Tim Cook was recently quoted on CNet about what separates Apple from Microsoft and he said, “I think it’s different. Part of the reason Microsoft ran into an issue was that they didn’t want to walk away from legacy stuff.” It is an interesting and insightful comment and having lived through much of it, not an inaccurate comment. The article goes on to highlight many of the geniuses of Steve Jobs. My favorite goes back to Walter Isaacson’s fantastic biography (apparently Apple does not think so) of Steve Jobs where he said, “If you don’t cannibalize yourself, someone else will”. In the existing technology landscape you cannot expect a cash cow to go on forever. If you do in all likelihood you are doomed. The problem with cash cows is they are hard-core drugs, very hard to ween yourself off of. It’s a problem with technology, which is based on developer code, this is not Coca-Cola and a secret formula. Technology moves quickly and so do the business models that support it. By nature it is a disruptive force. If you live in your history you are doomed to become a part of its history.
There are numerous companies that serve as examples of either dead or dying entities as they struggle to reinvent themselves. Since he spoke of them, lets talk about Microsoft. Microsoft is and always will be an industry legend, and deservedly so. Bill Gates saw the value of software long before anyone else did, including Steve Jobs (as acknowledged by Jobs, in Walt Mossberg’s legendary interview of Steve Jobs and Bill Gates). The problem came when Steve Ballmer tried to extend Microsoft’s legacy with the same tried and true formula of Windows and Office. However the computing experience was moving and changing quickly . What Microsoft failed to understand was the computing experience was shrinking and becoming more fashionable. It went from a big Personal Computer tethered to the wall with a power cord and network cable, to a smaller and more nimble laptop. But it did not stop there. When Apple launched the iPhone in 2007 the ability to be free from your office and your keyboard was significantly altered. Microsoft desperately wanted that mobile experience to be a Windows experience, but the list of reasons as to why that has not happened are numerous and in the aftermath Microsoft is left trying to re-establish its relevance in mobility. In the tech industry size-mic shifts happen and you can either embrace them and move forward or hang on to what you know and lag behind
Microsoft’s success initially came at the expense of another competitor, IBM. There was a time in history where IBM defined everything in technology. They essentially created the standards that everyone followed, until a ill-fated meeting with Bill Gates where they gifted Microsoft the rights to the software in the PC. What seemed like a new beginning for IBM with the PC ended rather quickly. IBM became rather confused as it tried to compete with Microsoft, when Microsoft split from IBM over OS/2 and decided that Windows was the future, they decided to go with OS/2 and make a run at Microsoft’s growing empire. It ended almost before it had begun. The new PC’s with OS/2 loaded never really went anywhere and IBM’s status as a leader in technology was significantly wounded. In this case IBM would recover and focus on what it was good at by going after the enterprise. It had to realize that it was an enterprise consulting company. In this case IBM moved to a differnet playingfield, one that they understood
Sun Microsystems was interesting. During the early part of the dotcom boom they raged supreme. They had a lot of great talent. They were vocal in the industry to the point of extreme arrogance (which often is not a bad thing in the industry). They hated Microsoft, which was becoming fashionable. They were a company that did a lot of things. They made hardware. They had their own microprocessor, SUN Sparc chip, their own OS, Solaris, their own programming language, Java. They were cheaper than their UNIX competitors primarily IBM AIX and HP UX. With Java and J2EE they had a solution that corporate customers loved and needed. They were am alternative to the almighty Microsoft. Only problem with all this focus is that they were not paying attention to another rising force: Open Source. As big a threat as Open Source was to Microsoft’s business model, the immediate threat was to the UNIX incumbents. When the dotcom boom went bust, SUN Microsystems went with it. SUN was a shooting star, it rose with Java but before they had much of a legacy they were gone, gobbled up for cheap by Oracle. SUN was successful but failed to realize it had chosen the wrong battle.
What is always of interest to me, simply because I called on them as a sales rep at Microsoft and I worked for one, AT&T, for a year is the role of the telco’s. These ancient dinosaurs born out of the mind of Alexander Graham Bell, do not fit the mold or mindset of tech giants. And yet they have been indispensable in the creation of the digital highway. through the traditional world of Lanline and more modern era of wireless, their role has been huge. Yet after having spend a year I realize that they are thoroughly confused as to what to do next. The traditional world of digital pipes is being squeezed. In the world of wireless, this last year, we saw Google steal the Starbuck’s account from AT&T, using their typical disruptive ad model to say to Starbuck’s, “Don’t pay us, we will pay you”. I can only imagine at Starbuck’s the only discussion was around making sure Google was not screwing them by taking too much money. It’s tricky when you have a cash cow to devise a plan to let it die while you focus on new and more lucrative services. The biggest problem is risk. Telco’s are in trouble as risk is not in their nature. As we transmit more and more data through the air and no longer rely on fiber under ground it will be cheaper (still very expensive) for new entrants with new business models to enter the market that was once exclusive to Ma Bell’s domain.
The times are changing quickly and companies that were once defined in nice little bucks as energy companies or consumer staples and did not overlap cannot feel so safe anymore. Apple already has changed the music industry. When I look at Amazon I see a company that will tear down Wal-Mart and Target. I see Netflix altering the Hollywood Studios machine. The legacies are no longer limited to those companies we directly associate with technology, but those that operate outside and have grand traditions of their own in American history. It will impact every industry from automotive’s to oil and gas to your day-to-day household items. We are entering a time of robotics, quantum computing, artificial intelligence, Internet of Things (IoT), drones, big data, renewable energies all interconnected all digitally enabled. The big change is just the velocity of business as empires rise and fall quicker than before. Woolworth’s created the modern department store, but towards the middle of the 20th century was already fading and now are but a footnote in history . Bill Gates created the modern technology company and many seem lie streamlined imitations of what Microsoft created. In all instance though the speed of change does not allow time to reflect on a glorious history, because if you do you will be gone.
Good Night and Good Luck
Hans Henrik Hoffmann April 6, 2015