Pitching vs. listening – General Motors (GM) and Segway

General Motors and Segway have teamed up to do a new product launch.  The new product is described at Freep.com in "GM, Partner to unveil 2-seater" and is called the EN-V.  And there's almost no hope it will succeed.  Too bad, because both companies desperately need a winner.  But the process they used to develop and launch this product was all wrong – and it would be a miracle if the arrow hits a bulls-eye.

Segway is the long-running story of a company with what looks like a great idea, but it never takes off.  The original Segway seemed really neat.  But people struggled to figure out why they would buy one.  There is walking, there are bicycles, there are motorcycles and there are cars.  Segway never defined who was under-served, or unserved, and therefore had a real need to use their new product.  Segway management did a great job of public relations, because we all saw them on TV, in the news, and learned the name.  But the product was developed internally, not in response to a market need.  As a result, sales never materialized and Segway slipped into the business history file as another case study.

General Motors has no new product development process to create products for the future.  For decades GM has attempted to defend and extend its 1940's approach of designing updated products, and hoping people will keep buying.  It's been many years since GM launched a new product that people said "wow, that's just what I needed – and I wasn't even aware I needed that."

Now the two companies have teamed up to launch a 2 passenger Segway.  They have identified the use they think this fits, and they think they know a target.  But the problem is that this is just another "idea" designed and built without significant market input.  Instead of developing a scenario of the future with deep insight to what people will want, and then making that product, they have said "wouldn't this be neat – and can't we imagine who might buy?"  Interesting lab work, but unless they are very, very lucky the odds are greatest that people will think it's cute, but won't buy.  After all, with the plethora of current solutions across a huge price range from many competitors means nobody is living without transportation.  Why should potential customers inherently think this is a good idea.

Phoenix companies don't design products from inside the company outward.  Instead, they use market input to discover the unmet needs, and they fulfill them.  Especially when it's clear that competitors aren't jumping in to fulfill the need.  They intend to Disrupt the marketplace not by some splashy introduction and hoping people will switch, but rather by identifying the under-served customers and giving them a solution they didn't have.  Then the company learns, adapts and keeps pushing toward an ideal product that meets ever more needs.  From this initial small success the market grows.

Segway never understood this.  They don't define unmet needs, nor competitor inabilities – and thus they have great ideas but they fail to Disrupt the marketplace and their innovations have gone nowhere.  GM works hard to avoid innovations that might be market disruptions, instead offering sustaining innovations hoping to defend their old business model.

This new type of vehicle might have a chance of success.  But the only hope is for both companies to ignore the PR.  They should set up a White Space team, and give that team a year to really understand the unmet needs in the marketplace.  Then go back to the original design and make it very explicitly meaningful to people who have unmet needs. Launch small, make money, learn and grow. 

But given the approach this dynamic duo is taking, only luck will keep this from being another missed opportunity for both struggling companies.

Keep moving forward – Microsoft, Apple, Google, RIM, Hearst

Did you ever notice how often a large company will introduce a new solution (often a new technology), but then retrench from promoting it?  Frequently, the market is developed by an alternate company that captures most of the value.  We can see that behavior looking at smartphones.

Smartphone platform share 1.10
Source:  Silicon Alley Insider

In 2008, three early leaders were Microsoft, RIM and Palm.  But Microsoft chose to invest in Defending & Extending its PC software business – with updates to the operating system in Vista and OS 7.  As the market has shifted toward mobile computing, Microsoft has been clobbered.  But largely because it remained stuck trying to protect its "core" while the market shifted away.  Palm also tried to Defend & Extend its early position with updates, but because it did not follow the pathway to greater usage with new applications it also has seen dramatic share decline.

Meanwhile, RIM has promoted new uses within the corporate world for mobility, and thus grown its market share.  And Apple has made a huge impact by bringing forward dozens of new mobile applications, closely followed by Google.  What we see is a classic example of the early entrant fading largely because they decided to Defend the old market, rather than investing in the new one.  Really too bad for shareholders in Microsoft (losing 20 share points) and Palm (losing 10 share points), while good for shareholders of RIM, Apple and Google.

And in Apple's case we can see that the company continues using White Space to grow revenues by expanding the new marketplace.  The iPad is off to a very strong start, with tens  of thousands of units ordered last week.  But of greater importance is how Apple is promoting the shift to mobile devices from traditional PC devices.  At SeekingAlpha.com, in "How the iPad, Slates Will Evolve the Next Two Years," the reporter projects how demand for all laptop products will decline as more capability and functionality is added to mobile devices like smartphones and these new slate products. 

Microsoft can keep trying to Defend & Extend PC technology, but it won't be long before their efforts largely won't matter.  Don't forget that once Cray computers was a rapidly growing super-computer company.  But increasing performance from much alternative products eventually made Cray irrelevant. Same for Silicon Graphics and Sun Microsystems

Today the market capitalization of Microsoft is about $250B, about 4x sales.    Apple's market cap is just over $200B, about 6x sales.  Google's market cap is about $180B, about 8x sales.  All reflect investor expectations about future growth.  The D&E company is simply not expected to grow – and in fact is much more likely to disappoint than the companies growing share in growing markets toward which customers are shifting.

And any company can choose to participate in growth, versus Defend & Extend.  While Tribune Corporation is trying to find a way out of bankruptcy, and struggling to figure out how to deal with market shifts away from newspapers, Hearst is taking positive action.  The Wall Street Journal reports in "Hearst Jumps Into the Apps Business" how the old-line newspaper company has set up a White Space project, complete with dedicated people and its own funding, to begin developing mobile applications for news! 

Even when business leaders see a market shift, far too many choose to Defend & Extend the "core."  Unfortunately, that leads to disappointments.  Keep in mind Microsoft and its rapid loss of Smartphone share as users move increasingly to mobile devices from PCs.  To succeed leaders need to drive their organizations in the direction of market shifts, and growth.  Like Apple, Google and even Hearst.

Looking for Winners – Dell

It's easy to recognize a company in the winner's circle.  Like Apple or Google.  Most of us want to know how to spot the winners early.  And that can be hard, because often the reported information will make an emerging winner sound horrible.  Like the expected demise of Apple in 2000.

Last week Dell reported sales and earnings, and valuation fell (Marketwatch.com "Dell Shares Fall as Company Net Slips").  The article notes that sales were "surprisingly strong," but claims that a dip in profits was bad news sending the stock price downward.  Of particular concern was a lack of growth in desktop PCs.  Many analysts are expecting (I should say hoping) that System 7 is going to spur additional desktop sales and are upset that Dell isn't getting "its fair share" versus Hewlett Packard.

This is entirely the wrong way to evaluate Dell's results.  Simultaneously, the Mobile unit had very strong performance.  As did Services, greatly aided by the Perot acquisition.  As I blogged months ago, Dell has started moving in a new direction.  Toward the growth markets of mobile devices and the need to build out applications using Cloud computing architectures.  These markets are certain to grow in the future.  Meanwhile, desktop PC sales are destined to decline.  There is no doubt about this.

Dell has been undertaking some Disruptions, and using White Space to develop and go to market with new products in these newer, growing markets.  Amidst this effort, it has put less money into the hotly contested and profit-margin-declining old fashioned PC business.  This is clearly the right move.  If Dell is the first and strongest to transition to new markets it has the best chance of regaining old growth rates.  For Dell, the best thing possible is to see it growing beyond anticipation in these markets. 

Some analysts complained that both mobile and services are too small as businesses at Dell, and therefore the company needs to put more resources (meaning price actions) into traditional PCs.  These same analysts will lambaste Dell when the market shift is completely pronounced and the traditionalist (which now appears to be HP) is left in decline.  Dell has used White Space to begin launching products.  If it uses these White Space efforts to learn the company can become smart, faster than other competitors, and "jump the curve" from its old business/market to the new one.  Isn't that what every business needs to do?

What we want to see now is ongoing investment in these growth markets,
with breakout products that can make a big revenue difference.
  White
Space is good, but it is critical that Dell invest fast and smart to
replace old revenues as quickly as possible.

I was encouraged by Dell's results.  The company is growing where it needs to, and de-emphasizing businesses that can become slaughterhouses.  For investors, employees and suppliers this is a good thing.  When companies are using White Space it is easy to beat them up and ask them to "refocus" on traditional markets.  It also can kill them.  Here's hoping Dell stays on track.

Change How You Do Market Research – New Book “Remote Research”

Paralysis from analysis is all too common.  Why? Because for the longest time people have assumed that it's possible to predict the future by studying history.  And there has been ample belief that if you ask customers questions, they will give you the answers which will guide your future.  Further, people want to believe that it was possible to find hidden meaning via discovering previously unseen correlations — even though almost all these sorts of low-score correlations turn out to be spurious, merely mathematical artifacts. 

Readers of this blog know that when we investigated The Phoenix Principle we learned that  traditional market research rarely improves understanding of customers or markets.  And we learned that customers are incredibly unreliable at telling you what they really want, or what they are likely to do next.

Nate Bolt of market research firm Bolt Peters now confirms this.  His recent column at Venturebeat.com "Stop Listening to Your Customers" is an indictment of traditional market research observed through his 9 years working with clients in the field.

  • "A common assumption… is that listening to
    potential customers is the best way to find out whether your product or
    idea will succeed in the market. Honestly — don’t bother."
  • "Opinions are often inconsistent with behaviors or other attitudes,
    especially when discussing hypotheticals."
  • "Remember 'Clippy" the little character that appeared in Microsoft Word years ago? That
    little bastard arose, in part, from Microsoft asking users if they
    wanted help working on their documents — everyone said, “Sure, sounds
    great.” But once people started actually using it in the real world,
    they hated it
    — it might be one of the most hated features in the
    history of computing."
  • "Never ask people what they think of your product or idea."
  • "Test ideas early by watching behavior. It’s fine if you
    don’t have a 100 percent functional interface — having eight people
    interact with a prototype or even wireframes or design mockups can be
    incredibly useful. Even recruiting strangers from the street to use your
    prototype is better than nothing."
  • "Use unorthodox methods. Companies like Apple and
    37signals make a big deal about never conducting user research. They lie… Releasing products in generations, like Apple does, provides them with
    mountains of reviews, task-specific complaints, crash reports, customer
    support issues, and Genius Bar feedback
    "

Too much money is spent on research that can never, by it's design and method, tell the business what it needs to know.  The only way to know how to compete is to get into the market.  Quit trying to analyze – go do it!  An ounce of  "doing it" is worth a kilogram of research and analysis.  Get out of the office, out of the conference room, and into the market.  Set up a White Space team and make them responsible for launching, learning, reporting and figuring out what customers want that you can sell at a profit.  That feedback is the research which is really worthwhile.  It's faster, easier to get and more accurate than anything you'll get from a market study or focus group!

Nate Bolt's new book is "Remote Research."  The link I found to the book was at RosenfeldMedia.com.

Setting Expectations for White Space – Apple iPad

It's easy to misunderstand White Space.  About twenty years ago Apple launched the Newton.  The company sold about 375,000 of the first commercial PDAs, but Apple's leadership thought the market wasn't really there – and decided instead to focus on growing Mac sales.  Obviously, as Palm and other PDA makers demonstrated, there was a tremendous market for PDAs.  Apple misread the feedback from White Space.

Look now at the recent iPad launchSilicon Alley Insider headlined "Now That They've Seen Apple's iPad, Most People Don't Want One."  The headline keys on the fact that after the launch the number of people who said they were not interested to buy doubled (26% to 52%).  Wrong fact to grab onto.

IPad sentiment 2.3.10

Instead, look at the fact that the number who said they would buy one tripled, from 3% to 9%.  This is incredible, and should excite Apple's management as well as employees, suppliers and shareholders.

Most people will see a new, innovative product and say "why would I want that?  I already have this other thing and it works great."  And that is what marketers should expect.  Most people are just trying to Defend & Extend what they regularly do, and thus all the want is a product that helps them do their thing a little easier, faster, better and cheaper.  They want minor improvements – variations and derivatives of what they already have.  Improvements that are immediate, without them doing anything new or different. 

All new deeply innovative products start with customers who are under-served or unserved.  And this is why it is so important they be launched in White Space.  White Space teams aren't intended to develop the big, mass market of known customers looking for something new.  White Space is about doing new things that bring in new customers, give new solutions that attract real growth.  And White Space teams have to learn how the market is evolving, how they fit into the market shift and how their solution will advance the market in order to sell more.

For the iPad, the 3% to 9% shift in likely buyers is huge because it shows that the iPad is an offering that appeals to people who are not today well served by their existing PC, laptop, netbook, mobile phone, kindle or mix of these solutions.  9% of respondents are saying that they see the iPad and they see a solution for what they want to get done.  And if 9% of potential buyers see this option, that is HUGE.  By White Space standards, often there are only .5% or 1% or 2% of people who initially see how the new product fulfills their under-served needs.

Set expectations right for White Space.  White Space is not for launching variation 4 of an existing product – targeted at existing customers.  That's what the marketing and sales department can do fine, thank you very much.  White Space is the team that finds the 3% (or in Apple's case 9%) of users that see value in this solution, then works with them to implement the product/solution in order to make sure it fulfills the market need and is priced to sell effectively while providing a profit to the company.

Apple understands this, you can be assured.  Look at how successfully the Apple White Space teams found the underserved users that jumped all over the iPod and iTunes, the iTouch and then the iPhone.  They got the product positioned and selling in a hurry.  And now that Apple has that skill, the company is going to apply it to the iPad.  If you understand this chart correctly, you understand that it bodes very, very good things for Apple. 

And it tells you the importance of having White Space teams, setting their expectations correctly, and managing them for the kind of results that can turn your organization into the next Apple.  It took Apple 10 years to reach this skill level.  It did not happen overnight.  Or with one product introduction.  And it will take your organization a few years to build this skill.  So, what are you waiting on?

Participate, don’t Spectate – Google uses White Space

Lots of new things are happening with technology.  Everyone knows that.  We see the emergence of new communication vehicles like Facebook, and  new ways to exchange data – like Apple's iPhone and RIM's BlackberrySkype replaces the telephone and in-person meetings.  iTunes replaced CDs. The list is pretty long.  But how much of these new technologies do you use regularly, how many do you use in your business, and how many do you use in "mission critical" applications of things you do? 

Most of us watch new markets develop.  Many even think the smart thing to do is to wait, let things evolve, see what happens.  Be a late adopter when technology is "stabilized" and prices are lower.  These are spectators to the world of innovation, doing what they've always done and waiting for some future time when it will seem better to switch.

Then there are participants.  The participants are learning.  While others  watch, they actually learn how to get new customers, how to sell more product, how to apply technology to lower cost while improving the solution, how to be more competitive, how to read market shifts (and prepare) – how to make more money.  Like Google.

Google just launched Buzz ("Google Betting on Mo Better Buzz" at Mediapost.com.  Buzz is a new product that links up to social media sites for a variety of functions – one of which is its ability to deliver ads (imagine that) while also adding benefits to users like location tagging and enhancing email.  It does new things, and some things already available via Facebook or Yelp.  That it's market position, or even its functional position in the technology environment, isn't clear is not terribly important to Google management.  In "A Buzz and A Shrug: Why Should Google Kill Anything?" MediaPost.com goes on to describe that at the launch meeting management went out of its way refusing to declare a specific position, or competitive plan, for Buzz.  Google is in the market, trying something, learning and participating – being part of making Disruptions happen and seeing if it can find a way to create sales and profits.

And that's what White Space, and participation, is all about.  While spectators watch and get left behind, participants are in the market.  Spectators fall off the S-curve, as their capabilities fall away from market needs they become less relevant, sell less and profits fall.  Participants use White Space to jump the curve – to move from an old product/market S curve to a new one.  They are in the market learning, and adapting, and moving toward that point where the technologies and solutions collide – thus they are ready and able to move to the next new thing.  While spectators are stuck, doing the same old thing, falling farther behind.

Being a participant isn't hard, nor is it all that expensive.  It requires the willingness to get in the game.  To start.  To do less "planning" and instead get in there and do it – like the NIke ad recommends.  Instead of devoting all your money to defending and extending what you know, take some and invest in the places where growth is rampant.  The learning will pay for itself as it allows your business to move into new markets and generate new revenues.  You will have to Disrupt your thinking and processes to do this, but the payoff is it could save your company!

Long ago business education started with a lot of focus on industrial engineering.  Improving operations to get more stuff out the door.  This was augmented by sales and marketing, to help sell stuff so we could get more out the door.  And finance was added as a way to understand cash flow and funding in order to get more stuff out the door.  All of that was predicated on endless demand for the stuff.  But today, it's not about making lots of your stuff and cramming it down customer throats.  Instead, winners have to be adaptable to market needs – to be part of creating new solutions that generate more revenues and higher profit rates.

You don't need all the answers.  White Space is about having a plan, and goals, based upon scenarios.  But then avoiding analytical paralysis and getting into the market.  Google is phenomenal at this.  Not everything Google launches is a big hit.  Google Wave appears to be struggling.  But that's OK.  If you don't put all your eggs in one basket, because you get into markets earlier and faster, you can afford to have misses.  You still get the benefits of market learning – and move forward to possibly jumping the next S curve.  Google's Buzz is another stereotypical White Space entry into the market.  A product with a lot of possibilities, looking for how to fit into a quickly shifting market, teaching Google more about the marketplace and aiding the company toward maintaining its torrid growth pace.

Overcoming Hurdles and Growth Stalls – Microsoft vs. Apple

Sustaining growth is really hard.  Consulting firm Bain & Company just published the statistic that only 12% of companies were able to grow revenues and profits more than 5.5% from 1998 to 2008 (read more in the Harvard Business Review downloadable book excerpt Profit from the Core.) Given that all companies want to grow, it seems remarkable so many stall.

But while most managers blame lack of growth on the economy, truth is we can learn a lot from those who DID sustain growth.  What doesn't work, and what does, can be found by starting with a great OpEd column about Microsoft published in The New York Times "Microsoft's Creative Destruction." Former Microsoft Vice President Dick Brass provides insight to why Microsoft has become a market laggard in new products – despite enormous revenues, profits and new product development spending. Calling Microsoft "a clumsy, uncompetitive innovator," he says products are "lampooned" and the company is "failing." Harsh words. 

He points out that profits are almost entirely from legacy products Windows and Office.  "Microsoft has lost share in Web browsers, high-end laptops and smartphones. Despite billions in investment, its Xbox line is still at best an equal contender in the game console business."  He explains how internal managers set up false hurdles, often claiming quality was the primary issue, for ClearType and a tablet PC. He claims the internal executives "sabotaged" new projects and he blames inability to meet market needs on "internecine warfare."

But all of that could be said about Apple as well. It once was just like Microsoft.  In the 1990s Apple stopped everything but new Macs from making it to market.  Remember that the first PDA (personal digital assistant) was Apole's Newton? Killing that product became a priority for several Apple executives, and caused the ouster of then CEO John Scully

So the Microsoft described behaviors can happen anyplace. When organizations begin to focus on Defending & Extending their "core" business it leads to hurdles and growth stalls. "Operational improvements" leads to "focusing" on doing what the business always did, perhaps just a touch better (like a next generation operating system [Vista], or a new variation on Office [2007].) The culture, decision-making processes and operating cost model all are geared to doing more of the same. Without intending any downside, in fact in pursuit of improved competitiveness in the "core" products, the business begins erecting hurdles to doing anything new, or different

This problem isn't limited to Microsoft  Although we can clearly see the impact and feel pessimistic about Microsoft's future. It has afflicted many companies, and is why they cannot adjust to market shifts. Even if loaded with executives and enormous budgets for R&D, technology or marketing. Don't forget how Apple looked even worse than Microsoft in 2000.

And that's why so few companies maintain growth. The desire to do more, better, faster, cheaper of what we've always done is overwhelming. Defending & Extending the existing business always looks marginally better, and marginally less risky, than doing something new, or different. In trying to maintain growth by getting better at what you've always done – you kill it.

Why? Because Defend & Extend management does not take account of market shifts. New products, new competitors, new technologies, new business models, new customer approaches — the list is endless of variations which competitors bring to the marketplace. And these variations change the market. Trying to stay on the same course becomes suicide when customers begin moving on.

And that's where Apple has excelled. When Steve Jobs took over he quit trying to Defend & Extend the Mac platform. To the contrary, he reduced the number of Mac models.  Instead of planning based on old market share and sales, he pushed a rigorous scenario planning exercise to create a robust view of future markets – and what needs customers would like solved. He then led Apple to study competitors, both in-kind and on the fringe, to identify new markets being developed and new solutions being tested.  He then Disrupted Apple – by cutting the Mac platforms and investing heavily in other market opportunities like music (iPod and iTunes).  And he encouraged product managers to rush new products to market in order to obtain market feedback, using White Space teams to rapidly learn what would sell. And he repeated this again and again, agreeing to a joint development project with Motorola before entering into mobile phone testing and launch (iPhone.)

Microsoft's proclivity toward D&E management is putting its future at grave risk. All signs are it will become another fateful, negative statistic. But it doesn't have to be that way. Microsoft can learn a lesson from its resurrected competitor and follow The Phoenix Principle. It can escape from xBox, and other new product, second-tier status if it will get a lot more robust about scenario planning, quit acting like the only game in town and start obsessing about competition.  Disrupt its culture and decision making, and start using White Space to rapidly get new products in the market and learn how to match them with market needs to succeed!

Be Flexible, and Forward Thinking – Office Depot, Apple

"Strategic Plans Lose Favor" is a recent Wall Street Journal headline.  Seems like some big companies, and big consulting firms like Accenture, McKinsey and the Boston Consulting Group are rapidly learning what this blog has been pushing for a few years.  That flexibility trumps traditional approaches to strategic planning.

  • When Office Depot's strategic plan was leading to revenue struggles, the company set up a situation room to track key indicators and adjust to market shifts much quicker.
  • "Strategy as we know it is dead" according to Walt Shill, head of strategic planning at Accenture. "increased flexibility and accelerated decision making are much more
    important than simply predicting the future
    ."  (Do you think he's been reading this blog and my book?)
  • "business leaders will start to rely less on static five-year strategic
    plans and more on rough "adaptive" strategies that consider multiple
    scenarios
    "  according to Martin Reeves, Senior Partner at BCG.  (Where'd he read that – on this site?)
  • ""The rate of change and width of volatility is much wider and faster
    than what we would have assumed
    coming into this," Jeff Fettig, CEO at Whirlpool
  • McKkinsey has opened a "Center for Managing Uncertainty."  Really.

As this recession has come on, and lingered, businesses are clearly starting to realize that market shifts happen fast, and businesses cannot be slow to change.  Adaptability is one of the most important capabilities to compete in the post-2000 business world.

And the real market leaders are incorporating this kind of thinking into their organizations.  While the earlier quotes show how, caught on the defensive, organizations are finding new ways to react, the best performing organizations are taking market leadership by being Disruptive.  Like Apple.  In a Harvard Business Review blog Roberto Verganti, professor at Politecnico di Milano tells us "Apple's Secret:  It tells us what we should love." 

The good professor of design and management points out that Apple does not ask customers what they want.  Instead the company designs products which take customers to new levels of performance beyond what they imagined.  Instead of being reactive, Apple uses scenario planning to understand future market needs and create shifts with its products.  This approach leads to breakthrough performance, such as the success of Nintendo and its Wii product line.

To be successful businesses can no longer try to Defend & Extend their old strategies.  They have to be market focused, and flexible to manage through market shifts.  And to earn superior rates of return they have to be market leaders that use scenario planning and White Space to launch new solutions meeting emerging needs which attract customers and grow sales.

Winners and Losers from Shifts – Apple, Amazon, Microsoft

One of the biggest business news items this week was the launch of Apple's iPad for $499.  Although perhaps overlooked by many big companies, and several IT departments.  To some businesspeople, the iPad seems another consumer toy, thus not terribly noteworthy.  Some see it as a small-market share sort of oversized iPhone for mobile telephony/data use.  One executive commented to me this week "I don't understand why anyone cares, I don't own an iPhone and cannot imagine why I would ever want to download an app,"  He has a huge investment in Microsoft technology, has never used an iPhone or Palm Treo or even a Blackberry.  Hes' never seen an iPhone app, and was amazed when I told him 1 billion had been downloaded.  He's comfortable in his traditional IT solution, and doesn't see the importance of iPad.

But the iPad is another step demonstrating a big market shift is happening.  With Apple's announcement, Amazon announced that it's sales of Kindle are about twice what most analysts had expected – see "During Apple Week Google and Amazon try to Remind You They Exist" at Fast Company.  Further, it appears now that for every 10 books Amazon sells, it sells 6 Kindle books — a substantial number and indications of serious market change.  The iPad is half the price most people expected, and now rumors are Kindle's will drop to $100 as competition heats up.  It rapidly appears that while there is an emerging battle between Amazon and Apple, the biggest insight is that the market for BOTH is growing a whole lot faster than anyone expected.  As are iPhone sales.  These devices, and the technology solution embedded within them, are grabbing a lot of buyers, and quickly.  The sales, in units and dollars, are growing much faster than anticipated.  And new users are flocking toward this technology platform.

Thus, the iPad is likely to be a big winner for Amazon and Kindle – as well as Google.  It is expanding the application base, and use patterns, for mobile devices.  It is expanding the product breadth and price points.  Quite simply, it is helping people do new things they couldn't do before – especially when mobile – that they could not do before.  As a result, apps will grow and sales of both hardware and software will grow.  And early adopters will gain an advantage as they use this new technology to create advantages for their customers.  Apple and Amazon are both "winners" who are driving revenue and profit growth.

And Microsoft loses.  Microsoft has never changed its Success Formula.  Its Identity, Strategy and Tactics remain as they've been for three decades – to provide a one-stop near monopolistic, integrated (mainframe style – and certainly monolithic) solution.  As the market has been shifting, however, this has been less and less successful.

Chart-of-the-day-microsoft-stock-during-steve-ballmers-leadership
Source:  Silicon Alley Insider

As the chart shows, Microsoft's product strategies, product introductions, acquisitions and management changes have done nothing for growth – or valuation.  Microsoft keeps trying to do what made it great in the late 80s and early 90s.  But since then, the market has shifted dramatically and the sustaining innovations Microsoft has offered, while meeting customer requests for improvement, haven't really helped growth. 

The cost of this Lock-in has been horrific.

Chart-of-the-day-microsoft-operating-income
Source:  Silican Alley Insider

Microsoft has poured billions of dollars into a failed approach intended to Defend & Extend its Success Formula – but to no avail.  The market is going a different direction – toward cloud computing with its distributed data, extremely small apps at very low (disposable) prices, easy to use interfaces and greatly lower device cost.

Even as large and cash rich as Microsoft was in 2000, it cannot stop a market shift.  And even though this shift has been predictable, with competitors from the fringe like Google, Amazon and Apple bringing to market new products, Microsoft has chosen to try Defending & Extending its Success Formula rather than Disrupt and use White Space to develop new solutions.  What can we expect from Microsoft in the future?  Unfortunately, more of the same and most likely a dramatically deteriorating value.  When the market's shift to these thin devices with a different architecture becomes clear, the inability of System 7 and Bing to make any difference in Microsoft results will be clear.  And investors are likely to run for the proverbial hills – letting the stock price drop along with new users.  Microsoft will increasingly be dependent upon legacy applications and maintenance – markets with little/no growth.  Microsoft could soon be the next Unisys (remember that company?)

So, what is your company doing?  Are you moving forward with new apps which will grow your revenues and profits?  Are you looking for ways to use these devices, and the underlying mobile computing architectures, to offer your customers better solutions?  Are you bringing out new approaches that are potential game changers, bringing new customers to you and accelerating growth?  Or are you trying to Defend & Extend your old processes, approaches and products?  Are you planning a future that will be PC/laptop centric, and delivering traditional web pages?  Are you following the laggard, Microsoft, or are you Disrupting your business, and market, with White Space projects that will change market behaviors using these new technologies and positioning you as the market leader?  In 2015, will you look like Microsoft – frozen in place as the market shifts – or will you look more like Google, Amazon and Apple with new solutions that create excitement and new sales?

Have you tried a Kindle yet?  iPad?  iPhone?  Do you have any White Space wher
e you are trying these new things?  Have you Disrupted any of your organization and challenged them to apply this technology?  Exactly what are you waiting on?

New Solutions Emerge – Apple, Amazon, Netflix, YouTube, Hulu

Most people misunderstand evolution.  They think that changes happen slowly.  Imagine an animal with a 12 inch tail.  Every generation or so it's imagined that the tail gets a little shorter, then a little shorter, then a little shorter until after some very long time it simply disappears.  But that's not at all how evolution works.

Instead, most of the animals have a long tail.  Some small number of animals are born each year with very short or no tails.  For the most part, this matters little.  If the tail is valuable – say for warding off parasites – those without tails may suffer and die off quickly.  And that's the way things are, largely unchanged, for decades.  But then, something happens in the environment.  Perhaps the emergence of a predator able to catch these animals by the tail and hold them in place to let the pack kill it.  Within one generation almost all of the tailed animals are killed by the predator, and only the no-tail animals survive.  Some of these have developed an immunity to the parasite.  So then this "evolved" animal becomes dominant.  No-tail animals replace the tailed animals.  That's how evolution really works.  It happens fast, with drastic change (and this time of change is referred to as a punctuated equilibrium.)

Once we know how evolution really works, we can start to better understand business competition.  A Success Formula works for a really long time, until something changes in the marketplace.  Suddenly, the old Success Formula has far poorer results.  And a replacement takes over.

Consider newspapers.  They played a very important role in society for at least 100 years (maybe 200 or 300 hundred years.)  But with the advent of the internet, their role is no longer viable.  Printing and delivering a daily paper is too expensive for the value it can provide.  So think of newspapers as the long-tail animal.  And digital news delivery is a short-tail animal.  The internet is the attack pack that kills the newspapers.  And within short order, the world is a different place – in a new equilibrium.  And everything about the surrounding environment is shifted.  Regardless of how much you enjoyed newspapers, they simply cannot compete and new competitors are a better fit in the new marketplace.

Now consider Netflix.  Netflix played a major influence in obsoleting traditional movie rental shops – like Blockbuster.  Netflix was a winner.  But markets – new attack packs – keep emerging.  And the latest shift are products like the Kindle and Apple Tablet (as well as other tablet PCs.)  These products make Hulu and YouTube a lot more viableSuddenly, Netflix is the long-tail animal, and the short-tail animals are doing relatively better. 

According to The Wall Street Journal, in "Apple Sees New Money in Old Media" Apple is close to a deal with several newspapers to deliver their content to readers via their internet device.  They also are negotiating rights to deliver movies and television (small format) entertainment.  Simultaneously, Amazon keeps marching forward as MediaPost.com reports in "Take That Apple: Kindle Introduces Apps."  We see that there are a LOT of potential different versions of the short-tail animal.  Tablets, phones, netbooks, etc.  Which will be the biggest winners?  Not clear.  But what is clear is that the old long-tail competitors (newspapers, print magazines, network television, traditional PCs) are not going to flourish as they once did.  The market has permanently shifted.  Those competitors are in the back end of their lifecycle.

Simultaneously, this market shift causes ripple effects through the environment.  The market shift affects ALL players – not just the one most visibly being attacked.  So, as SiliconBeat.com reports in "Looks Like Netflix is Dead, Again" this change suddenly imperils Netflix which has mostly counted on postal delivery rather than digital.  And it provides a boost to short-tail players like Hulu and YouTube which could see much larger revenue given their digital-based delivery models.

And this affects you.  What do you print, or say, that could be better handled on a mobile device?  Could you deliver user instructions via an iPhone or Kindle app?  If so, why aren't you doing it?  Are you still working on traditional web pages, with embedded text in graphics that can't be seen by a mobile phone, when most people are likely to find you first on their mobile device?  Are you busy working on your web site, while ignoring having a Linked-in or Facebook account?  Are you advertising on television, or in newspapers, and ignoring Facebook ads – or YouTube links?  Do you have a YouTube channel with short clips to instruct users on your product, or how to install an upgrade, or even why to buy?  Are you still competing with a long tail, while the pack is rapidly killing off the long-tail species?

Market shifts are happening fast today.  If you don't react, you just may find yourself deep into the pack with declining results.  Or you can shift with the market to keep your business competitive.