How Important is Steve Jobs?

With the news that Steve Jobs is taking another medical leave from Apple — his third — it’s legitimate to ask the question of just how essential he is to Apple’s success.  This is going to be a quick post, because I think the truth of the matter is that there are probably only 20 people who can answer that question…and they’re so secretive and such a part of the Jobsian communications strategy that we’re not likely to know the answer to that question for another year or more.

By all accounts, COO Tim Cook is a buttoned-down manager.  Apple has been AMR Research’s (now Gartner’s) #1 in its Supply Chain Top 25 for three years in a row.  Thus, I think it’s safe to say that Apple’s ability to execute its plan is in safe hands.  Cook has probably been running large amounts of the operational show for years anyhow.  How much it has helped him to have Jobs’s notoriously strong hammer can be asked, but ultimately this is not where Apple’s potential issues lie.

More to be questioned is how much of the marketing power of Apple is attributable to the “Jobsian reality field” and how much of the product vision is directly attributable to Jobs.  Jobs has indicated that he’s going to remain engaged as CEO and assuming there’s some veracity to that assertion, it’s reasonable to assume that his exquisite sense of product development will continue to guide the company.  With the Verizon announcement, the iPhone momentum continues even while Android continues to make inroads in the smartphone marketplace.  Apple’s business plan never was to be the volume leader so this marketplace condition was to be expected.  The same will probably happen in the tablet marketplace; Apple is quite happy to be the pioneer and then to reap early-mover profits while moving gracefully into the premium price place of the market.  But given that, the question becomes “what’s next?”  Apple has introduced two category-creating, or at least redefining, products in a row.  They probably need another home run in the next two years to sustain their momentum and lofty market perceptions.  Without Jobs at the plate, you’d have to question Apple’s ability, or at least likelihood, of hitting another home run.

This concern extends to Apple’s marketing as well.  Again, they do a remarkable job, second to none certainly in the technology space , and even the broader consumer space.  Here’s where it gets hard to call.  Jobs doesn’t have to be omnipresent to sustain the Jobsian magic.  In fact, lesser Jobs could actually mean more impact when he’s around.  On the other hand, if he becomes perceived as merely a figurehead disassociated from the company he used to rule with an iron fist, his magic could be compromised.

Apple more than most companies is a cult of personality and the extended absence of its leader is a challenge for the company.  That said, I don’t think it’s an insurmountable challenge.  Microsoft was able to transition from a “cult of Bill Gates” to something more nuanced.  But that was much easier because the cult of Bill was vastly weaker than the cult of Steve and the truth of a Bill-ruled company was less than the truth of a Steve-ruled company.  I think we’re nearing the time when for myriad reasons Apple is going to need to let Jobs sprinkle some pixie dust on someone else, a visionary who can sustain the momentum and help transition the cult of Steve back once again to the cult of Apple.  This mingling of Jobs and Apple is a relatively recent phenomenon.  While a search of Time Magazine’s web site and Google couldn’t help me locate the quote, I have vivid recollections of a late 80’s/early 90’s quote there which said “second perhaps only to Harley Davidson is an Apple user’s love of their computer and the company who makes it.”  The Jobs worship started with his return to the company who ousted him and with each successive product success, it grew only larger.  It’s imperative now for Apple to share the spotlight, to bring a new person to the forefront as well as transition that passion back to the company so that it transcend’s Jobs, whatever his health.

So, back to the question that started my musings.  I think Steve Jobs is as important to Apple’s success as any one individual has ever been to any technology company.  Any extended absence by him could prove to be damaging to Apple’s future products and prospects.  It sounds like there’s time for Apple and Jobs to transition that passion back more heavily to the company so that it can thrive in the inevitable absence of Jobs, whether it be this health-related matter, his waning interest or any other thing in life that could lead to his moving on/out.

He’ll be a tough act to follow, no doubt…but not impossible.  Back in the late 80’s, I actually had Steve Jobs as the luncheon speaker at a Gartner PC conference I was running.  This was right after he had introduced the NeXT computer, an amazing piece of software engineering that stood to transform the way we created and used software.  He had demonstrated it weeks earlier at Gartner’s offices in Stamford, after which none other than Gideon Gartner came to me and said “do you think we should standardize our company on these?”  The demonstration was that compelling.  I, being a noted curmudgeon, said “give me a night to think on it,” after which I came up with any number of good reasons why it wasn’t the right thing to do.  At the conference, Steve did his thing, and it was amazing.  You could hear jaws dropping in the audience.  I don’t know how many of you have ever given a meal speech but let me tell you, it’s the hardest thing in the world.  Within three minutes, all you hear is silverware clanking and the din of conversation at the tables gets louder and louder.  Not this time.  Jobs had their rapt attention.  You could have heard a pin drop.  At the end, thunderous applause.  Well, I was the next speaker.  Now what do I do?  How do you follow God and the 10 Commandments?  All I was talking about was operating system futures.  So I asked the audience, “how many of you want one of those things right now?”  Every hand in the room went up.  Then I said “how many of you are ready to standardize your company on those things tomorrow?”  Every hand went down.  (Well, I’m pretty sure Gideon wasn’t in the audience.)  I then said “so now let’s focus on what our real options might be.”

So you can follow Steve Jobs.  I’m just glad that I don’t have to do it again.

Live from NRF: The Dismal State of Retail Technology

I’ve spent the last day and a half at the big National Retail Federation’s 100th annual conference in New York.  (No, there is no truth to the rumor that I covered the technology at the first conference, although I did learn to type on a manual typewriter in 1971 or so.)  I was one of the people behind Gartner’s designation of companies as Type A (aggressive technology adopters), Type B and Type C and as I walked the floor of the trade show and listened in on keynotes and sessions, I’m struck by how hard it is to characterize retail and many retailers.  On the one hand, technology is ubiquitous and you can’t pretend to be a retailer of any scale without a massive IT investment.  On the other hand, the ability to invest, and even more to innovate, when dealing with such tight margins can be constrained.  Netting it all out, I’m struck by how far behind the technology curve the retail industry seems to be.

A few observations from the show:

  • Peter Sachse, the CEO of Macys.com appeared on a panel run by Alison Paul, head of Deloitte’s Retail Practice.  (As an aside, this was a really well-done panel, which is all too rarely the case.  This wasn’t scripted and the panelists did an admirable job of refraining from the sales pitches that ruin so many panels.)  Sachse talked about how Macy’s is working hard to get a 360 degree view of the customer.  My take:  good luck with that.  The only person with a 360 degree view of the customer is the customer themselves.  No matter how you integrate the data you have and obtain, you will have at best an incomplete picture of the customer and at worst a misleading view.  I do, however, believe that’s a laudable goal but that retailers don’t have nearly enough vision nor understanding of the impact of social technologies to realize that vision in a meaningful way.  More on that in a bit.
  • Coming as it did a week after CES, where every gadget known to man (and lusted after by me), is shown, the show floor here is not nearly as exciting.  I mean how many booths can you see with barcode scanners or keyboards.  Yes, keyboards!  I understand they’re important to the speed of a retail transaction but somehow soft-configurable keyboards just don’t get my heart racing.  By far the most interesting booth to me was Intel’s, where they were demonstrating not some far-off fantasy retail environments but rather things that are possible today (and are already in limited deployment).   While Apple has virtually no presence at the show (they’re not here and I only saw one vendor who was hawking Mac solutions), their influence on retail interfaces is pervasive.  Everything looks like an iPhone/iPad, and that’s a good thing.  User familiarity with touch interfaces will likely lead to their much wider deployment in retail settings.
  • Everyone’s using iPads to demonstrate their wares.  It actually makes for an interesting conference experience, with the human interaction enhanced by technology rather than the somewhat sterile approach of presenters standing around their monitors and kiosks.
  • For an industry that just came through a lackluster holiday season and is facing more tough times ahead, the mood around is actually upbeat.  Whether they’re rearranging deck chairs on the Titanic or otherwise, high energy and increased attendance is actually refreshing.

Now, however, for the zinger.  If I hear one more retailer talk about “listening to the customer,” I’m going to puke.  What’s worse, generally when they say that, they mean “I’m listening for the customer to express even the slightest receptivity to getting a marketing message so that I can blast them with my multichannel outreach program.”  I have found the discussions around social media and mobility to be horribly shallow and maybe even misguided.

On the mobility front, there were actually people debating whether customer-accessible WiFi was a good idea in retail environments.  There’s a legitimate question there but the tone of the discussion was more like “do we want to enable customers to price shop while they’re in our store?”  Let me introduce you to these things called SmartPhones, 3G and 4G.  The genie is out of that bottle.  Customers do have access to competitive pricing and thus the question must become “how can we leverage consumer technologies to increase the likelihood of a purchase” or even “how can I use the consumer’s expressions of interest to sell them more stuff.”    You have to assume radical transparency and that an increasing percentage of your retail traffic is going to have good information, maybe better than the retailer has and certainly better than is known on the front lines.

And then there’s social media.  I really fear that too many — dare I say most — retailers still think of social media as a vehicle to dump messaging to customers who are eager for that messaging and have in fact invited it.  Exhibit #1:  just look at the Tweetstream for the event:  http://search.twitter.com/search?q=%23nrf11 .  Maybe I’m spoiled by tech events where attendees use Twitter as a vehicle to discuss issues raised in sessions or the news of the day, but this is appalling.  The stream is dominated by vendors screaming “come to my booth,” “win an iPad.”  Sure, @Teradata has generated a lot of retweets.  Do you think any of those people are actually interested in hearing anything from Teradata other than “you’ve won”?  I keep saying I’ll be writing about it, and I promise I will soon, but I think social media in its full expression inverts the relationship between retailer/brand and customer.  It isn’t about a 360 degree view of the customer; rather, it’s about my expressing my needs, interests and criteria, enabling people and companies to deliver solutions to me.  If you think social media is just another channel to enable you to dump marketing messages onto willing potential customers, you’ve got it way wrong.

Facebook Messages: Why This Could be Even Bigger than Anyone Thinks

It’s hard to imagine that anything Facebook does, let alone something on the scale of Facebook Messages, could be underappreciated, but I believe that’s the case here.  Facebook Messages could be “the next big thing.”  I’m not prepared to anoint Messages as such, yet; I haven’t even been blessed with being one of the platform’s first users and thus haven’t had the opportunity to see if the reality is remotely in the league of the promise.  But the promise is huge.  Facebook has an enormous opportunity to capitalize on several intertwining trends.

  • Email ceased being a productivity tool a decade ago or more.  We are overwhelmed by the volume of email and have few good tools for harnessing it.  My friend and former colleague Bill Kirwin, the godfather of TCO, has spent good portions of the last few years focused on this issue alone.
  • Email has become the bearer of malicious payloads as much or more than it has been the source of valuable information.  Simply put, without email, viruses, phishing and spam are much less prevalent.
  • At the same time, a new generation of users views email as the platform of last resort.  If you ask a teenager today what they use email for (and I have a focus group of two of my own), if you really parse through the answer, they use email to communicate with old people.  The new generation uses Facebook, IM, Skype, Twitter (maybe) and texting as more immediate, personal and relevant forms of communication.  Email has been forced upon them.
  • The prominence of email has made us slaves to Outlook and the inbox.  We have the appearance of productivity without really being productive.  We have the appearance of communications without really sharing anything valuable.  We have the appearance of progress but that progress is fragile and is broken the moment the next person in the thread doesn’t click reply.
  • Email is directed to people, not communities of interest.  The maintenance of email communities (groups or mailing lists) is slow if not glacial, incomplete and organizationally driven, not user-driven.
  • As we move to increasingly mobile platforms, we need a communications system that blends both the comprehensiveness of email with the urgency of texting.  Today they co-exist uncomfortably on the device.  Unifying them is an opportunity, if not an imperative.

For all these reasons and more, a replacement for the email platform is necessary.  It’s not like there haven’t been attempts.  Ray Ozzie spent much of his pre-Microsoft career trying to introduce new platforms (including Notes and Groove).  He was met with limited success at best and his tenure at Microsoft will not be remembered by progress on this front.  Google with great fanfare introduced Wave, only to abandon the platform, retreat and introduce Buzz, whose market impact has been approximately zero.  When Google, Microsoft and Lotus/IBM fail at something, you realize the enormity of the challenge.

So why might Facebook succeed where these others have failed?

  • Taking a page from the Microsoft playbook, Facebook is adopting an “embrace and extend” solution to the problem.  Rather than introducing an entirely new platform and hoping to migrate its users to the new approach, over time, Facebook instead has taken the email metaphor — the installed base, if you will — and has added capabilities that bring the new forms of communication under the email umbrella.  If you’re an email user, you’ll find the approach familiar.  And if you’re a next-generation “Facebook communicator,” you’ll find the new platform is familiar and extends your capabilities in interesting ways.  If Facebook can truly blend the email world and the IM/text world to the benefit of both, this is a massive accomplishment.  I still say “if” because the requirements of the two environments don’t lend themselves obviously to a merging but if Facebook has done a good enough job here, then they are well-poised to realize the kind of success I’m positing here.  Note, “good enough” is usually the market requirement for massive success.  In fact, in a Gresham’s Law-like way (I have to leverage my college economics major every once in a while), good enough has usually been better than great in the technology space so in fact some of Messages’ shortcomings can and should be overlooked.  View someone saying “Messages, while interesting, is not as good as ‘x'” as a success indicator, not a shortcoming.
  • With over 500 million users (probably 600 million by now), Facebook is one of the rare platforms that has bridged the two user groups with their distinct communications styles.  Email is an activity of the old (get over it, friends!), texting is an activity of the young.  But Facebook is actively used by nearly half of all Americans (and even greater percentages of people in other countries).  This gives them a bully pulpit from which to reach both categories with neutral footing.
  • Facebook itself has been responsible for a change in the way we communicate.  No, they didn’t invent the status update but they’ve certainly been the largest beneficiary of it and have evolved it in meaningful ways.  And this is not just a consumer-driven phenomenon.  Hardly a day goes by when I don’t have a conversation about what I’d loosely call “Facebook for the enterprise.”  They’ve already evolved the way we communicate which gives them a great opportunity to continue to evolve it while subsuming existing forms of communications.
  • It’s frequently the case in the technology industry that a successful platform follows a platform that failed by overreaching.  Windows 3.x was a step back from OS/2.  The Internet was actually a step back from many more specialized platforms that sought to do so much more than “just” hyperlink.  Thus, Messages, following a litany of failed “groupware” approaches and major platform initiatives (Sharepoint, Wave) has the requisite market conditioning and, perhaps this time, the market timing.  (I don’t want to hear from you that Sharepoint isn’t a failed platform.  It has certainly achieved some degree of ubiquity but that’s more a testament to Microsoft’s tenacity and doesn’t really reflect its market impact or certainly its leadership.)
  • It’s the subject for another upcoming blog post but I don’t think social capabilities have been understood and embraced nearly as much as they’re going to be.  “Social” is more than status updates and tweets.  It transforms application categories and the way users relate to each other, and the communities, companies, suppliers and friends with whom they interact.  Adding social capabilities to the communication platform in a fundamental way is going to happen, and Facebook has as good a vision as anyone and is better-positioned than anyone to make that happen.

For all these reasons, I’m excited by Facebook Messages.  We need a new platform that blends the urgency of texting and IM with the familiarity and functionality of email.  Messages is the leading contender to do just that.  Can they fail?  They certainly have ample opportunity, and track record to do that.  Their last attempt at a “game changer” — Beacon — didn’t end well.  Because I correctly identified Twitter in a February 2008 research note (“Twitter:  The Most Important Platform You’ve Never Heard Of), I’m often asked “what’s the next big thing.”  Wave, no.  Foursquare, no.  FriendFeed, no.  We don’t have one of these a year.  Messages?  I’m not prepared to declare it “the next big thing,” but it’s the first thing in years that I think has that potential.

Dear Google: Buy Adobe

Recent news reports have linked Apple and Microsoft as potential suitors for Adobe.  While Adobe CEO Shantanu Narayan has thrown cold water on the Microsoft discussions and the rancorous relationship between Apple and Adobe renders an amicable partnership unlikely, one name has been absent from these discussions, and they’re the ones who should most likely want to buy Adobe, has the resources to do so and can build an extremely synergistic business case for the combination, and that’s Google.

A brief look at the financials.  Adobe at this writing has a market capitalization of a little over $14 billion.  Google has $33.4 billion cash on hand and generated over $10 billion in operating cash flow in the last 12 months.  Not only does Google therefore have the financial wherewithal to make an acquisition of this size, it’s probably one of the few acquisitions of this scale (along with Salesforce.com; market cap almost $15 billion) that it could make without significant antitrust scrutiny.  While continuing to trash Adobe, it’s not like Apple could argue compellingly that Google shouldn’t be allowed to buy it.  (While we’re at it, Google should also buy Salesforce, but we’ll talk about that later.)

So, why should Google buy Adobe?

  1. In a battle for the hearts and minds of developers, Google is missing key elements.  Yes, Android is a successful and growing platform but Google’s developer relations are no better than Apple’s, with both of them being substandard.  As Google grows out its platform ambitions, with Chrome OS on the horizon, having a well-developed developer relations program will be important in its battles with Apple and also increasingly Microsoft.  Do developer relations matter?  One could argue that one of the compelling reasons why early Windows beat IBM’s OS/2 in the marketplace after the Microsoft/IBM split in the late 80’s and early 90’s was because Microsoft had strong developer relations and after the split, IBM had to effectively start from scratch and was way behind even while having the technologically superior platform.  Developers matter, differentiated applications matter and so developer relations matter.  Adobe has a long history with them; Google has none.
  2. Google, despite its myriad product offerings, is effectively a one-trick pony:  advertising.  Of course, if you’re going to rely on one trick, this is a pretty good one to rely on, and Google is an ongoing financial juggernaut.  However, to realize their full software and platform ambitions, Google is going to need to broaden beyond advertising as the sole source of their revenue.  Adobe presents Google with great opportunities to grow into traditional software licensing models.
  3. And while offering traditional software licensing models, Adobe also presents some familiar-to-Google bottoms up enterprise opportunities.  Adobe has, shall we say, an interesting portfolio of enterprise software.  Traditional industry analysts (read:  Gartner) have always had a hard time characterizing Adobe since they don’t always neatly fit into Gartner Magic Quadrants or at least their products are missing certain features that Gartner considers key in its category definitions.  Adobe’s response has always been “we just meet actual customer needs.”  While they haven’t therefore neatly fit into architectural diagrams, Adobe has successfully penetrated enterprises with a bottoms-up, or more accurately middle-out, approach.  This fits well with Google, who <sarcasm alert> hasn’t exactly penetrated the enterprise through the front door. <end alert>
  4. While Google advertising opportunities have enabled “freemium” models to flourish on the web, paradoxically Google itself has not benefited from such models.  Over 98% of Google’s revenue derives from advertising and there are scant opportunities to upgrade from free Google products into revenue-producing ones.  Adobe offers several such opportunities, from consumer-oriented ones like moving from Picasa to Photoshop to enterprise-oriented ones like Acrobat.
  5. While Google has major cloud computing infrastructure initiatives in place, the early market has been dominated by key emerging competitors Amazon, Microsoft and Salesforce.  Adobe has interesting infrastructure elements that expand Google’s presence in the cloud architecture space.
  6. As noted earlier, Google’s enterprise approach is largely lacking.  One could have said the same of Apple, who has pursued a consumer-driven strategy for virtually all of its corporate life.  It was interesting to see, therefore, Apple’s announcement earlier this week of a partnership with Unisys to better help integrate Apple technologies (notably the iPhone and iPad) into enterprise architectures.  Google, too, must pursue external relationships to meet real customer requirements but an Adobe acquisition would give Google some much-needed internal support capabilities as well.  As mentioned earlier, I still believe Google should acquire Salesforce.com to expand its software and platform capabilities and to dramatically expand its enterprise support capabilities.    Google is going to have to either acquire Salesforce or get serious about competing with them.  Either way, an Adobe acquisition would be a step in the right direction.
  7. Lastly, this makes sense as a defensive move.  To the extent Apple and/or Microsoft are seriously looking at Adobe, it would hurt Google were they to acquire Adobe, necessitating Google to adopt a piecemeal solution to the elements addressed above.

So why should Adobe be interested in a Google acquisition?

  1. While I hardly embrace Steve Jobs’s bombast about Flash, it’s clear that HTML5 presents a significant challenge to one of Adobe’s major and enduring platforms and thus from a purely financial perspective, this may be the best time to sell.
  2. Adobe’s cross-platform arguments diminish in a world where there are fewer platforms and different requirements.  If, as I have argued, the mobile world is coalescing around Apple IOS and Google Android, and Adobe’s presence on one of those platforms is insecure at best, the rationale for an Adobe solution is dramatically diminished.  Further, with the different requirements of a mobile platform, with its lesser hardware power, the ability to support interim software layers is not as clear-cut as on the desktop, or in the cloud.  Mobile devices are heavily about the integrated experience and Adobe doesn’t play well against that requirement.
  3. Adobe is a better fit with Google.  With Microsoft and Apple both, there are significant overlaps in the product portfolio and/or minimal interest in some of the pieces with the the likely result being that core Adobe products and platforms are discontinued or sold off.  There is little to no overlap with Google and yet strong synergies; thus the ability to preserve the product portfolio, and the driving vision behind it, remains largely intact.

Google and Adobe…better together

Technology Change: Slower than I Think but Faster than You Think

Last week, I gave a presentation to a “traditional” publisher on the impact of new technologies on their business.  This is someone who has a very successful and profitable “dead trees” business and my mandate was to come in and challenge their thinking with regards to the impact of technology on their business.  Their managers feel no sense of urgency to do anything about new technology now because the existing business continues to thrive and despite the prognostications of industry pundits, they have yet to feel an impact on their current business and thus are in no rush to actually invest in new approaches (even while it’s fun to think and talk about them).

This caused me to reflect on the technological change I have seen in my lifetime.  I have spent 31 years focused on “disruptive technologies.”  I started working on PCs in 1979 — two years before IBM launched its PC — and I’ve witnessed some amazing technological change in those 31 years.  As an observer of, and advocate for, those changes, I’ve come to an interesting and important realization.  As optimistic as I am about the pace and depth of technological change, I’m usually over-optimistic about the time frames in which it happens.  This was the case in the early Internet days and I believe is once again the case with regards to a new set of disruptive technologies.

While I was never a wild-eyed proponent of Pets.com or Webvan, I am certainly guilty of feeding into the hype that led to their elevation.

So, we technology pundits are overly optimistic.  No big news there.  However, there is big news:  while we may be overly optimistic in the short-term, we’re actually overly conservative in the medium-term!  Ten years ago, the Internet bubble was about to burst.  All those wildly optimistic claims about how the Internet was about to change everything were going to be laid to waste.  Yet here we are, ten years later, and the truth is that the Internet has changed everything.  It has reached a point where, if you lose your Internet connection at work, you just go home or go somewhere where you can get that Internet connection because without it, well, you just can’t do your job.  And it’s not much different at home.  When I lose my cable TV connection, well, there are lots of other ways to entertain myself and, short of a major sporting event (on the level of the World Series), I feel no obligation to leave the house.  Lose my Internet connection?  I may wait around an hour to see if it comes back but anything longer than that and I’m contemplating a run to Starbucks or Borders or somewhere else where I can grab a Wifi connection.

The truth is that the Internet revolution is more profound than even we wild-eyed optimists thought it might be a decade ago.  We had the timing wrong but, even more significantly, we had the impact wrong, and weren’t wild-eyed enough.  And guess what?  We’re doing it again.  And this time again, it is going to happen more quickly than you think…and more quickly than the Internet took.

So, what is “it”?  Regular followers know that I have been talking about the “perfect storm” of disruptive technologies — social, mobile and cloud — for over three years now.  My premise is that each of these, while an interesting phenomenon in their own right, actually serve to amplify each other such that the overall market impact is greater than if any one of these phenomena were occurring in isolation.  That amplification effect is one reason why I think that the medium-term impacts of these technologies tend to get understated.

There are two other unique characteristics of these new technologies that I think will cause their impact to be so significant more quickly:

  • Pace of change
  • Economics

With regards to pace of change, the fact that we’re heavily Internet-connected enables us to embrace new capabilities much more quickly.  In the early Internet days, we were faced with the daunting challenge of upgrading connectivity models from dial-up to broadband and to deploying new software (the browser) on a large number of machines.  Having done that now, we’re in a position to embrace new Internet models of distribution (e.g., cloud computing) with very little friction.

Mobile also has some radically different market dynamics than the desktop that enables, and leads to, a faster pace of change.  First of all, we’re embracing the mobile Internet even faster than we did the desktop Internet, as famously called out in a Morgan Stanly report.  In fact, they project that the number of mobile Internet users will pass the number of desktop users in the next 3-4 years.  The dynamics of the mobile market are also very different than those of the desktop, enabling more rapid change.  First of all, this is a much larger market.  Cell phones of all kinds (not just Smartphones) are shipping approximately 1 billion units per year, or about 4x that of the desktop market.  These will rapidly shift to Smartphones across the entirety of the market as prices plummet (in Moore’s Law fashion).  Even more striking, the average lifespan of a desktop or laptop computer is in the 3-5 years range whereas the average lifespan of a mobile device is 21 months.  That means we are changing over the installed base of a multi-billion unit market every two years or so.  There is very little installed base drag in the mobile marketplace!  And this perhaps understates the pace of change.  Granted, we’re in a period of software immaturity but the leading mobile software platform providers (e.g., Apple, Google, RIM) are upgrading their software platforms with significant new capabilities (both software and form factor) every 3-6 months.  That contrasts sharply with the desktop, where software advances are measured in 3-7 year cycles and are often met with significant market resistance because of the cost and disruption of upgrades.

Bigger market, faster turnover, greater pace of change.  Yes, the impact is going to be felt faster than you think.

Economics are also contributing to a faster-than-you-think impact of new technologies.  I refer particularly here to the impact of cloud computing.  In the past, for businesses to embrace this kind of technological change would have required massive capital investments on their part to deploy infrastructure to exploit the new platforms.  Cloud computing now enables companies to embrace new technologies in a much more flexible fashion, requiring little to no capital investment and as a result, much faster and more scalable implementations.

I don’t want to get into an argument here about cloud computing.  That’s a discussion for another day.  Security?  Red herring.  In fact, I posit that over time you’ll find cloud computing solutions will have better security than on-premises solutions because the cloud computing providers have greater incentive to provide that security.  I have come across many CIOs who have an immediate negative reaction to the cloud.  I’ll ask them “if you were starting a business today…” and usually before I can complete the question, they’ll go “well, of course then I wouldn’t own infrastructure.”  The question therefore isn’t whether or not to do cloud but rather how and when.  But I digress.

Bottom line, the flexible economics of cloud computing enable a more rapid embrace of new technologies than would be the case if companies had to make massive capital investments to support new software platforms like social and mobile.

It’s easy to ignore we proponents of massive technological upheaval in the early days.  Yes, we’re probably overstating how impactful these technologies will be in 2010 and maybe even 2011.  However, ignore our forecasts for 2012 and beyond at your own peril.  And if you wait until then to start embracing the change, you will find the pace of the market change then to be so fast that you’re unable to keep up, let alone catch up.  My advice to that publisher was this is absolutely the best time to be embracing technological change, while you’ve still got a successful business to fund that change.  If you wait until your existing businesses start to feel the impact from technological upstarts, you might find yourself in a very uncomfortable position, akin to the way Barnes & Noble and Borders feel about Amazon.  It’s not inconceivable that one or both of them will be out of business within a year.  They didn’t feel the urgency to get involved early — and probably saw the demise of Pets.com as validating their thinking — but when things happened faster than they thought, they had already lost the innovation edge and, more importantly, the customer.

We overstated the timing but understated the impact before.  I think we’re doing it again, and this time the change is going to be even greater, and so should your urgency.

Windows Phone 7: Microsoft’s (Considerable) Challenges and its Surprising Opportunity

As I discussed in my last post, mobile is a space Microsoft needs to win if it’s to remain as relevant in this decade as it was in the last two.  I’ll never underestimate Microsoft’s power and, more importantly, its stubbornness/tenacity in battles it must win.  However, there are so many moving parts in this space and so much potential for Microsoft’s efforts to go awry that it’s very hard for me to develop any enthusiasm for Windows Phone 7, launched yesterday.

Let’s just look at some of those challenges:

  • User interface.  Microsoft looked at the iPhone and unlike Google, which said “we should copy that,” instead said “we can do better than that.”  Trying to out-interface Apple is a daunting proposition.  Has anyone done that?  Ever?  And in any event, is this the time it’s going to happen?  I’ll give Microsoft credit for realizing that perhaps the market didn’t need yet another iPhone clone.  However, its approach is actually at odds with how it has succeeded on the desktop.  The desktop and to a large extent the iPhone and Android worlds have succeeded because they’re open platforms upon which application developers can unleash their creativity and users can freely and equally access that creativity.  Instead here Microsoft has said “we know what activities you do with your phone and we’ll make those more prominent.”  If this is actually a static set of activities common across a wide enough range of users, I’d actually applaud that approach.  However, I don’t believe it’s at all a static set of activities and I think there’s sufficient variation from user to user that this approach will generally suffer.  Sure, if you’re a Zune person, great for you.  Both of you.  But I don’t think many users are thinking “wow, this iPhone is too tough to use; I wish someone would simplify my choices for me.”
  • Does Microsoft’s approach make it harder for application developers to achieve prominence?  With Microsoft controlling so much of the initial user experience, applications are relegated to a less prominent position.  This might discourage application creativity in areas Microsoft considers “core,” like pictures or social networks, and might hurt application developers whose applications might otherwise be considered core by users but are relegated to less prominence on WP7.
  • How many platforms can the market support, anyhow?  It’s clear Apple is a long-term survivor.  I don’t say “leader” because ultimately that’s not their business model.  They don’t play in high volume, low margin spaces and make no mistake about it, the smartphone market is going to be high volume in very short order.  Blackberry is positioned to be a survivor as a niche solution.  Their investments in corporate-relevant infrastructure mean that they can be a trusted provider for key scenarios even while other providers infringe on them at the margin.  That means that Android, HP/Palm, Nokia/Symbian and Microsoft are left fighting for markets that can only support one or two of those parties.  The decision may actually rest on more than just smartphones, which leads us to our next discussion.
  • Whither the tablet.  Android needs rework to adequately support tablets.  HP is going to move Palm into a variety of Internet-connected devices, including tablets, printers and more.  What’s Microsoft’s tablet strategy?  I’ll need more time looking at WP7 to assess whether this is a viable UI for tablets or whether it’s more likely to be some evolution of Windows not-Phone 7.  If, however, WP7 is not a tablet or other embedded device OS, that constrains the market opportunity for WP7 and thus its attractiveness to application developers.
  • Velocity.  Microsoft’s track record at getting operating systems out the door is, well, spotty.  (I’m feeling charitable today.)  The velocity in the phone market is a radically different dynamic than on the desktop.  Upgrade cycles are measured in weeks and months, and certainly not years.  Is Microsoft going to be able to maintain that pace and do so in a way that doesn’t jeopardize product quality.  Their track record is sobering.

However, Microsoft is in an interesting position when it comes to the carriers, especially here in the States.  The carriers have a love/hate relationship with Apple.  They’d love to have the iPhone.  They hate that Apple gets to dictate all of the terms.  With Google, it’s more of a wary situation.

While Google is more complicit with the carriers than Apple, the carriers are (rightly) suspicious of Google’s motivations.  If Google isn’t exactly making money licensing the core platform, then what’s in it for Google?  Clearly Google views this as an essential step in moving its ownership of the search space on desktops into a mobile world.  Thus, at some level, Google’s economic rationale and that of its partners are competitive and/or misaligned.  That doesn’t make for a great partnership.  Google competitors all around are trying to drive stakes into that misalignment with these patent lawsuits that further the economic risk elements and point out some of the inequities in the relationship (I get the benefit, you assume the risk).  That said, unless we’re about to change the patent landscape and head to Armageddon like situations, these things usually resolve themselves with small amounts of money changing hands.  I actually think that should one of the involved parties pursue these patent matters to full resolution, it will be counter-productive and will in fact hasten the time when we see patent reform up to and including the elimination of software patents, many of which, to this outside observer, seem, well, patently absurd.

So where does this leave Microsoft?  To the carriers, Microsoft may actually seem like the most benign of the three partners.  At least they understand Microsoft’s licensing model and appreciate the fact that Microsoft was their complicit partner on earlier Windows Mobile platforms (even while such complicity rendered the platform in need of its very replacement).  Again, I’ll write about my dislike for the carriers in a future posting.  They still hold to a desire for control that is unhealthy for the ecosystem and for us users.  But given that they hold on to these notions, their desire to partner with someone who will cow-tow to their mandates is strong.  If Microsoft’s willing to be that partner, all may not be lost for them.

Of course, that means that a Microsoft victory could be very bad for the rest of us…

Who is the Technology Bellwether?

On my news analysis blog, I posited that IBM’s strong earnings announcement this week cements the fact that IBM is no longer the technology bellwether.  On Twitter, someone asked me “if not IBM, then who is the bellwether?”  Interesting question.  To be the bellwether, I think you have to have exposure to a wide range of solutions — consumer vs. enterprise, computing vs. consumer electronics, etc.  These days, almost all of the largest companies have significant platform bets, narrow portfolios or are otherwise unbalanced when it comes to assessing the overall health of the total ecosystem.

I’d rule out Apple,Microsoft and Intelfor just those reasons.  Apple is obviously heavily consumer-focused and is at this point as much or more of a consumer electronics company than it is a “computing” company.  Microsoft has such an unusual set of arrangements, most notably its OEM arrangements with hardware manufacturers, that sometimes make its results an anomaly.  Intel is still so heavily wedded to the PC/Windows world that its results may hide the news of strength in other platforms.

If I had to pick a bellwether, I’m tempted to make the easy choice and say HP.  They have a reasonable mix of all of the above elements and are perhaps most representative of the overall health of the industry.  It’s also significant to note that they’re the largest computer company.  (I’ll bet most people, if asked, would still bet it’s IBM, but HP passed them a few years ago.)  However, let me also posit that a company like SanDisk is a good indicator.  Their storage solutions play across a wide range of devices and sectors.  Yes, they’re underweighted in the enterprise segment but that’s likely to change and, in fact, share gains they have in the enterprise would be a good indicator of a rebound in that sector because of the relative price premium you have to pay for these types of storage solutions in enterprise class.

So those are my two nominations:  HP and SanDisk.  Others?

Inauguration Day

It almost seems trivial to note this on a day otherwise marked my tremendous symbolism and pomp but we now have our first technologically-savvy President.  From his attachment to his Blackberry to the campaign’s dramatic and powerful uses of social networking, this is the very first time the country has been led by someone who understands, embraces and even demands technology utilization.

As far back as 1984, when I was working at General Instrument, I learned the power of a chief executive who understood the power of technology.  GI in those days had an email system, linking facilities around the world.  However, its utilization was spotty.  There were a not-inconsiderable number of tech junkies — this was a technology company, after all — who loved the immediacy that email offered.  There was, however, a much larger population of people involved in manufacturing and operations, disciplines that had largely been untouched by technology back in those days.  The higher up in the organization you went, the less likely they were to use the email system.  The net result was that for reliable communications, to update the “systems of record,” you had to use “traditional” forms of communications.  Fortunately, however, GI was led by a CEO (Frank Hickey) who understood the potential of electronic communications.  He decreed that certain of his key reports be submitted to him electronically.  As you might imagine, the trickle-down was almost immediate and within a matter of months, the number of users on the email system had grown several orders of magnitude and the number of messages grew even more so.  Being in charge of the PC implementation as I was, the number of PCs in the company grew in a year from under 100 to over 1,000.

Clearly, there is power in a chief executive who understands, and demands, the use of technology.  Already this morning, I’ve seen stories on TV about how Obama is still fighting to retain his Blackberry and how his transition team has had to rely on Gmail prior to their .gov email addresses going live.  I hope this means that, much as my experience at GI, the country experiences a significant trickle-down effect, where we more effectively utilize technology to effectively communicate.  We have just scratched the surface of how social technologies are going to change the way we live and work.  I am optimistic that under our new President, we will embrace those changes in some profound ways not capable had another man been elected.

Tomorrow, the reality of the economy and my personal situation may temper my enthusiasm (just a little), but for today, I’m hugely excited about the future and what this Presidency means for technology, business and people.

Apple and Steve Jobs: Is There Another Emperor in the House

I’m hard pressed to come up with another situation like Apple’s.  Has there ever been a company where not only is the image of the company so closely associated with its CEO but also the company’s product strategy and even product details?  I can’t think of a remotely similar situation.

There might have been a time when you would have said “Bill Gates and Microsoft.”  Yet behind Bill was a cadre of senior executives (Ballmer, Raikes) who wielded significant product and strategy power.  It was convenient for Bill to be the face of the company — the friendly nerd — but when it was time for things to change, Microsoft was able to effect the change with minimal disruption.

Non-technology celebrity CEOs have included Southwest’s Herb Kelliher, GE’s Jack Welch and a long list, and in almost all instances, the company was able to transcend the personality of its leader, either sustaining his or her core values or seamlessly transitioning to a new stage in the company’s evolution.

So what of Apple?  Caveat:  I have long believed that many Apple products are a triumph of style over substance.  Yes, they’re beautiful products, well finished, and I perhaps consistently underrate how much that matters, even in technology.  However, Jobs has always had some huge blind spots that have influenced his product design often times for the negative.  For instance, why in the world would you design a phone/music player/web browsing/communicating device on power-sucking 3G networks without a replaceable battery?  Well, the added thickness to support a replaceable battery offended Steve’s aesthetic notions.

Perhaps only Jobs could pull this off.  He was truly a master showman without equal.  I had the interesting opportunity to speak immediately after him one time.  This was at the Gartner PC conference around 1990, when Jobs was at NeXT.  He was our lunchtime speaker and gave this amazing product demonstration.  Of course, large portions of it were smoke-and-mirrors but that didn’t really matter.  People had seen the future and wanted it now.  The only way I could get people in the room back paying attention to my session — which was about PC operating systems — was to ask two questions.  First, “how many of you want one of those?”  Virtually every hand in the room went up.  OK.  “How many of you are ready to standardize your company on those right now?”  Hands went (mostly) down and point made.  I hated to be the buzz kill but someone had to point out that the emperor had no clothing.

I’m sure Microsoft in particular but a lot of other players are hoping this is their opportunity.  Not that they’re wishing ill of Jobs, of course, but this is the opportunity to start the drumbeat “the (new) emperor ain’t the old one, and this one has no clothing.”  Can anyone continue the string of hits that Jobs has championed at Apple?  I’m not even sure Jobs himself could maintain this record.  Is COO Tim Cook the main to seize the mantle?  I don’t know Cook.  He’s clearly well regarded.  But to paraphrase Lloyd Bentsen of all people, “I know Steve Jobs.  I’ve been up on stage with Steve Jobs and Tim, you’re no Steve Jobs.”

This is clearly a pivotal time in Apple’s history.  They’ve been able to sustain above-market pricing in large measure because of the “Jobs factor.”  If their products receive greater scrutiny and are unable to sustain those price-premiums post-Jobs, it’s a new world.  And this, to me, is the likely scenario.  Welcome, competition.  Microsoft makes some inroads.  A few consumer electronics players (Sony?) are newly reinvigorated.  And we consumers benefit from new competition, more choice and freedom from the “Steve knows better” overhang.

Apres Idol, La Deluge: Text Spam Goes Mainstream

The New York Times today reports of a mini-uproar over AT&T’s decision to send a (free) text message to a large number of its subscribers, promoting American Idol (of which it’s a prominent sponsor).  Welcome to the next advertising battleground:  mobile devices.

This is a hugely attractive field for advertisers, offering key advantages over desktop-centric ad models (and I include laptops in that desktop-centric universe for the most part).  First of all, AT&T targeted the large number of people who had previously texted an Idol vote (along with “heavy texters”), thus obviously reaching a highly qualified group of people based on previous behaviors.  While it wasn’t the case here, mobile advertising increasingly offers the potential to exploit awareness of the user’s location and, particularly on SmartPhones, context (e.g., knowledge of calendar and contacts).

This is going to be an intricate dance.  Users treat their mobile devices differently than other computing platforms, considering it more “intimate.”  Thus, intrusions via spam-like communications, even if they incur no cost (as was the case with the AT&T case), are viewed more seriously than spam populating your email inbox.  Thus, the burden to deliver value is much higher on the mobile platform lest you risk offending users, not benefitting them.  On the other hand, users are increasingly going to have to understand that their value to a large portion of their personal “value chain” is predicated on someone’s ability to monetize the relationship.  In AT&T’s case, if they can’t increase your propensity to text message, you’re less valuable to them than someone who they can reach, and that ultimately will reflect how much you’ll pay for services (and products) and even what range of offers will be presented to you.

Welcome to the “ubiquitous eBay” world, one where we will be buying and selling privacy and information explicitly and implicity.  This AT&T dust-up is little more than a harbinger of things to come.  No one likes intrusions.  The challenge going forward will be how advertisers and merchants figure out how to turn these new customer outreaches into true value propositions for the user.  All it requires is a whole new approach to advertising, one with benefits to all parties.