How quickly the mighty fall – RIM and Nokia

It did not seem that long ago that the major fears at Microsoft were the existing and looming dominance of two foreign companies: the Finnish mobile giant Nokia and the ultimate business device, the Blackberry from the Canadian wizards at Research in Motion(RIM).  But the industry has a funny way of misleading you down the wrong path. Time and time again you fear a competitor or a group of competitors, only to discover you were not watching your back and have someone else fly by in the night and destroy everything in its path.  In this case Microsoft focused on Nokia and RIM only to be destroyed by Apple and Google.  But in their day these two companies seemed to be on top of the mountain and it would be very difficult to defeat and knock RIM and Nokia off that mountain.  They were the companies everyone envied.  But fate was cruel and today we see two companies about to disappear.

RIM was a lot like Apple is today.  Their famous Blackberry was often called “crackberry” due to the addictive behavior it caused in its user base.  People roaming the streets, typing away on their little Blackberry keypad, anxiously awaiting a response.  They became the standard in corporate America.  Originally an email device it would evolve to be a smartphone.  Early on at Microsoft a lot of employees carried them. That was until Microsoft launched its own Windows-based phone with partners, primarily HTC.  Then RIM was the company that Microsoft wanted to defeat. Originally Nokia was not on the radar, it was all about the smart phone and taking down Blackberry.  Presentations to perspective clients and carriers usually centered around, “Is this a Blackberry killer?”  RIM had done some innovative things.  The thumb wheel on the device was particularly addictive.  It allowed you to navigate fast.  The tiny keyboard seemed to be a hit.  If Microsoft could defeat RIM then it could go after a larger pie that was owned by Nokia, it was the classic Microsoft playbook.  Go after number two and then set your sights on number one. RIM, however, would prove very resilient in this pursuit.  Microsoft had to fight and claw for every percentage point gained in market share.  Slowly Microsoft seemed to be gaining momentum, but RIM users were hard to convert.

Nokia was a different animal, where RIM appealed to corporate America, Nokia appealed to the world of mobile consumers.  When mobile technology and the cellular phone world became real, Nokia was really the first to grasp it and what the possibilities were with these devices which had interfaces.  They were pioneers in the world of SMS (texting). They were also the ones to have accessories for their phones.  All of a sudden you would be walking around the mall and people would be holding colorful designs to their ear.  The old dove bar phones would sell 80 million in a single year.  Nokia in comparison to RIM was a true giant.  The company was not merely participating in the industry it was defining it.  However they made mistakes along the way. Nokia lost America early, when the public was asking for a clam shell device, Nokia said no as it thought it knew better.  It would still be powerful for years. Despite its US setback it was strong in the rest of the world and it bet early on markets like China and India.  It pursued more or less a dual strategy of low-end phones and high-end smart phones, all using the Symbian OS.    The OS would come back to haunt it.

Sometimes Tsunami’s happen and when Apple released the iPhone it laid waste to the competition.  In its wake lay RIM, Nokia and yes…Microsoft.  Only Google seemed to grasp the change that was happening in society.  It seemed in Nokia;s case and RIM’s case they spent the next few years in denial.  They believed they had good products and a good road map, when in reality they had none.  A large part of the problem was  in senior leadership where they seemed to not be willing to jump and make the big change.  When you have a cash cow it seems hard for some companies to realize the cow is being slaughtered. Nokia tried to correct the ship when Microsoft exec Stephen Elop took over as CEO.  He quickly penned “The Burning Platform” memo, which in short said Symbian sucks and we need to try something different.  Enter Windows Phone.  Nokia was late in making the change and Microsoft was late in delivering the Windows phone. Nokia continued to bleed cash for several more years.  RIM, on the other hand, just never seemed to realize what was happening.  Worse, they did not seem to know what to do.  By the time they came out with a competitive smartphone it seemed they were hoping that their loyal “crackberry” users would resurrect them. Problem was that loyal base had all turned to meth.

Now they are both gone.  The device business of Nokia purchased by Microsoft, while RIM was acquired by a Canadian holding company and being taken private.  This has all happened in a matter of weeks.  Two of the biggest names in mobile history about to become a permanent part of history.  It all comes back to one of my favorite quotes from former Microsoft GM Bill Baker, “The future comes slowly, change happens quickly”.  Predicting the future is not that difficult, but timing it..now that is the challenge.  In this industry you need to think big or risk becoming small.  Jobs set a high bar when the iPhone was being developed and when it came out even Bill Gates said, “….we did not set the bar high enough”.  When you miss the boat and are not taking risks to catch up, the end become inevitable.  Such was the case for both RIM and Nokia.  They will go down as legends of a bygone era.  There leaders left to ponder for the rest of their days, “how did we get it so wrong”?

Good Nigh and Good Luck

Hans Henrik Hoffmann September 24, 2013

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Apple is Dull

Do not get me wrong I love my iPhone and think that what Apple has done over the years to be truly amazing.  They are one of the great comeback stories in business and specifically technology history.  However driving to work and listening to the DJ’s on the radio, talking about  the release of the iPhone 5s, they were talking about how antiquated the iPhone and iPad were starting to look.  As much as I wanted to disagree I could not, Apple products are starting to look middle aged.   It is hard to believe but it is six years since the launch of the iPhone. Apple was huge and very sexy.  It seemed like they did not age, but only got younger.  But in the end time draws lines on all our faces.  Apple is getting kind of dull.

Apple had a tremendous run of success after the return of Steve Jobs.  It is a long list: Macs with Color, iPod, iTunes, iPhone, iPad, the Apple Stores – not to mention the ecosystems it created for app developers and the innovation of touch screen (they were not the first but they did it better).  In baseball terms they were a power hitter.  Hitting the ball out of the park with consistency.  More than any company they seemed to understand how technology could influence the consumer and fundamentally change their buying behavior.  Probably more than any company on earth Apple has fundamentally changed how people work and interact with one another over the past 15 years.

When we look at what has come out of the latest release we see larger screen sizes for the device.  We see new colors, like gold.  We see thinner devices.  We see new apps.  All good stuff, but also stuff that the competition is already trying to do and do better. The competition is fierce.  Out front you have Google and Samsung.  It would also be foolish to dismiss Microsoft with its hoards of cash.  Do not expect Microsoft to be RIM anytime soon.  These latest features are nice and simple enhancements, it is not really innovation.  They are improving on what already exists.  Like almost every successful consumer product, from the refrigerator to Lego blocks.

Icons are a part of the tech industry.   The industry moves so fast and those people who create new landscapes literally an impact hundreds of millions if not billions. Case in point; Facebook has over 1 billion users.  By default Mark Zuckerberg’s name will be etched into the history  of the industry.  In Apple’s case they may have had the biggest legend of all in Steve Jobs  For those who read Walter Isaacson’s biography of Steve Jobs (if you have not click here),, it tells a story of a very obsessively passionate man.  His attention to every detail in what he did from what we know of him, to his bizarre diet habits. to his relationships can be translated into the success he created.  When you lose someone like that, despite his efforts of a succession plan in Tim Cook, something massive is lost that cannot be replaced.

One thing Apple has in its favor is the immense loyalty of its user base, it has always had that.  A pretty compelling argument can be made that loyal base is what kept Apple alive during the era of no Steve Jobs (that and a rather large investment by Microsoft).  Apple has managed through it’s current run of success to seemingly expand that base.  That being said I would be hard pressed to say if you have 100 million users that more than 20% are that fanatically loyal.  A great thing to have but a small piece of what is now a much larger pie.

I see a few things happening on the horizon that will either sink or allow Apple to swim.  I think cost effective design will be increasingly important to differentiate devices, yes it is nice to have a killer app, but those are ported to other platform pretty easily.  This is usually done out of necessity and not loyalty.  Apple still has Johnny Ive (the man at Apple when it comes to design) and he may yet have a few home runs left in him.  The second and bigger challenge is creating new market opportunities.  Apple created and profited from digital music and they did the same for the smartphone and tablet.  The next area seems to be the television and though Apple has its Apple TV product it has yet to make a significant breakthrough in this area.  Not to mention the word is out and the Cable providers are not going to be willing to let their industry go the way of Apple (or Google)

When you create a mass market, like Apple has done it creates a awesome opportunity and one that Apple is still managing to grow globally.  But when everyone has one it is not that cool or exciting anymore and people eventually look for something to differentiate themselves.  Tim Cook could grow the business immensely and in the end be perceived like Steve Ballmer.  A sharp businessman but not a visionary. I don’t envy Apple, yes they have changed lives, in fact they have added to history.  But to come up with new innovations every three to four years that have a significant cultural and social impact is no simple task.  Especially when the man who drove so many of those changes is no longer alive   What we are left with today is more or less the status quo.  Events, New features, product launches, etc..It is tried and true and rather boring.  Apple is going to continue to expand as there are still many untapped markets, but that is just business as usual for many companies and just results in another stale MBA program lecture.  It is hard to stay sexy especially as you hit middle age.  For every George Clooney there are at least a hundred George Wendt’s.  What was once a sharp blade is now becoming dull as time and use catches up with it.  Can Apple reclaim it’s glory?  Only time will tell but as of now I am rather bored.

Good Night and Good Luck

Han sHenrik Hoffmann September 18, 2013

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The Nokia Acquisition

“Two Turkeys do not make an Eagle” – Vic Gudotra, Google Exec

The words of Vic Gudotra, a former Microsoft exec, now Google exec, upon hearing Nokia had selected the Microsoft Windows Phone OS over Google’s Android platform.  It makes for a nice quote and though it may seem a bit harsh given both companies performance of late in the mobile marketplace, for the interim it is pretty accurate.  With that being said this was something that had been rumoured for a long time,  It is interesting timing, given Ballmer’s retirement announcement and the massive re-org that Microsoft is going through. Ina Fried wrote a pretty interesting article on how the acquisition came to be (you can read here).   Nokia was Microsoft’s signature customer for the WIndows Phone OS, but it was never a guaranteed success.  During the entire time of this current agreement, Nokia was bleeding cash with every earnings report.  Market share was improving but it seemed very hard to sustain any momentum, when you have competitors like Google, Apple and Samsung not just increasing market share but owning the media every time they even whisper. No matter how quiet. Looking at what this relationship is and could be, is fodder for a lot of conversations and observations, moving forward this will be fun to watch.

One thing I have hated, let me please put in bold, hated is Microsoft saying there needs to be a third eco system. When Ballmer spoke about this a few years ago I was in shock, what happened to my Microsoft?  I never remembered this kind of talk when we were promoting Windows.  But as in all things in life, things change.  Even former Netscape founder Marc Andreesen says a third eco-system for mobility is necessary for the industry.  He is cheering for Microsoft.  Competition creates strange bedfellows.    Because of missteps and it reliance on its legacy, Microsoft more or less backed itself into this corner.  This ecosystem is first and foremost the developer, what Microsoft would call its birth right.  That is no longer the case as that has been eroding for years as technology advances and new and viable platforms come to market.  I have spent 20 years talking to, working with and selling to developers.  All the talk about better productivity etc… is nice but at the end of the day developers go where the money takes them.  This is an area that both Microsoft and Nokia have struggled, by coming together this could help simplify the message and opportunity for developers.

As Microsoft transforms itself into a device manufacturer the acquisition of a device manufacturer was going to be necessary.  It is one thing to say, “we are going to make devices”, it is another thing to figure out how to construct a supply chain to do it.  To hire the talent to design cool devices.  To make a device.  All skills that Microsoft was just learning.  This was an acquisition driven by necessity, by two companies struggling to compete in a space that was running away from them.  In reading Ina Fried’s article the point is made executives at both companies were becoming increasingly nervous about the fact that the Nokia Windows Phone was not creating buzz and grabbing significant market share.  This on top of the fact that unlike Microsoft earning’s Nokia was bleeding cash, Nokia does not have a Windows and Office business to hold it up.  The bigger concern was how long could hold out before it could no longer remain a viable entity.  It has not been brought up in articles I have read but the knowledge of the device supply chain is very valuable to Microsoft and unlike Nokia for the foreseeable future Microsoft has the cash to keep it afloat.

Long term it will be interesting to see how Microsoft’s relationships with its OEM’s plays out.  The OEM model that Microsoft built out under Joachim Kempin is legendary and has made billions for Microsoft and its OEM partners (Compaq, Gateway, Dell, Sony, HP, Acer, IBM, HTC, Samsung, LG and many more).  The big question is how far will Microsoft have to go.   As of today Microsoft is in  the business of creating new tablets and smartphones  Will they have to make PC’s?  Not in the foreseeable future, but those partners are being challenged as well as the PC market shrinks, what are they to do?   They will have to look at tablets, but he OS of choice by no means will be a guaranteed Windows device, especially as Android devices have an increasingly large share of the market.  The OEM’s I am sure are a bit put out as they look to new markets Tablets were going to play a big part,but  now I would say that they would be wise to hedge their bets by investing in alternate platforms like Android and Chrome. (many are already doing this).

This is the big gamble by Microsoft, it is done dipping its toes in the water with hardware project sand by acquiring a big piece of Nokia, is plunging into the icy depths in search of a bigger and brighter future.  The long run this looks like a great acquisition, but the bigger challenge will be managing the short run, the next 1-2 years.  The market will continue to move forward rapidly and is not waiting for Microsoft and Nokia to get their act together.  Approval of the deal will not be final until Q1 of 2014.  Then there is the  challenge of integrating 32,000 new employees into Microsoft.  This again will take some time.  The worry is if it takes 2-3 years to get this up and running how far will the market have moved ahead?

Will these turkey’s fly?  Will they become a great eagle?  Why are we being so harsh on the turkey?  It is very early, but one thing is clear is that if Microsoft is to become a device and services company it needed to make this acquisition.  Rather than working as separate companies, as partners, but with similar but different agendas this brings them together to work as one and set a mutual agenda.  It will also bring their different skill sets together and hopefully allow them to benefit through greater economies of scale and basic sharing of IP and best practices..  It is difficult to make these type of deals not because you want to but because you have to.  Ina’s article was very interesting in the fact that despite the situation there was a lot of executive posturing, but in the end  it had to happen otherwise it would be colossal failure by both parties. Can two turkey’s make an eagle?  We are about to find out.

Good Night and Good Luck

Hans Henrik Hoffmann September 10. 2013

End of an Era as Ballmer steps down

I guess there was no way I could not comment on the latest announcement. It was a big one that surprised and gratified a great many people. Wall Street certainly liked it and to be frank, I think a great many Microsoft employees welcomed it.  On August 22nd Microsoft CEO Steve Ballmer announced he would be retiring within 12 months or once a successor had been chosen.  It is a big day at Microsoft after many years of floundering, the guy who has been at the top since 2000 is stepping aside.  I have waited a week or so to get my thoughts around this change, as well as read as many articles as I can on what the post Ballmer Microsoft might look like. But as we look back and look forward it may be a case of be careful what you ask for as whoever takes the reigns will have a daunting task before them.

I was once told back in the day that Microsoft had a problem called “a cult of personality” .  The cult being Ballmer and Gates.  Not long after Bill announced that he was stepping down as CEO.  Bill envisioned the future and the role Microsoft would play and seemed to succeed at everything until he stepped down..  The company led by Steve would go through its first big transformation.  Moving from the mindset of a small entrepreneurial company to the mindset of a big American corporation.  It was new territory, a small tech company just 5 years before, now a Fortune 500 company.  Ballmer chose to follow then american business idol, Jack Welch to build the corporate Microsoft.   But everyone had faith in Steve, so it was not questioned. Throughout this process, even though Bill had removed himself from day-to-day operations, the company was still being led by those two friends from Harvard.   If you think about up until the day Ballmer departs the doors of Microsoft, the company has known no other leaders than Gates and Ballmer.  It has been and still is ingrained into the DNA of the culture of Microsoft.  Until the past five or six years it was not questioned.  Every shift, every great memo, every huge press release contained either Steve or Bill or both.

If you look at the numbers, it would be hard to call Ballmer’s reign anything but a success.  The company now generates over $70 billion in revenues.  It has nearly 100,000 employees and 66,000 contractors.  It has succeeded in the enterprise with the Windows Server line(Active Directory technology), SQL Server, Sharepoint Server, etc…  Windows and Office continue to reign supreme over the desktop world. Xbox has risen to be one  of the leading game consoles. The one big exception in the numbers would be the flat performance of Microsoft stock.  Where he gets criticized is the big misses, missing the mobile phone market and blundering on the tablet, which has led to the ultimate crime losing the developer.  As much as they embraced the internet, even when I was there, I don’t think that Microsoft under Ballmer, fully understood the internet, thus their tardiness in moving to the cloud.  Rather than move forward they looked backward and tried to protect their existing market share.

Since announcing his resignation Ballmer has been very critical of himself over the launch of Windows Vista.  Calling the release his biggest mistake.  I guess in saying that it validates one of my biggest disagreements with  Steve.  Was Vista a bad release of Windows? Yes.  Was it one of the most anticipated and delayed products ever? Yes.  Did we have to go through multiple execs to ship it?  Yes.  But I guess in calling out a product as his greatest failing, that to me, is the issue.  It is a mindset of the legacy of Microsoft.  Shipping product.  In my opinion the biggest mistake was not seeing the shift to a mobile world and realizing both the products and experiences that would be needed for Microsoft to fully participate in “the mobile future”.    With the announcement of the acquisition of Nokia’s Devices and Services division it shows Microsoft dramatically trying to transform itself to meet the challenges of this new age.  That will be the subject of another post.

There are certainly questions with the timing of the departure.  Microsoft has just announced the largest re-org in its history  A change that whatever the outcome will redefine the company, for better or for worse.  Followed by Steve’s announcement and then the acquisition of Nokia.  But if you start to think about it, all these changes coming at once does not happen randomly.  Microsoft is on the process of making big bets.  Companies in tech can rise very quickly, but what is less documented but equally true is they can fall.  For every Google there is a Yahoo, for a Facebook a MySpace, for a Microsoft a WordPerfect, Lotus 123, Novell etc..But it is curious that Ballmer would announce the largest re-org in history and  then step down so suddenly. Whomever succeeds him will need to be bought in on the re-org, but then it seems all these recent big announcements are connected.

When he steps down who will lead?  Given the acquisition of Nokia and the return of Stephen Elop, the early odds makers have Elop being the next CEO of Microsoft.  On the surface it makes sense.  If as I stated above, we believe all these events are connected, than Elop would likely have discussed these changes well in advance of the re-org announcement and the purchase of Nokia, plus he is ex-Microsoft.  At a time where the company craves a dynamic leader, if Elop is chosen it would be like Pope Benedict XVI succeeding Pope John Paul II.  A conservative, but safe choice.  Microsoft employees will await there Pope Francis.  I hope Elop does not do another “burning platform” memo, that would be a bad sign for the company.  The good news is Stephen is a confident and eloquest speaker, He led the Microsft Office division, which is no small task and wil give him some credibility to start. That should get him through the first six months should he assume the role, but after that hunting season will be open.

Some of the other bets and names that have been thrown about seem a bit far-fetched.  One was Kevin Turner, current COO. I dismiss this one simply because this would need Bill Gates blessing.  I cannot imagine a scenario where Bill Gates says, “Let the Wal-Mart guy have a shot”. J Allard, though a popular guy never ran an org close to the size of Microsoft, he was not even the number one guy in XBox.  Steve Sinofsky is interesting, but he was a somewhat polarizing figure while at MS so I don’t see those one happening.  A lot of names come from the outside but usually with Microsoft ties: Kevin Johnson, Bob Muglia, Vic Gudotra and Paul Maritz.  Of the four Paul Maritz is the most visionary and has a track record of success at VMware.  I think Bill likes him as well but he would need convincing to take on such a daunting task.  His downside would be he is not a consumer guy as he has always focused on big enterprise challenge.  Vic, now at Google and doing very well, would have the same challenge as J Allard.  Kevin and Bob I just don’t see, though I respected them both when they were at Microsoft, it would seem late in their careers to take over this role.  I am a bit surprised tha no one was groomed for this role, it seems a rather sudden departure.

Of all the aforementioned candidates in my mind the only one worth considering, would be Paul Maritz.   Maybe more importantly Is the fact that there is no leader I have heard of that inspires in me a dramatic shift at Microsoft.  There in lies the challenge; Whoever takes over will not have the knowledge of how Microsoft works even remotely close to Steve and Bill.  When the change happens it will be seismic as in Microsoft’s entire history has always been about the “Cult” of Bill and Steve, and legacies have a way of enduring beyond their expiration date.  For someone new to come in and say “I lead this company” will not be an easy things. This is however both the exciting and frightening thing about change, you do not know what to expect.  For many at Microsoft it will prove both challenging and frustrating.

Steve, loved the company, as he said many times.  His legacy will be felt for many years to come..  During his tenure there were certainly times where he achieved great highs and seemed to walk on water.  Those were long ago.  More recently he was criticized for lack of vision and relying on Microsoft’s legacy and not its future.  Only time will determine what his legacy will be and how history will judge him.  The future for Microsoft is now uncertain.  For many who wanted to see this happen, the question will remain, “now what?”.    If you polled a hundred people about what Microsoft should now do, I feel confident you would get a hundred different answers.  You got your wish, now be careful of what you wished for.  Uncertainty is a future without confidence.

Good Night and Good Luck

Hans Henrik Hoffmann September 6, 2013