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

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Technology History Mistakes and Opportunities

In 20 years in the technology sector I have seen a lot of both good and bad strategic decisions. At Microsoft I was with a company that was on the good side and then was on the bad side. I saw many competitors make what were poor strategic decisions. Decisions that in the end would either sink them or put them in a place of constant struggle for success or viability.  I thought it would be good to look back on some of my favorite “stupid” decisions made by companies in the industry.

Lets head to Utah for bad decision number one: WordPerfect.  This was a company that when the personal computer first came onto the scene quickly became the number one player in Word Processing.  Competing against other notable companies like Wordstar, Wang, and Microsoft Word.  If one thing killed them off quickly it can be summed up in the acronym GUI (Graphical User Interface).  When Apple launched the Mac, Microsoft used it as an opportunity to learn about creating software for the GUI.  WordPerfect on the other hand dipped their toes in the water and when they did not see the sales they wanted on the Mac, killed it.  As Microsoft became more enamored with something called Windows, WordPerfect dug their heels in and supported DOS, where they were a leader.  The problem being Microsoft owned both DOS and Windows and had more or less stated Windows was the future.  Towards the end the only thing WordPerfect had going for it was free technical support.  Sounds nice from a  customer perspective, but if you looked at the costs, not sustainable.  WordPerfect over time just seemed to disappear.

Apple actually makes the list.  During the period where there was no Steve Jobs.  Early learning here is Steve Jobs killed  himself off when he hired Pepsi executive, John Sculley.  Steve’s pitch to John was, “Do you want to change the world or sell sugared water”.  As Steve learned people who sell sugared water don’t change the world.  However they are master politicians which led to Steve’s ouster.  Apple would go through several CEO’s  before Steve returned.  Some like, Micheal Spindler would start to pursue a OEM model where they license the software, like Microsoft.  A nice form of flattery, but not in the Apple DNA.  Steve would come back, kill this plan, and we know the rest.

Next up we return to Utah and Novell Netware.  When the computer network first became popular, Novell was the dominant player for our file and print services.  However one stupid decision killed the company.  Why just a file and print server and not a app server to?  I remember I was in a meeting with Bill Gates and he went off about why Novell did not do this.  He was stunned that they did not have the foresight to see what was coming in the industry. In his view had they just added application services, Windows Server would never have garnered the market share it did.  A second more technical item was Novell had a proprietary protocol called IPX/SPX.  They did not support the dominant internet standard called TCP/IP. Eric Schmidt, when he was at Novell worked on fixing this, but then this startup called Google came knocking and he left for greener pastures (much greener as it turned out). As I am sure you all know this internet thing became rather large and Novell played themselves out of the market.  Oops.

As we entered a new millennium things would change.  My old company, Microsoft, which seemed to do no wrong would make plenty of mistakes in the new century’s beginning.  They might say search was a big mistake, but as I have said they never would have figured it out.  Google developed a new software business model.  They did a classic Sun Tzu, when faced with greater numbers change the playing field.  Probably the first blunder was the mobile phone space.  Though they might say they were successful prior to the iPhone I never saw it that way.  THe Microsoft strategy was a smartphone was a business phone and they went head on after RIM.  I never saw it that way.  I saw smartphone’s just a natural evolution of mobile phones and as more intelligence was put in the phone, the smartphone would be a consumer phone.  Then the iPhone launched and that was the end of the Microsoft mobile story.  I know they have this Nokia thing going on, but as good as the phone is, everything I am reading is it is too late.

Going back to search the big loser was Yahoo.  Jerry Yang had a dotcom success story, but was really just pushed aside by a competitor with a better search engine and a better business model.  Google ate everybody up in this space.  They proved the age-old business adage, revenue is king.  It was not long before Yahoo was on the defensive in everything they did.  Google was the tech darling and Yahoo had fallen into the worst place in the industry:  Yesterdays News.  Even when they got a get out of jail free card in the form of a massive Microsoft takeover offer they blew it.  Jerry Yang managed to convince everyone they had a future.  With the recent news of a massive layoff and reorganization, all is but lost. Jerry Yang will be a case study in graduate school, and it will not be flattering.  It will be along the lines on increasing shareholder value.  But then Mr. Yang is an engineer not a finance guy.

Amazon was not a likely candidate to be the early leader in cloud computing.  Next thing you know everyone was left standing with their pants of the ground.  Some rode the wave very well, companies like VMWare.  But across the lake the from Amazon’s Seattle headquarters a  Redmond based power was scrambling.  Google was also behind in this space.  When I look at Cloud based posting these days I see many references for people with experience in Amazon Web Services.  I am not sure I have seen one for Azure (Microsoft’s cloud service). VMWare is always in the conversation with its virtualization software, it is always a good place to be, “in the conversation”.  Most companies building out cloud services usually have either Amazon or VMWare, if not both, as part of their cloud offering

Finally there was the tablet phenom.  When Apple founder Steve Jobs announced Apples plans to make and sell the iPad, Microsoft CEO Steve Ballmer was quoted as saying, “They will never sell those things”.  As it turns out they can sell those tablets.  In the last quarter they sold over 15 million of these items Steve said they could not sell.  In the meantime a slew of Android based tablets have hit the market and as for Microsoft, we wait for Windows 8.  Why do I feel like this will be the Windows Phone all over again?  When the new tablets hit the market will it be revolutionary or just another Tablet?  The market is already 3 years down the road and the company that changed people’s lives sitting on the couch and watching TV was Apple.  That is what technology has always been about, changing people’s lives.

In all the examples I have given one thing is clear.  To create these industry and societal changes it takes a leader who see’s beyond today and looks to tomorrow.  When we look at what I provided in each case we have visionaries that we all know Gates, Jobs, Bezos, Maritz, to name but a few.  In the also ran category you see companies always flat-footed and never embracing the future, but reacting to a race that has already began.  If you are racing Usain Bolt and you are slow off the starting blocks do you think you will win?  Even if you were that fast and physically fit you cannot make up a half a second in a sprint.  That is how today’s tech sector works.  Even if you were to catch up the industry has moved on to a new race.  To win you need to jump the gun otherwise you will be but a  distant reflection in the rear view mirror.

Good Night and Good Luck

Hans Henrik Hoffmann April 9, 2012

Apple, Apple, Apple…

Though Steve Jobs has left us and leaves a tremendous legacy and hole to fill, he obviously left a great pipeline of products in place for Apple. Earnings for the quarter at Apple blew past every analysts expectations.  They just seem to keep coming with quarters that seem beyond belief.  As reported on Cnet, during the period, Apple posted $46.33 billion in revenue and a record profit of $13.06 billion. iPhone sales jumped 128 percent year over year to settle at 37.04 million units, while iPad sales rose 111 percent to 15.43 million units. Apple’s Macs got into the mix, too, soaring 26 percent to 5.2 million units sold.  Those are huge numbers and daunting for anyone competing against Apple.  If we break them down one by one it’s interesting to see the challenges for those competing and what to expect and do next.

Looking at the iPhone sales the number is staggering.  They sold 37 million units of primarily the Apple 4s, not 5 but 4s.  The 4s was what we used to refer to as a “dot” release, not a major release. Just a release with minor enhancements like Siri.  To put in perspective Nokia has announced they have 1 million Nokia Lumia 710 in the channel.  That is not in consumer hands but just to resellers.  Apples number reflects units in people’s hands.  The other thing is due to Apple’s channel that is pure money back to Apple.  With Nokia they get most and pay back a small percentage to Microsoft for the OS.  Then there is Google with Android, which is an indirect model as the hand set manufacturers keep the money and Google looks to make money via apps and mobile search.  The units of Android phone is impressive but to date it doe snot have the bottom line impact of Apple’s iPhone.  That could change as the mobile web grows and mobile ads increase the revenue to Google’s bottom line.  Though Microsoft Bing is challenging traditional search, Google seems light years ahead in mobile search.  With a major release from Apple due in 2012 with the iPhone5 could they beat 37 million?  One can only wonder.

Tablets are the fashionable device of the moment.  They have been since Apple made them so.  Steve Ballmer said “they will never sell those things”.   They sold over 15 million units in the quarter.  Though there are Android tablets I have not seen the excitement for Android Tablets like I do for Apple’s iPad.  The iPad seems to be playing its own game, in the short-term that could change with newer revs of Amazons Kindle Fire and further down the road with Windows 8 tablets.  The challenge for the competition is they may be talking about exciting new releases but no one I know of is putting their purchase decision on hold to wait for an Android or Windows 8 tablet.  I expect for the next 2-3 quarters that Apple to rule this domain, unchallenged.  The question will be how far in front they will be when a competitive alternative enters the market.  We will likely see a iPad3 this year, probably before Windows 8 Tablets hit the market, no one is waiting.

An interesting area of growth for Apple is its “old” business of Macs.  They sold 5.2 million units in the quarter an increase of 26%.  That is at the expense of Microsoft Windows.  Apple with around 10% market share is in an enviable position as they are not the leader and can only grow their market share.  As Microsoft Windows Revenue has flat lined (it’s still in the billions in terms of revenue) and Apple is enticing more and more developers to its platform you are seeing the first significant threat to the Microsoft crown jewel in over twenty years.  It’s interesting that it is coming from a competitor whose environment is considered very closed.  I think many people felt the most likely threat to Windows was going to come from the Open Source community in some variant of Linux.  But with Apple’s success in Smartphones and Tablets I can see the traditional Mac business was going to follow and it has.

With all this success it has led to that great American problem.  What do you do with $98 billion sitting in the bank?  When I was ta Microsoft we had (and they still do) usually upwards of $30-$40 billion in cash.  It would seem with Apples cash they could do almost anything they want, but in actuality it is a bit of a capitalist’s dilemma.  The obvious thing to do is return money to shareholders in either a quarterly dividend or one time payment.  They could also do a stock buy back, with  a market cap over $400 billion this could further drive the stock up benefiting shareholders.  They could do acquisitions, but Apple has never done the big multi-billion dollar purchases of tech companies.  I am not a big fan of these anyway as in the short run they slow progress down and when complete the industry has moved on.  It takes a couple of years for full integration, look at Microsoft’s acquisition of Skype for $8 billion and we have yet to see the fruits of this hit the bottom line.  It’s not a bad problem to have but the one thing that is for sure is they will have to do something as sitting in all that money does not seem a viable option, nor will shareholders allow for it.

Apple is truly in a state of grace.  It seems even when they do wrong, as in the previous quarter, they rebound.  It would be easy to see a future where we all are using Apple products, luckily tech and society do not work that way.  There will come a time when younger generations will not think Apple s cool as their parents think it is.  We are in a time when tech trends start with the teenagers and young adults.  Do I see a time when younger generations say “wow Microsoft or Dell is cool”.  Right now I am having a hard time believing that scenario will ever happen.  More likely it will be a young fresh start-up similar to a Facebook or Twitter.  When will this happen?  All I can say for sure is the next 2-3 years it is not likely to happen and the Apple strength will continue.  There are exciting horizons with iCloud and AppleTV.  But as I am fond of quoting Bill Baker, “The future comes slowly, change happens quickly”.  This will be the case with Apple as well but in the meantime let us just enjoy being, “Wowed!”.

Good Night and Good Luck

Hans Henrik Hoffmann January 30, 2012

Windows Phone..where are we today

Mobility is always one of the topics I like to write most about as I find the world fascinating. From the carrier networks and billing systems down to the actual consumer devices. I was at Microsoft in Bldg 117, home of Microsoft Mobility, when the first Windows Phone was released. I had every Windows Phone OS from v1.0 on up to 6.5. I won’t go through the whole history, but needless to say, things started to fall apart for the Microsoft Phone business after the release of the Apple iPhone.  With the latest release of Windows Phone, code-named Mango and the flowering relationship with Nokia, Microsoft at long last seems in a position to compete with Apple and Google.  However so far Windows Phone, despite every positive reviews seems to be at a cross roads.

Recently former Microsoft Windows Phone GM, Charles Kindel on his blog wrote about his thoughts as to why, despite in his view, WP7 is a superior product, sales were so lack luster.  Though I don’t agree with all his points some are very valid.  He highlights four areas of the mobile eco system. They are as follows:

  1. Carriers
  2. Device Manufacturers
  3. OS Providers
  4. Users
  5. Developer **

As noted in his blog he intentionally left the developer community off the list, but I shall add it back in.  So there you have it 5.

Carriers are kind of the Mitt Romney of tech, he wants to be popular to the conservative base of voters but he is not.  The carriers want to be like Silicon Valley, but they are not.  Telco execs are closer to Depends than Huggies.  Silicon Valley kids are definitely in the Huggie category.  Carriers at the end of the day own the last mile to the customer.  Any service for mobile devices will run through them.  They get us all connected.  It’s exciting stuff.  That being said no one gets excited by their carrier.  High School kids do not say they are cool now that they have Verizon Wireless.  Kids are excited by the device and  the functionality it provides them.  Voice and data plans are a necessary evil.  The only talking points are quality of service and the cost of the service.  But make no mistake these old boys wield a lot of power and would like nothing better than to be recognized as “cool” for it.  If you want your device sold you have to play with them…unless you are Apple which managed to dictate their own terms.  This leads us to the next category.

Device Manufacturers do some of the really cool stuff that make the handsets we buy..well cool.  But how do carriers select which handset they will place in their storefronts and promote?  Well we have two different approaches.  One is very monolithic and takes control away from the carriers.  That of course would be Apple.  Apple s the only device manufacturer that I can think of that was able to dictate how their phone would be sold , which at first was sold exclusively through AT&T.  Steve Jobs knew he had broken new ground when Apple created the iPhone.  It was a leap-frog step in mobile phones.  He knew it and he negotiated it.  AT&T sold voice and data plans for the iPhone, but Apple got the rest, including the App Store.  All AT&T could hope for was that the iPhone would drive more subscribers to their network.  It did.   a lot of new subscribers.  On the flip side is Google and what they have done with Android.  Buy a mobile OS, leverage open source and let device manufacturers create.  It was a good plan that gave some leading handset manufacturers cool software so that they could compete and sell against the iPhone.  Quickly HTC went from being a dominant Windows Phone shop to a dominant Android shop.  Other handset manufactures fell quickly into line such as Samsung and Motorola.  Device manufactures had the flexibility to innovate and not have to adhere to a rigid set of software design practices.  Charles Kindel highlighted this in his blog and I am in strong agreement with him on this.  Microsoft has not done this and it has caused friction with device manufacturers. The carriers liked this model as it was less friction between the carriers and device manufactures.  It gave carriers more variety to sell and also more inexpensive devices. Cost was an area where Google could innovate and compete with Apple.

For the providers of OS’s there are primarily three: Apple, Google and Microsoft.  Apple is a walled garden or prison cell, which ever analogy you prefer. Google is on the flip side as it pursued more the open source model and courted developers heavily to their Android platform. I flatter Microsoft by putting them here as they are around 2% in terms of market share, but they have over $30 billion in cash so I guess I should.  Operating systems, whether they are on a tablet, laptop, phone  or other don’t matter as much as the makers would like to think.  But they do enable our experiences so to minimize them would also be wrong.  Really Apple is a soup to nuts shop so they own hardware and software design,  Google and Microsoft differ in approach and cost.  Google has a better developer model and doe snot cost.  Microsoft is less open and does charge for the OS to hand set manufacturers.  In my view these two things will slow down their progress in the market place and to get to a substantial market share is going to be a hard journey.

Users in the end decide where they want to invest their money.  Sp much of what they invest is not necessarily for cool features and cutting edge technology.  It is for how the product makes them feel.  Don’t get me wrong all the technical stuff is very important in making the end product successful, but at the end of the day users want to feel good.   Apple has been far and away the best at this.  Android is good, but it is a cheap alternative to Apple.    Though Charles Kindel claims the Windows Phone is the best bar none, it is hard to substantiate when it’s hard to find anyone (as of yet) who owns one.  My view is tainted toward the positive as I live in Seattle so I have plenty of Microsoft employees happy to show me all the cool features.  Note to Microsoft employees here.  Stop showing features and hand the phone to whomever you are talking to, so they can “experience” the phone.  Feature demo’s are for geeks.

Finally we come to developers.  The are the Windows Phone is weakest in.  Remember Steve Ballmer saying, “Developers, Developers, Developers” .  Apparently he forgot.  Recently Apple hit 500,000 applications, Google has a few hundred thousand.  Microsoft announced they hit 50,000..  Apple amazed me as they used Object C as the development language for the  iOS.  I sold C compilers in the early nineties.  It seemed dead.  However after the release of the iPhone it went from dead to one of the top ten programming languages.  Developers g where the money is.  The development language they use is secondary.  Google use of open source made sense, since the open source community is a whole lot of developers at heart.  It’s a large community so leverage their brain power.  Which brings us back to the Microsoft developer.  Who is Microsoft asking to write Windows Phone apps?  Simple the large and robust Microsoft developer community and yet they are still not even visible in the rear view mirror of Apple and Google.  Why?  For starters mobile apps are simple and cheap.  It is based on a high volume lower margin principle.  Plus a lot of Microsoft developers are not targeting consumer apps.  One of two things has to happen.  Either Microsoft has to create enough consumer demand for Windows Phone to bring developers over to Microsoft or they need to attract non-Microsoft developers to the Microsoft brand.  Not easy but it has to be done.

In the long run I expect that Microsoft will pour enough money into Windows Phone to drive some success, but how much and what is deemed a success is to be determined.  I think short-term it makes more sense for Microsoft to go after Google and Android as Apple has extremely high consumer satisfaction.  A recent study cited 85% of Apple iPhone users would buy Apple again.  Android is ow cost but it is also in danger of fragmenting as the OS layer as more handset manufactures modify the OS , thus creating apps that are compatible on some devices but not all.  This needs to happen fast as Android sales are sky rocketing.  Microsoft and Nokia will have a successful launch and Windows Phone will increase in market share (how much?!?), but the next big question will be can it create and sustain momentum?  Though Charles Kindel claims the Windows Phone is the best mobile phone on the planet, that does not translate into success.  Technology is littered with products that were deemed the best and yet failed to catch on.  It is early for Windows Phone 7 and Microsoft is way late to the game.  Their key partner, Nokia, is making a last stand with the Microsoft mobile platform.  In the mean time Apple and Google have not slowed down.  It seems impossible to overcome.  But what does Microsoft have to lose except for ….the future.

Good Night and Good Luck.

Hans Henrik Hoffmann –  January 9, 2012

The Downer of Digital Music

In this day and age so much has changed in how we consume and how we live.  Technology has been the primary driver of those changes.   But for all the significant enhancements to our day-to-day lives I do feel we are replacing a sense of adventure with convenience.  A lust for now and not the search.  One area I loved dearly in my youth that has undergone fundamental change is music.   Some of my biggest changes in life and fondest memories were of finding new music and going through a journey of self discovery and self fulfillment.  I remember in 9th grade at Tillicum Junior High in my hometown of Bellevue, we had the final school dance. In order to celebrate a group of six of us decided to rent a limo, go out to eat, go the dance and then head into Seattle. It was our grand finale. After dinner and the dance we were heading into Seattle U-District to go to Arnold’s and play video games for the rest of the evening, well everyone except me I had a far grander plan…I was heading to Tower Records. So the chauffeur dropped the other 5 off at Arnold’s and drove me up to Tower Records and opened the door for me.  Many on the ave, as it was called. gazed and wondered who was this high-class dignitary?  Or so I thought (you can only imagine the kind of put together outfit a 15-year-old boy dons for such events).  When I entered the Tower records store it was like a musical Mecca.  It was completely overwhelming the aisles or records…of music.  I had never seen anything like it.  Prior to this it was the Sears record department.  I did not have much time to browse and had to decide quickly.  As I had just been introduced to the whole New Wave and Punk scene that was happening I went for the new classics. I settled on The Sex Pistols “Never Mind the Bollocks”.

Through the years, especially my high school days, I would hit Tower often, usually with my friend Carl.  The great thing was the University district had a lot of small new and used record stores as well as Tower Records..  It was fun just to adventure up and down the avenue looking for music. Looking at today’s tech driven consumer society we have seen music evolve into the digital download age and provide us avenues of access to music that are truly wonderful.  As I write I listen to Pandora, which I am completely in love with as it has allowed me to rediscover music lost in my soul and introduce me to a ton of new artists.   But in the iPod/iPhone/iTunes driven age something has been lost.  One thing I always enjoyed about an album was it was a constant process rediscovery, as often the music you originally bought the album for grow tiresome, but when a year later you played that same album you discovered new uncharted songs grabbed you attention.  Now in the download age the entire album is replaced by the purchase of individual songs.  When you burn out of that song you got on to the next latest and greatest hit, rarely listening or even being interested in listening to the artists body of work.  The album.

Buying music now is completely different as the hours spent going to record stores are replaced with the instant gratification of online retailing.  I guess the cool thing is I could be in the middle of Stanley Park, hear a song, and purchase and download within a few minutes.  Or I could be at my favorite restaurant.  Does not really matter where, to be honest.  I just need to be connected.  The days of making your girlfriend the “love” tape are gone.  No more hours spent going through albums and painstakingly recording the onto cassettes.  No reason to write down the songs with little love quotes next to them.  My wife recently found one of these tapes and read out load what I had written.  Painful.  Today you can have 20 romantic songs, title it, hit shuffle and play and be done in minutes.  Despite my nostalgia for the past I have to admit this is pretty damn cool.

Of course these dramatic changes did not just happen one day when Apple released the iPod.  It happened over time and through many changes.  The start of MTV, the move to the compact disc, Sony Walkman, peer-to-peer networking and the creation of Napster, Internet Radio, etc..But despite it all this disruption the music labels did not see the big change coming.  Focusing on short-term revenues and not envisioning long-term revenue.  How people would purchase music and when that change happened, they were ill prepared and left playing catch up in a rapidly changing digital world.  I remember an interview in Wired magazine with a VP of Sony discussing the transformation tat was going on in how music was being consumed.  This was around the time the Apple  iPod was taking off.  His view was that the hard drive was interesting technology. Interesting?!? Really?!?  I wish I could remember his name and only hope that he was fired.

These changes have also changed the artists.  It used to be taboo to be a rock start and market products, but the dear departed Michael Jackson was ahead of the game when he became the spokesperson for Pepsi.  Now it seems like pop stars are created to sell products.  Look at Brittany Spears, Jennifer Lopez, Beyonce, etc..Members of the Who must be rolling in their graves…hold it some are still alive (sorry Pete and Roger).  In fact it seems in many cases a lot of  pop stars are corporate entities.  They can cry me a river about the money and fame but in the end we all want it so I shed no tears.  The move to digital, to be fair, has caused the industry to expand on how to make money off of the artists work into new arenas.  It’s similar to comic books.  You don’t make money off the comic, but the movies and the accessories can be sold to a large buying public.

As for me, yes I have put all my music onto my PC and play on my Zune (yes I actually own one).  But recently thanks to Pandora I have had a desire to revisit my youth and go looking for music only to discover that there is not many places left to do that.  The future took off and when I went to return to my happy youth it was sadly gone.  The downer of digital music is also the downer of aging.  However I still have my memory of those days walking up and down the aisles of many record stores and the adventure it inspired and the joy it provided. I shed a tear for the departure of the album, the departure of my youth.

Good Night and Good Luck

Hans Henrik Hoffmann October 17, 2011

Dear Tim Cook – Learn from Steve Ballmer

Dear Mr. Cook

I am sure you are settling into your new role as Apple CEO, wondering how do you succeed a legend? I can only imagine it is a daunting task. Speaking from experience though I can say I have witnessed the good, the bad and the ugly of what can happen.  I was at Microsoft when Bill Gates decided to step down as CEO of Microsoft and handed over the reigns to his self-appointed successor, Steve Ballmer.  At the time things seemed to go so swimmingly as it was never in question who would be the successor to Steve Ballmer.  Things have worked out far differently than those of us who were around would have predicted.

I have been a witness to greatness as I had the opportunity to listen to BillG speak many times.  His ideas and vision for Microsoft and the industry always so crystal clear. As if they had been freely floating around in his mind since the day he was born. As change took place in the industry, Bill always seemed  to understand it, to grasp it and to be ahead of it.  This is not much different then Bill’s chief competitor for the top spot in tech history, your former boss Steve Jobs.  Steve seemed to understand the impact technology could have on day-to-day life and what it emotionally meant to people, and most importantly how to get there.  But these chapters are now closing and it’s time for your chapter, but let’s hope it is better than Steve’s.

When SteveB took over from Bill he was the golden boy.  He was much revered and loved in the field sales force.  Many of us considered him one of us.  Unlike you he even had the benefit that Bill would hang around for a while as Chief Software Architect.  And for a while things seemed to look like they would work out ok, or so we thought.  He was being given the opportunity to lead the future, not just of the industry but of a company that had made changes in the world, in the way we live..  But cracks in the armor were starting to show.  And that is my first bit of advice to you which is old advice, big things start small.  Both the positive and the negative.  We started to see some of the tech guru’s leave the company, most notably Paul Maritz.  Even though I revere BillG he had a circle of people around him that was his think tank. People he could turn to and have those deep discussions on the state of the industry and where it was headed.  Today I don’t know who Steve listens to these days for advice and guidance, but he has become an increasingly isolated figure.

Point two, remember the core of who you are and what makes you great.  It’s easy to look at others success and think it may be a good idea to emulate, but don’t do it at the cost of what got you to where you are.  As Microsoft grew managing growth became a paramount obsession for Steve,  He really fell under the guise of Jack Welch and the GE model, trying to apply those ideas to Microsoft.  The problem was that though it worked for GE that does not necessarily mean it was a good fit for Microsoft.  Over time the passion that was so core to Microsoft seems to have dissipated and been replaced by big corporate politics from the top to the bottom.  It has created an environment where people are more interested or fearful in doing the politically wrong things versus doing what’s right for the company.

Point three is drive the industry and don’t let it drive you.  This to me was a direct result of point two.  When I first started at Microsoft, the idea of standards and specifications were something that Microsoft was directly involved in and trying to drive a major influence in bending them to what Microsoft saw as the right direction for the industry.  It was important that Microsoft be viewed in the lead on technology.  As new start-ups and technologies have come forward Microsoft has chased these new opportunities, thinking they could catch up like they did in the past and taking their eyes off the core standards.  A case in point was HTML5.  While Microsoft was pursuing Adobe with their Silverlight Player and Smooth Streaming, Apple rightly saw that the right thing to do was support the new standards being developed for playing media files, HTML5.  Thus causing Microsoft to do yet another about-face.  This type of mistake can be blamed on product groups, but ultimately these type of visions start at the top.  Which is why your mentor was on record as saying the future is HTML5, Microsoft has seemed to stutter and fail with each new change in the industry and ultimately be viewed as a laggard.

Microsoft back in the day was always fearful of falling prey to a company that was smaller and hungrier than they were, Steve was certainly involved in a lot of those discussions.  It was an obsession of  the executive teams. However today that does seem to be exactly what is happening to them.  It has everything to do with that they forgot all about those fears and took their eye off the globe shaped ball predicting the future.  Nothing has changed in the industry.  This remains an industry where small start-ups innovate and create the next generation shifts in the technology industry.  You and I have both seen companies like Facebook, Google, Twitter, Flickr, Pandora, Linkedin, Dropbox etc. emerge within the last 10 years.  Some of these will grow very large and some already have, some will fail.  The only guarantee is that there are more to come, so pay close attention to who they are and where that are taking the market place.  And most importantly capitalize on it.

In conclusion Mr. Cook you have been granted an exciting challenge and opportunity at what today is the most admired company in tech.  The pipeline is solid for product delivery over the next five years.  Be true to who you are, but more importantly be true to who Apple is.  I don’t want to see you become a Steve Ballmer,  it has been painful to watch.  At the same time as I have outlined there is a lot you can learn.  The one guarantee I can make to you is history always repeats itself, but you do not need to be the one to repeat it.

Good Night and Good Luck

Hans Henrik Hoffmann  September 7, 2011

Steve Jobs moving on

It was not a stunning announcement but it still surprised us all when it happened. Steve Jobs was resigning as CEO of Apple. Unlike his peer, Bill Gates, not by choice, but because his health had deteriorated to a point he could no longer continue as leader of one of America’s most admired companies.  It’s hard to measure the impact Steve Jobs has had not just on technology but on popular culture.  It’s has been a journey of a young brilliant arrogant man to the top of the pack as one of the most admired and respected leader’s in the industry today.  During that time we saw a transformation from youth to mature dignitary.  He has been the an ultimate leader in technical discipline and a  marketing mega star.

When I started in the industry, back in 1991 Steve Jobs was a legendary lost soul, having been booted from the very company he helped create.  Apple at the time was led by former Pepsi exec John Sculley, while Steve was working on something called NeXT.  I did not have much insight into Steve Jobs at this point until I was part of the account team at ATT Wireless.  I worked with a partner, Accenture at the time, and we were all trying to bid on the call center business.  We needed to replace their existing system built on…NeXT.  Who used NeXT?  It was hard to believe, but according to my counterpart from Accenture, who was in the room, when it was pitched to ATT Wireless it was the single best sales job he had ever seen, delivered by none other than Steve Jobs.  Everything I ever heard about Steve Jobs always spoke to the power of his personality and when he was in a room you knew it, he was not to be ignored.  It was a force of will.

By the time I was covering ATT Wireless and heard the legendary stories, Steve had already returned to Apple.  It was one of those announcements that I am sure for anyone who loved Apple or worked for Apple was greeted with a sense of joy and relief.  Apple at the time was a company in the wilderness.  Losing market share and ceasing to do anything innovative.  It was funny early on that the first release under Steve Job’s direction was the iMac which really only introduced one things of note..lot’s of colors.  Up until then you could have any color that you wanted as long as it was beige.  I think this little fact goes unnoticed but whether by accident or design the introduction of color was important as it was recognized that the personal computer was becoming  more than just a productivity device, it was becoming a lifestyle device.  From there on the history is easy to follow as music went digital.  The web went mobile.  The PC became entertainment. All starting with a little “i” as went from iPod to iPhone to iPad.  All the time the attention to technical superiority and integrating that with the desire to be free and human.  The panache that was the computer geek gave way to the individual, regardless of the technical level of ability.  It was and remains the realization of the way technology is meant to be.

What will happen now that Steve Jobs is transitioning away from Apple. will Apple remain the same?  First the pipeline of innovation is strong with iPhone, iPad and iTV.  Not to mention the traditional sales of the iMac, Air, MacBoox etc…seems to be flourishing.  Every time I got to Starbucks I estimate that half of the laptops have the familiar Apple logo glaring at me.  I predict that in the not so distant future you could see Apple break the 10% mark in total market share for personal computers, which would be huge considering the decades it has been less than ten percent. computers.  Then there is the question of leadership, with the reigns being handed to COO Tim Cook.  In an odd way Steve’s illness has made this transition easier as Mr.  Cook has been running the company at various times while Steve took a leave of absence.  I think they are in good hands, with an experienced leader who has been very close to Steve Jobs over the last ten years, who knows the Apple culture.

As long a s Apple does not get to arrogant and continues to listen to consumers and be innovative they will move on and up just fine.  The reality is most people like Apple.  It will be a company that can reflect upon one of the great business leaders of the last hundred years and will have a legacy to move forward with.  As for Steve Jobs we can only hope for the best, though the announcement seemed to be an indicator that he is gravely ill with not much time.  He had a liver transplant which is never an easy thing to go through or a treatment with a “longer life span” as an option.  It simply buys one time, which he has made good use of.  STeve Jobs is moving to a different place in life’s long road, but many of those places on the road, he defined.

Good Night and Good Luck

Hans Henrik Hoffmann August 30, 2011