Hans Hoffmann's Blog

It was a big announcement. Larry Page and Sergey Bryn have decided to create a holding company called Alphabet, which will house a slimmed down Google and other companies.  Larry and Sergey will run the new company and hand over the CEO title of Google to Sundar Pichai.  Should we be shocked by this announcement? Maybe.  To be honest it is the kind of big thinking we have grown used to with  Sergey and Larry.  Google has always been about pushing boundaries.   They created the search engine business model that would rule all others.  Beyond search they bet early on video and bought Youtube.  They developed Android and Chrome. They thought mapping would be interesting and have grown the business to where it is on almost every smart phone on the planet.  They have used Project Moonshot to explore new businesses like driver less vehicles.  They have smart glasses and watches, though not huge success they continue to drive interest.  Now they are thinking, “we are a $50 billion business how do we invest and invent the next great business, but not get bogged down by our own size”?  There is debate on is this a bold move or not.  I would not categorize this as bold, but I think it is smart The first question is what does this mean to Google’s business?

One thing Wall Street has been clambering for is better transparency into Google’s different business units, in particular those “project moonshot” spin offs. A team like Google Fiber will now report earnings and what and why it did things the way they did. NEST will be broken out as separate entity, Life Sciences,  Calico, Investment arm of Google and Project X.   It’s smart as it gives investors visibility into different groups.  The core components of Search, Android, Chrome, YouTube etc..will remain as part of Google.  By creating these financial boundaries Google can create smaller nimbler divisions that can focus on big ideas, big visions, big opportunities.  It is important that they retain the entrepreneurial flare that has guided them to great success thus far and can keep them relevant for the future.  In the end it is one of those games companies hate to play, but have to play once they are a publicly traded company.  they have to make investors happy.

There are numerous examples of companies in tech that lost their way.  When I started in the industry IBM was at the forefront of companies that had been a leader only to lose their way in an ever changing tech landscape and at that time it was the idea of a personal computer.  They spent years trying to be better than Microsoft, before realizing under Lou Gerstner that they were IBM.  IBM had become an old stale company, grappling with its size and reach.  It was a legend in corporate America.  However Larry and Sergey were not afraid of be becoming IBM.  If you ask me who I think Larry and Sergey are afraid of becoming, it is my old company: Microsoft.  A company that defined the industry in the early days, but went from cool to being the new IBM. I remember quite well as the dotcom era created a booming economy that a challenge that was surfacing at Microsoft was growth.  When Steve Ballmer took over one of his priorities was to successfully manage that growth   He turned to the dean of the business world to find his answers and create his plan, Jack Welch.  The result was less than stellar as Microsoft became slow and monolithic.  The ability to lead seemed to disappear which led to failed projects like MySpace (A Facebook attempt), Soapbox ( a YouTube attempt), Zune (a iPod attempt) and a host of others. I don’t blame Ballmer too much for this because at the time Microsoft was the first of these young and new tech companies to experience this challenge of “hyper” growth.  Steve looked to existing business leaders of big legendary American companies. The big problem from my standpoint was those “other’ companies operated in a different landscape than Microsoft, with roots set before Microsoft even existed.  Though there was some good learning a lot did not transfer so well to a technology company.  Microsoft’s failure would be learning for those to come.

Many have said this move by Google is bold, amazing, giant, etc..I really do not fall in to that camp.  In many ways I think Google is tackling the biggest challenge with growth, which is, “How do you stay relevant?”.  It is ironic that the best quote, to paraphrase, comes from Microsoft CEO Satya Nadella, “This industry does not respect history, it only respect innovation”.  It is a true statement and the answer to the question of relevance. In 2013, Larry Page said”If you’re not doing some things that are crazy, then you’re doing the wrong things.”  Though many of Google’s ideas are out there in the wilderness, it will just take one or two to take off to drive the next $20 billion industry.  Some of Google’s ideas are obvious – driver less cars will happen.  The fact that Google was in early will help it immensely moving forward.  Life Sciences, the only thing I know is health care is at the dawn of a new revolution.  Fiber?  All tech companies hate the fact that they have to work with monolithic telecom carriers.  The challenge will be what kind if investment is involved to replace them?  In telecommunications the one guaranteed thing is every year will require billions of investment in the network.

In my final view I believe Google is doing the right thing.  Trying to create a smaller nimbler environment so that they can continue to innovate and take big risks.  The GE idea has proven to not work at a high level, operationally it has possibilities, but in tech you have to be bold as you move towards the future.  Google I think will try to balance the middle and appease the Wall Street dweebs, while continually investing in crazy ideas that could yield the next big industry shift.  In technology if  you view your business by where it is today it will not be long before you belong to yesterday. Googles move to Alphabet is an opportunity to invest in the businesses of tomorrow, it could fail miserably, however if they stay where they are today their failure will be all but guaranteed.  In technology nothing lives forever as the landscape is ever evolving.  You have to make bets on what you see the future to be like in five or ten years, it is the only way to ensure survival.

 

Good Night and Good Luck

Hans Henrik Hoffmann August 14, 2015

Sometimes it is fun to look back on posts I did – this is five years old and dare I say still as relevant today as it was then in light of recent announcements…

As I said when I started my blog this was not just going to be a Microsoft love fest and now we enter an area where I was probably the most disappointed in the company. With the announcement of Windows Phone 7 it may be a good time to look back at Microsoft’s entry into the mobile phone business. It has been a rough ride of late for the mobile business at Microsoft. I will admit even when they thought they were doing well I was never that impressed with the products they were delivering. I may be a “non” Microsoftee on this analysis, but it is how I saw things and though I never worked directly in the group I sat in the building (Building 117) with them for several years and saw how they went about their business. I also covered some of the accounts that they called into; ATT Wireless, Western Wireless and T-Mobile.

The first time I ever saw a Microsoft phone was around 1999 at a Microsoft Telecom Service providers event in downtown Seattle. At the time it was a project code-named “Stingray” or “Stinger”. It was as expected a brick, but it was the first step. For Microsoft it made sense to go into the Mobile space, simply for one reason: During the 90’s the mobile phone had gone beyond being just a phone, it now had a user Interface (UI) which you could do things with, like texting. If there was a UI then there was an opportunity for Microsoft to play, in fact it was so ingrained into Microsoft’s DNA that it had to play and it had to be the leader.

Early on Microsoft tapped a former exec of Symbian, the OS used in most mobile phones at the time, he was a Dane (so naturally I thought that was cool) named Juha Christiansen. Later on they would call back from Asia, Pieter Knook to act as Senior VP reporting straight to Ballmer. They decided early on that Microsoft’s strategy would be to take down Research in Motion (RIM) with their cool Blackberry device. Microsoft wanted to focus on business professionals and the smartphone market. I think this strategy was significant as it meant that Microsoft would not provide consumers with an offering for mobile phones. Second I will add I am not a big fan of the term “smartphone”. To me all that means is feature creep, as phones get more powerful they add more features and before you know it all phones are “smartphones”, but I guess marketing people like these kind of things to show they are monitoring something important, no matter how obvious it is.

A second thing that Microsoft was thinking was the role of software with the phone. Microsoft viewed hardware and software as two different things and were still under the guise of Bill Gates who said “you are either a hardware vendor or software vendor but not both”. Microsoft thought it could sell the software separately from the phone, so if you bought a mobile phone and an update came out for Windows Mobile, you could purchase for $5-$10 off of a website and upgrade your phone. Then and today it is still amazing to me how Microsoft was so not in tune with the end-user. Microsoft also wanted to replicate the OEM channel like it had with the PC by getting Motorola, Samsung, LG, Ericsson, and all the big mobile phone providers, minus Nokia to act as a channel. The problem here is unlike the PC, which was virgin territory and created companies like Dell, Compaq, and Gateway, Microsoft was dealing with mature established companies. These companies did not need to be educated about the mobile market place.

A third area was Microsoft did not get SMS (texting). Texting had become a global phenomena, driven by the younger audience. It is a crude technology as you have a limit of 160 characters (140 bytes). It looks like a mobile version of DOS. But it is useful. I asked one of my nieces once why she liked it (we shall call her the Russian Princess) and the Russian princess relied, “A lot of times I just have a question I need answered and I do not want the formality of a phone call”. Smart girl. I can only guess here what the discussions were at Microsoft but based on the actions of the Bus Development folks, I think Microsoft looked at SMS as old, simple and stupid. Why not use a rich email client to do the same thing? Microsoft Outlook offered way more for the end-user than a text message. Two reasons why that did not really work: 1) consumers wanted light and simple (outlook is feature rich and big) 2) Telecom carriers make a huge amount of money per text and what Microsoft was offering was part of a flat rate data plan. Telling Fortune 1000 companies to cannibalize their revenue stream was not a smart idea. Today over 2 trillion text message are sent annually around the globe, which in monetary terms equals billions of dollars of profit to telecommunications carriers.

The first task for Microsoft Mobile was to get a carrier to resell the Microsoft phone and that duty fell onto my client ATT Wireless. The hardware manufacturer was a Taiwanese company, HTC. The first phone cannot be called elegant. It was not great, but it was the first and soon thereafter a lot of people on the Microsoft campus had them. It was a significant change as now as an employee you get your email anywhere (at Microsoft email is king). Microsoft was on its way. Pieter Knook had laid out a plan to ship 1 billion phones with Microsoft software in 5 years.

As time went by the phones went global and more manufacturers came on board Motorola and Samsung released Windows Mobile phones and through time I would own about 10 different phones. Some good, some bad none were great. My issues with the Microsoft Mobile offering were more corporate. For starters corporate marketing required that the phone experience be in line with the Windows OS, so the look and feel was Windows. It had a start button. The browser experience was usually not good and sometimes just plain awful. It really highlighted to me a lack of the fundamental understanding of the end-user experience.

A second issue that cane to light was internal politics. As the realm of mobile applications became larger it was natural that other groups within Microsoft would have their own mobile offering. There was CRM ERP and MSN offerings. The problem was from the Mobile team not all offerings were Windows Mobile specific. The MSN team could not limit themselves to Windows Mobile phones since that covered less than 20 percent of the market place. However the bus development folks would make a point of trying to keep them out of accounts. I can certainly understand a passion for your product, I know the people in Windows Mobile worked hard, but at the same time I felt arrogance got in the way of reality. To say you needed to limit MSN offerings like Hotmail to Windows Mobile would cede the market to the main competition at the time: Yahoo and AOL.

Despite all the issues with Windows Mobile through the first part of the decade they did pretty well as they saw global market share increase, but as in many things you do not know reality until you look under the covers. The core code was fragmented and it seemed like rather than innovating new features Windows Mobile was just trying to replicate what others were doing in the market. This would all catch up to Microsoft on June 21, 2007, that was the day that ATT launched the Apple iPhone. It was hilarious in an infuriating way how the Windows Mobile team tried to downplay this launch and provide info on all the things the iPhone could not do. For example it could not copy and paste. Funny I did not know Windows Mobile could do that, but then I have never used Pocket Word to write an essay. How stupid could I be. When Bill Gates saw the iPhone he said, “Microsoft did not set the bar high enough”.

I think Apple hit a home run in several areas. First and foremost was the touch screen which remains to this day the best I have seen and used. It enables everything from there. When I clicked on apps it was responsive. By being so responsive it created the apps for the iPhone phenomena. Finally the browse experience was the best I have seen. It is easy, useful and responsive. In short Apple controlled the whole experience.

It raises significant questions about business models. Apple’s experience is contained in one form factor (there is only one Apple hardware/software experience). RIM does this to a certain extent but has more form factors. Microsoft and Google Android chose to distribute to any hardware vendor who is interested. Microsoft was really big into choice. I always thought this was a big mistake and frankly positioned very poorly. First off consumers always had choice. It was not like Microsoft invented it. You walk into any ATT or Verizon Wireless store you have wall to wall choices in phones. Microsoft does not enable choice the carrier does. Second user experience is very personal and it is based on the hardware and software experience. I met a sharp girl in San Francisco once at a Microsoft dinner. She had a Motorola Razor. Why? She liked the color (Pink) and it was so slim she could put it in her back pocket, without a bulge. Girls do not like to look fat. If Microsoft could develop Mobile software for that, well then they would be on to something.

When I left Microsoft there were 7000 iPhones on the Microsoft network. Certain groups (XBox and Zune) encouraged employees to get an iPhone as a challenge to the Windows Mobile team. They even embarked ona “skunk’ works project to develop a Zune phone. One of the last executives I ever saw talk was Scott Guthrie, VP of development Tools. He had a iPhone and mapped out what was happening. The kernel code for Windows Mobile had to be scrapped and they needed to start over. Andy Lees, VP of Windows Mobile was brought over to revamp the team (Pieter Knook had left and taken a job with Vodafone). Andy did not want the job, but when SteveB tells you this is what you will be doing it is not a negotiation. the few times I have seen Andy speak he has not looked comfortable. I think he realizes that mobile software and the mobile industry in general require sex and sizzle. Andy is a very smart guy but he has no sex and sizzle.

With Ballmer’s recent announcement of the launch of Windows Phone 7 for the holidays (which is 9 months from now) it will challenge the Microsoft partner model. All I can say is every phone I have had though they have the same look the experience is greatly different. The market is also getting very crowded (Apple, RIM, Nokia, Google, Palm, Samsung, LG, Motorola etc..). Form factors are also getting more plentiful as the world of mobility expands. You have Laptops, Tablets, Netbooks, PDA’s, Smartphones etc..It is a very exciting time in the world of mobility but the question will be what is Microsoft’s role?

Good night and good luck.

Hans Hoffmann

February 24th , 2010 (Happy B-day to me eldest son)

It did not take as long as I expected but as of last week Microsoft determined its acquisition of the Nokia Mobile device business was a failure. Microsoft announced it was cutting 7,800 jobs and taking a $7.6 billion dollar charge related to its acquisition if Nokia.  Most jobs being removed would be in the mobile device business.  This comes after former Nokia CEO Stephen Elop stepped down from hos role as chief device guy at Microsoft.  It has been along road to get to this point, a little over 8 years since the launch of the Apple iPhone, which started the downward tailspin of what once was an aspiring division at Microsoft.  Sometimes a company’s culture gets in the way of doing what is right and what is needed, but that did not start to change until Satya Nadella took over the reigns of the company

I have to admit the litany of excuses I have heard from Microsoft executives over the years when it comes to mobile makes this move by Satay somewhat satisfying.  Starting with the king himself, Steve Ballmer, the quotes are comical.  I remember, regarding developers for mobile devices “There needs to be a third mobile ecosystem”.  No there does not need to be.  On the Apple iPad, “They will never sell those things”.   Yes they will. On iPhone pricing, “Who wants to pay $500 for a phone?”  Billions and billions of Apple dollars later. On the mobile strategy, “We just got the formula wrong”.  You think, Mr 3% global market share..  All these quotes without ever having the courage to say I failed.  As Bill Gates once said, “It is fine to celebrate success, but it is more important to heed the lessons of failure”.

Before Microsoft acquired Nokia, Microsoft exec Stephen Elop had left Microsoft to become CEO of Nokia.  Early on in his tenure he wrote the now infamous “We are on a burning platform” email to Nokia employees..  After this Nokia was open for business, they needed a new platform as they needed to ditch the aging Symbian.  There were only two contenders, Google’s Android Platform and the Microsoft Windows Mobile platform.  The issue before Nokia was Google wanted Nokia, but they did not need them.  Microsoft, on the other had, desperately needed Nokia.  In the end two sinking ships got together and the Nokia Lumia brand would come to life.  After the deal was announced Nokia VP and ex- Microsoft GM Vic Gudotra tweeted, “Two turkeys do not make an eagle”.

It was rumored at the time of Ballmer’s initial inkling’s to buy Nokia that Satya was not on board withe the idea.  Then over time Satya was persuaded by Steve that it was the right thing to do.  When I first heard this story my reaction was “Satya was not won over to this point of view”.  I think it was more a case of Satya is a team player and since Steve seems hell-bent on doing this I might as well get on board.  As would later come out Steve had wanted all of Nokia but the board restructured the deal and brought it down to a more streamlined acquisition (this effort was led by Bill Gates). When the deal was announced what I always found interesting is that Steve seemed to be buying into the Apple model.  I always viewed the Google model much more in line with Microsoft’s DNA, perhaps it was the open source component of Google’s model that made Microsoft uneasy.  It just seemed more consistent with Microsoft developer and partner story than doing proprietary hardware.

Following the deal there were some exciting announcements and glimmers of hope, they were just that glimmers.  Global market share would go from 4% to 5%.  The challenge with Microsoft was they were never able to sustain momentum.  Thy never could get developers excited.  Steve wanted a third ecosystem, but as former Microsoft executive Ray Ozzie said later after he had left Microsoft, “Developers only have so many calories they can burn”. With each release there was an uptick and then a drop.  Time and time again we were told, “wait until Windows x”.  It has become a “boy who cried wolf” kind of thing.  The bottom line was and a big problem for Microsoft, people were happy with their Apple and Android phones..  To get people to move you have to change the playing field, something Microsoft was simply not able to do, with or without Nokia.  It is hard to get satisfied customer to move.

Is Microsoft done?  No there are plans to release more Windows Phones.  At a reduced pace. I don’t think Microsoft will ever be a major force  in the hardware segment, at least for mobile devices.  However I think Satya is being smart and pragmatic.  What has happened over the last 8 years has been a mobile nightmare for Microsoft.  When you are sitting at 3% global market share that means 97% of the phones on the planet, most users have a near zero percent experience when it comes to having any Microsoft software at all on their device.  Though some may say Steve started development on Microsoft Office for the iPad, which he did, he was slow and failed to pull the trigger.  Satya on the other hand has quickly released these apps to market.  When Microsoft talks about a Cloud First, Mobile first world, I think they understand that they don’t have it all.  The bigger challenge here will be creating those experiences that mobile users have to use, both professionals and consumers.

Following the Nokia mistake the next several years will be critical for Microsoft in the mobile space as it tries a new strategy to make itself relevant. Granted given the big miss with trying to be the operating systems for mobile devices it was necessary.  How Microsoft measure’s success will be important, so they have to win the hearts and minds of business users and consumers to be successful?  Will just one suffice?  Is this yet another attempt to tie the desktop to the device?  Microsoft needs to be relevant in mobile, it’s life depends on it.  In setting the course for this new strategy it also needs to be aware of shifts in the industry, it cannot have another iPhone moment.  That would just breed Nokia 2.0.

Good Night and Good Luck

Hans Henrik Hoffmann July 13, 2015

 

It seems about every 10-12 years an event happens in the technology industry that shakes the foundation and causes the industry to have to change direction. They change the way society lives and interacts. The companies that are on top of what is happening tend to come out ahead in the end.  Positioned for growth and to be one of the industry influencers.  The companies that fail to grasp the degree or significance of change, tend to fall behind.  To be sucked under by the undertow of the retreating waves.  These shifts tend to be big, launching new companies  or making existing ones bigger than could have been imagined.  In my lifetime I have seen four tidal shifts.  Each was different, each was important.  Each had its time and place and is cemented in technology history as a defining moment.

The first big moment happened on one of the greatest of American holidays, Super Bowl Sunday.  It was January 22, 1984 and pitted the Los Angeles Raiders versus the Washington Redskins.  The game was over by halftime, but the biggest of moments came during the legendary Super Bowl ads, where Apple Computer ran an ad directed by famed Hollywood Director, Ridley Scott.  It was a play on George Orwell’s classic novel, “1984”.  Pitting a young, and in color, female runner versus a mammoth screen with a blue colored “Big Brother”.  In those days, that meant IBM, who up until than had defined the computing landscape.  Apple was going to break the control of the menace known as “Big Blue”.  Most people are familiar with the ad, but it’s impact at the time was that it was the dawn of a new era.  Prior to 1984 the personal computer industry was still very young and trying to find an identity and a market.  The Apple ad basically opened up to America and the world the idea that anyone can own a personal computer.  This was not a hobby industry or an enterprise industry, this would evolve to be a consumer industry.  Prior to this the standard quote was from IBM, “Why would anyone want a computer in their house?”  But they operated in the world of Mainframes, which were the size of a living room.  The PC could fit on your desktop.  The race was on and a lot of new companies were created and entered the market, companies like Dell, Compaq, Gateway, etc..in the background a small company called Microsoft was biding its time.

The second big moment would take almost 11 years to occur.  During that time period one company stood out above all others; Microsoft.  Microsoft had been clever with its licensing model realizing to sell computers at $4000 though cheap was out of the price range of most people.  Licensing first Microsoft DOS and then Windows to any PC manufacturer that was interested.   It was Bill Gates Thomas Edison moment.  Edison was not the first to create the light bulb, he was the one who created the channels to deliver to the masses.  Bil Gates did a similar thing by licensing the software to drive the PC industry forward and deliver the computing experience to the masses.  This occurred through the next decade, but it was with the launch of Windows 95 that the industry to the masses finally to a great leap forward.  though the OS was a great leap forward from its predecessors, it was the launch that set it aside. The campaign began in earnest over a year before the launch.  The name had been announced, Windows 95, but time was running short. When the product launched on August 24, 1995 the media coverage was larger than anyone or any company had ever seen in the industry before.   The party on campus was over the top.  The lines at the stores were long.  Skylines in New York decorated.  It was what Bill Gates had envisioned, personal computing to the masses.  The general public was excited about technology and the possibilities.  The future was starting to move much faster.

The technology industry is a funny place, you can be great one day, forgotten the next.  The year 1995 was a pretty defining year in the industry.  It would be a year where not one, but two tidal wave moments would hit the industry.  It remarkably happened before the launch of Windows 95, but its impact remains with us today.  On August 9, 1995 a mere two weeks before the launch of Windows 95 a small company called Netscape IPO’d on the NASDAQ.  They had created a web browser for the internet.  You could now search and find all sorts of interesting things on the world-wide web. Maybe cooler is these websites were colorful and contained graphics.  The internet had been a round a long time but until than was really used predominately by academics.  Once Netscape was launched and everyone knew about their browser, Navigator, every person and company became interested on the internet.  Within months everyone wanted a website.  Customers and corporation started talking about how they could use the web to sell products.  The web would be what we generically refer to today as a disruptive technology.  Either hop on board quickly or be gone quicker.  As big a tidal wave that Windows 95 was, the craze launched by Netscape was far bigger.   Windows 95 fulfilled a promise laid out by Bill Gates and Paul Allen, A PC on every desktop and in every home”, the internet delivered the future.  Luckily for Microsoft Bill Gates was at his peak and was quick to recognize what was happening and on December 7, 1995 delivered a key speech telling Microsoft we had better jump on or be lost to history.  Netscape never had a chance, they were destroyed but their legacy lives on as does their impact.

We would not see another tidal wave until June of 2007.  This was when Apple Computer, resurrected from the dead launched the iPhone .  The iPhone was a new kind of Smartphone.  Prior to the iPhone, the Smartphone market was targeted at enterprises and the two companies fighting for command were RIM with their Blackberry and Microsoft with their Windows Mobile Phone.  Apple had seen an opportunity and seized it.  The iPhone was light years ahead of RIM and Microsoft.  The touch screen was better than the qwerty keyboard and stylus offerings.  The ability to browse the internet was unusable in Microsoft and RIM’s smartphones.  The iPhone made this easy.  And the apps?  Apple had thought through the developer story much better than Microsoft or RIM.  All of a sudden their were hundreds of thousands of apps for the phone and they were usually free or dirt cheap.  In addition Apple had struck a deal with AT&T that they essentially dictated terms.  That had not happened before.  Usually the carrier dictated the terms. All app revenue was Apple revenue.  Within a year Microsoft and RIM were done and they have never recovered.  The one competitor left standing was a new entrant, Google with its Android platform. Microsoft never seemed in that era to understand what was happening in popular culture. Before the iPhone smartphones were for business people. After the iPhone launch it was hard to find anyone who did not have a smartphone.

It has been 8 years since the launch of the iPhone.  I feel the surf beginning to swell and something big is looming on the horizon.  What will it be? Could it be wearable technology or robotics? Perhaps IoT? Big Data? Virtual Reality? Who knows, but everything just mentioned is still early.  Waiting for  a breakthrough to bring it to the masses.  This is what drives technology more than anything, that ability to change lives within moments.  So much of what is routine today seemed a distant future not so long ago.  When I was at Microsoft early on, the discussion was about Information at your fingertips, this was before the internet became huge and mobile devices were not envisioned as they are today.  Now that dream exits, I can be anywhere and if needed get info immediately via my iPhone.  I can get directions to where I need to go in seconds.  Entirely due to the four tidal waves I mentioned earlier.  I am excited for the next tidal wave, it is building as we speak and the question will be as it crests and the wave comes crashing down upon us, are we ready?

Good Night and Good Luck

Hans Henrik Hoffmann June 26, 1015