Microsoft = IBM

When I started in the industry, sitting at my cubicle, reading email and trying to learn as much about the industry as possible there was a common joke that floated around: IBM. They were viewed as grey beards and very old school.  Where as Microsoft was defining the future with “A PC on every desktop and every home”, IBM were the guys who said, “Why would you want a computer in your home?”.  We were young, brash, cocky and arrogant.  We were the definition of your not worn down by life’s experiences and thing anything is possible, even the impossible.  The IBM guys, well frankly they needed a diaper change, in the old guy sense.  We seem to have come full circle since those days back in the late 80’s and early 90’s. In this down economy IBM just announced blow away earnings.  IBM seemingly over the past decade has rediscovered itself while Microsoft has become eerily kind of like IBM, going in a variety of disjointed directions.

For starters IBM back in the mid to late 90’s made a series of smart decisions under the direction of CEO  Lou Gerstner. There is a saying in the industry “No one was ever fired for hiring big blue”.  Lou understood this.  At the time IBM was involved in the emerging PC business and being looked at as the company to drive the industry vision forward.  the problem was that a lot of this “vision” involved consumers.  Consumers are not part of the IBM DNA.  IBM was an enterprise company.  It was after Lou did a speech on “The Network is the Computer” that Lou returned IBM to its roots.  Let IBM use technology to focus on where it can make in impact, the consulting business.  When Open Source  came along it was not a threat to IBM but an opportunity.  When Off shoring came along it was not a threat but an opportunity.  Anything that would require some type of consulting with cost savings, IBM could play.  For such a large company they have done a truly magnificent job.  Not getting caught up in technologies holy wars, just watching from the sidelines and seizing the opportunity.  Lou has since retired many moons ago but IBM keeps on moving forward.  In a complicated industry they have kept it simple and simply asked questions like, “Who are we” and “what do we do well”.

Microsoft, on the other hand, had pursued a path of complication.  A large part of that is Microsoft’s DNA is rather complex.  When Bill Gates was at the helm it was simple.  If there was a large opportunity that required a graphical user interface, that implied software and Microsoft had to play.  That is how they got into the phone business, the game business, television, the internet etc..  The challenge today is that the user interface has become rather pervasive.  It is everywhere and on all  the time.  It is in people’s home, at our schools, at work, where we shop, would be more difficult to name where it is not.  Microsoft has attempted to be everything to everyone, from Joe Blow on the street to the high-powered CEO in every Fortune 100 company on the globe.  It has led to a company stretched thin across the board.  When you look across the competitive landscape you have companies very well entrenched and defined as to who and what they want to be.  IBM is an enterprise company.  Oracle a enterprise software company.  Google wants to make information available anywhere at any time.  Nintendo does games.  Apple wants a soup to nuts consumer experience.  VMWare is about the enterprise and the cloud. Try making such an easy definition with Microsoft.

I believe Microsoft has entered its IBM moment and needs to rediscover itself so here is my list of what needs to be done:

  1. Kill the GE model:   SteveB really went into this hardcore phase of creating the Jack Welch GE model – which is essentially creating a bunch of silos where each division operates as its own entity and generates the next billion industry.  At the same time BillG was talking about integrated innovation.  This requires cross group collaboration. In the end it has created confusion  GE is not Microsoft and Microsoft is not GE.  Steve needs to find the Microsoft way.
  2. Unified Vision: Microsoft employees I talk with (and I talk to many) all have the same concern.  They can talk about their individual metrics but as to where the company is headed, in a meaningful way, they are being pulled by every new event.
  3. Create your own Events:  People get tired of one week it is Search, because search is hot, next week Cloud, because Cloud is hot, following week it’s Smartphones because Smartphones are hot – all the time following, all the time being late.  I rarely hear the discussion of the future  – it would be nice for Microsoft employees for a change to have Google or Apple chasing Microsoft.
  4. Think Big: The iPhone did not alter technology it altered our culture, that is simply how big the phenomena is.  the good news is it will happen again.  Windows 95 really ushered in the PC to the mainstream of day-to-day life, so Microsoft has a legacy of life changing technology.  People might say, the internet was the game changer.  they would be right.  But remember 90% of the world did it with Windows.
  5. Get Young and Focus:  Sorry Steve but if you want to compete leadership needs to change – starting at the top.  You know the industry but depending on what is decided it maybe time to have someone closer to the end customer.  It is time for a different viewpoint in et company.  That gets to my second point which is focus – Microsoft needs direction on what it wants to be and where is it going.  Can it be a consumer company?  An enterprise?  There are many more questions, and they all need answers.
These are tough issues to address because despite the problems and challenges you are still talking about a company that earned $62 billion in 2010.  My fear is with Apple seemingly on a straight line north and upward, will we have the quarter where revenues come in under and market share slips into the 80 percent range?  Microsoft’s IBM moment is upon them, is there a Lou Gerstner to ride in on his white horse and reinvent the company?  I believe we will see this sooner than anyone thinks.  I can only hope.
Good Night and Good Luck
Hans Henrik Hoffmann July 21, 2011

Facebook + Skype = Microsoft

One minute you’re a villain and an idiot named Steve Ballmer and the next you are a saint and a genius named Steve Ballmer. That is the way the industry flows. This past week, Facebook CEO and boy wonder Mark Zuckerberg announced something he dubbed, “awesome” and then proceeded to unveil video chat for Facebook using Skype.  Today Skype is in the process of being purchased by Microsoft for the paltry sum of $8.5 billion.  For Microsoft this Facebook announcement would strike either of pure genius or luck.  In any case it raises a lot of eyebrows as there is a lot to think about from the future of technology to the survival of Steve Ballmer.

When I think about the future of communications and how we are evolving, Facebook is a great place to look and ingest what is happening with how interact as humans.  Several months ago my old alma matter, Sammamish High School,  had its 25th year high school reunion for the Class of ’85 .  It was a bad day that was chosen (no fault of the organizer), the Friday of Thanksgiving weekend, not many people went, for obvious reasons.  I would have liked to have gone, but it just was not going to happen with all my family commitments. Later in May a bunch of my old high school buddies got together for a weekend get together and as we were walking on the beach we started talking about the recent high school reunion.  My old high school buddy Mark made the astute observation that Facebook has killed the high school reunion.  That is true.  I don’t need a reunion to hear about people from that pasts lives, I see and read about them every day.  It’s both great and sad, but technology keeps evolving making these societal changes happen. Bringing us up to date with the new deal between Facebook and Skype we may finally be on the brink of a new communications paradigm that will see live video streaming reach the masses.  The deal for Skype is huge as it gives instant access to over 600 million Facebook users.  It will be global in scope as Facebook is growing faster outside the US than in the US.  It will give users an old fashioned way to communicate in a new paradigm: face to face.  I must admit in today’s world of email, text messaging and social networking I miss the dynamic of taking the time to get together and talk, freely.  However maybe to a certain extent maybe this paradigm shift will bring face to face communications, back but in a different physical medium.

What should be interesting is to see how this “new” communication tool is used.  Facebook is great for reaching out to old friends, but it also allows you to reach out to those high school classmates I did not know (and in some cases I did not really want to know).  In short Facebook could become like my own personal phone book in the cloud.  Some of the things envisioned in science fiction novels and film may now be on the verge of being reality.  What will be cool is as the quality of streams get better we will have this full screen – no more little windows on our desktop.  We should have instant – on capabilities, meaning the moment a user accepts my request (in old terms, “answers the phone”) the video stream will instantly commence.  Keep in mind as great as technology is there are somethings it still does not as well as the technology it replaces, case in point are old lan line phones.  I have no doubt that eventually performance will be better and the experience, as is already evident will be much richer.  There will be a large amount of excitement in this new paradigm.

A big winner here could be my old employer, Microsoft.  They invested early in Facebook and now their recent acquisition, Skype, has a deal with the world’s most popular social networking site.  This could be a “killer” app for Facebook (ok..I am getting so tired of the term “killer” app).  I would caution senior execs at Microsoft against re-branding this with the “Microsoft” name.  I can hear the arguments already, “Microsoft is one of the worlds most recognizable brand names, who wouldn’t want this brand plastered all over their site?”  But an interesting study might be how do younger audiences view the name?  It’s never the first question that gets you to your answer but the fourth or fifth.  This deal could help Skype get into the stratosphere of mainstream technology, to be our phone service of the future.  It should be interesting if other services like Twitter, follow suit.  Leave well enough alone is my final verdict on this one, but internal corporate politics I am afraid will get in the way.  It’s hard t change things in your DNA.

Finally there is Steve Ballmer, the long serving Microsoft CEO, who is in desperate need of a win.  Both externally and internally.  Externally he has had 10 years of a stock that besides a meager dividend, has provided little value back to shareholders.  Internally he is loathed for his inability to provide a vision and strategic direction to the company and its employees.  The Skype purchase was initially considered overpriced and a waste of money by Microsoft, for a bunch of technology they already had.  This announcement by Facebook, already has reduced the pressure,as in has provided a little “panache” to an increasingly stale company.   It remains to be seen if long-term this could be a turning point for Microsoft.  But at least in the in term they can breathe a little easier and maybe do something rare at Microsoft these days…smile.

Good Night and Good Luck

Hans  Henrik Hoffmann July 14, 2011

My RIM Commentary

One thing I love about technology is I am never out of things to discuss and comment on. So it was with great joy I saw the posting by a disgruntled RIM employee titled “An Open Letter to Blackberry Bosses”.  These types of “call to action” or “wake up” memos are nothing new in the industry.  Every great company who goes through rocky times will see a few of these and thanks to technology they are no longer internal, we all get to read them.  I will leave it to you my readers to read the context of the whole memo.  I shall just comment on each point he makes and what my initial thoughts are regarding the matter.

  1. Focus on the End User Experience:  A concerning opening statement. If a mobile phone provider has not figured this out yet they are in big trouble.  As I have said before not just mobility but software and hardware are becoming all about the end-user experience.  I will disagree with the writer on Android’s weakness, just because point four is such a huge advantage for  them.  Technology fr consumers has been about user-experience and lifestyles since the first iPod shipped.  If RIM is just figuring this out I can only say, “buyer beware”‘.
  2. Recruit Senior Software Leaders & Enable Decision Making: I can’t tell you of a great software engineer from RIM.  However it is very important in the game of technology to have all-stars on your team.   I think what is really being asked for here is get smart people who can set the technical vision and direction for the company.  This also means RIM does not have them now and by the time these people are brought on board and are in place 2 years will have passed and where will RIM be?
  3. Cut Projects to the Bone: It seems a common theme at many companies.  As the industry moves forward rapidly to maintain focus on the prize and not get sidetracked every time your competition makes a hit or the industry seems to make a change.  It’s easy to look at the industry landscape and say “hey look the industry is heading over that way” , next thing you know you have started a new project or added stuff to existing project thus delaying the end deliverable.  It is easy in this business to lose sight of where they are going.  Keep project as simple as possible, only add-on of your existence depends on it.
  4. Developer, not Carriers can now make or break us: With the growing popularity of applications the industry has gone through a titanic shift.  In the world of voice and text the carrier was king, but now with applications growing in popularity the carrier, though still powerful, has been shoved a side a little.  Their networks carry the traffic but they cannot bill like they used to.  They want to.  It is a bit concerning to me that this needs to be spelled out in a memo, I would hope that this would be self-evident.  Just look at Angry Birds.
  5. Need for serious marketing punch to create end-user desire: Easier said than done.  To do this requires a really creative marketing agency and a lot of cold hard cash.  They go hand in hand.  You can through hundreds of millions of dollars at a campaign (Windows Phone) – but without good marketing it can quickly fizzle away.  Or you can have a creative campaign, but without the corresponding dollars no one will hear the campaign and thus it will all be lost.  For many companies it is one of those “have to do’s” but RIM is no different from many in not knowing what to do.  If you look at Apple it’s gotten to the point that they are getting so much press and free marketing that it becomes hard for the competition to identify how much money needs to be spent to get to even.
  6. No Accountability – Canadians are too nice: Having spent many a vacation in Canada all I can say is yes and get to know smarter members of the Russian mafia.
  7. The press and analysts are pissing you off.  Don’t snap. Now is the time for humility with a dash of paranoia: There is no doubt RIM is starting to get the “your yesterday’s news” treatment and it has to be frustrating and demoralizing.   It was just 2008 when then candidate Barack Obama was running around the United States glued to his Blackberry, some of the greatest free press ever and now you’re a “has been”.  Companies need to listen to the press and identify both positive and negative trends.  Unfortunately many want to find the positive and shield against the negative.
  8. Democratize.  Engage and interact with your employees:  I think this is the real plea in this email.  You execs are up in the ivory tower making all these strategic decisions and screwing every one of those decisions up – so please listen to your loyal employees.
In reading and thinking through everything that was listed I find the only conclusion being that RIM is on its way to becoming the next Nokia.  Like Nokia they are standing in a burning platform, though it is not too late to extinguish the flames.  Some of the areas like User-Experience and Developers, if I take what is written at face value, if these areas are only being recognized now it’s too late.  RIM is doomed to failure because it will take years and significant expenditures to reach volume that will enable RIM to organically grow like Google or Apple.  There has been rumors that RIM could be sold, but based on this memo I am not sure what of value would be bought.  Buying a subscriber base doe snot seem a fitting strategy for anyone.  Many of the problems identified need to be fixed through significant expenditures, which I agree with, however the one area that i snot discussed is shareholder value.  To fix these problems is going to require someone to step up and say the next couple of years are going to be bumpy, it will require a strong leader with vision, which at the time of this writing RIM does not seem to have.
Good Night and Good Luck
Hans Henrik Hoffmann July 5, 2011
Categories Uncategorized