Microsoft Win8 Tablet Is Not a Game Changer

While there is an appropriately high interest in the Win8 Tablet announcement from Microsoft today, there is no way it is going to be a game changer.  Simply because it was never intended to be.

Game changers meet newly emerging, unmet needs, in new ways.  People are usually happy enough, until they see the new product/solution and realize "hey, this helps me do something I couldn't do before" or "this helps me solve my problem a lot better."  Game changers aren't a simple improvement, they allow customers to do something radically different.  And although at first they may well appear to not work too well, or appear too expensive, they meet needs so uniquely, and better, that they cause people to change their behavior.

Motorola invented the smart phone.  But Motorola thought it was too expensive to be a cell phone, and not powerful enough to be a PC.  Believing it didn't fit existing markets well, Motorola shelved the product.

Apple realized people wanted to be mobile.  Cell phones did talk and text OK – and RIM had pretty good email.  But it was limited use.  Laptops had great use, but were too big, heavy and cumbersome to be really mobile.  So Apple figured out how to add apps to the phone, and use cloud services support, in order to make the smart phone fill some pretty useful needs – like navigation, being a flashlight, picking up tweets – and a few hundred thousand other things – like doctors checking x-rays or MRI results.  Not as good as a PC, and somewhat on the expensive side for the device and the AT&T connection, but a whole lot more convenient.  And that was a game changer.

From the beginning, Windows 8 has been – by design – intended to defend and extend the Windows product line. Rather than designed to resolve unmet needs, or do things nobody else could do, or dramatically improve productivity over all other possible solutions, Windows 8 was designed to simply extend Windows so (hopefully) people would not shift to the game changer technology offered by Apple and later Google. 

The problem with trying to extend old products into new markets is it rarely works.  Take for example Windows 7.  It was designed to replace Windows Vista, which was quite unpopular as an upgrade from Windows XP.  By most accounts, Windows 7 is a lot better.  But, it didn't offer users anything that that made them excited to buy Windows 7.  It didn't solve any unmet needs, or offer any radically better solutions.  It was just Windows better and faster (some just said "fixed.")

Nothing wrong with that, except Windows 7 did not address the most critical issue in the personal technology marketplace.  Windows 7 did not stop the transition from using PCs to using mobile devices.  As a result, while sales of app-enabled smartphones and tablets exploded, sales of PCs stalled:

PC shipments stalled 6-2012
Chart reproduced with permission of Business Insider Intelligence 6/12/12 courtesy of Alex Cocotas

People are moving to the mobility provided by apps, cloud services and the really easy to use interface on modern mobile devices.  Market leading cell phone maker, Nokia, decided it needed to enter smartphones, and did so by wholesale committing to Windows7.  But now the CEO, Mr. Elop (formerly a Microsoft executive,) is admitting Windows phones simply don't sell well.  Nobody cares about Microsoft, or Windows, now that the game has changed to mobility – and Windows 7 simply doesn't offer the solutions that Apple and Android does.  Not even Nokia's massive brand image, distribution or ad spending can help when a product is late, and doesn't greatly exceed the market leader's performance.  Just last week Nokia announced it was laying off another 10,000 employees.

Reviews of Win8 have been mixed.  And that should not be surprising.  Microsoft has made the mistake of trying to make Win8 something nobody really wants.  On the one hand it has a new interface called Metro that is supposed to be more iOS/Android "like" by using tiles, touch screen, etc.  But it's not a breakthrough, just an effort to be like the existing competition.  Maybe a little better, but everyone believes the leaders will be better still with new updates soon.  By definition, that is not game changing.

Simultaneously, with Win8 users can find their way into a more historical Windows inteface.  But this is not obvious, or intuitive.  And it has some pretty "clunky" features for those who like Windows.  So it's not a "great" Windows solution that would attract developers today focused on other platforms.

Win8 tries to be the old, and the new, without being great at either, and without offering anything that solves new problems, or creates breakthroughs in simplicity or performance.

Do you know the story about the Ford Edsel?

By focusing on playing catch up, and trying to defend & extend the Windows history, Microsoft missed what was most important about mobility – and that is the thousands of apps.  The product line is years late to market, short on apps, short on app developers and short on giving anyone a reason to really create apps for Win8.

Some think it is good if Microsoft makes its own tablet – like it has done with xBox.  But that really doesn't matter.  What matters is whether Microsoft gives users and developers something that causes them to really, really want a new platform that is late and doesn't have the app base, or the app store, or the interfaces to social media or all the other great thinks they already have come to expect and like about their tablet (or smartphone.) 

When iOS came out it was new, unique and had people flocking to buy it.  Developers could only be mobile by joining with Apple, and users could only be mobile by buying Apple.  That made it a game changer by leading the trend toward mobility. 

Google soon joined the competition, built a very large, respectable following by chasing Apple and offering manufacturers an option for competing with Apple. 

But Microsoft's new entry gives nobody a reason to develop for, or buy, a Win8 tablet – regardless of who manufactures it.  Microsoft does not deliver a huge, untapped market.  Microsoft doesn't solve some large, unmet need.  Microsoft doesn't promise to change the game to some new, major trend that would drive early adopters to change platforms and bring along the rest of the market. 

And making a deal so a dying company, on the edge of bankruptcy – Barnes & Noble – uses your technology is not a "big win."  Amazon is killing Barnes & Noble, and Microsoft Windows 8 won't change that.  No more than the Nook is going to take out Kindle, Kindle Fire, Galaxy Tab or the iPad.  Microsoft can throw away $300million trying to convince people Win8 has value, but spending investor money on a dying businesses as a PR ploy is just stupid.

Microsoft is playing catch up.  Catch up with the user interface.  Catch up with the format.  Catch up with the device size and portability.  Catch up with the usability (apps).  Just catch up. 

Microsoft's problem is that it did not accept the PC market was going to stall back in 2008 or 2009.  When it should have seen that mobility was a game changing trend, and required retooling the Microsoft solution suite.  Microsoft dabbled with music mobility with Zune, but quickly dropped the effort as it refocused on its "core" Windows.  Microsoft dabbled with mobile phones across different solutions including Kin – which it dropped along with Microsoft Mobility.  Back again to focusing on operating systems.  By maintaining its focus on Windows Microsoft hoped it could stop the trend, and refused to accept the market shift that was destined to stall its sales.

Microsoft stock has been flat for a decade.  It's recent value improvement as Win8 approaches launch indicates that hope beats eternally in some investors' breasts for a return of Microsoft software dominance.  But those days are long past.  PC sales have stalled, and Windows is a product headed toward obsolescence as competitors make ever better, more powerful mobile platforms and ecosystems.  If you haven't sold Microsoft yet, this may well be your last chance above $30.  Ever.

Getting Rich vs. Getting Lost – Smartphones – Google & Apple vs. RIM, Nokia, Samsung, Microsoft


Summary:

  • Most planning systems rely on extending past performance to predict the future
  • But markets are shifting too fast, making such forecasts wildly unreliable
  • To compete effectively, companies must anticipate future market shifts
  • Planning needs to incorporate a lot more scenario development, and competitor information in order to overcome biases to existing customers and historical products
  • Apple and Google have taken over the mobile phone business, while the original leaders have fallen far behind
  • Historical mobile phone leaders Nokia, Samsung, Motorola, RIM and Microsoft had the technologies and products to remain leaders, but they lacked scenarios of the future enticing them to develop new markets.  Thus they allowed new competitors to overtake them
  • Lacking scenarios and deep competitor understanding, companies react to market events – which is slow, costly and ineffective.

Apple, Android Help Smartphone Sales Double Over Last Year” is the Los Angeles Times headline.  Google-supplied Android phones jumped from 3% of the market to 26% versus the same quarter last year.  iPhones remained at 17% of the market.  Blackberry is now just under 15%, compared to about 21% last year.  What’s clear is people are no longer buying traditional mobile phones, as #1 Nokia share fell from 38% to 27%.  Like many market changes, the shift has come fast – in only a matter of a few months.  And it has been dramatic, as companies not even in the market 5 years ago are now the leaders. Former leaders are struggling to stay in the game as the market shifts.

The lesson Google and Apple are teaching us is that companies must have a good idea of the future, and then send their product development and marketing in that direction.  Although traditional cell phone manufacturers, such as Motorola and Samsung, had smartphone technology many years prior to Apple, they were so focused on their traditional markets they failed to look into the future.  Busy selling to existing customers an existing technology, they didn’t develop scenarios about 2010 and beyond that would describe how the market could expand – far beyond where traditional phone sales would take it.  Both famously said “so what” to the new technology, and used existing customer focus groups of people who had no idea the potential benefit of a smart phone to justify their willingness to remain fixated on the existing business.  Lacking a forward planning process based on scenario development, and lacking a good market sensing system that would pick up on the early market shift as novice competitor Apple started to really change the market, these companies are now falling rapidly to the wayside. 

Even smartphone pioneer Research in Motion (RIM) was so focused on meeting the needs of its existing “enterprise” customers that it failed to develop scenarios about how to expand the smartphone business into the hands of everyone.  RIM missed the value of mobile apps, and the opportunity to build an enormous app database.  Now RIM has been surpassed, and is showing no signs of providing effective competition for the market leaders.  While the Apple and Android app base continues to explode, based upon 3rd and 4th generation product inducing more developers to sign up, and more customers to buy in, RIM has not effectively built a developer base or app set – causing it to fall further behind quarter by quarter.

Even software giant Microsoft missed the market.  Fixated upon putting out an updated operating system for personal computers (Vista then later Windows 7) it let its 45% market share in smart phones circa 2007 disappear.  Now approaching 2011 Microsoft has largely missed the market.  Again, focused clearly upon its primary goal of defending its existing business in O/S and office automation software, Microsoft did not have a forward focused planning group that was able to warn the company that its new products might well arrive in a market that was stagnating, and on the precipice of a likely decline, because of new technology which could make the PC platform obsolete (a combination of smart mobile devices and cloud computing architecture.)  Microsoft’s product development was being driven by its historical products, and market position, rather than an understanding of future markets and how it should develop for them.

We can see this lack of future scenario development and close competitor tracking has confused Microsoft.  Desperately trying to recover from a market stall in 2009 when revenues and profits fell, Microsoft has no idea what to do in the rapidly expanding smartphone market today.  Its first product, Kin, was dropped only two months after launch, which industry analysts saw as necessary given the product’s lack of advantages.  But now Mediapost.com informs us in “Return of the Kin?” Microsoft is considering a re-launch in order to clear out old inventory.

This amidst a launch of the Windows Phone 7 that has gone nowhere.  Firstly, there was insufficient advertising to gain any public awareness of the product launch earlier in November (Mediapost “Where’s the Windows Phone 7 Ad Barrage?“)  Initial sales have gone nowhere “Windows Phone 7 Lands Without a Sound” [Mediapost], with many stores lacking inventory, very few promoting the product and Microsoft keeping surprisingly mum about initial sales. This has raised the question “Is Windows Phone 7 Dead On Arrival?” [Mediapost] as sales barely achieving 40,000 initial unit sales at launch, compared to daily sales of 200,000 Android phones and 270,000 iphones! 

Companies, like Apple and Google, that have clear views of the future, based upon careful analysis of what can be done and tracking market trends, create scenarios that allow them to break out of the pack.  Scenario development helps them to understand what the future can be like, and drive their product development toward creating new markets with more customers, more unit sales, higher revenues and improved cash flow.  By studying early competitors, especially fringe ones, they create new products which are more highly desired, breaking them out of price competition (remember the Motorola Razr fiasco that nearly bankrupted the company?) and into higher price points and better earnings. Creating and updating future scenarios becomes central to planning – using scenarios to guide investments rather than merely projections based upon past performance.

Companies that base future planning on historical trends find themselves rapidly in trouble.  Market shifts leave them struggling to compete, as customers quickly move to new solutions (old fashioned notions of “exit costs” are now dead).  Instead of heading for the money, they are confused – lost in a sea of options but with no clear direction.  Nokia, Samsung, RIM and Microsoft all have lots of resources, and great historical experience in the market.  But lacking good scenario planning they are lost.  Unable to chart a course forward, reacting to market leaders, and hoping customers will seek them out because they were once great. 

Far too many companies do their planning off of past projections.  One could say “planning by looking in the rear view mirror.” In a dynamic, global world this is not sufficient.  When monster companies like these can be upset so fast, by someone they didn’t even think of as a traditional competitor (someone likely not even on the radar screen recently) how vulnerable is your company?  Do you plan on 2015 looking like 2005?  If not, how can future projections based on past actuals be valuable?  it’s time more companies change their approach to planning to put an emphasis on scenario development with more competitive (rather than existing customer) input.  That’s the only way to get rich, instead of getting lost.

 

 

Know when to change course – BP, Dell, Microsoft

"Stay the Course" is a popular phrase.  It sounds all macho, and committed to a destiny, to proclaim you must "stay the course."  However, as bnet.com pointed out there are times when "Stay the Course is a Recipe for Disaster." The article calls it "Stay The Course-Itis" (or STCI) for leaders that don't know when it's time to change direction.  We can now see that BP simply drilled one too many deep-water holes in the Gulf – just as Exxon let one too many tipsy captains steer oil vessels before the Valdez crashed.  Staying the course may sound good, but too often the course isn't right.  And a bad course can lead you into disaster.

Take for example Dell.  As reported by The New York Times, and picked up by CNBC.com, "in Suit Over Computers, Window into Dell's Fall," we learn that Dell went just a bit too far in its effort to be a low cost industry supplier.  Hoping desperately to maintain a slight lead in lowering costs, Defending & Extending Dell's long-term Success Formula as industry supply chain leader, Dell simply bought bad parts. It then replaced bad product with more bad product.  Refused to admit to itself that it had gone "too cheap" in its effort to be cheap.  Things went from bad to worse as the Lock-in to keep costs low led to multiple customer disasters – even at the law firm defending Dell in court!  And Michael Dell is being accused of financial irregularities in his effort to make Dell's results possibly look better than they were.  Both corporately and personally leadership made some big mistakes – not unlike BP – in the effort for Dell to "Stay the Course."  

Microsoft certainly isn't without it's STCI as CEO Steve Ballmer keeps dropping new projects to funnel money and other resources into old desktop/laptop products. The Wall Street Journal reported "Microsoft Kills Kin Mobile Less Than Two Months After Launch."  Kin was a product targeted at the hot market for youthful cell phone users.  A double-digit growth market.  But Microsoft is backing out, despite its ballyhooed launch – including announcements to take the product to China very soon.  Microsoft can't seem to do much but "Stay the Course" supporting old products.

Both tech companies have had no improvement in their market value the last decade.  And BP has watched its value drop more than 50% since the spill started.  Some now actively wonder if BP could disappear as SeekingAlpha.com discussed in "How Likely is a BP Takeover bid?" Staying the course in the Gulf, drilling for more oil in deeper water and taking on more risk, could cost BP its existence if another company buys up the discounted equity.  Of course, there is still reason to think BP could get wiped out from the costs of the disaster without a takeover.

Companies can get over SCTI if they follow advice given at ABCNews.com "Reboot Your Small Business by Reinventing."  The article applies to all size businesses, however.  When you see your business doing poorly, especially relative to competitors, it's time to attack sacred cows and do some things differently.  Instead of "doubling down" on the old Success Formula, do new things!

You don't want to end up like BP, Dell or Microsoft today.  Once great companies that are floundering now – struggling to find growth as they continue spending so much energy trying to "Stay the Course."  When the seas are too calm to sail, leaving you stranded with no growth, or the waves are crashing too heavily, as competition is derailing your efforts, why not set a new course?  One that can lead you to better growth?  There's no harm, or shame, in heading where the market is going, using Disruptions and White Space to develop new solutions.  Don't let your ego, pride, or history/legacy push you to "stay the course" when better results can be found in new markets, new customers and new solutions.

PS – Yesterday SmartBrief on Leadership newsletter ran ""For Real Innovation, Pick Up the Phone" linking to the BloggingInnovation.com repost of "It's the One You Don't See That Kills You."  Compliments to Braden Kelley for a great web site, and getting the word out about how important it is to apply innovation! I enjoyed how the newsletter grabbed the conclusion, that businesses need to obtain more outsider input, and ran with it as the title.  better than my title, to be honest!

PPS – PRLog.org just picked up my blog on "Journalism in 2020."  Great to see the media enjoying my comments about their industry, and passing them along through this communication site!