Edison and
Westinghouse and finds ample evidence of how such battles can escalate. The War
of the Currents started when Westinghouse realized that the Edison direct
current (DC) electrical system could not be used for long-range transmission of
power. He obtained the necessary patents for alternative current (AC), which
transmits much more efficiently, and his company was soon a major competitor of
the Edison companies. The market competition expanded into a full-blown rivalry
when Edison started using competitive slander to turn media and consumers
against AC and Westinghouse.
Edison’s recipe was simple: Make the newspapers
publish stories about experiments showing that AC easily killed dogs and other
animals, so that people would associate AC with danger—unlike the safer DC. A
simple strategy, but also a grotesque one. To make it work, he needed to
conceal his association with the experiments, having an electrical engineer act
as the front man, and also make them seem legitimate by conducting them in famous
institutions’ facilities. As a final step, his company made direct contacts
with politicians who could influence the marketplace.
The campaign worked because it was well orchestrated
and because Westinghouse initially thought there was no need to strike back.
This left Westinghouse exposed, and when his company did respond, it chose an
ineffective approach—directly countering the Edison attacks through attempts to
discredit the message and expose Edison’s methods as sensationalist and
immoral. This was ineffective because Edison had chosen a vulnerable point to
attack: although killing dogs is immoral, it correctly illustrated that AC is
more dangerous than DC at comparable voltages.
I suppose we could have all ended up with expensive DC
as a result of this rivalry. But in the end, Westinghouse won by returning to
the foundation of the AC advantage: it is a superior system for distributing
electrical power over long distances. He won the bid to illuminate the city of
Chicago as part of the World’s Columbian Exposition. He sank considerable
resources into the contract, making it a financial loss but a spectacular
success as a PR event for AC and for Westinghouse technology. Soon after, AC
dominated and even Edison started marketing AC systems.
The War of the Currents has many lessons for current
organizations, and I want to highlight one disturbing and one promising lesson.
The disturbing lesson is the effectiveness of attacking: when the attacker
picks the target well and is willing to go far, the rival is very likely to get
hurt. The promising lesson is the effectiveness of sticking to basics: when the
rival emphasizes its own strength rather than countering the attack directly,
its chances of recovering are best.