by Adam Hartung | Apr 7, 2010 | Current Affairs, eBooks, In the Rapids, Innovation, Leadership, Openness, Web/Tech
Nancy Munro of Knowledgeshift.com posted a great blog "Technology was Blago's Enemy Again." Although many people watch The Apprentice, I'm not one. Apparently the former governor of Illinois was a contestant, and when he was challenged to lead a project team his lack of technology skills got in the way of effectively doing the job. Although he's a smart lawyer and politician, his tool set had become outdated. A competitive team leader who was very good at texting and other state-of-the-art technologies was able to best Governor Blagojevich's team, and the ex-governor was "fired" by Donald Trump from the show.
On the surface, this is a funny story. But Nancy points out how it reflects the very real issues of using technology when competing. All businesses compete every day. Those that learn to use new technologies are able to get more done, faster and more effectively. Those who fall into a routine of doing things the same way, and don't advance their tool set, run the risk of being knocked out of the competition. Mr. Blagojevich's inability to use modern technology killed his chances of winning the competition.
Will you, or your business, go to any trade shows or conferences this year? Probably. But you'll limit attendance because you're still worried about financial performance. How will you select where you go? Probably by attending the ones most closely associated with your industry or business. But think about it, are those the ones that will be most valuable? You'll probably mostly hear what you already know, and reinforce your existing beliefs about the business. Is that really an effective spend?
Instead, shouldn't you use the funds to learn about what you don't know? Like how to be a world-class social marketer? This is an amazingly fast growing area where early adopters are gaining new sales. For example, Guy Kawasaki and the world's leaders in social marketing will be talking about how to get sales and profits from Twitter and Facebook at something called "The Smartbrief Social Media Success Summit." I'm not a shill for the conference (I'm not even speaking there), but this kind of event offers the very real opportunity of learning something you don't know – rather than reinforcing old Lock-ins and keeping you doing what you've always done.
Have you purchased a Kindle or iPad yet? If not, how do you know what they can or can't do? At SeekingAlpha.com "Thoughts on the iPad" offers one person's reflection on what the iPad does well, and doesn't, and where it might evolve – as well as how it compares to the Kindle. These devices are selling in the millions – so are you and your business thinking about how to use one to help sell more products or make more money? Yahoo and Google are both launching ad models for iPad (see Mediapost.com "Yahoo Readies Launch of Online Advertising Model"). Are you considering using this media to reach new customers? Have you considered how one of these products embedded in what you sell might offer you a competitive advantage? If you and your colleagues haven't tried one, experimented, how would you know?
Our businesses rarely get into trouble from something we know well. It's what we don't know, what we ignore, that gets us in trouble. Like Craigslist.com wiping out newspaper classified ads. The newspapers didn't even see it coming. On the other hand, if they had investigated and used Craigslist they could have prepared, and maybe even developed a competitive on-line product to grow new revenues!
It's incumbent upon us to constantly expand into new markets. We have to constantly keep White Space alive where we use resources to experiment in areas outside traditional permission. It's easy to keep throwing all our resources into what we know, but in the end, it's what we don't know that will knock us out of the game – like poor Blago.
by Adam Hartung | Mar 29, 2010 | Current Affairs, Leadership, Lock-in, Web/Tech
Apple now has a market cap of $210B. Microsoft has a market cap of about $260B. To traditionalists, this must seem contradictory. Apple has fought its way into new markets, and has domination in none (except maybe the narrowly defined individual music download business). Microsoft has near monopolistic market presence in personal computer operating systems and office software. According to modern business theory from business schools, and the output of books such as Business Strategy by Michael Porter, the monopolist company has entry barriers protecting its return – and thus the ability to almost print unlimited profit. Yet this has not happened.
At SeekingAlpha.com "Apple versus Microsoft: The Value Gap is Closing" the case is made that the value difference is all due to growth. Apple's business for music devices and content is growing – quickly. Its business for mobile devices and mobile device applications is also growing very fast. Those offer substantial positive cash flow today, as well as dramatic cash flow growth in the future. So much so that many analysts wonder what Apple will do with all that money. And that doesn't even count the iPad sales which have exceeded expectations – before even available to ship. And businesses are starting to build applications for the iPad, as explained in the BusinessWeek article "Businesses want Apple's iPad, too."
On the other hand, the demand for PCs is sluggish – at best. People increasingly leave their laptop at home for extended time while the use their mobile device instead. But Microsoft is stuck in a loop of upgrade development and launch. But because of the market shift, these investments are yielding less and less return. Complexity cost is going up, and profits are going down, and growth is dropping precipitously. Products in music, mobile phones and advertising have all lost significant share to Apple, Google and others as attention has remained on the "core" business. So even though current cash flow is strong, value has gone absolutely nowhere for several years, and there's precious reason to think it will go up.
When you lose growth, even if you prop up profits with draconian cost cutting and inventory sales, you lose value. Just look at Sears/KMart. Investors were really excited when Mr. Lampert used his takeover of KMart to acquire Sears. Predictions flew that he would get Sears growing again, while simultaneously monetizing the huge real estate portfolio. But as detailed in Chicago Tribune "Sears and KMart Still Standing, but Market Share Dwindles," value has declined. Mr. Lampert has proven very good at whacking cost. But when it comes to growing revenue – something that will drive ongoing growth in cash flow for a decade or more, he's shown nothing. You can't cost cut your way to long term success.
by Adam Hartung | Mar 26, 2010 | Current Affairs, Defend & Extend, Innovation, Web/Tech
General Motors and Segway have teamed up to do a new product launch. The new product is described at Freep.com in "GM, Partner to unveil 2-seater" and is called the EN-V. And there's almost no hope it will succeed. Too bad, because both companies desperately need a winner. But the process they used to develop and launch this product was all wrong – and it would be a miracle if the arrow hits a bulls-eye.
Segway is the long-running story of a company with what looks like a great idea, but it never takes off. The original Segway seemed really neat. But people struggled to figure out why they would buy one. There is walking, there are bicycles, there are motorcycles and there are cars. Segway never defined who was under-served, or unserved, and therefore had a real need to use their new product. Segway management did a great job of public relations, because we all saw them on TV, in the news, and learned the name. But the product was developed internally, not in response to a market need. As a result, sales never materialized and Segway slipped into the business history file as another case study.
General Motors has no new product development process to create products for the future. For decades GM has attempted to defend and extend its 1940's approach of designing updated products, and hoping people will keep buying. It's been many years since GM launched a new product that people said "wow, that's just what I needed – and I wasn't even aware I needed that."
Now the two companies have teamed up to launch a 2 passenger Segway. They have identified the use they think this fits, and they think they know a target. But the problem is that this is just another "idea" designed and built without significant market input. Instead of developing a scenario of the future with deep insight to what people will want, and then making that product, they have said "wouldn't this be neat – and can't we imagine who might buy?" Interesting lab work, but unless they are very, very lucky the odds are greatest that people will think it's cute, but won't buy. After all, with the plethora of current solutions across a huge price range from many competitors means nobody is living without transportation. Why should potential customers inherently think this is a good idea.
Phoenix companies don't design products from inside the company outward. Instead, they use market input to discover the unmet needs, and they fulfill them. Especially when it's clear that competitors aren't jumping in to fulfill the need. They intend to Disrupt the marketplace not by some splashy introduction and hoping people will switch, but rather by identifying the under-served customers and giving them a solution they didn't have. Then the company learns, adapts and keeps pushing toward an ideal product that meets ever more needs. From this initial small success the market grows.
Segway never understood this. They don't define unmet needs, nor competitor inabilities – and thus they have great ideas but they fail to Disrupt the marketplace and their innovations have gone nowhere. GM works hard to avoid innovations that might be market disruptions, instead offering sustaining innovations hoping to defend their old business model.
This new type of vehicle might have a chance of success. But the only hope is for both companies to ignore the PR. They should set up a White Space team, and give that team a year to really understand the unmet needs in the marketplace. Then go back to the original design and make it very explicitly meaningful to people who have unmet needs. Launch small, make money, learn and grow.
But given the approach this dynamic duo is taking, only luck will keep this from being another missed opportunity for both struggling companies.
by Adam Hartung | Mar 23, 2010 | Current Affairs, Leadership, Lock-in, Openness, Web/Tech, Weblogs
Let's see, would you rather spend $4million to reach 100 million people once – say via a Super Bowl ad – or spend almost nothing to reach 400million people every day? Seems obvious economics. Yet, how good is your Facebook presence? Because that is the route to all those people who are on-line daily.
Most of today's business leaders grew up in the world of one-way advertising. They watched TV, listened to the radio, read magazines and newspapers. They were taught that to get a message into potential buyer heads, unfiltered by journalists, you had to advertise. And for a long time, that was pretty true. So they Locked-in on advertising and traditional PR as the route to name awareness and brand image. But that was before the market shift which is dampening enthusiasm for traditional media while social media (broadly – including YouTube) is exploding.
Now your customers, and potential customers, are most likely using Twitter, Facebook, Linked-In and other social media every day. And when they search on your products, they get Google responses from social media. If you aren't putting some effort into the media, your image and message could be far removed from your goal!
I remember talking to the CEO of Rolex in 1997. Rolex did not have a web site. His point of view was that as a luxury good, the internet was "below" his company's standards for communicating. If there was to be a web site, he thought Tourneau – the world's largest retailer of luxury watches – would build it. In 10 minutes I demonstrated to him how a simple search on "Rolex" turned up gobs of used dealers, unauthorized dealers, unauthorized repair shops, and outright fakes! Several near the top of the list! He was shocked. His brand was rapidly being marginalized via a channel he had never even considered. His worst fears about how the brand would be stolen, manipulated and value minimized were happening – and he was blithely ignorant. Of course, Rolex got involved quickly to protect its brand.
So when was the last time you reviewed your brand, or image, or message across social media channels? Are you possibly, blithely letting someone else manipulate your image?
At MediaPost.com in "Ensuring A Successful Corporate Facebook Presence" the authors outline a 4 step approach for doing a good job. My biggest fear is that Lock-in to old approaches to sales and marketing mean too few companies are paying even a shred of interest in social media. Over and over I hear marketers of large, established companies saying that social media access is blocked at work – and nothing is being done to leverage the channel! In some instances, I've heard of Chief Marketing Officers making a "command decision" to avoid social media, because they can't "control" it.
Secondly, the competition that is going to ruin your day just might do it via social media! An existing company may have an image, advertising and effective PR. So how would a Disruptive new competitor go after you? Why, using the very low cost channel of social media. We've all heard about disgruntled customers that have used songs, videos and other clever tools to spread extremely negative information like wildfire through a customer base. Yet, by ignoring the channel – by ignoring the opportunity to develop a strong and effective presence that ties to customers – we encourage competitors to use this channel to our detriment.
Don't let Lock-in cause you to ignore this powerful, and shockingly low cost, communication tool. Realize that social media is here to stay, and incorporate it into your future scenarios. Additionally, social media is where your competition – especially fringe competitors – are likely to target you. Why not study them, learn from them, and use the tool to grow instead of being a target? And when it's time to implement, Disrupt your old decision-making and spending patterns so you allocate some resources to build out your social media campaign. Then put together a White Space team with Permission to really go for success using the resources you've now dedicated to the project.
Applying the Phoenix Principle can result in a rapid improvement in social media marketing – and it just might save you a huge amount of spending on your traditional marketing communications plans. While bringing in new customers and markets!
by Adam Hartung | Mar 15, 2010 | Current Affairs, Defend & Extend, General, Innovation, Leadership, Openness, Web/Tech
Did you ever notice how often a large company will introduce a new solution (often a new technology), but then retrench from promoting it? Frequently, the market is developed by an alternate company that captures most of the value. We can see that behavior looking at smartphones.
Source: Silicon Alley Insider
In 2008, three early leaders were Microsoft, RIM and Palm. But Microsoft chose to invest in Defending & Extending its PC software business – with updates to the operating system in Vista and OS 7. As the market has shifted toward mobile computing, Microsoft has been clobbered. But largely because it remained stuck trying to protect its "core" while the market shifted away. Palm also tried to Defend & Extend its early position with updates, but because it did not follow the pathway to greater usage with new applications it also has seen dramatic share decline.
Meanwhile, RIM has promoted new uses within the corporate world for mobility, and thus grown its market share. And Apple has made a huge impact by bringing forward dozens of new mobile applications, closely followed by Google. What we see is a classic example of the early entrant fading largely because they decided to Defend the old market, rather than investing in the new one. Really too bad for shareholders in Microsoft (losing 20 share points) and Palm (losing 10 share points), while good for shareholders of RIM, Apple and Google.
And in Apple's case we can see that the company continues using White Space to grow revenues by expanding the new marketplace. The iPad is off to a very strong start, with tens of thousands of units ordered last week. But of greater importance is how Apple is promoting the shift to mobile devices from traditional PC devices. At SeekingAlpha.com, in "How the iPad, Slates Will Evolve the Next Two Years," the reporter projects how demand for all laptop products will decline as more capability and functionality is added to mobile devices like smartphones and these new slate products.
Microsoft can keep trying to Defend & Extend PC technology, but it won't be long before their efforts largely won't matter. Don't forget that once Cray computers was a rapidly growing super-computer company. But increasing performance from much alternative products eventually made Cray irrelevant. Same for Silicon Graphics and Sun Microsystems.
Today the market capitalization of Microsoft is about $250B, about 4x sales. Apple's market cap is just over $200B, about 6x sales. Google's market cap is about $180B, about 8x sales. All reflect investor expectations about future growth. The D&E company is simply not expected to grow – and in fact is much more likely to disappoint than the companies growing share in growing markets toward which customers are shifting.
And any company can choose to participate in growth, versus Defend & Extend. While Tribune Corporation is trying to find a way out of bankruptcy, and struggling to figure out how to deal with market shifts away from newspapers, Hearst is taking positive action. The Wall Street Journal reports in "Hearst Jumps Into the Apps Business" how the old-line newspaper company has set up a White Space project, complete with dedicated people and its own funding, to begin developing mobile applications for news!
Even when business leaders see a market shift, far too many choose to Defend & Extend the "core." Unfortunately, that leads to disappointments. Keep in mind Microsoft and its rapid loss of Smartphone share as users move increasingly to mobile devices from PCs. To succeed leaders need to drive their organizations in the direction of market shifts, and growth. Like Apple, Google and even Hearst.
by Adam Hartung | Mar 8, 2010 | Defend & Extend, In the Rapids, In the Swamp, Leadership, Web/Tech
Two tech giants are Microsoft and Google. The former has been around for over 30 years. The latter about a decade. Which is the company you should work for, or invest in? The one that has demonstrated a long history and great record of earnings, or the newer one participating in new markets still not well understood with a slew of new – but largely unproven – products? You might think the older one is less risky, and feel more comfortable backing.
But we know that Microsoft is losing market share, especially in growing markets. Although its products have been dominant, the market for those products (personal computers used as servers, desktop machines and laptops) has seen substantial slowing. New solutions are emerging that compete directly with Microsoft (new operating systems like Linux and others) and compete indirectly (cloud computing and thin applications on mobile devices.)
Source: Silicon Alley Insider
In just 18 months Microsoft Internet Explorer has lost 13 market share points – dropping from 68% of the market to 55%. Almost all of that has gone to Safari (Macintosh) and Google Chrome. Chrome has risen from nothing to 7% of the market. And since internet usage is growing, while desktop usage is shrinking, this is the "leading edge" of the market.
Also, the Chrome operating system will be launching later in 2010. It also will go directly after the "Windows" franchise which had a very unexciting launch of System 7 in 2009.
Let's look at valuation: First Microsoft – which has gone basically sideways. Huge peak to trough, but overall not much gain for investors despite launching two major upgrades during the period (Vista and System 7 as well as Office 2007). Obviously, upgrade products have produced very little growth for Microsoft, or its valuation.
Now we can look at Google. Google investors have doubled their money, while employment has grown. All those new products have helped Google to grow, and investors have an optimistic view of future growth.
Do you make decisions looking in the rear view mirror, or out the windshield? It can be tempting to be influenced by a great past. But that really isn't relevant. What's important is the future. And we can see that Microsoft, which keeps trying to Defend & Extend what it knows is rapidly falling behind the market changer, Google, which is rapidly moving toward where markets are heading.
D&E Management never creates growth. By trying to recapture the past, new market moves are missed and growth opportunities lost. Companies have to move forward, with new products, into new markets. And if you have any doubt, just compare the results of Defend & Extend Management at Microsoft the last 5 years with Phoenix Principle management using White Space at Google.
by Adam Hartung | Mar 4, 2010 | Current Affairs, Defend & Extend, In the Rapids, Leadership, Web/Tech, Weblogs
Apple's shareholder meeting was last week. In an era where shareholders are most worried about the survivability of the companies where they are invested, the biggest issue at Apple is what to do with all its cash! Reuters.com reported "Apple's Jobs says must think 'big' on cash hoard." In 2009, when most companies saw their market value decline, Apple's value doubled. Yet, it's cash is fully 1/5 (20%) of its current market capitalization! Clearly the company is generating cash faster than it has found investment opportunities. Even after launching the iPad with expectations of selling 2 to 5 million units in 2010!
We all should be so lucky, to have this problem of riches. Apple has enough cash that it could buy all the equity of Dell. Of course, why do that? It just goes to show that the company that built its market cap in the 1990s on Defend & Extend behavior – focusing on execution in a growing PC marketplace – has seen its valuation multiple shredded as buyers have shifted to other solutions. Meanwhile, Apple's value has skyrocketed because it entered new markets and created new solutions. Yet, it's cash flow has skyrocketed even faster!
It is possible for all companies to follow Apple's lead, increasing revenues and valuation. Last week I was interviewed by Zane Safrit for his radio program and highlights are on his blog, and the full interview is available for listening at the BlogTalkRadio site. In the interview Zane brings out how so many business leaders are stuck defending and extending broken Success Formulas that cannot produce better returns, and waiting for a "better economy" to "save" them. What Zane also cleverly brings out is how The Phoenix Principle can be applied to any business, with results that can be as stunning as Apple's. If leaders will start focusing on the future, obsessing about competitors, utillize Disruptions and White Space.
Of course, these are amplified in the "10 Ways to Stay Ahead of the Competition" I posted in yesterday's blog. I've received comments that the links to the deeper discussion on both the Business Insider web site and the IBM Open Forum weren't working, so I'm reproducing them here again.
10 Ways to Stay Ahead of the Competition – Business Insider
How to Stay Ahead of the Competition – IBM Open Forum
All companies can grow like Apple. But it takes a different way of approaching management. I hope you can find time to listen to the interview and explore how your organization can become like a Phoenix, forever growing through constant rebirth.
by Adam Hartung | Mar 3, 2010 | General, In the Rapids, Leadership, Openness, Web/Tech, Weblogs
Guy Kawasaki contacted me a couple of weeks ago, asking me to write a short piece for him. I was happy to do so, and he published it at the BusinessInsider.com War Room as "10 Ways to Stay Ahead of the Competition." Fortunately for me, the article was also picked up at IBMOpenForum.com with the alternate title "How to Stay Ahead of the Competition." Full explanations of each bullet are at both locations (although the graphics are outstanding at Business Insider so I prefer it.)
- Develop future scenarios
- Obsess about competitors
- Study fringe competitors
- Attack your Lock-ins
- Seek Disruptions
- Don't ask customers for insight
- Avoid Cost Cutting
- Do lots of testing
- Acquire outside input
- Target competitors
Blog followers know that this program has now worked for many companies who want to grow in this recession. The reason it works is because
- You focus on the market, not yourself
- You avoid Lock-in blindness by avoiding an over-focus on existing products, services and customers
- You use outside input, from advisers and competitors to identify market shifts that can really hurt you
- You put a competitive edge into everything you do. Competitors kill your returns, not yourself.
- You use market feedback rather than internal analysis guide resource allocation
Of course this works. How can it not? When you are obsessed about markets and competitors and you let it direct your flow of money and talent you'll constantly be positioned to do what the market values. You'll have your eyes on the horizon, and not the rear view mirror.
The biggest objection is always my comment about "don't ask customers for insight." So many people have been indoctrinated into "always ask the customer" and "the customer is always right" that they can't imagine not asking customers what you ought to do. Even though the evidence is overwhelming that customer feedback is usually wrong, and more likely destructive than beneficial.
Just remember, IBMs best customers (data center managers) told them the PC was a stupid product, and IBM dropped the product line 6 years after inventing the PC business. DEC's customers kept asking for more bells and whistles on their CAD/CAM systems, then dropped DEC altogether for AutoCad ending the company. GM customers kept asking for bigger, faster more comfortable cars – improvements on previous models – then moved to imports with different designs, better gas mileage and better fit/finish. Circuit City customers asked for more in-store assistance, then took the assistance across the street to buy from cheaper Best Buy stores. The stories are legend of failed companies who delivered what the customer wanted, and ended up out of business.
Enjoy the links, and thanks to Guy for publishing this short piece. Follow these 10 steps and any business can stay ahead of the competition.
by Adam Hartung | Feb 28, 2010 | In the Rapids, Openness, Web/Tech
Google keeps on growing. While many companies bemoan revenue losses and poor results in 2008 and 2009, Google keeps new products flowing out the door and revenues continue to increase. New markets are being developed.
This Google revenue growth is powered by use of White Space, as CNN.com reported in "Gmail holds Graduations and Funerals." GMail labs is a White Space team that develops new applications and uses for Gmail. Its operating premise is that it should develop the products rapidly, then push into the market to get feedback. Then the team can determine what to modify and test further, what to push into the market as non-beta and what to kill. As recently demonstrated in the headlined behavior, Google is ready to keep some things and kill others based upon market feedback – not just what the internal people or analysts think.
- "This isn't the first time Gmail Labs has graduated and killed some test
features since Gmail Labs started in June 2008, but the event does
underscore an idea that Google says is key to its success as an
innovative company: Let people create products they'd use themselves,
get those products out to the public as soon as possible, and make
consumers think it's OK for things to break."
- ""At Google, in general, the philosophy is to get things out quickly in
front of our users and not make huge promises," said Ari Leichtberg,
another Google engineer"
Nothing is more accurate than real market feedback, as readers of this blog have heard me say often. Scott Anthony of Innosight recently took up this mantra in a Harvard Business Review blog "How to Kill Innovation: Keep Asking Questions." He relates how a large company with a new idea kept asking "what if" questions about a new idea. Each piece of research led to more "what if" questions. With its massive resources, the company could keep asking and researching forever, never getting real market input and never getting the innovation to market.
In traditional companies, with a new product funnel and stage gate implementation process which can take years to run through, once something moves into the market the internal "champions" are so vested in the innovation they can't stand for it to fail. Far too often, if the innovation were to fail the champions would lose their jobs – or see their careers tank. Too much analysis causes too few ideas to make it to market, and causes the organization to overspend on the innovation that does. After launch market feedback is often ignored, or manipulated, to allow the innovation to be pushed harder and longer on the hopes that with "just a little more time and effort" it will succeed.
What keeps Google growing, and attracting top talent, is its willingness to use White Space. It is willing to develop ideas quickly and obtain real market feedback. Then decide what to keep, and what not to keep. Because it moves quickly, market input shapes the offering. Market input allows the company to see what people really use, and thus worthy of additional investment. Or what people don't use, and thus needs to be dropped before too much is sunk into the idea.
When Microsoft decided to add "clippy" to its products it was a herculean effort to install it across all products. This computerized help tool has had little use, and is often despised by users. Microsoft decided to create this feature based on almost no market input, instead relying on some customer focus groups. After making the enormous investment – in lieu of many other opportunities passed over internally – Microsoft simply became "married" to the innovation. Now "clippy" is still on the applications, but is almost never used. And it gives Microsoft's products no user advantage.
All companies can grow in 2010. You need to act more like Google. Develop early stage products quickly, and get them into White Space projects which will market test them. Don't spend too much time, money and effort "what iff-ing" or doing "market research" trying to predict future customer behavior. Listen carefully for market input, then modify. Have more than one opportunity in White Space, because you don't want to over-invest in any single idea that ran the internal gauntlet. Be ready to move forward quickly with things that work, and abandon those that don't. If you use give yourself permission to test new things in White Space, and resources, you too can grow in 2010 and climb out of this recession.
by Adam Hartung | Feb 22, 2010 | Current Affairs, Innovation, Leadership, Web/Tech
It's easy to recognize a company in the winner's circle. Like Apple or Google. Most of us want to know how to spot the winners early. And that can be hard, because often the reported information will make an emerging winner sound horrible. Like the expected demise of Apple in 2000.
Last week Dell reported sales and earnings, and valuation fell (Marketwatch.com "Dell Shares Fall as Company Net Slips"). The article notes that sales were "surprisingly strong," but claims that a dip in profits was bad news sending the stock price downward. Of particular concern was a lack of growth in desktop PCs. Many analysts are expecting (I should say hoping) that System 7 is going to spur additional desktop sales and are upset that Dell isn't getting "its fair share" versus Hewlett Packard.
This is entirely the wrong way to evaluate Dell's results. Simultaneously, the Mobile unit had very strong performance. As did Services, greatly aided by the Perot acquisition. As I blogged months ago, Dell has started moving in a new direction. Toward the growth markets of mobile devices and the need to build out applications using Cloud computing architectures. These markets are certain to grow in the future. Meanwhile, desktop PC sales are destined to decline. There is no doubt about this.
Dell has been undertaking some Disruptions, and using White Space to develop and go to market with new products in these newer, growing markets. Amidst this effort, it has put less money into the hotly contested and profit-margin-declining old fashioned PC business. This is clearly the right move. If Dell is the first and strongest to transition to new markets it has the best chance of regaining old growth rates. For Dell, the best thing possible is to see it growing beyond anticipation in these markets.
Some analysts complained that both mobile and services are too small as businesses at Dell, and therefore the company needs to put more resources (meaning price actions) into traditional PCs. These same analysts will lambaste Dell when the market shift is completely pronounced and the traditionalist (which now appears to be HP) is left in decline. Dell has used White Space to begin launching products. If it uses these White Space efforts to learn the company can become smart, faster than other competitors, and "jump the curve" from its old business/market to the new one. Isn't that what every business needs to do?
What we want to see now is ongoing investment in these growth markets,
with breakout products that can make a big revenue difference. White
Space is good, but it is critical that Dell invest fast and smart to
replace old revenues as quickly as possible.
I was encouraged by Dell's results. The company is growing where it needs to, and de-emphasizing businesses that can become slaughterhouses. For investors, employees and suppliers this is a good thing. When companies are using White Space it is easy to beat them up and ask them to "refocus" on traditional markets. It also can kill them. Here's hoping Dell stays on track.
