Quick Takes: The RIM Tragedy, Lame Market Research, Ebooks Closer to Tipping, Flip vs. Cisco, Google as Microsoft, Nokia and the Word "Primary"

Short thoughts on recent tech news...


RIM as Greek tragedy

I wrote last fall that I was worried about RIM's financial stability (link), but I never expected the company to start inflicting damage on itself.  RIM has always come across as a calm, dependable company.  Maybe not as flashy as some other firms, but reliable and smart.  But as we approached the PlayBook launch, the company has started to look like its own worst enemy.

It's clear that the PlayBook was designed initially as a companion device for people who have BlackBerry phones, and only those people.  That's an interesting choice -- not one I would have made, but I can see RIM's logic.  But apparently RIM decided late in the game that it needed to market the tablet to a broader range of customers.  It started talking up the features those users would need, without making clear that the features would not be included in the device at launch.  Many of the things the company has been touting -- such as Android app compatibility and the ability to check e-mail messages independently of a BlackBerry -- were not available when the device shipped.  RIM has been marketing vaporware.  That guarantees disappointed reviews that focus on what the device doesn't do, rather than what it does.  Check out Walt Mossberg's write-up (link).

While this has been going on, RIM co-CEO Mike Lazaridis has been compounding the problem by creating a personal reputation as a loose cannon.  His latest escapade was ending a TV interview with BBC when they asked about security issues.  The use of the word "security" was mildly provocative, but if you've ever dealt with the British press, you know they specialize in goading people to get an interesting reaction.  The more senior your title, the more they'll poke at you, to see if you can take the heat.

The way this game works, there are several techniques you can use to deal with an aggressive question.  You can laugh at it, you can calmly point out the flaw in the question, you can answer it earnestly and patiently, and you can even pretend not to understand it (I did that once on a UK TV show and it drove the interviewer crazy because he didn't have time to rephrase the question).  But the one thing you can't do is stop the interview.  If you do that, the BBC will post a clip of you online that makes you look like a gimlet-eyed prima donna (link).

The fact that Lazaridis did this means either he's losing personal control under pressure, or not being properly briefed by his press people, or both.  Whatever the cause, it is unprofessional, and it's making RIM's challenges harder.

If you want to understand the damage being done, you can read the forward-looking obituary of RIM that Slate just ran (link).  Or check out this column by Rob Pegoraro of the Washington Post (link). Rob's a very fair-minded, professional journalist who isn't given to hyperbole.  But he called Lazaridis' actions "profoundly foolish from any sane marketing perspective...Seriously, does RIM not realize whom it’s competing with? The company is all but begging to get crushed by Apple."

I haven't written off RIM by any means.  They have a huge customer base, a great brand, and a long history of overcoming skepticism from people like me.  I hope they can do it again.  But at a minimum, RIM's management needs to recognize that they do not have the marketing skills needed to play in the world of increased smartphone competition.  They need professional help, immediately.  And I worry that the marketing problems are actually symptoms of much deeper disorder within the company.


The lamest market research study of the year

It's still early in the year, but I think someone's going to have to work pretty hard to do a lamer market research study than Harris Interactive's EquiTrends survey of mobile phone brands in the US.  Harris says the survey indicated that Motorola has the most "brand equity" of mobile phone brands in the US, followed by HTC, Sony Ericsson, Nokia, and Apple.  Harris also provided a nice chart of the results (link):



There are a couple of problems here.  The first is that the reportedly best-selling mobile phone brand in the US, Samsung, was not included in the results (link).  Oops.

The second problem is that Harris doesn't directly measure brand equity (which is a pretty fuzzy concept anyway).  What it measures is "Familiarity, Quality, and Purchase Consideration."  Those three ratings were combined into an overall brand equity score.

So this is a made-up rating created through a mathematical formula that Harris hasn't shared with the public, as far as I can tell.  But Harris assures us that it's meaningful: "Those companies with high brand equity are able to avoid switching behaviors of those brands that lack brand equity."  (link).  So, according to Harris's research, people in the US should be switching from other phone brands to Motorola.

But in the real world, the exact opposite has been happening.  Motorola has been losing share.  The number three rated brand, Sony Ericsson, has barely any distribution in the US, so it doesn't have much share to lose.  The number four brand, Nokia, has lost most of its US share.

Harris argues that Apple's mediocre score is driven by the sophistication of the iPhone:  "There is still a large audience of consumers that aren’t interested in a smartphone running their life, and Apple doesn’t have a product to meet that need."  I think that's correct, but HTC also sells only smartphones, and it was ranked number two.

And oh by the way, what's the margin of error in Harris's survey?  I can't find it disclosed anywhere, but my guess is that it's several points plus or minus, in which case everyone except Motorola is in a statistical tie.  That wouldn't have made for a cool looking marketing chart, though.

It's been distressing to see websites pick up the Harris story and repeat it without questioning the results.  PC Magazine swallowed it whole (link), as did MocoNews (link).  A lot of other sites reprinted the Harris press release verbatim.  Even if you didn't dig into the flaws, the study ought to fail the basic sniff test of credibility -- does anyone really believe that HTC has a stronger brand in the US than Apple?

When I worked at Apple and Palm, we hated synthetic brand rating studies like this one (and the JD Power ratings, which are similar) because the results depend more on the secret formula used by the polling company than on the actual behavior of customers.  The polling companies construct these special methodologies because they can then sell long reports to the companies surveyed explaining the results, and also charge the winners for the right to quote the results in their marketing.  Check out the fine print at the bottom of the Harris press release: "The EquiTrend® study results disclosed in this release may not be used for advertising, marketing or promotional purposes without the prior written consent of Harris Interactive."  I don't know for sure that Harris charges to quote the survey, but that's the usual procedure.

The lesson for all of us is that you should never accept any market research study without looking into its background, even if it comes from a famous research company.


Ebooks: Here comes the tipping point

The continued strong sales of iPad, Kindle, and Nook in the US are bringing us steadily closer to the tipping point where it will pay an author to bypass paper publishing and sell direct to ebooks.  The latest evidence is from the Association of American Publishers, which reported that ebooks made up 27% of all book revenue in the US in January-February 2011 (link).  AAP correctly pointed out that the ebooks share was raised temporarily by people buying ebooks to read on all of the e-readers they got for Christmas.  The share will go down later in the year.

Still, at any share over about 20%, it will be more economical for an established author to self-publish through ebooks (where they can retain 70% of sales revenue) rather than working through a paper publisher (where they get at most 15% of revenue).  When we hit that point on a sustained basis, I expect that a lot of authors will move to electronic publishing quickly.

It looks like we'll hit that point sometime this year or next.


Flip aftershocks

Silicon Valley has the attention span of a toddler in a candy store, but it was interesting to see how people around here lingered on the story of Flip's demise several days after the announcement.  There were dark suggestions of ulterior motives at Cisco -- that they had bought the company to strip it of its intellectual property (link) or that they shut it down a viable company only so they could look decisive to Wall Street (link).  And that was just the stuff in the press.  I've heard even more pointed speculation from people working in Silicon Valley.

My guess is the real story is a lot more complicated and nuanced, but at this point it doesn't matter.  Killing Flip may have helped Cisco with Wall Street analysts, but the sequence of buying Flip and then shutting it down has seriously damaged the company's image in Silicon Valley as a leader and a partner.  Silicon Valley is a very forgiving place.  You can make huge strategic mistakes, and waste billions of dollars, and still you'll be forgiven as long as you did it in sincere pursuit of a reasonable business idea.  But Cisco's senior management is now viewed as either overconfident to the point of stupidity, or as the deliberate torture-murderer of a beloved consumer brand.  I've rarely seen this level of hostility toward a management team, and I don't think they will be forgiven anytime soon, if ever.

Does that have any practical impact on Cisco's business?  Not immediately; business is business.  But it will probably be a little harder for Cisco to make alliances and hire ambitious people in the future.


Google 2011 = Microsoft 2000?

It's spooky how Google is sometimes starting to remind me of Microsoft circa 2000.

The latest incident was a quote from a Google executive saying that the company wants iPhone to grow because Google makes a lot of money from it (link).  Microsoft used to say the same sort of thing about Apple, claiming that it made more when a Mac was sold rather than a Windows PC (link).  (The idea was that many Microsoft apps were bundled with Windows at low cost, whereas Mac customers bought Microsoft apps at retail.)
   
In both cases, the statements may be technically true, but what they really point out is that the company has deep internal conflicts between its various business units.  Yes, part of Microsoft wanted to make Macintosh successful, but another part of Microsoft wanted to kill Macintosh.  Microsoft as a whole wanted to do both at the same time, which created internal confusion.  Add in antitrust lawsuits by governments and Wall Street pressure for quarterly growth, and Microsoft quickly became distracted, inwardly focused, and slow-moving.

Parts of Google, I'm sure, think iPhone is great and want it to grow.  But I guarantee that the Android team is trying to kill iPhone (and Nokia, and HP/Palm).  Google has its own set of government distractions, plus a big old lawsuit from Oracle, plus legal action by Microsoft and Apple against Android licensees. 

There are huge differences between Google and Microsoft, of course.  Google is not under the same sort of Wall Street pressure that was applied to Microsoft, and Google's founders have not lost interest in running the company. 

But it's disturbing to see how quickly some of Microsoft's symptoms are showing up at Google.


Hey Nokia, how do you define "primary"?

Microsoft and Nokia said they have finalized the contract for their alliance.  There were a couple of interesting tidbits in the announcement:

--Both companies said they completed the negotiations sooner than they expected.  Usually that sort of statement is hype, but for an agreement of this size, it actually was a pretty fast turnaround.

--They went out of their way to say that Nokia will be paying royalties for Windows Phone similar to what other companies pay.  That's important legally and for regulators, so companies like Samsung can't complain that Microsoft is giving discriminatory pricing.  At the same time, the announcement also made it clear that Microsoft will be passing a ton of money to Nokia for various services and IP, which Nokia wanted on the record to help with its investors.  I think the net effect will be that Nokia gets a free Windows Phone license for a long time.  That will not please Samsung, HTC, and the other Windows Phone licensees, because it puts them as a price disadvantage.

--The companies are apparently cross-licensing a lot of patents.  I wonder if this will help Nokia with its IP warfare against Apple.

--In an interview with AllThingsD (link), Microsoft and Google Nokia said Windows Phone was Nokia's "primary smartphone operating system." That leaves open the door for Nokia to play with other smartphone operating systems, and it leaves completely unanswered the question of tablets.  I'm sure the Symbian/Meego fans will be all over that as a ray of hope for their platforms, but to me it just leaves some prudent wiggle room for Nokia in the future.  I'd love to know how the agreement defines the words "smartphone" and "primary" -- or if it even has definitions for them.

(Note: Edited on April 22 to fix an embarrassing typo.)

The Real Lesson of Cisco's Billion-Dollar Flip Debacle

Cisco announced that it's closing down the Flip camera business and revisiting its other consumer products.  With a purchase cost for Pure Digital (maker of Flip) of over $600 million, and now restructuring charges of $300 million (link), the total cost of Cisco's failed consumer experiment is probably north of a billion dollars, making it one of the larger business debacles in Silicon Valley in the last few years.

Most online analysis of the announcement doesn't really explain what happened.  The consensus is that Flip was doomed by competition with smartphones, but that says more about the mindset of the tech media than it does about Cisco's actual decisions.  I think the reality is that Cisco just doesn't know how to manage a consumer business.

There are important lessons in that for all tech companies.

Here are some samples from today's online commentary:

Gizmodo (link):  "The Flip Camera Is Finally Dead—Your Smartphone’s Got Blood on Its Hands."

Engadget (link):  "Cisco CEO John Chambers says the brand is being dispatched as the company refocuses, done in by the proliferation of high-definition sensors into smartphones and PMPs and the like."

ReadWriteWeb (link): "Single-purpose gadgetry has no place in today's smartphone-obsessed world."

ArsTechnica (link):  "Flip can't be faring well against the growing number of smartphones with built-in HD cameras. The quality of your typical smartphone video camera is comparable to the Flip, and people have their phones on them all the time."

Computerworld (link):  "More and more people are using their smartphones to take lower-quality video...the market for low-cost small video cameras that produce quick-and-easy videos is dead."

There's an old saying that when all you have is a hammer, every problem looks like a nail.  We need a similar proverb for news analysis -- when you're obsessed with smartphones, every market change looks like it was caused by them.

But did smartphones alone kill Pure Digital?  Two years ago, it was the most promising consumer hardware startup in Silicon Valley.  It had excellent products and a rabid customer base.  Two years later, it's completely dead.  That's a lot to blame on phones.  Plus, Cisco appears to be moving away from driving consumer markets in general.  The Umi videoconferencing system is being refocused on business, and Cisco CEO John Chambers said, "our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network's ability to deliver on those offerings."  In other words, we'll be working through partners rather than creating demand on our own (link).

Smartphones didn't cause all of that.  But they did play a supporting role in the drama.  They commoditized Flip's original features, putting the onus on Cisco to give it new features and innovations.  As Rachel King at ZDNet pointed out (link), Cisco failed to respond:

"The technology of Flip never really evolved since then, making it a very stale gadget. Sure, even once Cisco picked up Flip, new models continued to come out each year. Yet Cisco dropped the ball by never pushing further with Flip. It never moved beyond 720p HD video quality, and it never got HDMI connectivity."

Presenting a stationary target is enough to doom any consumer electronics product.  For example, what would have happened if Apple had stopped evolving the iPhone after version 1?  You'd have no app store, no 3G.  Today we'd be talking about iPhone as a cute idea that was fated to be crushed by commodity competition from Android. 

Just the way we're talking about Flip.

The important question is why Cisco failed to rise to the challenge.  Why didn't it innovate faster?  I don't know, because I wasn't there, but I'm sure the transition to Cisco ownership didn't help.  It was not a simple acquisition.  Cisco didn't just buy Pure Digital and keep it intact, it merged the company into its existing consumer business unit, which was populated by consumer people Cisco had picked up from various Valley companies in the previous few years.   Some of the key Flip managers were given new roles reaching beyond cameras, and there must have been intense politics as the various players jockeyed for influence.

Then there was the matter of Cisco's culture.  I had a great meeting at Pure Digital several years ago, prior to the merger.  They were housed above a department store in San Francisco, in a weird funky space with lots of consumer atmosphere.  The office was surrounded by restaurants and shops.

In contrast, visiting Cisco is like visiting a factory.  Every building on their massive campus looks the same, with an abstract fountain out front, the walls painted in muted tans and other muddy colors.  The buildings are surrounded by an ocean of cars.  The lobbies are lined with plaques of the company's patents, and the corridors inside have blown-up photographs of Cisco microprocessors.  In the stairwells you'll usually see a couple of crates of networking equipment, shoved under the stairs.  And all of the cubicles look the same.



The Cisco campus.



A typical Cisco building.

Cisco is an outstanding company, and an excellent place to work.  But it screams respectable enterprise hardware supplier.  To someone from a funky consumer company, going there would feel like having your heart ripped out and replaced with a brick.

Then there were the business practices to contend with.  As an enterprise company, Cisco is used to long product development cycles, direct sales, and high margins to support all of its infrastructure.  A consumer business thrives on fast product cycles, sales through retailers, and low margins used to drive volume.  Almost nothing in Cisco's existing business practices maps well to a consumer company.  But it's not clear that Cisco understood any of that.

The transition to Cisco management happened at a terrible time for Flip.  Just when the company's best people should have been focused obsessively on their next generation of camera goodness, their management was given new responsibilities, and Cisco started "helping out" with ideas like using Flip cameras for videoconferencing -- something that had nothing to do with Flip's original customers and mission.

If Pure Digital had remained independent, would it have innovated quickly enough?  Maybe not; it's very hard for a young company to think beyond the product that made it successful.  But merging with Cisco, and going through all of the associated disruptions, probably made the task almost impossible.

I'm sure that as the Flip team members get their layoff notices, we'll start to hear a lot more inside scoop.  But in the meantime, this announcement by Cisco looks like a classic case of an enterprise company that thought it knew how to make consumer products, and turned out to be utterly wrong.

That's not an unusual story.  It's almost impossible for any enterprise company to be successful in consumer, just as successful consumer companies usually fail in enterprise.  The habits and business practices that make them a winner in one market doom them in the other.

The lesson in all of this: If you're at an enterprise company that wants to enter the consumer market, or vice-versa, you need to wall off the new business completely from your existing company.  Different management, different financial model, different HR and legal.

You might ask, if the businesses need to be separated so thoroughly, why even try to mix them?  Which is the real point.

The other lesson of the Flip failure is that we should all be very skeptical when a big enterprise company says it's going consumer.  Hey Intel, do you really think you can design phones? (link)  Have you already forgotten Intel Play? (link)

I'll give the final word to Harry McCracken (link):  "You can be one of the most successful maker of enterprise technology products the world has ever known, but that doesn’t mean your instincts will carry over to the consumer market. They’re really different, and few companies have ever been successful in both."

Right on.

The Five Most Colossal Tech Industry Failures You've Never Heard Of

The tech industry is famous for forgetting its own history.  We're so focused on what's next that we often forget what came before.  Sometimes that's useful, because we're not held back by old assumptions.  But sometimes it's harmful, when we repeat over and over and over and over the mistakes that have already been made by previous generations of innovators.

In the spirit of preventing those repeated failures, I spent time researching some of the biggest, but most forgotten, failures in technology history.  I was shocked by how much we've forgotten -- and by how much we can learn from our own past.


5. Atari Suitmaster 5200

Video console manufacturer Atari was notorious for its boom and bust growth in the 1980s.  The company's best-known failure was probably the game cartridge ET the Extraterrestrial, which Atari over-ordered massively in anticipation of hot Christmas sales that never materialized.  Legend says that truckloads of ET cartridges were secretly crushed and buried in a New Mexico landfill.

What's much less well known is that Atari was also involved in the creation of an early motion-controller for home videogames, a predecessor of Microsoft's Kinect.  Since video detection technology was not sufficiently advanced at the time, the Suitmaster motion controller consisted of a bodysuit with 38 relays sewn into the lining at the joints, plus 20 mercury switches for sensing changes in position.  The suit was to be bundled with the home cartridge version of Krull, a videogame based on the science fiction movie of the same name.

A massive copromotion was arranged with the producers of Krull, and Atari made a huge advance purchase of Suitmaster bodysuits and cartridges.  Unfortunately, development was rushed, and late testing revealed two difficulties.  The first was that the suit's electromechanical components consumed about 200 watts of power, much of which was dissipated as heat.  That may not sound like much, but imagine jamming two incandescent light bulbs under your armpits and you'll get the picture.  There were also allegedly several unfortunate incidents involving mercury leaks from broken switches, but the resulting lawsuits were settled out of court and the records were sealed, so the reports cannot be verified.

The Christmas promotion was canceled, but Atari didn't give up on the Suitmaster immediately.  The next year, it was repurposed as a coin-op game accessory, allowing the user to control a game of Dig Dug through gestures.  Sadly, Atari's rushed development caught up with it again.  Due to a programming error in the port to Dig Dug, under certain obscure circumstances when Dig Dug got flamed by a Fygar the suit would electrocute the player.  (The bug was discovered by an arcade operator trying out the game after hours, in what is now memorialized in coin-op gaming circles as The Paramus Incident).  That was the last straw for Atari's corporate parent, Warner Communications.  To limit its potential liability if a Suitmaster were to fall into public hands, Warner arranged to have the entire inventory chopped up and mixed into concrete poured into a sub-basement of the Sears Tower in Chicago, which was then undergoing renovation.   A small bronze plaque in the third sub-basement of the Sears Tower is the Suitmaster's only memorial:


 

4. eSocialSite.com

Before Facebook, before MySpace, even before Friendster, the most successful social networking site on the web was eSocial.  Largely forgotten today, eSocial thrived in the late 1990s as usage of web browsers took off on PCs.  By 1998, it had reached more than 50 million users worldwide, an unheard-of success at the time.  Its Series A fundraising in 1999 raised more than $132 million from a consortium of VCs led by Sequoia Capital.  Many people still cite eSocial's Super Bowl ad in January 2000, which featured a singing yak puppet, as a classic of the dot-com bubble era.  When the company went IPO in February 2000, its stock price made it the 23rd most valuable company in North America.

Unfortunately, just two months later, it was revealed that 99.999974% of eSocial's registered users were fake people simulated algorithmically by a rogue eSocial programmer.  The other 13 were middle school students from Connecticut who were technically too young to sign up for the service.  eSocial was sued for allowing underage users, which delayed critical service upgrades for several months.  By the time the litigation was resolved, Friendster had seized the initiative, and eSocial was quickly forgotten.

eSocial found a second life overseas, though, and today it is still the leading social site in several former Soviet republics in Central Asia.  The founders of eSocial have long since left the company, and today are active in Wikidoctor.org, a promising new site that enables people to crowdsource the diagnosis of diseases and other chronic health problems.
   

3. The cardboard aeroplane

It's an unfortunate fact that wartime is a great stimulator of innovation.  Desperation leads countries to try all sorts of crazy ideas.  The successful ones become famous, while the failures are usually forgotten.   For example, you don't hear much today about Britain's World War II plan to turn icebergs into aircraft carriers (link).

Even more obscure was the effort to create an aircraft from cardboard.  One of the greatest bottlenecks in aircraft construction during the war was the shortage of aluminum feedstock.  Britain could not expand aluminum production quickly enough to meet its needs, so it attempted to substitute the output from the Empire's massive Canadian paper mills.  The idea of a cardboard airplane sounds crazy at first, but cardboard can be incredibly rigid in some directions (as you've found if you've ever tried to smash a box for recycling).  Through the proper use of corrugation in multiple directions, the British found that they could create a material with the same tensile characteristics as aluminum, with only slightly greater weight.

Early flight tests of the cardboard aircraft were not encouraging, as the first two test planes broke up suddenly in mid-flight.  Subsequent investigation revealed that water was infiltrating the corrugations, and then freezing when the plane reached altitude.  The expansion of the ice caused the cardboard to delaminate, resulting in failure of the airframe.

But the engineers persevered, sealing the cardboard with paraffin wax to waterproof it.  These new models successfully completed flight tests in the UK, and were demonstrated for Winston Churchill in 1943, who endorsed them enthusiastically. 

The new aircraft were deployed to North Africa, where another unfortunate problem appeared: the paraffin melted in the desert heat, causing the planes to wilt on the tarmac.  Needless to say, this limited their effectiveness.  The British engineers persevered, eventually creating a new waterproofing scheme utilizing used cooking oil.  This not only waterproofed the planes, but also made them smell like fish & chips, a definite plus to homesick British airmen.  Unfortunately, wartime supplies of cooking oil in Britain were limited, and by the time alternate supplies could be imported from the America South, the war was nearly over.

The cardboard airplane disappeared into history, but its spirit lives on (link).


2. The microwave hairdryer

The 1950s and 1960s were the golden age of innovation in electronics.  Companies like HP, Varian, and Raytheon created amazing new devices, often adapted from wartime technologies.  One example was the microwave oven, which was derived from radar.

But microwaves were once used for a lot more than cooking food.  My dad worked in the electronics industry at the time, and he often told me stories about the remarkable new product ideas he worked on.  One was the microwave hairdryer.

Today we're frightened of microwaves because they're "radiation," and that's assumed to be bad.  But in the 1960s people understood that microwaves had nothing to do with nuclear radiation.  They were just another tool that you could use to get things done, like arsenic or high voltage electronics.  Engineers at my dad's employer (which he asked me not to name) were looking for new ways to use microwaves to solve everyday problems.  Someone noted the number of hours women spent under rigid-hood hairdryers, used to finish the elaborate hairdos that were prevalent in the 1960s, and realized that a microwave hairdrying helmet could do the same job in just 45 seconds -- creating a massive increase in national productivity.

Unfortunately, the microwave hairdryer ran into a series of technical problems.  The first was that the microwaves caused metal bobby pins and hair clips to arc, which frightened customers and gave their hair an unattractive burned smell.  That was solved by substituting plastic clips.  The second problem was that the microwave frequency that couples best with wet hair is very close to the frequency that couples best with blood plasma.  This required some precise adjustments to the three-foot-long Klystron tubes that powered the hairdryers.  If they were jostled there was a very slight risk of causing the client's blood to boil (although this never actually happened in practice).

The technical problems were eventually resolved, but the death knell to the microwave hairdryer was something no engineer could fix: a sudden change in hairstyles in the late 1960s.  The move toward long straight hair, frequently unwashed among younger people, caused a collapse in the hairdryer market, from which it has never recovered. 

There was an abortive attempt to create a microwave blow dryer in the 1970s, but it was pulled from the market when it caused LED watches to burst into flame.


1. Apple Gravenstein

During the Dark Years when Steve Jobs was away, a rudderless and confused Apple Computer churned out a long series of failed initiatives.  Their names echo faintly in tech industry history:  CyberDog, Taligent, Kaleida, OpenDoc, HyperCard, Pippin, eWorld, emate, A/UX, the 20th Anniversary Macintosh, Macintosh Portable, QuickTake, the G4 Cube (oh, wait, Steve did that one), Newton, and so on.

But the most catastrophic failure was the one Apple worked hardest to hush up, the project called Gravenstein.  Simply put, Gravenstein was Apple's secret project to produce an electric automobile.

In the late 1980s, Apple was growing like a weed, but the driver of its growth was the Macintosh product line initiated under Steve Jobs.  John Sculley and the rest of Apple's senior management team were concerned with securing their historical legacy by doing something completely different.  Sculley, noting the chaos caused in the world economy by the oil embargo of the 1970s, chose to focus on the creation of an all-electric car.  Michael Spindler, ironically nicknamed "Diesel," was chosen to manage the production of the vehicle.  Bob Brunner drove the overall design, but Jean-Louis Gassee was asked to do the interior, on account of he's French and has good taste.

Apple used its Cray supercomputer to craft a unique teardrop aerodynamic shape for the car.  Apple purchased all the needed parts, and planned to begin production in its Fremont, California factory.  To prepare the market for the car, Sculley started working automobile references into Apple's advertising.  The most famous of these was the "Helocar" advertisement (link).   If you watch the ad closely, you can see actual diagrams of the Gravenstein's design and aerodynamic shape, although of course the first version of the car was not intended to fly.

Unfortunately, the public response to the Helocar ad was so overwhelmingly negative that it frightened Apple's Board of Directors.  Sculley was ordered to scrap the Gravenstein project, and all documents related to it were shredded and then burned.  Although Gravenstein never came to market, its legacy affected Apple's products for decades to come.  The Macintosh Portable, for example, used bulky lead-acid batteries that were originally intended to power Gravenstein.  And many years later, Jonathan Ive reused the Helocar's aerodynamic shape in the design of the original iMac.




Those are my five top little-known tech failures of all time.  What are yours?  There are many other candidates.  Honorable mentions should include Leonardo da Vinci's steam-powered snail killer, Thomas Alva Edison's notorious electric bunion trimmer, spitr.com, and of course Microsoft Bob.

You can draw many lessons from these failures, but to me the most important lesson of all is that you can't trust blog posts written on this particular date.

Posted April 1, 2011

Quick Takes: Nokia's culture, RIM's interface, and living in the paradigm of engineers

This post is an experiment.  I sometimes run across information that I think is worth sharing, but that doesn't fit into my usual publishing tools.  Generally it'll be something too complicated to tweet, but too simple for one of my usual long blog posts.  I've decided to try compiling those tidbits into an occasional post, which I call "Quick Takes."

Please let me know if you find this useful.

This time I want to talk about the aftermath of the Nokia-Microsoft deal, Android on BlackBerry, wireless insecurity, and WikiLeaks as a model for the future of human society.


More aftershocks from the Nokia-Microsoft deal

In the flood of commentary about Nokia's deal with Microsoft, I ran across three items with interesting perspectives on the deal.  They helped me understand how much work Nokia still needs to do.  If you're interested in the deal, or just in organizational change, I think they're worth checking out...

The engineering-driven culture.  Adam Greenfield, a former Nokia employee, discussed Nokia's culture and explained how it produces wonderful mobile phone devices but poor user experiences (link).  The key sentence:

The value-engineering mindset that’s so crucial to profitability as a commodity trader is fatal as a purveyor of experiences.

When I've written in the past that Nokia needs to learn how to do real product management, this is what I was trying to say.

This is how it feels to have an alliance dumped on you.  Meanwhile, if you want to get a sense of how corporate alliances get built, check out Engadget's interview with Aaron Woodman of Microsoft (link).  Aaron is a Microsoft spokesman and a key player in the Windows Phone team, so you might expect him to know chapter and verse about the plans for the alliance with Nokia.  But he doesn't, and you can feel his discomfort as Engadget tries to pin him down on some details:

Q:  There will be no preferential treatment given to Nokia in terms of the level of customization that they can apply to their devices. Is that correct, or no?
A: So it's an interesting question -- you say, like, preferential treatment, so say more about that. Is that like oh, they can modify...

The reality is that a big corporate alliance is created from the top down.  Senior management negotiates the broad outlines, and then announces the deal (because it's material to both companies and has to be announced to prevent insider trading).  Then the mid-level employees have to painstakingly work out what the agreement actually means.  I believe that's happening as you read this, and that process will probably continue for some months.  Meanwhile, Aaron can't answer most of Engadget's questions because the answers don't yet exist.  I give him a lot of credit for not trying to make up something to make himself sound better.

Anyway, if you see some vagueness from Microsoft and Nokia in the next few months, don't be alarmed.  It's how these things are done.

When is an installed base not an installed base?  I've been delighted to watch the rise of Horace Dediu, a former Nokia employee who has built himself a huge online following through very cogent analysis of Apple, and now the overall mobile market.  Although I usually find myself agreeing with everything he says, I thought he was a bit off base in some recent commentary about Nokia (link).

Dediu plotted the installed base of every mobile platform, and pointed out that Symbian has a far larger installed base than any other mobile platform.  He said Nokia has decided to throw away that installed base:

The disposal of such a large installed base must count among the largest divestitures in technology history and, when coupled with the adoption of the least-tested alternative as a replacement, elevates platform risk-taking to a new level. It may seem bold, but there is a fine line between courage and recklessness.

If all of those Symbian users understood that Symbian was their OS, had purchased applications for it, and felt that Symbian added value to their devices, then Nokia would indeed be taking a huge risk.  But virtually the only people who were even aware of Symbian were the people reading and writing blogs about the mobile industry.

Try this -- go look at a typical Nokia Symbian phone.  What is the brand you see on it?  Start the software, launch some apps.  Do you see the word "Symbian" displayed prominently?

Have you ever seen an ad for Symbian?  A billboard perhaps, or a big glossy ad on the back cover of the Economist?

Maybe a teensy little text ad inside the Economist?  Anything?

Indeed not.  Because Nokia didn't want the name Symbian to be prominent.  Heck, it didn't even let Symbian create its own user interface, let alone advertise its brand.  Nokia made Symbian into anonymous plumbing, because Nokia wanted Nokia to be the brand that users bought.  And considering how things worked out, that was something the company did right.

When I was at Palm and we surveyed mobile phone users, we asked Symbian users what OS was on their phones.  Most of them had no idea.  Among the minority who said they knew what their OS was, more of them thought it was Windows than knew it was Symbian.

Let me say that again, more Symbian users thought they were using Windows than knew they were using Symbian.  I guarantee that hasn't changed in the years since we did our surveys.

So, if Nokia executes its marketing properly, it should be able to flip most Symbian users to Windows Phone easily.  Just grin, tell them it's the cool new Nokia smartphone, and move on.  In that vein, the riskiest thing Nokia has done in the past couple of weeks is play up its deal with Microsoft.  It would have been better to play it down, so Nokia customers wouldn't get a message of disruption.

But I doubt most of them are listening anyway.

If there's anything reckless in the Nokia-Microsoft deal, it's the huge number of things that both companies need to execute very well in order to make it work.  But I think there's nothing reckless about the basic idea of ditching Symbian.


Android apps on BlackBerry?

There have been persistent rumors that RIM is trying to get software that will let its PlayBook tablet run Android apps (link).  Now there's some evidence that they may be looking to do the same on BlackBerry phones as well (link).  This seems like a reasonable thing to do, but I'm astounded that they're only working on it now.  The time to plan the app platform for your tablet is when you're creating the software for it, about a year before it ships.  It's not the sort of thing you dink around with a couple of months before shipment.  And you especially don't tell the public about it right before the hardware launches -- all that does is undercut any chance you had of getting native app development on your platform.


Wireless isn't secure (duh)

This isn't news if you've been paying attention.  For years the security companies have been telling us that wireless networks (especially wifi) can easily be snooped.  I'm not sure why the wireless insecurity story has never gotten much traction outside the beltway.  Maybe we weren't using enough web apps to care, or maybe no one listens to the security companies because they're presumed to be alarmists who just want to charge you $49.95 a year for something that'll make your computer run slow.

Anyway, it seems to me that the story is now popping up all over the place.  In December the Wall Street Journal ran a series on the information collected by mobile apps (link), this week The New York Times ran a story on the third party tools available to hack wifi hotspots (link), and a professor at Rice University posted on the types of data his class could sniff from his Android phone (link).  A surprising find -- two apps unrelated to location services were broadcasting his GPS location.

Why is this significant?  The mobile operators plan to offload traffic to wifi to reduce network congestion.  If those networks turn out to be insecure, the operators might be blamed for security breaches that result.  Or if more wifi networks are restricted due to security fears, the operators might find it harder to do that offloading in the first place.  Bottom line -- it is risky to depend on someone else's infrastructure as part of your core product.


WikiLeaks: Human society as designed by an open source engineer

O'Reilly ran a fascinating review of Inside WikiLeaks, a new book describing how WikiLeaks operates (link).  It reminded me of some thoughts I had after I heard a talk by Ward Cunningham, one of the creators of the wiki (link).

Most of the social structures in the world today were designed by two groups of people, religious leaders and lawyers.  The religious leaders gave us governments based on moral codes and hierarchies; the lawyers gave us governments based on laws, property, and checks and balances.  In both cases, the people creating the system built into it their own worldviews, their own assumptions about human nature.  The assumptions were so fundamental that I think they didn't even realize they were using them; they just baked them into the system.

Wikipedia, WikiLeaks, and movements like them are profoundly new because they attempt to structure society around the social assumptions of a third group of people: engineers.  And not just any engineers, but open source engineers.  That culture believes in the rationality of human beings and the existence of absolute truth.  It assumes that if the same information were available to everyone we'd be able to settle all disputes through logical discourse.  And it is intensely hostile to authority structures, because by definition they're assumed to get in the way of free discussion.

WikiLeaks is an attempt by that culture to restructure society.  I know that sounds crazy, but here's a quote from the book:

In the world we dreamed of, there would be no more bosses or hierarchies, and no one could achieve power by withholding from the others the knowledge needed to act as an equal player.

If you want to see this idea taken to its logical extreme, check out the short story "The Ungoverned" by science fiction author Vernor Vinge (it's online here).  I'm not saying that's the world we're headed for, but I think we'd all be foolish to assume that WikiLeaks will be the last attempt at open source social engineering.

I think it's actually just the beginning.

The Info Pad Creeps Closer

It's hard to believe that it's been four years since I first wrote about the idea of an info pad.  I thought for sure we'd have one by now, but to my immense frustration it's still not here.  We're gradually getting closer, though, so I think this would be a good time to revisit the idea.

As I explained in my original post on the subject (link), the info pad is a small tablet computer designed not for consuming content but for managing the information needs of a knowledge worker.  It's a business tool, not an entertainment device.  It has a stylus, so you can take notes and sketch on it, but it also acts as an extended memory, letting you access your old files, messages, contacts, and other important documents.

Mike Rohde drew a picture that captured the idea well (link):



For people who work with huge amounts of information, the info pad is a Holy Grail device.  It's the extended memory that captures what you're doing during the day, and lets you easily recall anything you need to know, whenever you need it. 

We studied the info pad idea when I worked at Palm.  There was a big audience for it, very distinct from the people who buy mobile devices for entertainment or communication.   Unfortunately, Palm got into financial trouble before we could do anything about it.  Since then I've tried twice to pull together a startup to build one.  The result was always the same: many people loved the idea (I can't tell you how many venture capitalists wanted to be beta testers).  But no one wanted to fund it, because hardware startups are viewed as incredibly high risk in Silicon Valley.  I was told to go to the big hardware companies and convince them to build it, but when I tried they were all focused on copying each other rather than creating anything new.

So I settled back and waited, figuring someone would eventually build it.  And I waited.  And waited. 

I'm still waiting today.


Signs of hope

Lately we've started to see some devices that raise my hopes.  The info pad isn't here yet, but I wonder if we're starting to see the first hints of it on the horizon.

The first is the Boogie Board, a tablet device that's literally a replacement for a dry-erase board.  It has a touch-sensitive monochrome screen, so you can write on it with a stylus, finger, or any other object.  Like a dry-erase board, you can't save pages or do much of anything else with them.  So it's not even close to an info pad.  But it currently sells for just $40 on Amazon, showing that basic tablet technologies can get to extremely low prices (link). 




A step up from Boogie Board is NoteSlate (link).  It's a tablet note-taker that works a lot like a piece of paper.  Like Boogie Board, it has a monochrome screen (no grays) and you write on it with a stylus.  Unlike Boogie Board, you'll supposedly be able to save pages, and share them with others via wifi.  The online illustrations of the NoteSlate prototype look nice, although text on its monochrome screen looks a bit blocky (I'd be a lot happier with smaller pixels and grayscale, so you could do some subtle anti-aliasing of lines).



This closeup shows the graininess of the writing in the mockup device.  The right software, and a better screen, can fix those jaggies.

The price will supposedly be $99, although that model may not include wifi.  It's hard to tell exactly what NoteSlate will do because it's not shipping yet, the developer is located in the Czech Republic, and the company's website is written in broken English.  Here's a sample:

Sorry if we were not able to response sooner all the great emails. When we have been preparing year ago all this, about bit weird NoteSlate device, we hoped this kind of exciting story becomes real, real product. We are going to make this thing real, also thanks to you, to produce open-source NoteSlate device and create unique NotesLate handwritten network. For 99$.

You don't have to speak good English to create a great product.  But the fact that the company can't afford to get an English native speaker to edit its website implies that it has very few resources.  That will make it hard to finish the product, let alone get it into retail distribution.  I'm amazed that such a small, early-stage company has managed to get so much press coverage.  Some websites even speculate that the product may be a hoax (link).  I was able to find an interview in Czech with the product's designer, Martin Hasek, and he gives some more details on the plans.  You can read Google's translation here.

NoteSlate has been nominated for an Index award, a design competition based in Denmark.  The online nomination gives more details on the product (link).  Reading between the lines, it looks like Martin is a designer who cooked up the NoteSlate idea.  He's apparently working with Albumteam, a Czech company that sells an electronic photo viewing tablet (link).  And there was a hint that the manufacturing might be done by another Czech company, Jablotron (link).  At this point I'm struggling to interpret auto-translated Czech blog posts, which is not a great way to get information, but that tells you how difficult it is to find hard details on NoteSlate.  (If anyone reads Czech and can give a better translation, please post a comment.)

The bottom line, I think, is that NoteSlate may be real, or may be caught in limbo.  When I was trying to get the info pad idea funded, I toyed with the idea of announcing it, getting people excited, and then using the excitement to get someone to fund it.  That felt too much like a pyramid scheme to me, but it's a possible approach.


High hopes for the Flyer.  There are several other upcoming tablet devices that bear watching, including the mySpark education tablet (link), and the Kno dual-screen device (link).  It's very hard to tell if any of these will actually ship.  But the device that has me the most excited is one that I know exists: the HTC Flyer, a new Android-based tablet computer previewed earlier this month.  The Flyer is a seven-inch Android tablet, very similar in looks to the tablets coming from Samsung and Motorola.  But there's one crucial difference: the Flyer comes with a stylus.

That sounds like a simple change, but actually it's a profound difference.  The iPad and most Android tablets can't tell the difference between a stylus and a finger.  If you try to write on them with a stylus, the screen will also sense the places where your hand touches the screen, and you'll end up with multitouch confusion.  HTC has paid extra for a touch sensor that can distinguish between the stylus and your hand.  Touch it with the stylus and you'll get ink on screen; touch it with your fingers and you can swipe, pinch, or do anything else you'd expect from a touch tablet.

HTC has also added a note-taking application to the tablet, so you can write on the screen during a meeting and save your notes to Evernote.  You can also record sound during a meeting, in a process that reminds me of the LiveScribe pen.

None of this is completely new -- Microsoft has been pushing Tablet PC systems for note-taking for the better part of a decade.  But they were extremely expensive, complex, heavy, and had very short battery life.  If you want an example, check out Asus' new $999 tablet PC, the EP121 (link).  In contrast, the Flyer looks to be the first product that marries the good ergonomics and usability of an Android tablet with reasonable note-taking.

What's missing.  Unfortunately, the Flyer has several very significant drawbacks.  The first and most significant is its price.  There have been several reports that the Flyer will see for about 700 euros in Europe, which is about $950 in the US (link).  That's an outrageous price.  When we studied the info pad idea in the US and Europe, the top price most people were willing to pay was about $499, and the demand sweet spot was $299.  At $950, the Flyer is going to be compared to full-function notebook computers, and it won't come off well in those comparisons.  Next to a notebook, it has very little memory, no keyboard, and few apps.  The price makes it an interesting curiosity for technophiles, not a mainstream product.

Maybe HTC is hoping for a big mobile operator subsidy that will make the Flyer more affordable.  Or maybe it's planning to strip out some features.  The announced version of the Flyer has a 3G cellular radio built into it, which increases its cost.  HTC says a WiFi version will come out later.  That might cut as much as $100 from the parts cost, which could translate to a couple of hundred dollars retail.  But still that would leave the device at $750, which is vastly too expensive.

I am also worried about the marketing of the Flyer.  HTC is positioning it as an ideal device for gaming, browsing, productivity, communication, and just about anything else except making espresso (link).  The message reminds me a lot of the old Palm LifeDrive (link), and we know how that worked out (link).

It's very easy for tech companies to fall into this sort of kitchen sink marketing, because they don't want to give up any possible customers.  But the messages tend to cancel each other out -- if the device is great for gaming and music, it sounds inappropriate for business productivity, and vice versa.  This also leads to bad design decisions.  If you build in graphics acceleration, 3D, HDMI video, dual cameras, and a stylus, the device gets too expensive for any single use.


Would your boss reimburse you for buying this?

It doesn't help that HTC has a clear case of iPad envy.  Their website even echoes some of Apple's iPad language:

Apple:  "A magical and revolutionary product."
HTC:  "HTC Flyer's magic pen transforms anything...Work or play, it's magic for the whole family."

The trouble is that Apple's already cornered the market on people who want a magical tablet experience.  HTC needs to play counterpoint to that, not imitate it.


Where the heck is Baby Bear when we need him?

I feel like Goldilocks.  Papa Bear (Tablet PC and Flyer) is too expensive and too loaded with features.  Mama Bear (Boogie Board and NoteSlate) is too limited.  What I want -- what's required to kick off the info pad revolution -- is a product in the middle on both price and features, optimized just for managing information.  At its current price, the Flyer is destined to sell very poorly.  When that happens, I hope HTC won't cancel the product.  Instead, it should strip out the 3G and the entertainment features, focusing it into a business tool that could sell for less than the magic $499 price point.  If Flyer doesn't survive, maybe NoteSlate or one of the other note-taking tablets will make it to market. I can always hope.

Once we get the right hardware, all we'd need would be the right software to make the info pad a reality.

We don't have the info pad yet, but we're getting closer. I am cautiously hopeful that I won't have to write this post again in another four years.

This is why it's so much fun to do business with the mobile operators

"Quite frankly, we’re happy that we’re not first to market with the iPhone."--Dennis Strigl, Verizon COO, 2007 (link)

"I don't think Verizon needs the Nokia and Microsoft relationship."--Tony Melone, Verizon CEO, 2011 (link)

There's a backstory to this.  Verizon sells CDMA phones, a technology which Nokia dropped years ago.  Microsoft jerked Verizon around on the availability of the Kin phone last year.  So Verizon doesn't love either company.  On top of all that, Verizon has always been a lagging adopter of new phones.  It has a reputation for doing more testing than the other operators, and doesn't mind being late on a product or technology.

Still, the quotes are very revealing of an almost subconscious arrogance that I often see in operators around the world.  They view their customers as possessions who are allowed to buy only the phones that the operator chooses to offer.  The operator sits in the middle and extracts money from everyone.  What Melone's really saying is that Microsoft and Nokia will have to pay him a lot of money in order to have the opportunity to sell phones to Verizon customers.  Never mind what the customers might want; all that matters is what the vendors do for the operator.

This is why the operators love the increasing competition between smartphone platforms.  It gives them that much more leverage to play them off against each other.

Picture yourself as a smartphone company trying to deliver a great new phone to customers.  What do you do about these restrictions?  It puts a lot more pressure on your financials and your ability to execute -- you need to create a strong brand through heavy marketing, and create products so iconic that people will demand them.

And if you're a phone customer looking to choose whichever phone you want?  The situation varies around the world.  In some places, phones have to be sold separate from mobile service.  That gives the greatest customer choice.  In many areas, you can buy a phone and then switch SIM cards to use a different network, but you lose the operator subsidy on the phone.  So it costs you hundreds of dollars to exercise freedom of choice.  But Verizon doesn't even support that level of choice, so you are stuck with only the phones that Verizon allows you to buy.

The options for Verizon customers:  Change operators (if you can find another one with coverage in your area).  Change the law to mandate free choice of phones.  Or change countries.

Impact of the Nokia-Microsoft Alliance: Welcome to the Five-Platform World

Like a big collective cow, the blogosphere is continuing to chew on the Nokia-Microsoft announcement.  It seems to be one of those rare events that forces people to stop, step back, and reconsider their assumptions.

I think it's impossible to say today what impact the Nokia-Microsoft alliance will have, because we don't know how well Nokia will execute.  If Nokia executes poorly, there won't be any change at all -- both Microsoft and Nokia will continue to gradually decline in mobile.  If Nokia executes well, I think the impact could be pretty big.  Not asteroid-killing-dinosaurs big, but a very large meteorite, with effects felt worldwide.

For the purposes of this note, I'm going to assume that both Nokia and Microsoft will execute well.  That's a risky assumption -- they would not have formed this alliance if they had been executing well in the past.  But for today we'll give them both the benefit of the doubt.


How many platforms can we stand?

Ignore the hype from Nokia about the "third platform."  The reality is that we're on track to end up with four or five significant smartphone platforms in the US and Europe: Apple, Android, RIM, Windows Phone, and HP/Palm if their new products are excellent.  Japan as usual will be very different, and I don't think all five players will be equally active worldwide.

You might ask if the market can accommodate five platforms.  There's a school of thought that says the smartphone market is destined to go the way of the PC market -- eventually almost everyone will coalesce on a single platform that has the most applications and licensees.  If that's how smartphones are destined to work, nobody seems to have told the customers.  Platforms with small numbers of apps (RIM in particular) have continued to sell well.  Also, back when I was at Palm and we had far more apps than any other mobile device, it didn't let us destroy Pocket PC, or RIM, or Symbian.

I think apps do matter in smartphones, but so far they appear to matter less than they do in PCs.  Without any apps, a PC is useless, whereas most smartphones ship with a lot of functions built in: voice telephony, texting, e-mail, browser, camera, etc.  Third party apps are more gravy than steak, at least for now.

So maybe the magic number is two platforms.  In marketing, many experts believe customers can hold only two major brands in their heads for any market: a leader and a challenger.  Think Coke and Pepsi, Hertz and Avis, Airbus and Boeing.  On the other hand, there are plenty of markets which have dozens of competitors.  Automobiles, for instance.  You can have huge numbers of successful brands there because the market is heavily segmented -- Rolls Royce doesn't compete with Mini Cooper.

I believe the number of smartphone vendors and platforms is going to depend on the actions of the smartphone companies themselves.  If they treat smartphones like a single consolidated market, a shakeout is probably inevitable.  If they segment the market, creating brands and devices that serve different groups of customers differently, I think there's room for all the platforms to survive.

Unfortunately, at this point most of the smartphone companies are focusing only on slavishly copying Apple.  Even RIM, a company with differentiated communicator products, is trying desperately to turn them into iPhone clones.  That's a great strategy to ensure commoditization and market dominance by Apple.

Since we're giving Nokia the benefit of the doubt today, let's assume they create differentiated products that help to segment the market.  I think that would stimulate other handset companies to do the same thing, leading to a relatively stable multiplatform world.

Here's what that means to the rest of the industry...


For the Android licensees, there will be intense competition for shelf space

In a five platform world, I think it'll be hard for all of the Android licensees to survive.  Picture your typical Verisprint store a couple of years from now (Vodorange if you're in Europe).  It probably carries three iPhone devices, because Apple has diversified its line.  There are a couple of RIM devices with keyboards.  We're assuming Nokia and Microsoft are successful, so there are a couple of Nokia smartphones on display.  Since we're giving the benefit of the doubt, we'll also assume HP has paid big comarketing dollars to get two of its devices shelved.  That's nine smartphones.  How much space is left for Android models?  I figure maybe two or three devices, split between Samsung, HTC, Motorola, SonyEricsson, LG, etc.  Life gets very uncomfortable for a couple of those companies.

Or maybe they get lucky and a RIM or HP gets knocked out of the picture.  That would leave space for more Android vendors.  But the Android licensees can't control that -- they're counting on Google to drive one or two of the other handset platforms out of business.  Is Google prepared to fight that sort of alley knife-fight against an HP or RIM, companies that might otherwise be Google partners? 

Android was a fun product for Google when all it meant was bleeding Microsoft.  But it eventually made Apple into an enemy, and now Nokia.  HP is next, and RIM will come after unless it licenses Android.  Is that the lifestyle Google wants?  I doubt it.

By the way, I think the Android shelf space problem is one of the reasons why Nokia went with Microsoft rather than Google.  Nokia has more control over its fate as a Windows Phone vendor, and it knows Microsoft is willing to do anything to win.


What happens to the other Windows Phone licensees? 

It's really hard for me to picture them sticking with the platform in more than a token fashion.  They avoided Symbian because it was a stacked deck in Nokia's favor; I think Windows Phone now looks the same.  The only way they'd invest more is if Nokia's WinPhone products started to take off strongly in a couple of years, and they were afraid of being left out.  I presume that's what Microsoft is counting on (it's how they dealt with IBM in PCs).


Can HP really be the fifth platform? 

HP is by far the weakest of the five mobile platforms.  Although it has a great legacy, it has neglected its developers tragically and its products are late.  The recent HP event shows it still has a legacy of goodwill in Silicon Valley, and you can't count out the world's largest PC company.  But HP's success depends on great execution.  If its products are timely and deliver on their promises, I think it has a good shot.  I am especially impressed by the things HP wants to do to link its products together (another on the long list of things Microsoft fumbled years ago).

But can HP execute?  It's been steering a zigzag course in PCs.  For several years it invested heavily in differentiation, and hired a lot of former Apple staffers.  But in the last year it laid off many of those people, killed its advertising campaign, and focused on Acer-style price competition.  Now suddenly HP is talking like it wants to go back to being a differentiated premium vendor.  That sort of inconsistency will be deadly when competing directly with the other smartphone platforms.

I can't figure out if the HP guys are Jedi knights or middle-aged paunchy men playing with plastic swords.  Based on history, I'm about 60-40 in favor of the plastic swords.


For the mobile operators, all of this produces immense happiness

Sometimes it's better to be lucky than good, and the Nokia-Microsoft deal is a huge stroke of luck for the operators.  They have always wanted the handset vendors to be barefoot and pregnant, too weak and divided to fight with them for control over phone customers.  A five-platform world is immensely attractive to them because the platforms can be played off against one another.  If RIM gets too uppity, you can just tip the product mix toward HP, or vice-versa.

The downside of this for the operators is that five platforms are a lot more work to support.  So they'll have conflicting temptations -- carrying more platforms gives them more leverage, but adds to their costs.  I think the biggest operators will choose the leverage; Verizon proved that it's not healthy to be cut off from a successful platform, and you can never tell which one is going to be successful next. 


For app developers, there will be more pain

The prospect of a five platform market is a nightmare for developers.  It's already hard to support two platforms (Apple and Android); the idea of supporting five is a logistical nightmare.  Most developers will focus on one or two, but that limits their potential revenue because the available market is smaller.

This situation favors large established developers that can afford to do ports to all the platforms.  Unfortunately, large software companies are usually the slowest to innovate, so I fear the net result of a five-platform world is likely to be less innovation in mobile apps.

There will probably be intense interest in cross-platform development environments that let a developer write once and deploy anywhere.  The platform companies will resist, and probably governments will eventually get dragged into the debate as they are asked to define what constitutes restraint of trade in an online app marketplace.

The one silver lining might be if the platform vendors start to compete for developers by giving them benefits -- for example, by loosening restrictions in their app stores, and taking a smaller cut of revenue.  I hope that will happen, but it's not enough to make up for the fractured development platform.


What it means to Nokia: A chance to survive

Although Europe is really a collection of nations rather than a single place, there are a few things that seem to tug on heartstrings across many European countries.  The Eurovision song contest is one, Airbus is another, and Nokia is a third.  It represents European style and marketing prowess, and it proves that people in Europe can lead a high-tech industry.  So the deal with Microsoft represents far more than a business deal; it feels like a betrayal of a European jewel at the hands of a rapacious American company.

It's important to understand what the alternative was for Nokia.  If the company had continued at current course and speed, the decline in gross margins would have put it close to breakeven this year, and it would have started losing money in 2012.  Things were already so bad that restoring 10% operating profit this year would require laying off about a third of the company.  Obviously the cuts won't be that severe because Elop is aiming at a multiyear recovery, but the numbers show how close Nokia was to a death spiral in which spending cuts and revenue declines start reinforcing each other.

Nokia was like a plane rapidly losing altitude.  If you don't pull back on the yoke in time, there's nothing you can do to avoid hitting the ground.  The company was very close to that point.

I believe Nokia's directors knew this when they hired Stephen Elop, and his charter was to restructure the company radically before the problems became unsolvable.  In that sort of situation, you don't ask what products you ought to save.  You figure out how much money you can spend, you make a prioritized list of everything you do, and you start cutting from the bottom of the list until your activities fit into the budget.

I think when Elop and the board did that exercise, all of Nokia's OS business was below the line.  They just couldn't afford it.

Although stepping back from OS is emotionally devastating to many Nokia employees and fans, I don't think it's necessarily bad for the company.  Operating systems are like plumbing; they don't actually add much value to the building, but if they're built wrong they can destroy it.  Symbian advocates talked persuasively about its superior power management and ability to run on low-cost hardware, but as far as I can tell that was never reflected in higher margins for Nokia smartphones.  Most Symbian users didn't even know the OS was there, and if they had they would not have paid extra for it.  Symbian was enormously complex and difficult to work with, and it cost Nokia a fortune.  According to Nokia's annual reports, it paid about $800 million when it bought Symbian, and it reportedly employed at least 2,500 Symbian engineers (link).  Those engineers probably cost about $500m a year, or about $5 per Symbian phone sold.

Nokia went into the OS business because it was afraid of depending on someone else's plumbing.  Now it's betting that Microsoft is weakened enough that it'll actually cooperate with Nokia.  Microsoft will reportedly end up paying Nokia more than a billion dollars to adopt Windows Phone (link), and Nokia can reassign the Symbian engineers to tasks that will actually differentiate Nokia's products.  The deal with Microsoft could end up being not a surrender for Nokia, but a liberation.

But as I've said before, it all depends on execution.  For the folks inside Nokia, things will feel worse before they feel better.  The layoffs are still to come, and until then it will be hard for employees to focus on their jobs.  Even after the layoffs are done, it will be a lot of months before Nokia can ship new devices designed to take advantage of Windows Phone.  Until then, Nokia is unlikely to reverse its gradual loss of share in smartphones. 

When I first held a Nokia n97, I was lost in admiration at how beautifully the hardware was put together.  Everything from the shape of the case to the motion of the sliding hinge screamed elegance.  Then I tried the software and I wanted to toss it out a window.  Nokia's smartphone task is now very simple: produce some great devices like the n97, marry them cleanly with Windows Phone, and partner with Microsoft to get them distributed as broadly as possible.

If Nokia targets those products at real customer needs, and differentiates them from the iPhone rather than just trying to top it, it has a good chance of creating the multi-platform future it's talking about.

It's not as much fun as conquering the entire tech industry, but it's a lot better than going broke.  And it's probably the only choice Nokia had.