by Adam Hartung | Apr 29, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Web/Tech
CIO Magazine today published my latest article for IT professionals “Why You Should Stop Worrying and Let End Users Have iPads.” (note: free site registration may be required to read the full article)
The editors at CIO agreed with me that a big change is happening in “enterprise IT.” User technology is now so cheap, and good, that employees no longer depend upon corporate IT to provide them with their productivity tools. When you can buy a smartphone for $100, and a tablet for $500, increasingly users are happy to supply their own, private, productivity tools rather than try using something they find larger, heavier and harder to use from their boss — and also something which they’ve been told for years should not have personal items on it.
The serious impact is that increasingly the users feel “burdened” by corporate IT. They become less accessible as they leave the company laptop at work – and shut off the company Blackberry after work hours. They complain about the inefficiency of corporate tools, while using personal phones and tablets to do internet searches, access networks for fast info sharing (Facebook, Twitter, Linked-in), and generally find greatest productivity by ignoring technology supplied by employers. Often tehnology that is incredibly expensive.
Leading companies are taking advantage of this trend, and supplying the latest devices to employees. They recognize that greatest good comes not from “controlling” employee technology use. Rather, productivity is greatly enhanced by encouraging employees to take advantage of newest technology in the course of their work. Thus, leaders are providing iPhones and iPads, and giving access to Facebook and YouTube through the company network.
The world of IT shifts fast. Changes in IT have often seperated winners from losers. IT leaders have to change their mindsets if they want to help their companies profitably grow. And the first step is giving users technology they want, rather than technology they too often despise.
You can also access this article by clicikng on links to the following journals:
I look forward to your opinion about this topic! Do you think IT departmernts are slow to react to new tools? Do you think the new tools are “enterprise ready?” Do you think the advantages of newer techbnology outweigh potential IT risks? Drop comments here, or on the article pages! Love to hear what others think
by Adam Hartung | Apr 26, 2011 | Defend & Extend, In the Rapids, In the Swamp, Innovation, Leadership, Lock-in, Web/Tech
Summary:
- Everyone discriminates in hiring – just some is considered bad, and some considered good
- Only “good discrimination” inevitably leads to homogeneity and “group think” leaving the business vulbnerable to market shifts
- Efforts to defend & extend the historical success formula moves beyond hiring to include using internal bias to favor improvement projects and disfavor innovations
- Amazon has grown significantly more than Wal-Mart, and it’s value has quadrupled while Wal-mart’s has been flat, because it has moved beyond its original biases
The long list of people attacking Wal-Mart includes a class-action law suit between former female workers and their employer. The plaintiffs claim Wal-Mart systematically was biased, via its culture, to pay women less and limit their promotion opportunities. The case is prompting headlines like BNet.com‘s “Does Your Company Help You Discriminate?”
Actually, all cultures – and hiring programs – are designed to discriminate. It’s just that some discrimination is legal, and some is not. At Google it’s long been accepted that the bias is toward quant jocks and those with highest IQs. That’s not illegal. Saying that men, or white people, or Christians make better employees is illegal. But there is risk in all hiring bias – even the legal kind. To avoid the illegal discrimination, its smarter to overcome the “natural bias” that cultures create for hiring. And the good news is that this is better for the business’s growth and rate of return!
Successful organizations build a profile of “who did well around here – and why” as they grow. It doesn’t take long until that profile is what they seek. The downside is that quickly there’s not a lot of heterogeneity in the hiring – or the workforce. That leads to “group think,” which reinforces “not invented here.” Everyone becomes self-assured of their past success, and believes that if they keep doing “more of the same” the future will work out fine. Whether Wal-Mart’s hiring biases were legal – or not – it is clear that the group think created at Wal-Mart has kept it from innovating and moving into new markets with more growth.
Markets shift. New products, technologies and business practices emerge. New competitors figure out ways of providing new solutions. Customers drift toward new offerings, and growth slows. Unfortunately, bias keeps the early winner from accepting this market shift – so the company falls into serious growth troubles trying to do more, better, faster, cheaper of what worked before. Look at Dell, still trying to compete in PCs with its supply chain focus long after competitors have matched their pricing and started offering superior customer service and other advantages. Meanwhile, the market growth has moved away from PCs into products (tablets, smartphones) Dell doesn’t even sell.
Wal-Mart excels at its success formula of big, boring, low price stores. And its bias is to keep doing more of the same. Only, that’s not where the growth is in retailing any longer. The market for “cheap” is pretty well saturated, and now filled with competitors that go one step further being cheap (like Dollar General,) or largely match the low prices while offering better store experience (like Target) or better selection and varied merchandise (like Kohl’s). Wal-Mart is stuck, when it needs to shift. But its bias toward “doing what Sam Walton did that made us great” has now made Wal-Mart the target for every other retailer, and stymied Wal-Mart’s growth.
A powerful sign of status quo bias shows itself when leaders and managers start overly relying on “how we’ve done things here” and “the numbers.” The former leads to accepting recommendations fro hiring and promotion based upon similarity with previous “winners.” Investment opportunities to defend and extend what’s always been done sail through reviews, because everyone understands the project and everyone believes that the results will appear.
Nearly all studies of operational improvement projects show that returns rarely achieve the anticipated outcomes. Because these projects reinforce the status quo, they are assumed to be highly accurate projections. But planned efficiences do not emerge. Headcount reductions do not happen. Unanticipated costs emerge. And, most typically, competitors copy the project and achieve the same results, leading to price reductions across the board benefitting customers rather than company profits.
Doing more of the same is easily approved and rarely questioned – whether hiring, or investing. And if things don’t work out as expected results are labeled “business necessity” and everyone remains happy they made the original decision, even if it did nothing for market share, or profit improvement. Or perhaps turns out to have been illegal (remember Enron and Worldcom?)
To really succeed it is important we overcome biases. Look no further than Amazon. Amazon could have been an on-line book retailer. But by overcoming early biases, in hiring and new projects, Amazon has grown more than Wal-Mart the last decade – and has a much brighter future. Amazon now leads in a large number of retail segments, far beyond books. It has products which allow anyone to take almost any product to market – using the Amazon on-line tools, as well as inventory management.
And in publishing Amazon has become a powerhouse by helping self-published authors find distribution which was before unavailable, giving us all a much larger variety of book products. More recently Amazon pioneered e-Readers with Kindle, developing the technology as well as the inventory to make Kindle an enormous success. Simultaneously Amazon now offers a series of technical products providing companies access to the cloud for data and applications.
Where most companies would say “that’s not our business” Amazon has taken the approach of “if people want it, why don’t we supply it?” Where most organizations use numbers to kill projects – saying they are too risky or too small to matter or too low on “risk adjusted” rate of return Amazon creates a team, experiments and obtains real market information. Instead of worrying whether or not the initial project is a success or failure, market input is treated as learning and used to adapt. By continuously looking for new opportunities, and pushing those opportunities, Amazon keeps growing.
Every business develops a bias. Overcoming that bias is critical to success. From hiring to decision making, internal status quo police try to reinforce the bias and limit change. Often on the basis of “too much risk” or “too far from our core.” But that bias inevitably leads to stalled growth. Because new competitors never stop beating down rates of return on old success formulas, and markets never stop shifting.
Wal-Mart should look upon this lawsuit not as a need to defend and extend its past practices, but rather a wake-up call to be more open to diversity – in all aspects of its business. Wal-mart doesn’t need to win this lawsuit neary as badly as it needs to create an ability to adapt. Until then, I’d recommend investors sell Wal-Mart, and buy Amazon.com.
Chart of WMT stock performance compared to AMZN last 5 years (source Yahoo.com)
by Adam Hartung | Apr 17, 2011 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Innovation, Leadership, Lock-in, Web/Tech
Research in Motion pioneered the smartphone business. While Motorola, Samsung and others thought the answer to market growth was making ever cheaper mobile phones, RIM figured out that corporations wanted to put phones in employee hands, control usage cost, while also securely offering email distribution and texting. Blackberry handsets and servers met user needs while providing IT departments with everything they needed.
This success formula was a winner, driving tremendous growth for RIM. People joke about their “crackberry” connecting them to their company 24×7, but it was a tremendous productivity enhancer. RIM produced a consistent string of growing revenues and earnings, meeting or exceeding projections. RIM still dominates the “enterprise” smartphone business. The overwhelming majority of mobile phones issued by companies are still Blackberries.
“RIM’s CEO is Annoyed that People Don’t Appreciate Our Profits” headlined Silicon Alley Insider. He can’t understand why the stock languishes, despite meeting financial projections. When challenged about whether or not RIM is as secure as it claims, “RIM CEO Abruptly Ends an Interview After Getting Annoyed About Security Questons” (SAI).
That the CEO is annoyed is the first of two reasons you need to sell RIMM now. If you are waiting for a recovery to old highs, forget about it. Won’t happen. Can’t happen.
The mobile phone/smartphone market has taken an enormous shift. Apple’s iPhone introduced the “app” phenomenon – allowing smartphone users to do a plethora of things on their devices that aren’t possible on a Blackberry. If we just count apps, as a baseline, iPhone users can do some 350,000 things that Blackberry users cannot. Additionally, iPhones – and increasingly Android phones – are simply a lot easier to use, with bigger touch screens, more built-in functionality and easier user navigation.
As charted in my last column, RIM has only about 5% the apps of iPhone. And less than 10% the apps of Android. Even Microsoft will soon provide more apps than Blackberry. But the CEO of RIM is stuck – defending his company and its success formula – rather than aggressively migrating the company into new products. He’s hoping all those company employees, including execs, now carrying 2 phones – their corporate Blackberry and personal iPhone – will keep doing that.
He’s letting the re-invention gap between RIMM and Apple/Google widen with every passing quarter. While no other provider offers the “enterprise solution” of RIM, increasingly the gap between the usability of new solutions and RIM is widening. It won’t be long before users won’t put up with having 2 phones – and the loser will clearly be RIM
And it won’t be long before people completely stop carrying laptops as well. Rather quickly we are seeing a market shift to tablets. Into this market RIMM launched its Playbook product last week. And that’s the second reason you need to sell RIMM.
We all know the iPad has been a remarkable success. To date, nobody has developed a tablet that users, or reviewers, find comparable. Unfortunately, RIM launched its Playbook tablet to entirely consistent reviews, such as “The Playbook: Blackberry’s ‘Unfinished’ Product” headlined at TheWeek.com. The Playbook simply isn’t comparable to an iPad – and doesn’t look like it ever will be.
Most concerning, to use a Playbook you must also have a Blackberry. Playbook relies on the Blackberry to provide connectivity – via Bluetooth. In other words, RIM is trying to keep customers locked-in to Blackberries, using Playbook to defend and extend the original company product. Playbook doesn’t even look like it’s ever intended to be a stand-alone winner. And that’s a really bad strategy.
RIM sees Playbook is seen as an extension of the Blackberry product line; the first in a transition to a new operating system for all products. Not a product designed to compete heads-up against other tablets. It lacks apps, it lacks its own connectivity, it has a smaller screen, and it doesn’t have the intuitive interface. Basically, it’s an effort to try and keep Blackberry users on Blackberries – an effort to defend and extend the original success formula.
When markets shift it is absolutely critical competitors shift with them. Xerox invented desktop publishing at its PARC facility, but tried to defend xerography and lost the new market to Apple. Kodak invented digital cameras, but tried to defend the film business and lost the new market to Japanese competitors. When the CEO tries to defend and extend the old success formula after a market shifts only bad things happen. When new products are extensions of old products, while competitors are bringing out game changers, the world only becomes uglier and uglier for the stuck, old-line competitor.
The analysts are right. RIM has no future growth. Companies are already switching into iPhones, iPads and Androids. Simultaneously, Microsoft will pour billions into helping Nokia push Windows 7 phones and future tablets the next 2 years, and that will be targeted right at “enterprise users” which are RIM’s “core.” Microsoft will spend far more resources than RIM could ever match trying to defend its “installed base.” RIMM is stuck fighting to keep current users, while the market growth is elsewhere, and those emerging competitors are quickly going to hollow out RIM’s market.
There’s simply no way RIM can increase its value. Time to sell.
Update 4/20/2011 Goldman Sachs Survey Results – CIO intention to adopt Tablets by Operating System provider:
Published in SiliconAlleyInsider.com
by Adam Hartung | Apr 7, 2011 | Defend & Extend, In the Rapids, In the Swamp, Innovation, Leadership, Web/Tech
Most folks know that Apple is now worth more than Microsoft. Although few realize the huge difference. After years of dominating as the premier “PC” company, Microsoft is now worth only about 2/3 the value of Apple – $224B versus $310B this week (or, said differently, Apple is worth about 50% more than Microsoft.) Apple’s run by Microsoft the last year has been like a rock out of a slingshot. But that’s largely because Apple grew revenues almost 50% in fiscal 2009 and 2010, while Microsoft saw revenue decline 3% in 2009, and only grow 7% in 2010, putting revenues up a net 3% over the 2 years.
What few realize is how much Microsoft spent trying to grow, but failed. A look at 2009 R&D expenditures showed Microsoft outspent all tech competitors in its class – spending 8 times what Apple spent! 
Source: Silicone Alley Insider Chart of the Day from BusinessInsider.com
What did customers and investors receive for this whopping Microsoft spend? An updated operating system and set of office automation tools to run on existing products. Nothing that created new demand, or incremental sales. On the other hand, for its much lower spending Apple gave investors upgrades to iPods, the iPhone and the operating system for the later released iPad.
Simply put, Microsoft opened the check book and spent like crazy in its effort to defend its historical PC products business. And the cost was more than just dollars. That “focus” cost Microsoft its position in other growth markets; like smartphones. Few recall that as recently as 2008 Microsoft was the leading smartphone platform: 
In order to defend its “core” business, Microsoft under-invested in smartphones and over-invested in its historical personal computing products. Now, PC growth has stalled as people are switching to new products based on cloud computing – like smartphones and tablets.
Apple is cleaning up with its investments, while Microsoft is hoping it can catch up by enticing its former executive, now the CEO at Nokia, to revamp their line using the Windows Phone 7 operating system. Good luck, because the market is already way, way out front with Apple and Android products
That was the past. What we’d like to know is whether Apple will keep growing like crazy, and whether Microsoft will do what’s necessary to grow as well. And that’s where some recent announcements point out that Apple, quite simply, is better managed. So it will grow, and Microsoft won’t.
ZDNet reported on the “changing of the guard” at Apple in March. Due to its different investment approach, iOS is now bigger than the MacOS at Apple. The “legacy” product – that made Apple into a famous company in the 1980s – has been eclipsed by the new product. And the old technology leader is graciously moving on to do research in a scientific community, while Apple pours its resources into developing products for the future.
Don’t forget, the Lisa was a product that Steve Jobs personally took to market – yet didn’t succeed. He personally remained involved, converting Lisa into the wildly successful 1980s Mac (see AOL Small Business story on history of Lisa and Mac.) You gotta love it when that CEO, and his leadership team and all the managers, can transition their loyalty and put resources into the future product line in order to keep growing! MacOS is not dead, nor is it going to be devoid of resources. But the future of Apple lies in growing the new platform, and that is where the best talent and dollars are being spent.
Comparatively, Microsoft announced this week it was changing its Chief Marketing Officer (SeattlePI.com.) And, not surprisingly, they did NOT select someone with smartphone, tablet or even gaming expertise for the role. Instead of identifying a leader who is deep into understanding the growth markets, Microsoft appointed as the next CMO the fellow who had been responsible for selling – wait – guess – Office, Sharepoint, Exchange and the other historical, legacy Microsoft products. Those products which have had no growth – only maintenance sales. Instead of reaching into the future for its leadership, CEO Ballmer once again reached into the past.
If you ever wonder why Apple is worth so much more to investors than Microsoft, just think about this moment in the marketplace. Apple is investing its best talent and resources into new products in new markets that are demonstrating growth. Microsoft, struggling with its growth, keeps placing “old guard” leaders into top positions, attempting to defend the historical business – hoping to recapture the old glory.
Too bad the market has already shifted and doesn’t care what Microsoft thinks.
When it comes to networking, cloud computing and the future of how we all are going to be productive Microsoft just isn’t in the game. And its attempt to have a fast falling Nokia save it by distributing second rate mobile products that are late to market while iPhones and Androids keep extending their lead won’t make Microsoft great again. Especially when the leadership keeps wanting, in its heart, to sell more PCs.
Apple is just better managed, because it keeps looking to the future, while Microsoft simply can’t seem to get over its past. Good thing Steve Ballmer is already rich. Too bad all the Microsoft employees aren’t.
by Adam Hartung | Apr 1, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Openness, Transparency, Web/Tech
Summary:
- Google is locking-in on what it made successful
- But as technologies, and markets, change Google could be at risk of not keeping up
- Internal processes are limiting Google’s ability to adapt quickly
- Google needs to be better at creating and launching new projects that can expand its technology and market footprint in order to maintain long-term growth
Google has been a wild success. From nowhere Google has emerged as one of the biggest business winners at leveraging the internet. With that great success comes risk, and opportunity, as Larry Page resumes the CEO position this year.
Investors hope Google keeps finding new opportunities to grow, somewhat like Apple has done by moving into new markets with new solutions. Where Apple has built strong revenue streams from its device and app sales in multiple markets, Google hasn’t yet demonstrated that success. Despite the spectacular ramp-up in Android smartphone sales, Google hasn’t yet successfully monetized that platform – or any other. Something like 90% of revenues and profits still come from search and its related ad sales.
Investors have reason to fear Google might be a “one-trick pony,” similar to Dell. Dell was wildly successful as the “supply chain management king” during the spectacular growth of PC sales. But as PC sales growth slowed competitors matched much of Dell’s capability, and Dell stumbled trying to lower cost with such decisions as offshoring customer service. Dell’s revenue and profit growth slowed. Now Dell’s future growth prospects are unclear, and its value has waned, as the market has shifted toward products not offered by Dell.
Will Google be the “search king” that didn’t move on?
When companies are successful they tend to lock-in on what made them successful. To keep growing they have to overcome those lock-ins to do new things. The risk is that Google can’t overcome it’s lock-ins; that internal status quo police enforce them to the point of keeping new things from flourishing into new growth markets. That the company becomes stale as it avoids investing effectively in new technologies or solutions.
At Slacy.com (“What Larry Page Really Needs to Do to Return Google to its Start-up Roots“) we read from a former Google employee that there are some serious lock-ins to worry about within Google:
- The launch coordination process sets up a status quo protection team that keeps things from moving forward. When an internal expert gains this kind of power, they maintain their power by saying “no.” The more they say no, the more power they wield. Larry Page needs to be sure the launch team is saying “here’s how we can help you launch fast and easy” rather than “you can’t launch unless…”
- Hiring is managed by a group of internal recruiters. When the people who actually manage the work don’t do recruiting, and hiring, then the recruits become filtered by staffers who have biases about what makes for a good worker. Everything from resume screening to background reviews to appearances become filters for who gets interviewed by engineers and managers. In the worst case staffers develop a “Google model employee” profile they expect all hires to fit. This process systematically narrows the candidates, leading to homogeneity in hiring, a reduction in new approaches and new ways of thinking, and a less valuable, dynamic employee population.
- Increasingly engineers are forced to use a limited set of Google tools for development. External, open source, tools are increasingly considered inferior – and access to resources are limited unless engineers utilize the narrow tool set which initially made Google successful. The natural outcome is “not invented here” syndrome, where externally created products and ideas are overlooked – ignored – for all the wrong reasons. When you’re the best it’s easy to develop “NIH,” but it’s also really risky in fast moving markets like technology where someone really can have a better idea, and implement, from outside the halls of the early leader.
These risks are very real. Yet, in a company of Google’s size to some extent it is necessary to manage launches systematically, and to have staffers doing things like recruiting and screening. Additionally, when you’ve developed a set of tools that create success on an enormous scale it makes sense to use them. So the important thing for Mr. Page to do is manage these items in such a way that lock-in doesn’t keep Google from moving forward into the next new, and possibly big, market.
Google needs to be sure it is not over-managing the creation of new things. The famous “20% rule” at Google isn’t effective as applied today. Nobody can spend 80% of their job conforming to norms, and then expect to spend 20% “outside the box.” Our minds don’t work that way. Inertia takes over when we’re at 80%, and keeps us focused on doing our #1 job. And we never find the time to really get started on the other 20%. And it’s unrealistic to try dedicating an entire day a week to doing something different, because the “regular job” is demanding every single day. Likewise, nobody can dedicate a week out of the month for the same reason. As a result, even when people are encouraged to spend time on new and different things it really doesn’t happen.
Instead, Google needs a really good method for having ideas surface, and then creating dedicated teams to explore those ideas in an unbounded way. Teams that have as their only job the requirement for exploring market needs, product opportunities, and developing solutions that generate profitable new revenue. Five people totally dedicated to a new opportunity, especially if their success is important to their career ambitions, will make vastly more headway than 25 people working on a project when they can “find the time.” The bigger team may have more capabilities and more specialties, but they simply don’t have the zeal, motivation or commitment to creating a success. Failing on something that’s tertiary to your job is a lot more acceptable, especially if your primary work is going well, than failing on something to which your wholly dedicated. Plus, when you are asked to support a project part-time you do so by reinforcing past strengths, not exploring something new.
Especially worrisome is Inc magazine’s article “Facebook Poaches Inc’s Creative Director.” This is the fellow that created, and managed, the new opportunity labs at Google. What will happen to those now?
These teams also must have permission to explore the solution using any and all technology, approaches and processes. Not just the ones that made Google successful thus far. By utilizing new technologies, which may appear less robust, less scalable and even initially less powerful, Google will have people who are testing the limits of what’s new – and identifying the technologies, products and processes that not only threaten existing Google strengths but can launch Google into the next new, big thing. Supporting their needs to explore new solutions is critical to evolving Google and aiding its growth in very dynamic technologies and markets.
The major airlines all launched discount divisions to compete with Southwest. Remember Song and Ted? But these failed largely because they weren’t given permission to do whatever was necessary to win as a discount airline. Instead they had to use existing company resources and processes – including in-place reservation systems, labor union standards, existing airports and gates – and honor existing customer loyalty programs. With so many parameters pre-set, they had no hope of succeeding. They lacked permission to do what was necessary because the airlines bounded what they could do. Lock-in to what already existed killed them.
The concern is that Google today doesn’t appear to have a strong process for creating these teams that can operate in white space to develop new solutions. Google lacks a way to get the ideas on the agenda for management discussion, rapidly create a team dedicated to the tasks, resource the teams with money and other necessary tools, and then monitor performance while simultaneously encouraging behaviors that are outside the Google norms. Nobody appears to have the job of making sure good ideas stay inside Google, and are developed, rather than slipping outside for another company to exploit (can you say Facebook – for example?)
I’m a fan of Google, and a fan of the management approaches Larry Page and Google have openly discussed, and appear to have implemented. Yet, success has a way of breeding the seeds of eventual failure. Largely through the process of building strong sacred cows – such as in technology and processes for all kinds of activities that end up limiting the organization’s ability to recognize market shifts and implement changes. Success has a way of creating staff functions that see themselves as status quo cops, dedicated to re-implementing the past rather than scouting for future requirements. The list of technology giants that fell to market shifts are legendary – Cray, DEC, Wang, Lanier, Sybase, Netscape, Silicon Graphics and Sun Microsystems are just a few.
It’s good to be the market leader. But Larry Page has a tough job. He has to manage the things that made Google the great company it is now – the things that middle management often locks in place and won’t alter – so they don’t limit Google’s future. And he needs to make sure Google is constantly, consistently and rapidly implementing and managing teams to explore white space in order to find the next growth opportunities that keep Google vibrant for customers, employees, suppliers and investors.
View a short video on Lock-in and why businesses must evolve http://on.fb.me/i2dekj
by Adam Hartung | Mar 22, 2011 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in, Web/Tech
Summary:
- The Japanese nuclear crisis is the result of historical industry decisions to build very large facilities and transmit power to distant locations – a strategy at risk of “force majure” activities
- U.S. electric utilities are locked-in to identical approaches to generation and transmission, which puts them at equal risk AND limits their willingness to innovate or implement new solutions
- Historical industry approaches to planning are all based on extending the past, even though new technologies and approaches offer potentially better, and less risky, solutions. Utilities are merely one example
- Google is expert in a far better planning approach, using scenario planning for identifying and taking to market innovations and new solutions
- All companies, would benefit from planning like Google, rather than using traditional approaches – and several are bullet listed below
- The electric utility industry really needs to adopt a Google approach, or everyone remains at risk
Everybody is now aware of the great radiation risk Japan faces from its damaged nuclear reactor powered electricity generators. This has repercussions on U.S. electric utilities, as Americans have renewed concerns about the safety of similar General Electric supplied reactors.
For example, Crain’s Chicago Business reports “Exelon Faces Regulatory Fallout After Japanese Nuclear Disaster.” The country’s largest nuclear plant operator is facing stepped-up reviews, likely delays in expansion, and discussions about long-term viability of facilities that are 30 years into an anticipated 40 year life. All of this threatens the viability of meeting affordable electricity needs for millions of midwestern Americans in as little as 5 years. And it puts a lot of risk on the viability of Exelon as a going concern should the regulators require extensive re-investment to keep the plants open, or build replacements – most likely without a rate increase. All utilities dependent upon nuclear – and coal as well – for generation are now facing significant challenges.
This points out a horrible weakness in planning by most participants in America’s electric utility industry. Almost all planning boils down to “we need to increase capacity to meet needs. The cost of new plants, plant expansions and transmission lines from massive facilities to customers is $X, therefore, we need to lobby regulators, rate-setters and the populace to allow us a rate increase of $.xxx per kilowatt hour to cover the cost.” Planning entirely driven by the past. Projecting the future based upon historical demand, sources of generation, cost of fuel, etc. utilities mostly keep planning to do what they have always done, and asking regulators and customers to fund doing what they always did. If you want anything new (like a renewables effort) then the companies want the cost for that added on top of the “business as usual” price increase.
But customers are increasingly tired of hearing about rising rates, while they are constantly trying to conserve. The old “compact” in which the price regulators guaranteed utilities a rate of return is under considerable stress. Increasingly, people are asking why they need to pay more, why these plants are so expensive, why the industry keeps doubling down on old technologies and fuel sources. Customers, and regulators, are asking for innovation, but the industry offers almost nothing, because it’s planning is all about extending the past, and defending its historical approach and investments.
Today we know that the industry’s future will not be like the past. Increasingly customers (with government support in many cases) are demanding changes in the sourcing of electricity. Requesting decommissioning of polluting generators (coal in particular), shut-downs of perceived risky, and now aging, nuclear facilities, more supply from renewable, or sustainable, sources — and without higher prices.
There are a lot of new technologies available. And some customers recommend a dramatic change in approach, from huge, centralized generation facilities to many smaller, safer, renewable generation facilities that are decentralized and closer to end-users. But most industry veterans are unable to even consider these options, because they see no way to get to the future from today. They are locked-in to defending and extending what the industry has always done, even if it means extending known risks, environmental concerns and creating higher prices for fuel and maintenance.
And that’s where Larry Page and Google have a lot to offer the utility industry planners. Instead of planning from the past forward, Google plans from the future back to the present. By helping employees develop future scenarios the leaders at Google identify far better solutions than the linear, historical planning approaches. Once a better future is identified, then the organization is unleashed to create that future by planning backward from the scenario, figuring out how to implement it.
Wired magazine, in “Larry Page Wants to Return Google to its Start-up Roots” gives great insights to how Google has created a $30B business in a decade – using scenario planning at the heart of its approach to business.
- Don’t fear being audacious when setting goals. Even if you don’t reach the ultimate goal, your improvement could be game-changing for the industry and greatly benefit the early adopter
- Instead of saying trying to help somebody with an immediate question, ask what would have the maximum impact in 10 years. Don’t just accept more of the same, look for the best answer
- Leaders should not fear being viewed as having stepped into the future, and returned to tell everyone what they’ve seen
- Don’t assume that the way things are done is the best way. Instead, ask “why is it done like that? Is there possibly a better way?”
- Is the obstacle to future success something that is impossible – say because of the laws of physics – or is the obstacle a need for resources – in engineering, scale design or implementation? Don’t confuse things that can’t be done with things that simply lack resources (even if the initial resource demand seems very high)
- When someone pitches an idea, leader’s should avoid questioning the viability. Rather, they should offer a variation that is an order of magnitude more ambitious and ask why the latter cannot be accomplished.
- Ask regulators what they want, and try really hard to achieve that goal rather than arguing with them. Offer creative solutions that are non-traditional, but that just might achieve the goal. Change the conversation to achieving the goal, rather than extending the past.
- If an idea requires creative thinking, be excited about it. Don’t hesitate to represent unrealistic expectations.
- Speed is really, really important. If there is merit, rush it toward the future state as fast as possible. Let implementation and the marketplace determine what’s successful, rather than trying to guess.
- Do the numbers, but don’t expect those who disagree to believe your numbers. It’s easy for people to pooh-pooh projections. Don’t let disagreement over forecasts stop you from proceeding.
- Don’t let potential legal problems stop you. Take action, and deal with legal issues when, and if, they arise.
Planning for the future, and being ambitious about what that future entails, has created a slew of new products from Google that have benefited everyone around the world. Google’s use of scenario planning to drive development and investments is a business implementation of an historical echo – asking not what Google needs from historical customers to succeed, but rather what Google can do to create something future customers will value. Google uses planning to rush headlong into providing a growing and profitable future, rather than trying to optimize the historical solution.
Giant, centralized distribution facilities that use nuclear or fossil fuels, then sending electricity over massive distances losing upwards of 70-80% of the power in transmission, is the historical utility industry approach. For a very long time it worked pretty darn well. But the limitations of that approach are being seen, and felt, in many locations – causing blackouts in various regions, health risks in others, rising polution levels, rising demands for limited fuels, higher costs (especially for maintenance and upgrades) and potential deadly disasters from unexpected events of mother nature. Industry outsiders question whether America’s growth will be limited (due to supply or pricing issues) if this approach is not changed.
Lots of options exist for the electric utility industry to do things differently. But it will take a big change in how the industry leaders plan. Maybe they’ll ask the folks at Google for a few ideas on how to change their approach to planning. Can you imagine a future where Google managed the electric grid?
by Adam Hartung | Mar 15, 2011 | Defend & Extend, In the Rapids, Innovation, Leadership, Openness, Web/Tech
You gotta love the revenue growth in companies like Apple and Google. From 2000 to 2010 Apple revenues jumped from $8B to $65B. Google grew from nothing to $29B. But for some organizations, amidst market shifts, simply maintaining revenues is an enormous challenge.
In a dynamic world, many companies are losing revenues to new competitors who seem on a suicide mission to destroy industry profitability! In this situation, the ability to grow takes on an entirely different flavor. As “core” markets retract (in revenues or profits,) can the company find a way to enter new markets in order to maintain revenues – and possibly grow profits? For many organizations, facing radical market shifts, moving from no-growth, declining profit markets into higher growth, better profit markets is a huge challenge.
Recall that IBM once completely dominated the computer industry. An IBM skunk works program in Florida is credited for creating the modern day personal computer – and because of the team’s decision to use external componentry (an IBM heresy at the time) creating Microsoft. As the market shifted toward these smaller computers, IBM focused on defending its traditional mainframe base, eschewing PC sales entirely. By the 1990s IBM was almost bankrupt! In trying to preserve its old, “core,” mainframe business IBM completely missed the market shift and waited until its customers started disappearing before taking action. But by then new competitors had claimed the new market!
In came an outsider, Louis Gerstner, who saw the trend toward far greater user of external services by people in information technology. He pushed IBM from being a “hardware” company to an “IT services” provider (overly simplified explanation, to be sure) and IBM roared back as a tremendous turnaround success story.
But, what would be next? As Mr. Gerstner left IBM the company’s “core” market was in for another huge upheaval. Vast armies of IT consultants had been created in other companies, such as Electronic Data Systems (EDS), Computer Sciences Corporation (CSC) and audit firms such as Anderson (now named Accenture) Coopers & Lybrand and Deloitte & Touche. This created rampant competition and margin pressures from so much capacity.
Simultaneously, the emergence of similar armies, often even more highly trained, of consultants in India at companies such as Tata Consultancy Services (TCS) and Infosys – at dramatically lower cost and using development standards such as the Capability Maturity Model – was further transforming the landscape of service providers. More and more services contracts were going to these new competitors in foreign countries at prices a fraction of historical rates. Domestic margins were tanking!
As IT integration and services lost its margin several big competitors began paying enormous premiums to buy customer computer shops, completely taking them over customer via a new approach called “outsourcing” – a solution offering that nearly bankrupted EDS due to the razor thin margins. The market IBM entered to save itself, and make Mr. Gerstner famous, was no longer capable of keeping IBM a profitably growing concern.
In 2002 it was by no means clear whether IBM would remain successful, or end up again in dire straights. But, as detailed in Fortune’s CNNMoney web site, “IBM’s Sam Palmisano: A Super Second Act” things haven’t gone too badly for IBM this decade as profits have grown 4 fold.
Rather than simply trying to do more of what Mr. Gerstner did, Mr. Palmisano lead IBM into developing a new scenario of the future, leading to the birth of the Smarter Planet program. Not dissimilar from how Steve Jobs used Apple’s scenario planning to push the company from Macs into new growth product markets, the scenario planning such as Smarter Planet opened many doors for new business opportunities at IBM. The result has been a dramatic increase (well more than doubling) its more profitable software sales, as well as development of new solutions for everything from global banking to transportation management, government systems and a whole lot more. New solutions driven by the desire to fulfill the future scenario – and solutions that are considerably more profitable than the gladiator war that had become IT services.
Using scenario planning to create White Space where employees can develop new solutions is a hallmark of successful companies. By redirecting resources away from defensive activities, new solutions can be created before the proverbial roof collapses in the declining margin business. By spending money on new product development, and new market development, new revenues are generated where there is more growth – and less competition. And that allows the company to shift with the marketplace, rather than be stuck in a bad business when it’s way too late to shift — because new competitors have already captured the new markets.
(For a White Space primer, check out the InnovationManagement.com article “White Space Mapping – Seeing the Future Beyond the Core.”)
When markets shift the first sign is intense competition, driving down margins. Too many leaders decide to “hunker down” and put all resources into defending the old business. Costs are slashed and all spending is put into competitive warfare. This, inevitably, leads to ugly results, because such behavior ignores the market shift. Being Smarter means recognizing the market shift, and changing investments – putting more money into new projects directed at finding new revenues, and most often higher rates of return.
Not all companies are growing like Apple, Google, Facebook or Groupon. But that doesn’t mean they aren’t on the road to growth by shifting their revenues into new markets – like IBM. What ties these companies together is their use of scenario planning to focus on the future, rather than relying on traditional planning systems firmly tied to the past. And investing in White Space so the company can find new markets, and new solutions, before competition eliminates the margin altogether.
If Mr. Palmisano is soon to leave IBM, as the article indicates is likely, we can surely hope the Board will seek out a replacement who is equally willing to make the right investments. Keeping the company pushing forward by developing future scenarios, and creating solutions that fulfill them.
by Adam Hartung | Mar 4, 2011 | Current Affairs, In the Rapids, Innovation, Leadership, Openness, Television, Web/Tech
My high school physics teacher spent a week teaching students how to use a slide rule. I asked him, "why can't we just use calculators?" At the time a slide rule was about $2, and a calculator was $300. The minimum wage was $1.14/hour. He responded that slide rules had been around a long time, and you never knew if you'd have access to a calculator. To the day he retired he insisted on using, and teaching, slide rule use. Needless to say, by then plenty of folks were ready to see him go. Too bad for his students he stayed as long as he did, because that was a week they could have spent learning physics, and other important materials. Ignoring the new tool, and its advantages, was a wasteful decision that hurt him and his customers.
Yet, I am amazed at how few people are using today's new tools for business, and marketing. At a small business Board meeting this week the head of marketing presented his roll-out of the boldest campaign ever in the business's history. His promotion plan was centered around traditional PR, supplemented with radio and billboard ads. I asked for his social media campaign, and after he confirmed I was serious he said he had a manager working on that. I asked if he had a facebook page ready, the videos on YouTube, a linked-in program ready to run against targets and his twitter communications established, including hash tags? He said if those things were important somebody had to be working on them. Two weeks from roll-out and he wasn't giving them any personal consideration.
I then asked the roughly 20 attendees, all but one of which were over 40, some questions:
- How many of you use skype at least once/month? Answer – 5%
- How many of you have a facebook page and check it daily? A – 15%
- How many of you check twitter daily? A – 5% Tweet at least 5 times/week? A – none
- How many own and use a tablet? A – 10%
- How many of you have a smartphone on which you've downloaded at least 10 apps? A – 10%
- How many of you carry a laptop? A – 100%
- Who knows the #1 company for new hires in Chicago in 2010? Answer – 5% (GroupOn)
- Who has used a Groupon coupon? Answer – 30%
Slide rule users.
New tools are here, and adopters will be the winners. If you still think we're a nation of laptop users, you need to think again. Laptop usage declined 20% in the last 2 years, to 2006 levels, as people have adopted easier to use technology
Chart Source: Silicon Alley Insider of BusinessInsider.com
If you are trying to pump out ads the new medium is mobile – not television, radio, outdoor or even web sites. Have you tested the look and feel of your web site on popular mobile devices? Do you know if new users to your business are even able to access your information from a mobile device?
And, it's more likely a customer will hear about you, and obtain a review of your product or service, via Facebook than vai the web! A CNet.com article asks the leading question "Will Facebook Replace Company Web Sites?" Want to understand the importance of Facebook, check out these same month comparisons:
- Starbucks: Facebook likes – 21.1M, site visits – 1.8M
- Coca-Cola: Facebook likes – 20.5M, site visits – .3M
- Oreo: Facebook likes – 10.1M, site visits – .3M
Yes, these are consumer products. But if you don't think the first place a potential customer looks for information on your business is Facebook, whether it's financial services, business insurance, catering or blow-molded plastic housings you need to think again. The use of facebook is simply exploding.
According to Business Insider, by the end of December, 2010 Facebook apps were downloaded to iPhones at a rate exceeding 500,000/day as the total shot to nearly 60million! Meanwhile the Facebook app downloads to Android devices grew to over 20million! Blackberry Facebook users has reached 27million, bringing the total by end of 2010 to well over 100M – just on smartphones! In September, 2010 Facebook became the #1 most time spent on the internet, passing combined time on all Google and all Yahoo sites! With over 500million users, Facebook isn't just kids checking on their friends any longer. When somebody wants a first peak at your business, odds are great it will be done over a smartphone and likely via a Facebook referral!
Chart Source: Silicon Alley Insider at Business Insider
As fast as smartphone usage has grown, tablet usage is on the precipice of explosion. Tablet sales will be 6 times (or more) notebook sales in just a few years! The second most popular product will be, of course, continued sales of advanced smartphones as the two new platforms overtake the traditional laptop. So what's your budgeted spend on mobile devices, mobile apps and mobile marketing?
Chart Source: Silicon Alley Insider of Business Insider
And in the effort to attract new customers, if you think the route will be newspapers, radio, TV, billboards, or direct mail – think again. Digital local deal delivery is projected to grow at least 45%/year through 2015 creating a market of over $10billion! If you want somebody to know about your product or service, Groupon and its competitors is already taking the lead over older, traditional techniques. By the way, when was the last time you bothered to open that latest Vallasis direct mail package – or did you just throw it immediately in the recycling bin without even a look?
Chart Source: Silicon Alley Insider of Business Insider
So, what is your business doing to leverage these tools? Are your marketing, and technology, plans for 2011 and 2012 still mired in old approaches and technologies? If so, expect to be eclipsed by competitors who more quickly implement these new solutions.
Too often we become comfortable in our old way of doing things. We keep implementing the same way, like the teacher giving slide rule instructions. And that simply wastes resources, and leaves you uncompetitive. The time to use these new solutions was yesterday – and today – and tomorrow – and every day. If you don't have plans to adopt these new solutions, and use them to grow your business, what's your excuse? Is it that much fun using the old slide rule?
by Adam Hartung | Feb 18, 2011 | Current Affairs, In the Swamp, Innovation, Leadership, Lock-in, Openness, Television, Web/Tech
Business people keep piling onto the innovation and growth bandwagon. PWC just released the results of its 14th annual CEO survey entitled “Growth Reimagined.” Seems like most CEOs are as tired of cost cutting as everyone else, and would really like to start growing again. Therefore, they are looking for innovations to help them improve competitiveness and build new markets. Hooray!
But, haven’t we heard this before? Seems like the output of several such studies – from IBM, IDC and many others – have been saying that business leaders want more innovation and growth for the last several years! Hasn’t this been a consistent mantra all through the last decade? You could get the impression everyone is talking about innovation, and growth, but few seem to be doing much about it!
Rather than search out growth, most businesses are still trying to simply do what their business has done for decades – and marveling at the lack of improved results. David Brooks of the New York Times talks at length in his recent Op Ed piece on the Experience Economy about a controversial book from Tyler Cowen called “The Great Stagnation.” The argument goes that America was blessed with lots of fertile land and abundant water, giving the country a big advantage in the agrarian economy from the 1600s into the 1900s. During the Industrial economy of the 1900s America was again blessed with enormous natural resources (iron ore, minerals, gold, silver, oil, gas and water) as well as navigable rivers, the great lakes and natural low-cost transport routes. A rapidly growing and hard working set of laborers, aided by immigration, provided more fuel for America’s growth as an industrial powerhouse.
But now we’re in the information economy. Those natural resources aren’t the big advantage they once were. Foodstuffs require almost no people for production. And manufacturing is shifting to offshore locations where cheap labor and limited regulations allow for cheaper production. And it’s not clear America would benefit even if it tried maintaining these lower-skilled jobs. Today, value goes to those who know how to create, store, manipulate and use information. And success in this economy has a lot more to do with innovation, and the creation of entirely new products, industries and very different kinds of jobs.
Unfortunately, however, we keep hiring for the last economy. It starts with how Boards of Directors (and management teams) select – incorrectly, it appears – our business leaders. Still thinking like out-of-date industrialists, Scientific American offers us a podcast on how “Creativity Can Lesson a Leader’s Image.” Citing the same study, Knowledge @ Wharton offers us “A Bias Against ‘Quirky’ Why Creative People Can Lose Out on Creative Positions.” While 1,500 CEOs say that creativity is the single most important quality for success today – and studies bear out the greater success of creative, innovative leaders – the study found that when it came to hiring and promoting businesses consistently marked down the creative managers and bypassed them, selecting less creative types!
Our BIAS (Beliefs, Interpretations, Assumptions and Strategies) cause the selection process to pick someone who is seen as less creative. Consider these comments:
- “would you rather have a calm hand on the tiller, or someone who constantly steers the boat?”
- “do you want slow, steady conservatism in control – or irrational exuberance?”
- “do we want consistent execution or big ideas?”
These are all phrases I’ve heard (as you might have as well) for selecting a candidate with a mediocre track record, and very limited creativity, over a candidate with much better results and a flair for creativity to get things done regardless of what the market throws at her. All imply that what’s important to leadership is not making mistakes. Of you just don’t screw up the future will take care of itself. And that’s so industrial economy – so “don’t let the plant blow up.”
That approach simply doesn’t work any more. The Christian Science Monitor reported in “Obama’s Innovation Push: Has U.S. Really Fallen Off the Cutting Edge” that America is already in economic trouble due to our lock-in to out-of-date notions about what creates business success. In the last 2 years America has fallen from first to fourth in the World Economic Forum ranking of global competitivenes. And while America still accounts for 40% of global R&D spending, we rank remarkably low (on all studies below 10th place) on things like public education, math and science skills, national literacy and even internet access! While we’ve poured billions into saving banks, and rebuilding roads (ostensibly hiring asphalt layers) we still have no national internet system, nor a free backbone for access by all budding entrepreneurs!
Ask the question, “If Steve Jobs (or his clone) showed up at our company asking for a job – would we give him one?” Don’t forget, the Apple Board fired Steve Jobs some 20 years ago to give his role to a less creative, but more “professional,” John Scully. Mr. Scully was subsequently fired by the Board for creatively investing too heavily in the innovative Newton – the first PDA – to be replaced by a leadership team willing to jettison this new product market and refocus all attention on the Macintosh. Both CEO change decisions turned out to be horrible for Apple, and it was only after Mr. Jobs returned to the company after nearly 20 years in other businesses that its fortunes reblossomed when the company replaced outdated industrial management philosophies with innovation. But, oh-so-close the company came to complete failure before re-igniting the innovation jets.
Examples of outdated management, with horrific results, abound. Brenda Barnes destroyed shareholder value for 6 years at Sara Lee chasing a centrallized focus and cost reductions – leaving the company with no future other than break-up and acquisition. GE’s fortunes have dropped dramatically as Mr. Immelt turned away from the rabid efforts at innovation and growth under Welch and toward more cautious investments and reliance on a set of core markets – including financial services. After once dominating the mobile phone industry the best Motorola’s leadership has been able to do lately is split the company in two, hoping as a divided business leadership can do better than it did as a single entity. Even a big winner like Home Depot has struggled to innovate and grow as it remained dedicated to its traditional business. Once a darling of industry, the supply chain focused Dell has lost its growth and value as a raft of new MBA leaders – mostly recruited from consultancy Bain & Company – have kept applying traditional industrial management with its cost curves and economy-of-scale illogic to a market racked by the introduction of new products such as smartphones and tablets.
Meanwhile, leaders that foster and implement innovation have shown how to be successful this last decade. Jeff Bezos has transformed retailing and publishing simultaneously by introducing a raft of innovations, including the Kindle. Google’s value soared as its founders and new CEO redefined the way people obtain news – and the ads supporting what people read. The entire “social media” marketplace is now taking viewers, and ad dollars, from traditional media bringing the limelight to CEOs at Facebook, Twitter and Linked-in. While newspaper companies like Tribune Corp., NYT, Dow Jones and Washington Post have faltered, pop publisher Arianna Huffington created $315M of value by hiring a group of bloggers to populate the on-line news tabloid Huffington Post. And Apple is close to becoming the world’s most valuable publicly traded company on the backs of new product innovations.
But, asking again, would your company hire the leaders of these companies? Would it hire the Vice-President’s, Directors and Managers? Or would you consider them too avant-garde? Even President Obama washed out his commitment to jobs growth when he selected Mr. Immelt to head his committee – demonstrating a complete lack of understanding what it takes to grow – to innovate – in today’s intensely competitive information economy. Where he should have begged, on hands and knees, for Eric Schmidt of Google to show us the way to information nirvana he picked, well, an old-line industrialist.
Until we start promoting innovators we won’t have any innovation. We must understand that America’s successful history doesn’t guarantee it’s successful future. Competing on bits, rather than brawn or natural resources, requires creativity to recognize opportunities, develop them and implement new solutions rapidly. It requires adaptability to deal with new technologies, new business models and new competitors. It requires an understanding of innovation and how to learn while doing. Amerca has these leaders. We just need to give them the positions and chance to succeed!
by Adam Hartung | Feb 15, 2011 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Web/Tech
Summary:
- Nokia agreed to develop smartphones with Microsoft software
- But Microsoft’s product is without users, developers or apps
- Apple and Google Android dominate developers, app base and users
- Apple and Google Android have extensive distribution, and customer acceptance
- Microsoft brings Nokia very little
- Nokia hopes it can succeed simply by ramming Microsoft product through distribution. This will be no more successful than its efforts with Symbian
- Apple is the winner, because Nokia didn’t select Google Android
“For First Time Ever, Smartphones Outsell PCs in Q4 of 2010” headlined BGR.com. This is a big deal, as it creates something of an inflection point – possibly what some would call a “tipping point” – in the digital technology market. For over 2 years some of us, using IDC data such as reported in ReadWriteWeb, have been predicting that PCs are on the way to extinction – much like mainframes and mini-computers went. Smartphone sales last quarter jumped 87.2% year-over-year to about 101M units. Meanwhile PC sales, a market manufacturers hoped would recover as “enterprises” resumed buying post-recession, grew only 5.5% in the like period, to 92.1M units. No doubt the installed base of the latter product is multiples of the former, but we can see that increasingly people are ready to use the newer, alternative technology.
This week Mediapost.com reported “Tablet Sales to Hit 242M by 2015.” Both NPD Group and iSuppli are projecting a 10-fold increase wtihin 5 years in the volume of these new devices, which is sure to devastate PC sales. Between smartphones and tablets, as well as the rapid development of cloud-based apps and data storage solutions, it’s becoming quite clear that the life-span of PC technology has its limits. Soon we’ll be able to do more, cheaper, better and faster with these new products than we ever could on a PC.
This is really bad news for Microsoft. Apple and Google dominate both these mobile markets. As Microsoft has fought to defend its PC business by re-investing in Vista, then Windows 7 and Office 2010, the market has been shifting away from the PC platform entirely. It’s common now to hear about corporations considering iPads and other tablets for field workers. And it’s impossible to walk through an airport, or sit in a meeting these days without seeing people use their smartphones and tablets, purchased individually at retail, while leaving their PCs at the office. Most corporate Blackberry users now have either an Apple or Android smartphone or tablet as they eschew their RIM product for anything other than required corporate uses.
Nokia has largely missed the smartphone market, choosing, like Microsoft, to continue investing in defending its traditional business. Long the largest cell phone supplier, Nokia did not develop the application base or developer network for Symbian (it’s proprietary smartphone technology) as it kept pumping out older devices. Nokia is reminiscent of the Ed Zander led Motorola disaster, where the company kept pumping out Razr phones until demand collapsed, nearly killing the company.
So the Board replaced the Nokia CEO. As discussed in Forbes on 5 October, 2010 in “HP and Nokia’s Bad CEO Selections” Nokia put in place a Microsoft executive. Given that Microsoft had missed the smartphone market entirely, as well as the tablet market, moving the Microsoft Defend & Extend way of thinking into Nokia didn’t look like it would bring much help for the equally locked-in Nokia. Exchanging one defensive management approach for another doesn’t create an offense – or new products.
It wasn’t much of a surprise last week when the 5-month tenured CEO, Stephen Elop, announced he thought Nokia’s business was in horrible shape via an internal email as reported in the Wall Street Journal, “Nokia, Microsoft Talk Cellphones.” Rather quickly, a deal was struck in which Nokia would not only pick up the Microsoft mobile operating system, but would use their products to promote other extremely poorly performing Microsoft products. “Nokia to Adopt Microsoft Bing, Adcenter” was another headline at MediaPost.com. Bing and adCenter were very late to market, and even with adoption by early market leader Yahoo! have been unable to make much inroad into the search and on-line ad placement markets dominated by Google.
Mr Elop went with what he knew, selecting Microsoft. I guess he’s the new “chief decider” at Nokia. His decision caused a break out of optimism amongst long-suffering Microsoft investors and customers who’ve gotten very little from the giant PC near-monopolist the last decade. Mediapost told us “Study: Surge of Support for Windows Phone 7” as developers who long ignored the product entirely were starting to consider writing apps for the device. After all this time, new hope beats within the breast of those still stuck on Microsoft.
But if ever there was a case of too little, and way, way too late, this has to be it. Two companies long known for weak product innovation, and success driven by market domination and distribution control strategies, are partnering to take on the two most innovative companies in digital technology as they create entirely new markets with new technologies.
RIM, the smartphone market originator, has seen its fortunes disintegrate as Blackberry sales fell below iPhones – even with over 10,000 apps. Today Microsoft has virtually NO apps, and NO developer base as it just now enters this market, “Google Searches for Mobile App Experts” (Wall Street Journal) as its effort continues to expand its 100,000+ apps base as it chases the 350,000+ apps already existing for the iPhone. Where Microsoft and Nokia hope to build an app base, and a user base, Apple and Google already have both, which theyt are aggressively growing.
Exactly what going to happen to slow Apple and Google’s growth in order to allow Microsoft + Nokia to catch up? In what fairy tale will the early hare take a nap so the awakened tortoise will be allowed to somehow, miraculously get back into the race?
Being late to market is never good. Look at how Sony, and everyone else, were late to digitally downloaded music. iPad and iTunes not only took off but continue to hold well over 50% of the market almost a decade later. Over the same decade Apple has held onto 2/3 of the download video market, while Microsoft’s Zune has struggled to capture less than 1/4 of Apple’s share (about 18% according to WinRumors.com).
Apple (and Google) aren’t going to slow down the pace of innovation to give Microsoft and Nokia a chance to catch up. Today (15 Feb., 2010) ITProPortal.com breaks news “Apple iPhone 5 to have 4 Inch Screen,” an upgrade designed to bring yet more users to its mobile device platform – away from PCs and competitive smarphones. The same article discusses how Google Android manufacturers are bringing out 4.3 inch screens in their effort to keep growing.
So, amidst the “big announcement” of Microsoft and Nokia agreeing to work together on a new platform, where’s the product announcement? Where’s the app base? And exactly what is the strategy to be competitive in 2012 and 2015? Does anyone really think throwing money at this will create the products (hardware and software) fast enough to let either catch up with existing leaders? Does anyone think Microsoft products dependent upon Nokia’s distribution can save either’s mobile business – while Apple has just expanded to Verizon for distribution? And Google is already on almost all networks? And where is Microsoft or Nokia in the tablet business, which is closely associated with smartphone market for obvious issues of mobility and use of cloud-based computing architectures?
The good news here is for Apple fans. Nokia clearly should have chosen Android. This would give the laggard a chance of leveraging the base of technology at Google – including advances being made to the Chrome operating system and its advantages for the cloud. No matter what the price, it’s the only chance Nokia has. With this decision the most likely outcome is big investments by both Microsoft and Nokia to play catch-up, but limited success. Results will not likely cover investment rates, leading Nokia to a Motorola-like outcome. And Microsoft will remain a bit player in the fastest growing digital markets. Both have billions of dollars to throw away in this desperate effort. But the outcome is almost certain. It’s doubtful between the two of them they can buy enough developers, network agreements and users to succeed against the 2 growth leaders and the desperately defensive RIM.
Like I said last month in this blog “Buy Apple, Sell Microsoft.” It’s still the easiest money-making trade of 2011. Now thankfully reinforced by the former Microsoft exec running Nokia.
