The Decline of CDs and PCs – Trends Affect Us All More Than We Think

The Decline of CDs and PCs – Trends Affect Us All More Than We Think

Do you still have a pile of compact discs? If so, why? When was the last time you listened to one? Like almost everyone else, you probably stream your music today. If you are just outdated, you listen to music you bought from iTunes or GooglePlay and store on your mobile device. But it would be considered prehistoric to tell people you carry around CDs for listening in your car – because you surely don’t own a portable CD player.

As the chart shows, CD sales exploded from nothing in 1983 to nearly 1B units in 2000. Now sales are less than 1/10th that number, due to the market shift expanded bandwidth allowed.

demand for compact discs CDs, statista  sales of personal computers PCs, statista

 

 

 

 

 

Do you still carry a laptop? If so, you are a dying minority. As PCs became more portable they became indispensable. Nobody left the office, or attended a meeting, without their laptop. That trend exploded until 2011, when PC sales peaked at 365M units. As the chart shows, in the 6 years since, PC sales have dropped by over 100M units, a 30% decline. The advent of mobile devices (smartphones and tablets) coupled with expanded connectivity and growing cloud services allowed mobility to reach entirely new levels – and people stopped carrying their PCs. And just like CDs are disappearing, so will PCs.

These charts dramatically show how quickly a new technology, or package of technologies, can change the way we behave. Simultaneously, they change the competitive landscape. Sony dominated the music industry, as a producer and supplier of hardware, when CDs dominated. But, as I wrote in 2012, the shift to more portable music caused Sony to fall into a rapid decline, and the company suffered 6 consecutive years (24 quarters) of falling sales and losses. The one-time giant was crippled by a technology shift they did not adopt. And they weren’t alone, as big box retailers such as Best Buy and Circuit City also faltered when these sales disappeared.

Once, Microsoft was synonymous with personal technology. Nobody maximized the value in PC growth more than Microsoft. But changing technology altered the competitive landscape, with Apple, Google, Samsung and Amazon emerging as the leaders. Microsoft, as the almost unnoticed launch of Windows 10 demonstrated, is struggling to maintain relevancy.

Too often we discount trends. Like Sony and Microsoft we think historical growth will continue, unabated. We find ways to discount market shifts, saying the products are “niche” and denigrating their quality. We will express our view that the market has “hiccuped” and will return to growth again. By the time we admit the shift is permanent new competitors have overtaken the lead, and we risk becoming totally obsolete. Like Toys-R-Us, Radio Shack, Sears and Motorola.

Aircraft stalls when power is too low to climb

Aircraft stalls when not enough power to climb

The time for action is when the very first signs of shift happened. I’ve written a lot about “Growth Stalls” and they occur in just 2 quarters. 93% of the time a stalled company never again grows at a mere 2%/year. Look at how fast GE went from the best company in America to the worst. It is incredibly important that leadership react FAST when trends push customers toward new solutions, because it often takes very little time for the trend to make dying markets completely untenable.

Why Amazon Echo Is Killing It While Windows Phone Is Dead — Developers Are What Matters

Why Amazon Echo Is Killing It While Windows Phone Is Dead — Developers Are What Matters

Amazon just had another record Prime Day, with sales up 60%.  And the #1 product sold was Amazon’s Echo Dot speaker. At $34.99 it surpassed last year’s unit sales by seven-fold.  And the traditional Echo speaker, marked down 50% to $90, broke all previous sales records.

Amazon just took a commanding lead in the voice assistant platform market

These Echo sales most likely sealed Amazon’s long-term leadership in the war to be the #1 voice assistant.  Amazon already has 70% market share in voice activated speakers, nearly 3 times #2 provider Google.  And all other vendors in total barely have 5% share.

While it may seem like digital speakers are no big deal, speaker sales are analogous to iPhone sales when evaluating the emergence of smartphones and apps.  The iPhone seemed like a small segment until it became clear smartphones were the new personal technology platform. Apple’s early lead allowed iOS to dominate the growth cycle, making the company intensely profitable.

Echo and Echo Dot aren’t just speakers, but interfaces to voice activated virtual assistants.  For Echo the platform is Amazon’s Alexa.  Alexa is to voice activated devices and applications what iOS was to Smartphones.  By talking to Alexa customers are able to do many things, such as shopping, altering their thermostats, opening and closing doors, raising and lowering blinds, recording people in their homes — the list is endless.  And as that list grows customers are buying more Alexa devices to gain greater productivity and enhanced lifestyle.  Echos are entering more homes, and multiplying across rooms in these homes.

alexa skills, Felix Richter, Statista

Do you remember when early iPhone ads touted “there’s an app for that?” That tagline told customers if they changed from a standard mobile phone to a smartphone there were a lot of advantages, measured by the number of available apps.  Just like iOS apps gave an advantage to owning an iPhone, Alexa skills give an advantage to owning Echo products. In the last year the number of skills available for Alexa has exploded, growing from 135 to 15,000.   Quite obviously developers are building on Alexa much faster than any other voice assistant.

By radically cutting the price of both Echo Dot and Echo, and promoting sales, Amazon is creating an installed base of units which encourages developers to write even more skills/apps.

The more Alexa devices are installed, the more likely developers will write additional skills for Alexa. As more devices lead to more skills, skills leads to more Alexa/Echo capability, which encourages more people to buy Alexa activated devices, which further encourages even more skills development.  It’s a virtuous circle of goodness, all leading to more Amazon growth.

Google Assistant answered the most questions correctly

For marketers it is important to realize that success really doesn’t correlate with how “good” Alexa works.  Google’s Assistant and Microsoft’s Cortana perform better at voice recognition and providing appropriate responses than Alexa and Siri.  But there are relatively few (almost no) devices in the marketplace built with Assistant or Cortana as the interface.  Developers need their skills/apps to be on platforms customers use.  If customers are buying speakers, thermostats and televisions that are embedded with Alexa, then developers will write for Alexa.  Even if it has shortcomings. It’s not the product quality that determines the winner, but rather the ability to create a base of users.

It is genius for Amazon to promote Echo and Echo Dot, selling both cheaper than any other voice activated speaker.  Even if Amazon is making almost no profit on device sales.  By using their retail clout to build an Alexa base they make the decision to create skills for Alexa easy for developers.

amazon echo

 

It is genius for Amazon to promote Echo and Echo Dot, selling both cheaper than any other voice activated speaker.  Even if Amazon is making almost no profit on device sales.  By using their retail clout to build an Alexa base they make the decision to create skills for Alexa easy for developers.

This is a horrible problem for Google, #2 in this market, because Google does not have the retail clout to place millions of their speakers (and other devices) in the market.  Google is not a device company, nor a powerful retailer of Android devices.  The Android device makers need to profit from their devices, so they cannot afford to sell devices unprofitably in order to build an installed base for Google.  And because Android’s platform is not applied consistently across device manufacturers, Google Assistant skills cannot be assured of operating on every Android phone.  All of which makes the decision to build Google Assistant skills problematic for developers.

Can Apple Stop the Alexa juggernaut?

The game is not over.  Apple would like customers to use Siri on their iPhones to accomplish what Amazon and Alexa do with Echo.  Apple has an enormous iPhone base, and all have Siri embedded.  Perhaps Apple can encourage developers to create Siri-integrated apps which will beat back the Amazon onslaught?

Today, Apple customers still cannot use Siri to control their Apple TV (Though as of August, 2017, it’s been improved.), or make payments with ApplePay, for example. Nor can iPhone users tell Siri to execute commands for remote systems which are controlled by apps, like unlocking doors, turning on appliances, shooting remote security video or placing an on-line order. Apple has a lot of devices, and apps, but so far Siri is not integrated in a way that allows voice activation like can be done with Alexa.

apple tv and siri image

Additionally, as big as the iPhone installed base has become, when comparing markets the actual raw number of speakers could catch up with iPhones.  Echo Dot is $35.  The cheapest iPhone is the SE, at $399 (on the Apple site although available from Best Buy at $160.)  And an iPhone 7 starts at $650.  The huge untapped Apple markets, such as China and India, will find it a lot easier to purchase low cost speakers than iPhones, especially if their focus is to use some of those 15,000 skills.  And because of the low pricing ($35 to $90) it is easy to buy multiple devices for multiple locations in one’s home or office.

Will we look back and call Echo a Disruptive Innovation?

Innovators Dilemma chart

Innovator’s Dilemma

Recall the wisdom of Clayton Christensen‘s “Innovator’s Dilemma.” The incumbent keeps improving their product, hoping to maintain a capability lead over the competition.  But eventually the incumbent far overshoots customer needs, developing a product that is overly enhanced.  The disruptive innovator enters the market with a considerably “less good” product, but it meets customer needs at a much lower price.  People buy the cheaper product to meet their limited goal, and bypass the more capable but more expensive early market leader.

Doesn’t this sound remarkably similar to the development of iPhones (now on version 8 and expected to sell at over $1,000) compared with a $35 speaker that is far less capable, but still does 15,000 interesting things?

The biggest loser in this new market is Microsoft

This week Microsoft announced another 1,500 layoffs in what has become an annual bloodletting ritual for the PC software giant.  But even worse was the announcement that Microsoft would no longer support any version of Windows Phone OS version 8.1 or older – which is 80% of the Windows Phone market.  Given that Microsoft has less than 2% market share, and that less than .4% of the installed smartphone base operates on Windows Phone, killing support for these phones will lead to sales declines.  This action, along with gutting the internal developer team last year, clearly  indicates Microsoft has given up on the phone business for good.  This means that now Microsoft has no device platform for Cortana, Microsoft’s voice assistant, to use.

Windows 10 mobile rest in peace

Microsoft ignored smartphones, allowing Apple’s iOS to become the early standard.  Apple rapidly grew its installed base. Microsoft could not convince developers to write for Windows Phone because there weren’t enough devices in the market.  Without a phone base, with tablet and hybrid sales flat to declining, and with PC sales in the gutter Cortana enters the market DOA (Dead On Arrival.)  Even if it were the best voice assistant on the planet developers will not create skills for Cortana because there are no devices out there using Cortana as the interface.

So Microsoft completely missed yet another market. This time the market for voice activated devices in the smart phone, smart car or any other smart device in the IoT marketplace.  It missed mobile, and now it has missed voice assist.  As PC sales decline, Microsoft’s only hope is to somehow emerge a big winner in cloud storage and services (IaaS or Infrastructure as a Service) with Azure.  But, Azure was a late-comer to the cloud market and is far behind Amazon’s AWS (Amazon Web Services.)  Amazon has +40% market share, which is 40% more than the share of Microsoft, Google and IBM combined.

Build the base and developers will come…

PC Sales drop >10% Q1 2016. Surprised? Do You Care?

PC Sales drop >10% Q1 2016. Surprised? Do You Care?

Leading tech tracking companies IDC and Gartner both announced Q1, 2016 PC sales results, and they were horrible.  Sales were down 9.5%-11.5% depending on which tracker you asked.  And that’s after a horrible Q4, 2015 when sales were off more than 10%.  PC sales have now declined for 6 straight quarters, and sales are roughly where they were in 2007, 9 years ago.

Oh yeah, that was when the iPhone launched – June, 2007.  And just a couple of years before the iPad launched.  Correlation, or causation?

Amazingly, when Q4 ended the forecasters were still optimistic of a stabilization and turnaround in PC sales.  Typical analyst verbage was like this from IDC, “Commercial adoption of Windows 10 is expected to accelerate, and consumer buying should also stabilize by the second half of the year.  Most PC users have delayed an upgrade, but can only maintain this for so long before facing security and performance issues.”  And just to prove that hope springs eternal from the analyst breast, here is IDC’s forecast for 2016 after the horrible Q1, “In the short term, the PC market must still grapple with limited consumer interest and competition from other infrastructure upgrades in the commercial market. Nevertheless….things should start picking up in terms of Windows 10 pilots turning into actual PC purchases.”

Fascinating.  Once again, the upturn is just around the corner.  People have always looked forward to upgrading their PCs, there has always been a “PC upgrade cycle” and one will again emerge.  Someday.  At least, the analysts hope so.  Maybe?

Microsoft investors must hope so.  The company is selling at a price/earnings multiple of 40 on hopes that Windows 10 sales will soon boom, and re-energize PC growth. Surely. Hopefully. Maybe?

death-of-the-pcThe world has shifted, and far too many people don’t like to recognize the shift.  When Windows 8 launched it was clear that interest in PC software was diminishing.  What was once a major front page event, a Windows upgrade, was unimportant.  By the time Windows 10 came along there was so little interest that its launch barely made any news at all.  This market, these products, are really no longer relevant to the growth of personal technology.

Back when I predicted that Windows 8 would be a flop I was inundated with hate mail.  It was clear that Ballmer was a terrible CEO, and would soon be replaced by the board.  Same when I predicted that Surface tablets would not sell well, and that all Windows devices would not achieve significant share. People called me “an Apple Fanboy” or a “Microsoft hater.”  Actually, neither was true.  It was just clear that a major market shift was happening in computing.  The world was rapidly going mobile, and cloud-based, and the PC just wasn’t going to be relevant.  As the PC lost relevancy, so too would Microsoft because it completely missed the market, and its entries were far too tied to old ways of thinking about personal and corporate computing – not to mention the big lead competitors had in devices, apps and cloud services.

I’ve never said that modern PCs are bad products.  I have a son half way through a PhD in Neurobiological Engineering.  He builds all kinds of brain models and 3 dimensional brain images and cell structure plots — and he does all kinds of very exotic math.  His world is built on incredibly powerful, fast PCs.  He loves Windows 10, and he loves PCs — and he really “doesn’t get” tablets.  And I truly understand why.  His work requires local computational power and storage, and he loves Windows 10 over all other platforms.

But he is not a trend.  His deep understanding of the benefits of Windows 10, and some of the PC manufacturers as well as those who sell upgrade componentry, is very much a niche.  While he depends heavily on Microsoft and Wintel manufacturers to do his work, he is a niche user.  (BTW he uses a Nexus phone and absolutely loves it, as well. And he can wax eloquently about the advantages he achieves by using an Android device.)

Today, I doubt I will receive hardly any comments to this column.  Because to most people, the PC is nearly irrelevant. People don’t actually care about PC sales results, or forecasts.  Not nearly as much as, say, care about whether or not the iPhone 6se advances the mobile phone market in a meaningful way.

Most people do their work, almost if not all their work, on a mobile device.  They depend on cloud and SaaS (software-as-a-service) providers and get a lot done on apps.  What they can’t do on a phone, they do on a tablet, by and large.  They may, or may not, use a PC of some kind (Mac included in that reference) but it is not terribly important to them.  PCs are now truly generic, like a refrigerator, and if they need one they don’t much care who made it or anything else – they just want it to do whatever task they have yet to migrate to their mobile world.

The amazing thing is not that PC sales have fallen for 6 quarters.  That was easy to predict back in 2013.  The amazing thing is that some people still don’t want to accept that this trend will never reverse.  And many people, even though they haven’t carried around a laptop for months (years?) and don’t use a Windows mobile device, still think Microsoft is a market leader, and has a great future.  PCs, and for the most part Microsoft, are simply no more relevant than Sears, Blackberry, or the Encyclopedia Britannica.   Yet it is somewhat startling that some people have failed to think about the impact this has on their company, companies that make PC software and hardware – and the impact this will have on their lives – and likely their portfolios.

Do Not Follow the Herd – Sell McDonald’s and Microsoft

Do Not Follow the Herd – Sell McDonald’s and Microsoft

This week McDonald’s and Microsoft both reported earnings that were higher than analysts expected. After these surprise announcements, the equities of both companies had big jumps.  But, unfortunately, both companies are in a Growth Stall and unlikely to sustain higher valuations.

Growth Stall primary slide

McDonald’s profits rose 23%.  But revenues were down 5.3%.  Leadership touted a higher same store sales number, but that is completely misleading.

McDonald’s leadership has undertaken a back to basics program.  This has been used to eliminate menu items and close “underperforming stores.”  With fewer stores, loyal customers were forced to eat in nearby stores – something not hard to do given the proliferation of McDonald’s sites.  But some customers will go to competitors. By cutting stores and products from the menu McDonald’s may lower cost, but it also lowers the available revenue capacity.   This means that stores open a year or longer could increase revenue, even though total revenues are going down.

Profits can go up for a raft of reasons having nothing to do with long-term growth and sustainability.  Changing accounting for depreciation, inventory, real estate holdings, revenue recognition, new product launches, product cancellations, marketing investments — the list is endless.  Further, charges in a previous quarter (or previous year) could have brought forward costs into an earlier report, making the comparative quarter look worse while making the current quarter look better.

Confusing?  That’s why accounting changes are often called “financial machinations.”  Lots of moving numbers around, but not necessarily indicating the direction of the business.

McDonald’s asked its “core” customers what they wanted, and based on their responses began offering all-day breakfast.  Interpretation – because they can’t attract new customers, McDonald’s wants to obtain more revenue from existing customers by selling them more of an existing product; specifically breakfast items later in the day.

Sounds smart, but in reality McDonald’s is admitting it is not finding new ways to grow its customer base, or sales.  The old products weren’t bringing in new customers, and new products weren’t either.  As customer counts are declining, leadership is trying to pull more money out of its declining “core.”  This can work short-term, but not long-term.  Long-term growth requires expanding the sales base with new products and new customers.

Perhaps there is future value in spinning off McDonald’s real estate holdings in a REIT.  At best this would be a one-time value improvement for investors, at the cost of another long-term revenue stream. (Sort of like Chicago selling all its future parking meter revenues for a one-time payment to bail out its bankrupt school system.)  But if we look at the Sears Holdings REIT spin-off, which ostensibly was going to create enormous value for investors, we can see there were serious limits on the effectiveness of that tactic as well.

MIcrosoft also beat analysts quarterly earnings estimate.  But it’s profits were up a mere 2%.  And revenues declined 12% versus a year ago – proving its Growth Stall continues as well.  Although leadership trumpeted an increase in cloud-based revenue, that was only an 8% improvement and obviously not enough to offset significant weakness in other markets:

It is a struggle to see the good news here.  Office 365 revenues were up, but they are cannibalizing traditional Office revenues – and not fast enough to replace customers being lost to competitive products like Google OfficeSuite, etc.

Azure sales were up, but not fast enough to replace declining Windows sales.  Further, Azure competes with Amazon AWS, which had remarkable results in the latest quarter.  After adding 530 new features, AWS sales increased 15% vs. the previous quarter, and 78% versus the previous year.  Margins also increased from 21.4% to 25% over the last year.  Azure is in a growth market, but it faces very stiff competition from market leader Amazon.

We build our companies, jobs and lives around successful products and services.  We want these providers to succeed because it makes our lives much easier.  We don’t like to hear about large market leaders losing their strength, because it signals potentially difficult change.  We want these companies to improve, and we will clutch at any sign of improvement.

As investors we behave similarly.  We were told large companies have vast customer bases, strong asset bases, well known brands, high switching costs,  deep pockets – all things Michael Porter told us in the 1980s created “moats” protecting the business, keeping it protected from market shifts that could hurt sales and profits.  As investors we want to believe that even though the giant company may slip, it won’t fall.  Time and size is on its side we choose to believe, so we should simply “hang on” and “ride it out.”  In the future, the company will do better and value will rise.

As a result we see that Growth Stall companies show a common valuation pattern.  After achieving high valuation, their equity value stagnates.  Then, hopes for a turn-around and recovery to new growth is stimulated by a few pieces of good news and the value jumps again.  Only after a few years the short-term tactics are used up and the underlying business weakness is fully exposed.  Then value crumbles, frequently faster than remaining investors anticipated.

McDonald’s valuation rose from $62/share in 2008 to reach record $100/share highs in 2011.  But valuation then stagnated.  It is only this last jump that has caused it to reach new highs.  But realize, this is on a smaller number of stores, fewer products and declining revenues.  These are not factors justifying sustainable value improvement.

Microsoft traded around $25/share from March, 2003 through November, 2011 – 8.5 years.  When the CEO was changed value jumped to $48/share by October, 2014.  After dipping, now, a year later Microsoft stock is again reaching that previous valuation ($50/share).  Microsoft is now valued where it was in December, 2002 (which is half its all-time high.)

The jump in value of McDonald’s and Microsoft happened on short-term news regarding beating analysts earnings expectations for one quarter.  The underlying businesses, however, are still suffering declining revenue.  They remain in Growth Stalls, and the odds are overwhelming that their values will decline, rather than continue increasing.

 

 

Why Google Glass, Amazon Fire Phone and the Segway Failed

Why Google Glass, Amazon Fire Phone and the Segway Failed

Despite huge fanfare at launch, after a few brief months Google Glass is no longer on the market.  The Amazon Fire Phone was also launched to great hype, yet sales flopped and the company recently took a $170M write off on inventory.

Fortune mercilessly blamed Fire Phone’s failure on CEO Jeff Bezos.  The magazine blamed him for micromanaging the design while overspending on development, manufacturing and marketing.  To Fortune the product was fatally flawed, and had no chance of success according to the article.

Similarly, the New York Times blasted Google co-founder and company leader Sergie Brin for the failure of Glass. He was held responsible for over-exposing the product at launch while not listening to his own design team.

google-glass_

Both these articles make the common mistake of blaming failed new products on (1) the product itself, and (2) some high level leader that was a complete dunce.  In these stories, like many others of failed products, a leader that had demonstrated keen insight, and was credited with brilliant work and decision-making, simply “went stupid” and blew it.  Really?

Unfortunately there are a lot of new products that fail.  Such simplistic explanations do not help business leaders avoid a future product flop.   But there are common lessons to these stories from which innovators, and marketers, can learn in order to do better in the future.  Especially when the new products are marketplace disrupters; or as they are often called, “game changers.”

Segway

Do you remember Segway?  The two wheeled transportation device came on the market with incredible fanfare in 2002. It was heralded as a game changer in how we all would mobilize.  Founders predicted sales would explode to 10,000 units per week, and the company would reach $1B in sales faster than ever in history.  But that didn’t happen.  Instead the company sold less than 10,000 units in its first 2 years,  and less than 24,000 units in its first 4 years.  What was initially a “really, really cool product” ended up a dud.

There were a lot of companies that experimented with Segways.  The U.S. Postal Service tested Segways for letter carriers. Police tested using them in Chicago, Philadelphia and D.C., gas companies tested them for Pennsylvania meter readers, and Chicago’s fire department tested them for paramedics in congested city center.  But none of these led to major sales. Segway became relegated to niche (like urban sightseeing) and absurd (like Segway polo) uses.

Segway tried to be a general purpose product. But no disruptive product ever succeeds with that sort of marketing.  As famed innovation guru Clayton Christensen tells everyone, when you launch a new product you have to find a set of unmet needs, and position the new product to fulfill that unmet need better than anything else.  You must have a very clear focus on the product’s initial use, and work extremely hard to make sure the product does the necessary job brilliantly to fulfill the unmet need.

Nobody inherently needed a Segway.  Everyone was getting around by foot, bicycle, motorcycle and car just fine.  Segway failed because it did not focus on any one application, and develop that market as it enhanced and improved the product.  Selling 100 Segways to 20 different uses was an inherently bad decision. What Segway needed to do was sell 100 units to a single, or at most 2, applications.

Segway leadership should have studied the needs deeply, and focused all aspects of the product, distribution, promotion, training, communications and pricing for that single (or 2) markets.  By winning over users in the initial market Segway could have made those initial users very loyal, outspoken customers who would recommend the product again and again – even at a $4,000 price.

Segway should have pioneered an initial application market that could grow.  Only after that could Segway turn to a second market.  The first market could have been using Segway as a golfer’s cart, or as a walking assist for the elderly/infirm, or as a transport device for meter readers.  If Segway had really focused on one initial market, developed for those needs, and won that market it would have started a step-wise program toward more applications and success. By thinking the general market would figure out how to use its product, and someone else would develop applications for specific market needs, Segway’s leaders missed the opportunity to truly disrupt one market and start the path toward wider success.

amazon-fire-phoneThe Fire Phone had a great opportunity to grow which it missed.  The Fire Phone had several features making it great for on-line shopping.  But the launch team did not focus, focus, focus on this application.  They did not keep developing apps, databases and ways of using the product for retailing so that avid shoppers found the Fire Phone superior for their needs.  Instead the Fire Phone was launched as a mass-market device. Its retail attributes were largely lost in comparisons with other general purpose smartphones.

People already had Apple iPhones, Samsung Galaxy phones and Google Nexus phones.  Simultaneously, Microsoft was pushing for new customers to use Nokia and HTC Windows phones.  There were plenty of smartphones on the market. Another smartphone wasn’t needed – unless it fulfilled the unmet needs of some select market so well that those specific users would say “if you do …. and you need…. then you MUST have a FirePhone.”  By not focusing like a laser on some specific application – some specific set of unmet needs – the “cool” features of the Fire Phone simply weren’t very valuable and the product was easy for people to pass by.  Which almost everyone did, waiting for the iPhone 6 launch.

This was the same problem launching Google Glass.  Glass really caught the imagination of many tech reviewers.  Everyone I knew who put on Glass said it was really cool.  But there wasn’t any one thing Glass did so well that large numbers of folks said “I have to have Glass.”  There wasn’t any need that Glass fulfilled so well that a segment bought Glass, used it and became religious about wearing Glass all the time.  And Google didn’t improve the product in specific ways for a single market application so that users from that market would be attracted to buy Glass.  In the end, by trying to be a “cool tool” for everyone Glass ended up being something nobody really needed.  Exactly like Segway.

win10_holoLensMicrosoft recently launched its Hololens.  Again, a pretty cool gadget.  But, exactly what is the target market for Hololens?  If Microsoft proceeds down the road of “a cool tool that will redefine computing,” Hololens will likely end up with the same fate as Glass, Segway and Fire Phone.  Hololens marketing and development teams have to find the ONE application (maybe 2) that will drive initial sales, cater to that application with enhancements and improvements to meet those specific needs, and create an initial loyal user base.  Only after that can Hololens build future applications and markets to grow sales (perhaps explosively) and push Microsoft into a market leading position.

All companies have opportunities to innovate and disrupt their markets.  Most fail at this.  Most innovations are thrown at customers hoping they will buy, and then simply dropped when sales don’t meet expectations.  Most leaders forget that customers already have a way of getting their jobs done, so they aren’t running around asking for a new innovation.  For an innovation to succeed launchers must identify the unmet needs of an application, and then dedicate their innovation to meeting those unmet needs.  By building a base of customers (one at a time) upon which to grow the innovation’s sales you can position both the new product and the company as market leaders.