CES 2014 – Wearable Technology

It seems as we get ready for this years Consumer Electronics Show, that we are entering a new phase of technology.  The buzz this year seems to be around a new emerging category of technology, namely wearable technology.  From the pre-show buzz it sounds like we should hear a lot coming out of CES this year from new Google Glass applications, to smart watches, virtual reality, and maybe even the classic dinner fork.  It seems a foregone conclusion that this years event will signal a launch pad for this category to go towards becoming mainstream in the modern world.  It is time for a new category as the Smartphone and Tablet are in a mature phase, where it’s no longer just cool to have but expected, meaning they are one step closer to being boring.

It seems all movements forward in technology are driven by limitations in what is currently popular.  The move to laptops was driven by the fact that desktops were tied to a power outlet and users had a need to take their productivity with them.  Then as laptops got smaller we wanted something even smaller and netbooks evolved to ease our troubles.  However all these devices were limited by battery supply and a constant need to find a location with an electrical outlet.  We also need somewhere to sit and place our laptop or netbook.  Thus the advent of Smartphones and Tablets, and a bonus, no keyboard.  We could access information where ever we stood, provided we had connectivity.   The limitation now?  We still need to hold the device and use our hands.

It was with this backdrop that the first device to get notoriety was Google Glass.  They actually looked ok.  I was expecting some huge visor of a person’s forehead, but they were actually kind of sleek.  I can already see that early on these new devices will create some of the social confusion that mobile phones with ear buds  did, the “Are you talking to me?” moment.  No, they actually do not even know that you exist (that is kind of rough reality for some people).  The concept of Google Glass is interesting, it at times seems like you could be in your own world, kind of like some of the bulkier Virtual Reality devices you see attached to people’s head,  however as you walk through town you more or less can interact with what is around you and get more information on things you may see and want to know more about.  Some places have already gone as far as banning them.  The Five Point in Seattle, WA has done this.  It is a dive bar and people go there to get drunk and lose themselves.  I can understand not wanting Google Glass to record them, this is a sign of legal battles to come.

The first Smartwatch I saw was over a decade ago when Microsoft Research came up with the Microsoft Spotwatch, it was connected via FM (as in you r radio).   It could do stuff like check the weather, but it was big and ugly.   In 2013 we started to hear a lot of talk about a new breed of SmartWatches.  At the forefront was the Apple iWatch, which was conceptual at the time and despite the rumors still has yet to be released.  Samsung has since released  its own watch which is available through carrier stores.  Having seen them they have some cool features.  The gentleman at the AT&T store I was at had one, but was not wearing at the time and discussed some of the features.  You can receive your texts via your watch.  Check the weather.   I can see this is going to happen and it will reinvent the whole idea of what a watch will be.  The advantage of having a watch that is connected will be having perfect time.  No longer having to reset your watch as it may be running fast or slow, your time is managed by the U>S Naval Observatory in Annapolis, MD. Beyond time we still need a killer purpose for the watch, but then perfect time may be enough.

An area I am rather excited about is fitness technology.  Wearable devices that in time will help manage our daily fitness.  Tell us when we are doing good and not so good.  We could have our bodies monitored throughout the day.  You have devices that help you train as well, like FitStar being promoted by former NFL great Tony Gonzalez.  A device that helps you workout and stay motivated, not sure about Tony yelling at me but it may work.  Going back to our previous theme of watched, Addidas has a Smart Watch that acts as a personal assistant when you are running tracking things like distance, heart rate, time etc..I can foresee a lot of  devices and services coming in the near future to aid and assist us in living healthier lifestyles.  Accommodating our increasingly mobile lifestyle.

A final area that wearable technology will need to conquer is our vanity.  The reality is most people do not want a geeky gadget.  In order to feel good we want to look good.  In the end we are all slaves to fashion so why should wearable tech be any different.  The idea of wearable technology will become mainstream when it is on the cover of GQ Magazine  or Heidi Klum starts analyzing and commenting on fashion technology on “Project Runway”.  This is wear I think Apple with its dedication to sleek and beautiful design can take a leadership role .  Though it is one thing to make a pretty phone another thing to make accessories that you want to wear.  Technology is a cross-section and intersection of industry as it impacts every business model it touches.  It has influenced design in the back room where ideas are conceptualized, not it will impact us in what we see and wear.

The Consumer Electronics Show this year promises to have a lot of buzz around this new and emerging market segment, which should make for an exciting and entertaining show.  CES is not always a success.  One year the buzz was 3D television, which struck me as not a winner.  Most of the US population had either recently purchased a Plasma or LED television and were not interested in buying a new TV.  Let alone having to wear those awful 3D glasses.  Wearable technology is just a natural extension of where we have already been, dating back to the mainframe.  It will push are lives into new areas we have not explored and hopefully make us better.  While at the same time freeing up our lives to do more of the things that we want, to make our lives more fulfilling.   Welcome to 2014, it is going to be the year to step out in your digital clothes.

Good Night and Good Luck

Hans Henrik Hoffmann January 3, 2014

Advertisements

Google – threats and opportunities 2014

One of the more popular blogs that I have written was about Google.  It was written back in March of 2012 and because this industry moves so fast it seems like I am overdue for an update on where I see Google’s opportunities and threats today.  I have actually written a couple of blog posts about Google (Threats and Opportunities and The Google Decade) and they are already starting to look a little dated.  In the world or technology that is not surprising, we are moving from decades to half decades. I thought it a good time to update what I see at one of the world’s leading technology companies.  In the two years since I wrote my initial blog, Google has continued to create industry excitement with its work in wearable technology, Google Glass and in robotics, with its efforts around creating a robotic vehicle.   It is rumored to be creating its own watch to potentially compete with the iWatch.  I say potentially because nothing has been released yet by any major player.  When we review what I wrote and where we are there are  a few updates.  A few new opportunities and new threats.

There is the obvious competitor and then the not s0 obvious co-opetition.  The obvious is Apple.  With the immensely popular iPhone it is the most direct competitor to Google’s Android platform and when we talk about consumers this is direct competition as we have come to know and love.  However this states the obvious, probably more relevant is the threat from its largest partner: Samsung.  When Google made its Android platform open-source and easy to license I imagine it saw a field similar to what Microsoft had created with its OEM platform, a huge ecosystem of partners competing with one another.  However an interesting thing happened along the way, Samsung took more than its fair share leaving the competition in the dust.  Unlike Microsoft’s ecosystems, in Google’s ecosystem one company has come to dominate.  Samsung will use it’s position as leverage against Google, that is for certain, otherwise they would not be a very wise in their future outlook.  How Google manages this relationship will be a big part of its future failure or success..

When we talk about consumers we quickly can get in the Social Media aspects of consumers lives.  Google’s foray into this space has not been an instant media darling as would have been hoped.  Google Plus launched and got some initial traction but has certainly seemed tp slow down to the point it is rarely even mentioned.  The two big threats to Google’s business are Facebook and Twitter.  Around a year ago, just after Facebook’s IPO, Mark Zuckerberg commented that Facebook was making a billion dollars in their search business, without even trying. Since that time Facebook has focused heavily on generating revenue from it’s mobile business.   Twitter is the pulse of the internet.  If you want to know what is happening right now in the world the best place to go is Twitter.  More than anything Twitter had become digital democracy.  With each revolution the main place to get news is on Twitter.  Google makes money on eyeballs on the internet, when another company comes along that takes those eyeballs they threaten revenues, which make Twiiter and Facebook two of Google’s prime competitors.

Robotics is an interesting area.  Google’s interest in Robotic vehicles is not a “humanitarian” act.  If you think about it the first things you do when you get in a robotic vehicle  is give it directions.  Let’s see, who does this better than anybody else?  Why of course it would be Google Maps, which is nicely tied in with Google search, and there you have it.  Google could make money every time you are in your car.  To me, though, Robotics is not just what we have come to now and love in film and books, it’s the new mobile future.  Despite the freedom we have with out tablets and smartphones, we are still in some shape or form physically clinging to our devices.  Robotics is the promise of removing the umbilical cord and providing us all we have today with out the need to be tied to a device. That vision will play out as hybrid of robotics and the cloud.  Google will play in both if it chooses.  That opportunity will dwarf everything we know.

In addition to robotic vehicles Google has what is known as Project Moonshot.  These are essentially where Google comes up with big ideas and then tries to figure out what it can do and if there is a future for Google in what ever Project Moonshot comes up with.  Robotic Vehicles and Google Glass are two such things that have come our of this en-devour.  Now Andy Rubin, of Android fame, has his own Project Moonshot underway focused on simply Robots.  I think what is best about Google and where it shines is with the efforts it places in Project Moonshot.  They come up with futuristic and really big idea and garner attention and admiration for what they do.  Having spent time at Microsoft and seen the billions put into research and development, it seems like the return has been very little, and I think a large part of it has been the inability to see new markets and to try to fund project that will fill the void.  The opportunity that Google envisions and creates in Project Moonshot can potentially yield huge financial upside for Google, while more importantly keeping Google a relevant technology company.

The browser war’s continue to tilt in Google’s favor as their share seems to have only increased since I wrote my original blog.  Google’s business depends on the internet.  The more eyeballs on the internet the more revenue for Google.  It only made sense for Google to invest heavily in the market that provides the windows to the internet.  The latest market share stats show a slow and fairly consistent trend upwards.  Google has launched Chrome based netbooks to challenge Microsoft’s traditional dominance in the PC Manufacturing space, should this take  off it would have a significant impact on the bottom line of Google and of Microsoft.  There are certainly other competitors in this space, such as Firefox and Apple’s Safari.  Firefox shows the limitations of open source as nothing speaks to pressure like an earnings report.  Something the folks at Mozilla seem to be missing, thus relying on the communities passion of the community, who can leave whenever they want.  Safari is too tied to Apple’s product line to be the “biggest” threat.  It will be relevant but in the short term I do not see it being the dominant player.

A lot of Google’s success can be tied to their indirect model of using cash revenues from search to fund other businesses at Google. One such beast is Google Docs.  It is still far behind the 800lb gorilla, Microsoft Office, but unlike previous competitors Google Docs is funded.  It is making headway with younger generations who do not need all that Microsoft Office has to offer.  My kids use GoogleDocs at school, in fact I rarely if ever see or hear about Microsoft software.  It may not hurt Microsoft today but if could tomorrow and considering the over ten billion in revenues it means to Microsoft I am sure Google has thought, “what if we get 20% of that market”?.  As usual Google is able to tie in Search and Chrome as part of the overall experience, thus increasing revenues and talking browser market share.  Cloud based productivity is here to stay and growing quickly and Google Docs will be a big part of that market.

The natural competitor to Google’s traditional search is Microsoft’s Bing search engine.  Despite its enormous financial resources and talent, Microsoft’s Bing has failed to become a serious threat to Google’s search business.  The fear Google should have here is not that Bing within a year or two will take serious market share from Google. A bigger concern is that they will go away all together.  Seems odd, but with the uncertainty at Microsoft these days around who the next CEO will be, some talk has begun that whomever takes over will either sell or kill off the business.  If that were to happen the competition for Google would shrink significantly.  We would have Yahoo, Baidu and a few other foreign competitors, but it would raise anti-trust fears and may make Google “lazy”, not having a competitor to wake up and focus on each working day.  Ironically you see rumblings by Microsoft about the anti-trust.  It seems human nature to hate the government until you need them.

Information everywhere is a powerful driver of revenue and in the end that means we are always connected.  Google drives its revenue from the internet, and despite its already enormous size it continues to grow, foster new innovations and by default new opportunities.  Despite the recent hype around the “cloud”, we have always thought of the internet as being  in some virtual non-physical location.  It is digital, not real.  Google has been at the forefront.  But looking to the future that ethereal environment is about to take on a more physical appearance as that information stored in the cloud will be relayed to communicate with a whole host smart and robotic devices.  There are plenty of great opportunities, not just for Google but the industry to capitalize on.  Perhaps it will be one or more of the existing players and likely their will be several new entries into the market who will become big fast.  The only thing for sure right now at Google is the future has never looked brighter or more ominous.

Good Night and Good Luck

Hans Henrik Hoffmann December 6, 2013

Tidal Waves create Innovation

In my last blog I talked about innovation. Which got me thinking again. I apologize that I again will reference Microsoft, but as it is my heritage and a relevant point of reference I shall go there again.  When we look at the big misses at Microsoft over the last decade it’s easy to say they got clocked by Apple and the iPhone. That they missed on the tablet.  But as I alluded to innovation is not often in the product unless you are there first.  Ballmer said his biggest regret was Vista. But in my humble opinion the bigger miss was not understanding a technology movement that was under way and envisioning how big the possibilities could be.   More than anything it was the inability to truly understand mobility that killed Microsoft,. In short they never did think big enough.

In any big shift there is a movement that occurs and then there are the innovators who take advantage of the movement.  In the early phases of the PC industry, the movement was the idea of a personal computer.  There where may companies who innovated based on this movement.  Intel created the microprocessor that powered the PC.  Microsoft jumped on the operating system with DOS and then Windows.  More than any company Microsoft understood the value of the software that created the experience for the PC.  Give Intuit credit for changing how we did our taxes. There where hardware manufacturers that popped up all over the place, like Gateway, Dell and Compaq.  There was a lot going on in the space and the competition was brutal.  It created a lot of wealth and a very affluent younger generation, who profited on this tidal wave.

These grand movements would continue with the birth (or maybe re-birth) of the internet.  As companies moved in force to get online and establish a presence in a global virtual real estate play with the creation of a website.  This again would drive innovators to start creating new opportunities along with new business models.  A second movement that coincided with the internet was the rise of mobility.  More accurately mobility was about freedom.  The ability to have access to our technology but not be connected to a wall.  Underlying all this was digital convergence as everything we had known from our music tour television and film, books, catalogs etc….  was being digitized.  I could access all this content from my PC, laptop or smartphone.  A new are is the cloud, which  in my opinion is not a new tidal wave, but more innovation built on the back of the internet.  All in all, these movements have fundamentally changed how we all lived and worked.

The list of examples of companies who rode these grand movements to success is a list of small companies who have become tech giants, with the exception of Apple, which made a grand comeback.  In the internet Google, Facebook, Twitter, Amazon, Netflix etc.. are but a few examples of companies that leveraged this new medium.  In many instance mobility created an expanded market and new opportunities.  In the case of Twitter it helped them become a global beacon of democracy and human rights.  Mobility projected Google and Apple to new heights as they drove new devices to new sales models.  For Google they used Android (and iOS) to extend the reach of their search engine.  There were companies that burned brightly only to fade, i.e. RIM and Nokia

If I look around the industry and try to predict the next industry movement, my eyes and ears always gaze to robotics.  There is a lot of work being done today that is far more advanced than anything we have seen before and in some cases hearkens to our favorite science fiction novels, film and television series.  If you take Google’s foray into robotic vehicles, it is visionary while making sense.  If you have a robotic car and you need to go somewhere, what is the first thing you will need to do? You will need to give it directions, “Bing” (not intended use of Bing but funny in any case), who makes great mapping technology?  More importantly it takes the most dangerous piece of driving out the equation, humans.  This is but one example of something that will come to pass.  Prosthetic’s will move from plastics and metals to having intelligence and a more human like appearance.  Anyone remember Steve Austin, aka the Six Million Dollar Man? I think robotics will combine all three of the previous tidal waves while creating a new one that removes humans from a number of traditional equations.  These movements do not happen without consequences.  It will be interesting as robotics evolves to see how it will impact the movement of labor.  If a robot is picking our apples will we have need of cheap labor?  Robotics will take off and have a bigger impact than mobility or the internet, as it is physical in nature, not virtual.

The excitement and disaster of these “big” movements is they are like tidal waves.  If you catch the wave early on you can ride the wave to extreme success.  However if you are late the wave you risk catching it as it crests and comes thundering down on you.  For the start-up these sometimes seem obvious as many gamble on the next big thing. Youth Is rampant in this area and like so many young generations they are more idealistic and dream of a bigger and brighter world, ignorant of the consequences, but driven none the less. For the incumbents that challenge is often much more daunting.  They may have been part of an earlier movement that still drives big revenues but makes them blind to the future, until they find themselves on the crest of the wave, looking down in horror at what has befallen them.

These changes are what makes the world today so exciting as when these “tidal waves” occur it has a material and social impact across the globe.  If you think about how internet has brought us all closer together and made communications across boards easier than they ever have been through out the history of mankind.  When these changes occur, for companies in the tech space and across other industries it is important to bet early and often, if one is to survive.  They come very fast and with great velocity, that those who do not anticipate quickly, they become a legacy to history, they become yesterday’s news.

Good Night and Good Luck

Hans Henrik Hoffmann October 24, 2013

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

Bing-ality

Microsoft Bing since its launch has been considered the primary competitor to the behemoth known as Google search. It is a valiant effort in a very lucrative market space. However despite the immense opportunity,the term success has so far eluded Microsoft Bing.  When you look at Search Engine market share the numbers continue to improve for Bing as it hit over 17% in April, however the revenues have so far failed to materialize.  In Q2 of Fy13 for Microsoft’s Online Services Division lost money, $283 million.  In Q1 Google generated over $11 billion in revenue.  Granted Microsoft’s OSD is not just Bing, but all the other online services such as MSN and Outlook Mail.  The flip side of course is we really don’t know how Bing as a stand alone business is doing, despite the market share increases.

The history of Bing some may say is one of failed opportunity.  I am not so sure it is so much that as it is understanding online reality.  Bill Gates and Steve Ballmer often have said they blew it on search and I have often said they would never have figured it out.  Even if they had I am not so sure they would have been willing to take the financial risk to challenge Google at the time (remember we are going back to the 2002/2003 time frame) .  In his short stint at Microsoft Ray Ozzie provided the best analysis of Google.  He stated that they were using their immense revenues to fund software development projects that would compete against Microsoft. It was an indirect model, where ad revenues funded software engineering.  As has been shown Google has a lot of revenue to fund these projects.  It was difficult for Microsoft to grasp as they for so long have lived off of volume license revenues.

In the past decade it took a long time for Bing to come to the forefront.  First Microsoft toyed around with  Live search.  It was not a well named product.  Certainly not as fun as saying, “Google”.  But globally it did ok and when you looked at the top 100 websites, Live did appear in the top twenty.  It just did not have an ad word business model set up that could compete with what Google was doing.  Microsoft was slow in understanding the competitive threat that Google posed, if not holistically, at least opportunistically.  My view is Microsoft viewed it as another software market to conquer rather than the threat it was to existing businesses, namely Microsoft Office and Microsoft Windows.   This is just another market space in which we are entitled to own.

As things progressed so did Microsoft’s desperation ending in an audacious bid to acquire its competitor Yahoo.  Luckily for Microsoft and many grad schools across America this would end in the ego of Yahoo founder Jerry Yang as he made every attempt to kill  the deal. In the end this may have worked out for the benefit of Microsoft as they entered onto a partnership rather than spending $40 billion on an acquisition that may have been doomed to fail. While Jerry Yang seemingly failed business 101 which is to increase shareholder value, not decrease it.  He is now a case study for business graduate school history.

What has happened as these events have unfolded  is that Google has systematically found other business opportunities to augment and promote its search business and increase revenues.  Namely using the mobile phenomena to launch Android.  This has led to great headway in the mobile phone business and the tablet.  In 2013 it is projected that there will be 800 million Android devices sold.  None of these devices will have Bing as the default search engine.  In addition there will be 300 million iOS devices sold in 2013, again none will have Bung as the default search engine.  I only wrote this to share with Steve  as he seems to be unaware of this fact, but hey, he is a numbers guy.

So what does Bing do?  For starters that Apple iOS number is key.  One of Steve Jobs last talks to the Apple faithful at their corporate headquarters was about the evils of its key competitor Google.  There is no question that there is no love lost between the two.  Apple has tried to compete with Google head to head.  The failed Apple Maps comes to mind.  In my opinion a rare case of me saying, “Whose stupid idea at Apple was this?”  Google owns that space and barring some catastrophe, I do not see them losing in that space.  So with all that hate and failure what if Bing was the default search engine for Apple iOS?  Instantly Bing would have access to 300 million users.  Granted this would be a bizarre twist of fate, but Microsoft is not in a position of power in this space and Apple would like nothing better than to hurt Google.  If Bing can meet Apple’s high quality standards they could have a very compelling play in this space and be considered attractive to Apple.

There is also a bigger question of “if Not Microsoft than who?”.  Competition  that is not challenged is a threat to the greater benefit of society.  They can dictate terms, which is never a good thing.  When we look at companies that are able to challenge Google there are few with the cash reserves to do it.  One of the few would be Microsoft.  And frankly they owe it to us all.  Fundamentally competition is a good thing and maybe Bing is competing, it’s just that Google is pushing their game to a higher place.  If that is true than Bing needs to set a higher bar, not just compete at parity.  Faster more accurate search is nice, but we are reaching a point where for the end-user it is becoming increasingly difficult. to distinguish in milliseconds.

Another factor is much of Bing’s success is tied to other products like Windows 8, Surface and Windows Phone.  To successfully get people to switch alla Coke versus Pepsi, is not so easy as there is a lot more tied to it than just switching a can. The effort Microsoft must put in will take years, which in technology is worlds away.    So far it has been slow in coming and market share has increased at a snail’s pace.  This may drain Microsoft’s cash reserves but the reward is high Once yo have been great there is always a thirst to be great again and I think that more than anything drives Microsoft.  To get there search will be a key cog in the engine.  Information rules the world and if Bing is not successful Google very well could rule that world.  Bing is in a tough place but it is a fight worth fighting.

Good Night and Good Luck

Hans Henrik Hoffmann July 10, 2013

The Cultural Phenomena of Technology

It is one of those things that begins with a whisper and then continues to grow louder into the wildest of crashing waterfalls. Sometimes it confronts us in a very direct way and other times it sneaks up on us spreading like a virus throughout society. It penetrates our lives and influences others around us. The beneficiaries are our day-to-day modern society that adopts them and adores them. The victors are the people and the companies who make them. In fact we can quantify the victors with the monetary term of billions of dollars.  Those who try to stand in the way of these cultural phenomena’s are simply pushed aside and deemed not relevant.  We deem these to be the companies we refer to as competition.  In the industry this is a big deal and though sometimes accidental many times it is brilliance, such as Steve Jobs.  In the end it is about creating emotional connections and  not negative emotions but positive ones.  Looking through history there have been some big moments (and winners).

The first I remember of this type of phenomena was the build up to the launch of Microsoft’s Windows 95.  It was funny at the time as the product was continually being delayed.  When the name was announced people even began to wonder if it would even ship in 1995.  But at the time Microsoft was the darling of the industry.  Even when it seemed destined to fail in the end it always seemed to succeed.  Windows 95 would turn out to be the greatest testament to the ability of the company to succeed.  When the product finally shipped it was to mass hysteria never seen in the industry.  People lined up at midnight waiting for doors to open to a new world of wonder. It brought the idea of technology into everyone’s home.  It was exciting and a fulfillment of a vision that Paul Allen and Bill gates had as young boys.  It was really the dawn of the new age of technology and every significant technology launch has been compared to the launch of Windows 95.  The main competition, Apple, could only sit, watch and wonder, “it should have been us”.

The second phenomena that occurred I did not become familiar with until, then CEO of Novel,l Eric Schmidt left his post and joined a small company known as Google.  Google was a search engine provider and certainly not the first, but it would turn out to be by far and away the most successful.  It was not long before it seemed everyone was searching the web with  Google, as it was far superior to what was on the market.  Google’s impact beyond the technology was it changed the market dynamics and how companies made money.  They were in many was also the first to demonstrate you can not only make money on the web, you can make tons of money on the web.  The growth of Google was so accelerated it was almost hard to comprehend.  While they are making all this money they also became part of our cultural linguistics as Google became a verb.  By the time Microsoft finally launched a technological viable competitor in Bing, they were no longer visible in Google’s rear view mirror

When the iPhone stated to be discussed the whispers started early and grew loud and clear.  I had a friend working at AT&T at the time and he said everything at the corporate office was driving towards the launch of the Apple iPhone.  When the iPhone launched in 2007  it would turn out to be a huge success on many fronts, from the device to the apps, creating a new market, a new ecosystem.  As time went by what was amazing to watch was the extremely personal relationship that would develop between people and their technology.  People really get addicted to these phones and it more or less becomes an extension of the individual.  One thing Apple was always great at was creating a product that fostered loyalty.  The iPhone would do this in spades.  So much changed with the iPhone in how we as a society interact with one another, the iPhone was a truly powerful technical and social breakthrough.

It is difficult for companies to compete against these type of movements in a direct head on manner.  Microsoft has more or less tried this with Bing against Google and not seen very good results.  The biggest challenge is not the market share but the cultural awareness they are up against.  It is not even a technology gap so much as the successful technologies of today are internalized by users, who purchase and use certain technologies without much thought.  It is as if they are predisposed to certain choices, they are conditioned . It is hard and I have yet to see a marketing plan that says with our latest release we need to brainwash society and condition them to use our stuff.  I would be most entertained if someone would try doing this as I think it would be an eventful exercise.  As we have learned over and over again just because you have the better technology does not mean that you win.  Part of the challenge when competing with these social titans is that it is not good enough to create a better technology because even if you do, you have to ask, “Now what?”.  You need not only a better product but a better vision.  Vision should proceed the product, not follow it.

I am waiting for the next phenomena and it may be just around the corner.  We are nearing the age of the robot and I am warily awaiting the device that becomes a consumer phenomena.  It may also be something not so dramatic.  It could be a new social networking innovation.  Perhaps Google Glass is bigger than we think or know?  All we know is software is becoming pervasive in nearly everything we touch.  As Bill Gates said, “It is where the magic happens”. Like all things in tech it is not predicting the future, but timing it.  For any company the pot of gold at the end of the rainbow is to become a necessary fabric of society. To be wanted. A basic, necessary and powerful human emotion.

Good Night and Good Luck

Hans Henrik Hoffmann May 29, 2013