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Category: Dear Industry
The Simple Shocking Failures of Microsoft Google Facebook Apple And Silicon Valley
Silicon Valley companies love to remind us they are on a mission to change the world. Perhaps, although I confess I’m slightly suspicious given their obvious relentless pursuit of funding, acquisitions, getting acquired, going public, and generating piles of cash.
And because so many things they offer us — things that really ought to work, every time, anytime, no questions asked — fail so miserably. This list, it seems, is endless.
Email gets a pass. Siri is so thoroughly ineffectual and so utterly counter to its advertising that I’m not even going to include it here. Wouldn’t be fair. Same with the industry’s tragic dependence upon advertising, which now litters nearly every real, physical, virtual and digital space any of us might occupy. But there’s far more than these, of course. My smartphone ought to know how I feel, right this moment. After all, what contains more data on me, about me, historical and present, than my smartphone? Know how I feel and play a song to match my mood, for example. That would be awesome. Only, that’s asking for too much, I suspect. I mean, has Apple’s “genius” service ever worked for anyone, ever? I’ve received better music and movie recommendations from my mother — and she neither listens to music nor watches movies.
There may be unknowable failures, of course. Perhaps with Google and Amazon giving us so much for free in return for using their service, we are creating a future America that believes everything should be offered at no price, or that profit is unnecessary to sustain a business, or that we are all entitled to something, anything, without ever paying for it. That’s a potential massive dependency failure. Only, I am merely concerned with the obvious failures. Those instances where some lone wolf at each of these companies should not have even had to point it out because it ought to have been so obvious to everyone involved.
Why is it that practically every single smartphone ever built can’t seem to recognize that the WiFi it is connected to isn’t actually connected to the Internet — so switch over to cellular, already! In a world where I can tweet from a jet 30,000 feet above the ground, this should not ever happen.
Any site that demands I first log-in using Facebook is a failure — and an affront to decency. Imagine any physical retail store doing the same. Similarly, any site that allows us to log-in using our Facebook credentials should not ever receive more than confirmation of our identity. Our location, contacts, friendships and long history on Facebook should not ever be handed over without our explicit and ongoing consent.
Too often, Instagram videos fail to play on my iPhone. On my Mac, Twitter Vine videos fail more often than they work. I’ve stopped clicking on Vine links, in fact.
Printing from an iPhone or iPad is a joke.
Windows 8 — and I promise you, I am no Microsoft hater — is so inexplicably, almost painfully user-unfriendly that, and I am serious here, every other thing Microsoft has done right, and every other thing they have achieved, and despite all their money, and ignoring the ascendency of iOS and Android and the rise of iPad in the workplace, the breadth and scale of of the Windows 8 OS failure is such that it could literally take down the entire company. Microsoft could absolutely afford to be years behind in the smartphone wars and could absolutely drop billions and billions more on online services and go through a succession of just terrible post-Ballmer CEOs and could be outright hostile to the consumer market — if such a thing exists — and they could still dominate the enterprise for at least another generation. Except…Windows 8 is so shockingly hard to use, so determinedly strategy over function that I now believe it’s a very real possibility that Bing will be worth more than Windows before this decade is out. I say this absolutely as someone who wants this great American company to thrive — and as someone who fully believes that Microsoft’s singular UI strategy and flat “live tiles” design is still the right one. As someone who cares, I cannot emphasize this enough: fix it.
It’s a failure for my hometown that Amazon somehow gets away with selling billions of dollars of goods without charging its customers sales tax.
It’s a failure that I can’t have my “smartphone” ignore every single call that does not include the number and person (or business) calling.
Has Eddie Cue every actually used iMessages? Or Maps?
When Jony Ive flies from San Francisco to London, at what point does his iPhone batter fail him? For me, it’s much too soon.
In return for a never-ending wave of our most personal information, Google promises us instant, usable search results. Yet when I enter “Brian S Hall” I am instantly offered 286 million results. That is a stupid failure.
That the entire tech sector has done next to nothing to make it so we don’t all have to pay near-criminal prices to HP and Canon for printer ink is a massive failure.
Similarly, it remains far too hard to move the pictures from my smartphone onto my computer(s) and to the cloud, and back again, and share them with exactly who I want. Probably every single user on the planet wants this, deserves this, and still can’t have it. Fail.
How is all this possible? Is it because for too many of the indicted companies, they believe that historic marketshare is an excuse? Or that free equals just good enough? Or that they will eventually get to it? Yet Google thinks I might get inside their driverless car?
With all the data Google collects on us — who we are, where we go, what we search, what we buy, going back forever — how is it that the only predictive service they can offer is Google Now? Which is little more than the weather and local bus schedule.
Why does Facebook insist on curating my newsfeed despite my repeated requests to give me everything, most recent to least, in order, every single time? If Mark Zuckerberg can’t trust me with that gushing flow of information, perhaps I shouldn’t trust him with the drip drip drip of my personal data.
It’s the second decade of the twenty-first century and far too much that comes out of Silicon Valley is broken. This makes me suspect everything they say and do. Yes, obviously, I want world peace, an end to hunger, longevity, joy and prosperity. But until the industry can get the tiny features of our most popular technological products actually working properly, those will have to wait.
Why Internet Sales Taxes Are Inevitable
Later today, the U.S. Senate will consider, and probably pass, a bill that allows states to collect sales taxes on online purchases shipped from other states. Though its fate in the rabidly anti-tax House is uncertain, sooner or later this bill or something like it will become law. And it’s about time.
The taxation of online, and earlier, mail order, sales has long been a mess. In 1992, the Supreme Court said that states could only tax the sales of companies that had a physical presence (or “nexus”) within their jurisdiction. The court recognized this would cause a lot of problems and more or less begged Congress to fix them, a pleas that has gone unanswered for two decades.
Beyond general anti-tax sentiment, two arguments were raised against allowing states to impose taxes. One is that complying with the crazy quilt of state and local sales tax rules and rates was simply too complicated for sellers. The second, which arose with the birth of 0online commerce in the late 1990s, was that taxation could kill a promising new form of business in its cradle.
The first argument is still being made, most vociferously by eBay. But it no longer makes much sense. A database can quickly tell a merchant whether a given product shipped to a given address is subject to tax and at what rate. And at a time when Amazon.com is threatening to devour traditional retailing, the argument for infant-industry protection is ridiculous.
Indeed, it is the success of Amazon and other online sellers that make new tax rules inevitable. As long as out-of-state sales consisted mainly of Land’s End polo shirts and L.L. Bean duck boots, the loss of taxes was annoying to states, but tolerable. No more. I’m probably ahead of most shoppers, but if it’s not something I have to check out physically, if I don’t have to try it on for fit, and if it isn’t perishable, I buy it online. Yesterday, I received four separate shipments from Amazon (one of them actually a book, albeit a used volume I would have had great trouble finding in a store.) With shoppers flocking online, states can no longer forgo the revenue.
The Senate bill would let the jurisdiction where the buyer lives collect the taxes. Adam Thierer of George Mason University’s Mercatus Center favors an alternative system where taxes would be collected by the seller’s state. This does have the advantage of being considerably simpler for sellers, since they would only have to pay taxes to their home jurisdictions and would only have to follow one set of rules. But I fear it would lead to large-scale gaming of the system, with sellers rushing to establish headquarters in the few states, such as Oregon and New Hampshire, that do not impose sales taxes. (Thierer argues that competition among states to attract business with lower rates would be a good thing.)
The complexity of having to distribute tax collections to hundreds of state and local governments is a legitimate complaint about the coming system. But I suspect the ingenuity of American business will spring to the rescue with the development of services that will handle the chore for you. Come to think of it, who would be better able to use its cloud computing expertise and vast knowledge of state and local tax regulations to provide such a service than Amazon?
The School Standards Debate: Time for Tech To Weigh In
Tech people are very fond of whining about the U.S. educational system, complaining that it is not producing the sort of workers they need. With a few notable exceptions–Bill and Melinda Gates and Dean Kamen come quickly to mind–the are much less good when it comes to doing anything about the problems of schools.
OK, here’s your chance. It won’t even cost you anything–calls for better education seem to die quickly in places like Silicon Valley when the talk turns to taxes–except some leadership.
The Common Core State Standards are the most important school reform to come along in many years. The standards fo mathematics and language arts lay out what we expect students to learn, year by year, from kindergarten through high school. They are not a curriculum, but a set of mileposts for what curriculum should cover, and they inject a badly needed dose of rigor into education. If you have any interest in K-12 education, you should take the time to read them here.
Despite a studied effort by their authors and sponsors at the National Governors’ Association and Council of Chief State School Officers to avoid political pitfalls, the standards have come under increasing attack from both the left and right. CCSS was initially adopted by 48 states and the District of Columbia, but three states have withdrawn their support and their is pressure in many others to do the same.
On the left, opposition to CCSS is closely tied to opposition to standardized testing, based on the assumptions, not necessarily warranted, that the standards will lead to increased testing. The anti-testing advocacy group FiarTest argues:
More grades will be tested, with more testing per grade. [No Child Left Behind] triggered an unprecedented testing explosion (Guisbond, et al., 2012). The Common Core will compound the problem….
Lured by federal funds, states agreed to buy “pigs in a poke.” The new tests do not yet exist except for a few carefully selected sample items, so it is not possible to judge their quality. Nevertheless, states are committing large sums of taxpayer money for the equivalent of “vaporware”—much hype, little substance. New drugs must be carefully tested before release lest they do more harm than good. Yet, these new measures are being pushed through with at most one year of trials. There’s no guarantee that they will function as advertised and many reasons to believe they will not.
The argument that more study is needed is especially pernicious. CCSS has been in development for more than a decade and, unlike the radical math and science curriculum reforms of the early 1960s (remember New Math?), the new standards are mostly a compilation of best practices already in use. Then there’s the obvious paradox of demanding more evaluation while opposing the testing the could provide the data. (The National Education Association and the American Federation of Teachers, which oppose the use of standardized tests to assess teacher performance, both are on the record in support of CCSS.)
But the truly fevered opposition to CCSS is coming from the right, and this is what is threatening implementation in the states, largely through interference by state legislatures. The main objection, despite evidence to the contrary, is that CCSS represents a federal takeover of local education. Then there’s the complaint that CCSS is both untested and that the government is trying too hard to test it. Tiffany Gabbay, writing on the conservative site The Blaze, syas:
According to the conservative think tank American Principles Project, Common Core’s technological project is “merely one part of a much broader plan by the federal government to track individuals from birth through their participation in the workforce.” As columnist and author Michelle Malkin has pointed out, the 2009 stimulus package included a “State Fiscal Stabilization Fund” to provide states incentives to construct “longitudinal data systems (LDS) to collect data on public-school students.”
With attacks, often ill-informed (or completely uninformed; many of the people attacking CCSS show no sign of any knowledge of what they contain) coming from all sides, CCSS could use some friends, and I think its time for the tech industry to step up. I am much more familiar with the math standards than language arts, both because it is my area of interest and because by the nature of the beast, the language arts standards or vaguer and harder to interpret. The math standards, if properly implemented, would represent a huge step forward. They aim both at increased computational skills, largely deprecated in the standards in use for the past 25 years, and deeper understanding of the connectedness of critical topics in mathematics. Curriculum based on these standards should produce students better able both to do math and to think more deeply and critically.
This is exactly what tech companies is looking for in its future labor force. So instead of complaining about the deficiencies of American students, get out there and work for some constructive change.
Dear Industry: Focus on Profit Share Not Market Share
The interest in the tech media world around market share is fascinating. Each quarter reports come out, for the quarter only, pointing out different vendor and software platform market share for things like tablets and smartphones. As interesting as it is to look at market share of hardware and software platforms, it is more interesting and relevant to look at profit share–a metric I think is more important.
Apple is perhaps the best example in this metric as a recent statistic points out. Asymco shared that in the smartphone segment Apple obtained 73% of operating profits, Samsung 26% and HTC 1% while everyone else lost money. Apple continually captures significant profit share of the markets they compete in, and to Apple profit share is more important than market share.
A common thread of thought in the tech industry, which I believe seriously lacks perspective, is that industry history will repeat itself to the degree that a platform will have the majority share of a market for a long period of time. What I truly believe many are waiting for or looking to happen is for the “open platform” like Google or Windows will rise to dominate the market since open should always win–a premise I reject. If anything I would place my bet on the closed system in a pure mature consumer market.
In my last Dear Industry column I pointed out many reasons why I don’t believe history will repeat itself. My whole argument is based on other consumer goods in other mature markets where there is simply not a dominant market share leader. Again this is true because consumer preference drives segmentation in mature markets.
If you look at other companies in mature or post mature markets like consumer goods or automobiles, you find that each of them focus more on operating efficiency in order to maximize profit share. Of course they would love to see their market share increase dramatically but in post mature markets consumers are driven by personal preferences. Consumers driven by personal preference know what they want and why they want it. Because of preference driven choices, market share shifts simply don’t happen often due to preferences being established. Think Coke and Pepsi, or Mercedes and BMW, or Nike and Adidas.
There are, of course, a number of differences between the computing market and consumer goods. But there is something about consumer markets that I think is interesting that may shed light on how to focus on profit share over market share.
A Deeper Look at Consumer Preference
What is interesting about consumer preference is that it is largely subjective. Although their preferences become refined over time that refinement often comes from subjective perceptions rather than objective ones.
To what extent subjective refinements around personal preference take place over time as consumers shop for computing products is yet to be determined. However, as the market for products like smartphones and tablets matures; I have a hunch that many early perceptions and experiences happening currently with technology products will shape future consumer preference.
On that point, a common foundation shaping consumer preference is the experience they have with a brand, product, or service. If consumers have a poor experience with a brand, product, or service, it becomes increasingly difficult to win them back. The importance of first impressions with consumers can not be overstated.
Understanding consumer preference is a key to understanding how to focus on profit share.
Create Features of Value
The second key point to drive better profit share is to focus on creating features consumer segments find valuable. If you look at any mature product strategy striving for profit share you find that the strategy is to maintain price but layer on features with each new product generation.
The key to that specific product strategy within a segment is to identify value and anticipate future value through research and development. Companies that do that well continually introduce new features that the market segments they are focusing on find valuable. Creating features of value is one of the better strategies to maintain a desired price within a segment and to avoid a race to the bottom.
Specifically in regards to the computing segment it is important to create products that do things better than other products on the market. Right now I am seeing a number of smartphone vendors start do this around the camera. The HTC One X for example is touting several features specific to the camera that is differentiated from the pack. For this strategy to work a “better” camera needs to be perceived as a feature of value that is important enough to sway consumers.
In an increasingly segmenting market feature centric products and product experiences are key to sustainable differentiation. When this strategy is employed it creates a better foundation to focus more on profit share of a specific segment.
Of course operating efficiency is key as well to drive better profit share. But both of the above points of understanding consumer markets and focusing on creating valuable products and experiences will shape operating decisions all the way down to the supply chain.
A strong argument can be made that by focusing on profit share by creating valuable features and experiences could lead to better market share. My overall point is that the right way to approach strategic product and roadmap decisions is to focus more on strategies that drive profit rather than market share.
Companies that employ a market share only strategy run the risk of gaining no market share and making no money.
Dear Industry: History Will Not Repeat Itself
I have noticed an interesting thread of conversation both with some industry folks as well as in the media. That thread is around the assumption that the technology industry will repeat itself and a dominant platform will emerge and command the lion’s share of the market. I understand why many people would assume that this would be the case, but I would encourage more discussion around the topic. History might not repeat itself—at least not the way they think.
This assumption that history will repeat itself also lies at the core of why people keep making a big deal about market share statistics. Since market share does not equal profit share, the only reason we would make a big deal of it is if we are looking for the dominant platform to emerge. If we are to assume history will repeat itself and we are anxiously waiting for the dominant player to emerge, then I would fully understand why market share is such a big deal. However, I do not believe history will repeat itself and here is why:
First of all this industry (the computer industry), quite frankly, is not old enough to assume that history is cyclical. In fact, the majority of this industry’s computing history has been in the enterprise. Only in the past 5 years or so, I would argue, have we moved to a mature consumer market in personal computers.
We have a slide in one of our big picture industry trend presentations where we start out by saying that we are in the middle of a 50 year journey. The first 25 years was about bringing computing to business customers and the next 25+ years is about bringing computing to the masses. Given that perspective, it is difficult to say that the way the industry operated during the past 25 years or so by developing technologies largely for enterprises customers, is going to operate the same way going forward in bringing computing to the masses in every corner of the earth.
Using history as their guide, many who believe it is cyclical will point out a trend within product categories to start out vertical, then go horizontal, then back to vertical. Since this happened in the category of Mainframes, Mini Computers, and now personal computers it is easy to think that the vertical-horizontal-vertical trend is an industry truth. However, if we truly analyze the cycle it is clear it is more a product category truth rather than an actual industry truth. In the case of Mainframes and Minis toward the end of the product life-cycle they generally ended vertical and stayed that way.
The reason for this is because the vertical-horizontal-vertical product path is the same path a technology takes as it moves from creation-standardization-maturity. In the beginning when a new category or technology is created there is a flood to create similar yet different products. It begins vertical and fragmented. Soon after a standard emerges, which is when the life-cycle goes horizontal the single standard drives the market to maturity at which point it then begins to fragment again and trend vertical. As interesting as that factoid is the real evidence lies in understanding mature markets.
Understanding Mature Markets
In all case studies the dominant platform is only dominant until the market matures. This is perhaps one of the best ways to understand how it is possible that Microsoft’s Windows OS is actually losing market share and Apple’s OSX is gaining market share. When markets mature they fragment and open up the doors for differentiated vertical players to succeed and begin to forge their own market share. Below is a slide depicting how this happened in automobiles.
What you will see (or recall if you remember) is that the shape of the mid-sized car (embodied in this photo by a Toyota Corolla) was the dominant look and feel of a car. They mostly looked the same as the market was maturing and consumers were figuring out their needs, wants, and desires with this product. However as the market matured and consumers became familiar with these kinds of cars, they wanted ones that were more suited to their needs, wants, or desires. When this happened, design variation opened the door to fragmentation so the dominant shape and form of an auto began to break up into segments. Thus the luxury, economy, SUV, Mini-Vans, Trucks and more segments of the market were born.
The fact of the matter is the consumer market is so large that it can sustain quite a bit of consumer choice rather easily. It is for this reason that multiple technology platforms, segments, and ecosystems can remain in the market and all retain healthy market shares. Take for example the chart below showing US automobile market share by brand in 2010.
I show this slide to show how a mature market that has segmented with a plethora of consumer choice all differentiated around form factors and preference can be sustained. Notice in this chart that there is not a clearly dominant brand or automobile platform. This is because the market for automobiles is mature and can sustain a healthy mix of variation.
Now with those charts in mind take a look at the chart below with a breakdown of OEM Vendor market share from earlier this year. Keep in mind some of these numbers have changed but the changes up or down have not been drastic.
When you break down Smartphone market share by OEM it looks very similar to the US automobile OEM market share. Now some may be questioning the comparison between the automobile market and the personal technology market, however, I would argue they are very similar. Both are very personal choices based on personal preference. The automobile industry is 30+ years further along in its industry cycle therefore I believe provides many of the fundamental market elements to shed light on what the future of the personal computer industry may look like. Namely one by which there is not a dominant platform or hardware vendor but one that can sustain a healthy diversity of consumer choice.
In part two of this series we will dive deeper into a smarter discussion about how to think about vendor market share and platform market share going forward.
Part 2: Dear Industry, Focus on Profit Share not Market Share
Dear Industry: We Owe Steve Jobs a Standing Ovation
Last night we learned of the passing of Steve Jobs, one of the most visionary and innovative leaders this industry has ever and perhaps will ever see. Because of all that Steve Jobs has meant to this industry we thought it appropriate to have our second installment in the Dear Industry series take a quick look at how much this industry owes to this master innovator.
It would be hard to imagine what this industry would have looked like had Steve Jobs and Steve Wozniak never dreamed up their vision for personal computing.
Steve was the only tech executive who had an eye for design and understood technology then married them together to create some of the most iconic products we have today.
Steve Jobs understood that innovation isn’t always about pure invention. Whether or not he invented a particular technology or took what existed and made it better, more useful and more valuable, he was constantly innovating.
He was the ultimate super user or super consumer. He had an un-matched discerning sense of what people wanted with technology before they knew they wanted it. I call this the forward thinking experience and Steve Jobs was an expert at it.
With his vision and leadership Apple never reacted to the trends they always set them.
He was the chief visionary, not just of Apple but of the entire technology industry. His products have challenged and inspired others to be better. He put massive pressure on any and all competitors and challenged them to raise the bar.
He helped create this industry and as a result created value with nearly everything he touched. His innovations made new industries, companies, jobs and more possible.
A great many people employed in the technology industry owe their careers to Steve Jobs.
If we had a technology hall of fame he would be a first ballot inductee and he would of course receive a well deserved standing ovation from the entire technology industry.
Dear Industry: Dare to Differentiate
Why should I (or anyone) buy your product or service over another? This is one of the most important questions any company in business should be asking. Right now it seems in the consumer and personal electronics industry too many executives answer that question with “price”. Their thinking is “My product costs less therefore it is the more desirable option.”
The only problem with that answer is that it is fundamentally flawed, particularly when a product or service competes in a market that is mature or post-mature. In mature product markets there is significantly more happening during the purchasing process.
The reason price is what most companies in the personal technology industry is because price was what drove the explosive growth over the past 10-15 years. However now that the market for PC’s is mature and smart phones and tablets will mature very quickly. Strategically thinking through product differentiation will be central to the innovation and product planning process.
Understanding Mature Markets
In a mature market differentiation is everything. This is true for the simple reason that in a mature market most consumers know what they want in a product and shop accordingly. As a product or category goes through the maturation cycle consumers first purchase helps to familiarize them with the product for the first time. This is happening now with smart phones and tablets.
Consumers are experiencing their first or second smart phone and their first tablet. This will continue to be case for the next few years as these categories mature. After owning one or two product generations consumers begin to become more familiar with their desires for a product.
However the PC market is fundamentally different. Most consumers have owned at least one if not several desktops and or notebooks. Because of this they now know for the most part what they want and what they don’t want with a personal computer and they are shopping accordingly.
It is with this consumer mentality that differentiation is crucial.
This idea first hit me five years ago when I was doing some specific analysis around differentiation. I walked into Best Buy to try to get the consumer experience for shopping for a notebook.
What I saw was a line of notebooks spread across the computer aisle all looking roughly the same. They all ran the same OS with no clear value proposition in favor of one over another except for price.
So as I watched consumers come in and shop for notebooks what was the first thing they went up and looked at? The price tag. Price is important but it should not be the only value proposition of a consumer product.
In a mature product market consumers move to shopping from price to preference.
PC’s Are Now Like Cars
I use this analogy quite a bit but the automotive industry I feel is the best example of a post mature product market to study.
There are more examples of technology and automotive industry similarities than I have time to get into but we can look at a few.
When consumers shop for cars they already know what they want based on their needs or preferences. Do they prefer a truck, do they prefer a minivan, do they prefer an economy car, do they want to save gas, or do they want to drive in luxury. These are all pre-defined buying characteristics that consumers are self-aware of.
The automotive industry has segmented and each segment has its own unique needs, wants and desires.
Similarly with regards to the technology industry consumers are shopping for PCs and other devices based on preference. For some price is their preference, like an economy car, however that is not the only differentiation opportunity.
Hardware Differentiation is Not Enough
All of that context on mature markets and the automotive industry to say that hardware differentiation is simply not enough.
Apple differentiates itself in three vectors all working together. These vectors are hardware, software and services. Apple services differentiate their software which differentiates their hardware. Because Apple is vertically integrated and own’s every level of their differentiation they stand apart from the pack.
It is for this reason that some level of vertical-ization is necessary in order to compete going forward. It is also for this reason enabling technologies or middleware companies need to figure out how to help their hardware partners differentiate their products.
This is never more glaringly true of a problem than with Windows and with Android. Android and Windows are middle ware software providers that solve the software problem for hardware manufactures but add the problem of differentiation.
Devices running the same software can only be different through hardware. This is why in my scenario above when I was looking for notebook differentiation I saw all the notebooks at Best Buy running Windows. None of them were really any different because of it.
Differentiation is no easy task in todays landscape. None the less the answer is innovation. Right now I see companies innovating looking through the rear view mirror rather than innovating with a forward-looking philosophy.
Dare to differentiate, dare to innovate and look to the future not to the past.
Read the First in the Dear Industry Series:
Dear Industry: The Series Introduction
Dear Industry: The Series Introduction
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