Bookman's Business

TapToTalk-Augmentative And Alternative Communication

2009-09-20T13:15:00.000-07:00

Through my work on the board of directors of AchieveKids, a non-profit that runs schools for the most behaviorally challenged autistic and developmentally disabled kids, I saw a need for a sturdy, economical, portable communications device that helps non-verbal children communicate. This led to me un-retiring and starting a company, Assistyx, and then developing TapToTalk (www.taptotalk.com).

TapToTalk is a new product that gives a non-verbal child a voice with the tap of a picture. It turns a handheld Nintendo DSi or DS Lite into an augmentative and alternative communication (AAC) device.

If you know anyone who works with kids with speech problems regardless of cause--autism, developmental disability, mental retardation, Down syndrome, and many diseases--please let them know about TapToTalk. And, of course, we want to let families of these kids know about this option.

I’ve started a number of companies over the years; this is the one that is a labor of love.

Registrar on Wikipedia

2009-06-22T14:16:00.000-07:00

Dave Atkins, a Registrar pioneer at British Telecom in the late '80s, has started a Wikipedia entry for Registrar. Please take a look and make any additions or corrections you wish. Also, please let others who may have Registrar lore know about this, so they too can contribute.

IE8 Sure Ain't Great

2009-03-31T09:54:00.000-07:00

I must be watching too many NCAA tournament games, because the title of this post has the rhythm of a basketball cheer.

After my last post, urging Microsoft to make IE8 the last release of Internet Explorer, the Softies announced that in Windows 7, you will be able to remove Internet Explorer and replace it with another browser. This is significant because they have long maintained that removing IE from Windows was impossible, even in the face of the wrath of the EU. This capability means that it would be pretty easy for Microsoft to take the next step I suggested, and make Firefox the successor to IE8.

I had suggested putting IE out to pasture for strategic reasons. But after using IE8 for a couple of months, I am now adding practical reasons. Internet Explorer 8 is a dog. It is painfully slow to load, and then it seems sluggish performing most browsing functions.

I admit to being spoiled by Google's Chrome, which has earned itself the role as my default browser because of its crisp performance and intelligent use of screen space. Chrome gives the real estate to the web page, not to itself. Since it is the new kid on the block, I do occasionally run into websites that don't work with Chrome. Then I switch to Firefox or Internet Explorer.

I could expound on my disappointments with IE8 in detail, but to what point? It is my least favorite browser. Besides, I only want one. I'd be happy with Firefox or Chrome.

Steve Ballmer, are you listening? Cut your loses, free your resources for more profitable use, and announce the retirement of Internet Explorer. Put it in the Microsoft hall of fame, right next to Encarta.

Dear Steve Ballmer: Adopt Firefox

2009-02-27T11:10:00.000-08:00

Dear Steve,

I guess you must have missed my January 8 post, so I'll give it another try.

The market pundits have been critical of your efforts to cut costs in the face of the recession. So here I offer a simple solution: announce that IE8 will be the last release of Internet Explorer. Announce that as of Windows 8 (yes, the successor to the in-process Windows 7), Firefox will be the preferred Windows browser.

It will be easy to do this. Do not include a browser with Windows 8. Add a one-click control to the Windows interface that says "Select Web Browser." Pop up a list that includes Chrome and Opera with Firefox at the top as the default. When clicked, it takes you to the install page for the chosen browser on the web.

Now, before you get all revved up with your "we can't separate the browser from the OS" spiel, we techies know better. True, there is a set of internet services that are needed inside Windows so that certain APIs work. Supply these core capabilities in a minimalist way. But no full-fledged browser. Trust me, your engineers can do this.

Why Firefox? Because Google is too much of a competitor and Opera is, well, flaky. And there is something delicious about the notion of Microsoft adopting the progeny of Netscape. Oh, and Firefox is real good and widely used already.

Now I know you may still think there is some sort of competitive issue about "owning the browser." Nonsense. The original Netscape threat was actually twofold. First, the only way Microsoft was going to "get" the internet was to build its own browser and engage in the browser war. Face it, you guys were bumping into walls trying to figure the internet out or make it go away. The browser war brought you kicking and screaming into the 21st century.

The second issue, the real strategic threat, was the traction Netscape server products were getting, just as Windows servers were taking off. Sure, Netscape over-promised and under-delivered. But that could have changed. The browser war was a perfect example of a Crown Jewels Attack. As spelled out in my book Attacking The Crown Jewels, this defensive strategy is to attack a product core to the enemy's strategy, one that it must expend resources defending at all costs. This pulls resources away form the enemy's product that threatens your strategy. You did this. You attacked Netscape's browser, pulling resources away for their nascent server product line. This stamped out the threat to Windows servers. It was beautifully done, even if you were not intentionally doing it.

Think of the savings! All of the engineering, marketing, and support resources that Internet Explorer consumes would be available for redeployment or release. The European Union would lose one of its treasured reasons for MS-whipping. Legal savings alone would be substantial.

In fond anticipation, I say, you're welcome.

Adventures In Kindleland

2009-02-24T13:05:00.000-08:00

I wanted to create a Kindle edition of my new novel, Opium. I had success, but it was not a task for anyone but a techie.

I figured this would be easy. I had text only, no images, no tables. I had a Microsoft Word document with just three styles (chapter heading, normal indented paragraph, normal non-indented paragraph). The Amazon Kindle Digital Text Platform was easy enough to use. I followed the steps to enter information about the novel. Then I got to the step to convert my book to Kindle format. And the fun began.

Kindle uses it own proprietary file format that works with a subset of HTML. But they have a program to convert Word files. So I uploaded my Word doc. Moments later, I was given a link to preview my converted Kindle book as it would look on a Kindle.

It was ugly. It had not picked up my paragraph formats. It had not handled a number of characters, including accented letters, the copyright symbol, and single quotes. And there were other cosmetic problems.

After trying a number of suggested approaches to fixing these issues that did not work, I finally bit the bullet and downloaded the converted HTML from the Kindle site. Then I fired up my trusty text editor and went to work on the HTML file.

Looking at the HTML, it was pretty easy to see what was wrong. So I went to work, correcting the styles, replacing symbols with HTML entities, and making other minor edits. In about an hour, I thought I had it in good shape, so I uploaded the HTML to the Kindle site. I previewed once more, spotted a few more minor issues, did one more editing pass on the HTML, and uploaded again.

I took careful notes of the steps I had taken, so I could do it again in the future more easily.

I was miffed that I had to scan through the whole book looking for glitches, not easy with a full length novel.

I was miffed that the Word doc conversion program had not handled the items I had to hand edit. Amazon's programmers could easily fix these things, which must be common problems.

Now I understand why there is an emerging cottage industry of outfits that will convert your book to Kindle format.

Now my novel is available in a Kindle edition. And I have already heard form several of my friends who ordered it for their Kindles. My small sample found more Kindle users than I would have expected, though I admit that many of my friends trend towards the techie end of the spectrum, and are early adopters of new tech gadgets.

My Novel, Opium, Just Published

2009-02-16T10:14:00.000-08:00

My first novel, Opium, has just been published and is available on Amazon.com. There will also be a Kindle edition out in a few weeks. Opium is a murder mystery set in Silicon Valley. The hero is (what else?) a software entrepreneur named Mike Gold. Here is the cover blurb:

What are the limits of friendship?
Silicon Valley software entrepreneur Mike Gold is between ventures and getting antsy when he’s offered an intriguing proposition: start up a new company funded by billionaire tech icon Barry Samson. But when Samson is found murdered, and Gold’s friends start disappearing, the FBI targets him as a suspect.
To protect his family, his reputation, and his freedom, Gold has to unravel a puzzle involving his best friends, buried events from his childhood, mysterious women, and retired mobsters. And he better move fast, because the FBI is after him and time is running out.

And, yes, I am working on the sequel.

Your LMS Costs Too Much--And It's Your Fault

2009-01-30T12:18:00.000-08:00

In my last post, I described the business model problems of the major (and most of the minor) LMS companies. These problems inflate the cost of an enterprise LMS beyond what it could be, and in my opinion, what it should be.

But we have this free enterprise thing going on. You don't have to buy these overpriced products. If you do, you are voting with your dollars in favor of these maladaptive business models. You are validating these companies. Since that behavior seems irrational, and I assume you are rational, something else must be at work.

In fact, the LMS vendors are themselves behaving rationally, albeit badly, in response to your (or your company's) behavior. And each time you buy from them, you reinforce their behavior.

Before I describe your behaviors that condition your vendors to behave as they do, let me be clear that it does not matter why your company does these things. What matters is that you do them and that you are responsible for your own actions. Change is up to you. No excuses.

Enough tough love. Here are the things you do that shape your vendors' business practices and seriously inflate their costs of doing business with you, which are of course in some way or another going to be passed on to you in inflated prices.

Customization

A few years ago, Oracle CEO Larry Ellison, who is arrogant enough and rich enough to say what he really thinks, suggested that enterprise application customers should use his company's products as they are delivered. He said that customers were driving their costs way up by insisting on customization. He was roundly criticized. Few heeded his wisdom. He ultimately bowed to the market's penchant for customization by increasing Oracle's prices, especially for maintenance. Oracle thrives. Its customers, well...

Ellison was right, of course. Unless an application is central to your core business and provides unique competitive advantage, you should be using something out-of-the-box. Learning may be a strategic issue for your workforce; a learning management system is not. It is infrastructure. LMS is a mature application. Major vendors offerings are very similar in terms of features and functions. And I do not care if you are a Fortune xx (you fill in the xx that impresses you) company. Drop the ego, your learning management needs are not that special.

My experience is that all the costly customizations produce little, if any, ROI. In fact, when I'd talk to customers a year or two later, they'd often be unable to explain why they (or their predecessors) insisted on the expensive doodads in the first place. I once had a CIO fume at me for having somehow been responsible for the costly and useless customizations his predecessor had insisted on.

I know some CIOs who insist that all applications be used out-of-the-box. Their companies seem to be doing rather well.

Let your LMS vendor be a software company, not a professional services company pretending to be a software company.

(Note: customization here means something implemented by custom code; it does not mean configuring software preferences through a user interface.)

RFPs

When your vendor has to respond to a massive RFP, one way or another, you pay for it. The trend towards ever more lengthy RFPs is bad enough. Worse, it is common that when the vendor asks for clarification of an item, the customer is unable to explain what it means. If the questions are incomprehensible, of what value are the answers?

About 80% of the typical RFP asks about standard LMS features. Drop these questions, they add no value to your analysis. Focus on genuine differentiators that really matter to your organization now and will matter in the future. A short RFP (try for two pages) is actually harder to prepare than a compendium of every conceivable question cobbled together from various sources. But it is a lot better.

Contracting

Unless there is a truly compelling reason to make a change, accept the vendor's contract. Your vendor does not have a one-sided agreement. They know your legal folks will read it. They want to keep their legal costs down. They want you to be okay with their provisions. Do not let your legal department prove its worth by insisting on a bunch of terms and conditions that genuinely are not worth a thing to your organization. Do not spend time negotiating for concessions the vendor won't ever give, or that have no real value.

I have spent countless hours in this process. I have never (truly never) seen a customer get a benefit from any contract language they insisted on. All the sound and fury is a waste of time and money.

The Squeeze

Everyone tries to squeeze the vendors' prices as low as possible. Yet they want financially healthy vendors. Well, your vendor is not going to make a profit on the other guys but lose money on you. Your vendor is, instead, going to engage with you and all customers in a costly dance of price negotiation.

When everyone expects a 40% or 60% or 80% discount (because, you will recall, everyone thinks they are so special), list prices are meaningless.

You ultimately pay the cost your vendor incurs by playing this game.

(Full disclosure: I was a founder of Silton-Bookman Systems, whose Registrar product, originally released in 1984, was instrumental in launching the LMS market. Silton-Bookman Systems merged with another LMS company, Pathlore Software, in 1999. I was COO of Pathlore when it was acquired by SumTotal Systems in 2005.)

Why Your LMS Costs Too Much

2009-01-09T09:45:00.000-08:00

If you have a learning management system (LMS) from SumTotal Systems, Saba, or one of their smaller rivals, you likely have two problems. One, your LMS costs too much. Two, your vendor's longevity is at risk.

Their are two culprits here: your vendor and your company. Today, let's look at what your vendor does wrong: your vendor is really a professional services company pretending (perhaps even yearning and trying) to be a software company.

Unlike a real software company (see my post on the software company business model on January 2), Saba, SumTotal and a lot of other so-called enterprise software companies are really in the professional services business. They use software as a loss-leader for professional services. They do this primarily because they are obsessed with top-line revenue growth in order to appease investors. The problem is that professional services are inherently low-margin. And they lose money on the software. So the net result is that they produce little, if any, profit. In fact, Saba and SumTotal have lost a monumental amount of money over the years. The result of this is that these companies get a low market valuation (see my December post on the zero billion dollar LMS market).

These companies do not think they lose money on software. They will, instead, patiently explain away their losses, year after year. They will tell you how each part of their business is profitable, yet, mysteriously, the total is not.

But their software is way too expensive to maintain and support. It is not designed to minimize maintenance and support costs. It is not designed to be easily configurable to meet user needs. It is not designed to minimize the cost of installation and upgrading. Instead, it is designed to provoke the need for customization by adding code to the product (that is, by requiring professional services). It is full of complexity to support different versions for different customers. Everything from installation to upgrading to adding a feature is seen as an opportunity to add professional services revenue, not to make the core product better. This lack of focus on the core product as the profit and revenue generator, which is at the heart of the software company business model, is the root cause of the overall profitability problem.

The rule of thumb is that a software company should derive the majority of its revenue from software, not services. But a more careful analysis is needed, because many so-called software companies have costs buried in R&D and technical support that are really costs associated with software designed to generate the need for professional services. It can cost ten to twenty times (yes, really, no typo) as much to support software that is thus poorly designed and architected. These costs usually get absorbed in R&D and tech support, but they are properly part of the overhead of professional services. In other words, you have to dig deeper to understand exactly how much professional services cost the company.

These companies must then try to recoup their costs from customers, driving up prices. Even so, they lose money. The hidden costs of being a professional services company instead of a software company mean they really lose money on every sale. And those losses escalate into the future because the true cost of support cannot be covered by maintenance revenue; the annuity stream is a money-loser. You cannot make that up on volume. Question is, how long can you survive?

Time For Microsoft To Embrace Firefox

2009-01-08T13:45:00.001-08:00

In August of 2006, I wrote a post suggesting that Microsoft get out of the browser business. Actually, I should have said browser charity, since Internet Explorer is a cost sink without revenue. So I ask again: what would be the bad thing that would happen for the Softies if the successor to IE 8 were Firefox?

Here is part of that post, which seems as relevant today as it was over two years ago:

I think it may have happened this way: At some Microsoft meeting...someone said something like, "I know this is a bit whacky, but why do we really care if people use Firefox instead of Internet Explorer?" After a long silence, someone else said, "You know, that is a very good question. We used to care a lot, but I’m not sure there is any longer a reason to care."

When Microsoft declared war on Netscape a decade ago, Windows had no Internet capability. The threat was that the Netscape browser might somehow evolve in such a way as to take over the user interface and make Windows irrelevant. Microsoft did not much understand the Internet or the web and its brain trust used an extreme version of the "attack their strength" strategy, attack and kill ("embrace and extend" in polite company). The rest is history.

That was then. Today, Windows has Internet and web functionality deep in its guts. Desktop applications can and do use these capabilities regardless of which browser a user may choose to use. In fact, Internet Explorer is now really just an application that uses Windows internet services, Improving Internet Explorer is costly. Its security problems have given Microsoft a black eye that never seems to heal. It does not bring in a dime of revenue. It causes antitrust problems. And Microsoft now fully understands what a web browser is and is not, and that a browser is no longer a strategic threat to Windows.

...How exactly would that threaten the Windows franchise? Perhaps it would not. Perhaps it would expand the market for the platforms which run Windows. Perhaps it is time to end the browser war so the Microsoft brain trust can focus resources on more important strategic issues?

Steve Ballmer, are you listening? Just declare the browser wars to be over, and offer Firefox as the Windows default browser. Then how about focusing on products that produce healthy revenue and profit streams instead of just cost?

How Times Have Changed

2009-01-04T10:24:00.000-08:00

It's a new year, MacWorld is coming, and I get teary remembering the image of the huge head of Bill Gates looming over Steve Jobs at MacWorld in Boston in 1997. You remember, too, don't you, how Gates saved Apple by tossing Jobs a hundred and fifty million dollars? In exchange, Microsoft got a settlement of Apple's patent suit that accused Windows of ripping off parts of the Mac GUI. Microsoft got Internet Explorer as the default Mac browser. Microsoft got Jobs to bless its Mac Office, which extended its Office hegemony. The audience was stunned. Boos and cries of horror were rampant. And Jobs pleaded with the crowd to stop bashing Microsoft.

How times have changed. Today, Microsoft once more dominates the tech headlines. Internet Explorer market share plunges below 70% (oh, yeah, Apple released its own Safari browser a few years ago). Early reviews of Window 7 are mainly focused on whether it can rescue the Windows brand after the Vista debacle (oh, yeah, Mac OS X has grabbed about 10% market share from the once seemingly unstoppable Windows monopoly). Zune forgets about leap years and stops working on the 366th day of the year (oh, yeah, the fix is to drain the battery; gotta kill it to save it!) And rumors circulate that there may be 10,000 fewer Softies soon due to layoffs in Redmond.

As for Apple, the main questions seem to be about Steve Jobs' health and how to further expand the iPhone, iPod, iTunes, iWhateverGadget drive to world domination. No one asks about Ballmer's health (would we notice a change?). No one asks about anything new from Microsoft dominating anything.

How times have changed!

The Software Company Business Model

2009-01-02T15:46:00.000-08:00

In my last post, I suggested that the beleaguered major Learning Management Systems companies like Saba and SumTotal Systems might do a lot better if they behaved like real software companies. What do I mean by a "real" software company?

Here is how the software company business model works. You invest in R&D and create a great product. You then leverage your R&D costs by selling lots of copies of that product. You make lots of margin on each sale because your cost of making each copy is very low. You add an annuity stream to your profit and grow a revenue base by selling updates to your product, which you assure customers want by providing constant meaningful improvements. Then repeat. This magical model has powered almost every successful software company. Those with other models may develop software, but, as we shall see later, they are not really software companies.

It does not matter if your product is sold as a service (the increasingly popular, web-enabled, software-as-a service or SaaS model) or as a product (software-as-a-product or SaaP). The difference here is primarily delivery, that is, how you get the software's benefit to the customer. In SaaS, you deliver a virtual copy over the web through a browser, and the software itself resides on your server. In SaaP, the software is physically installed on the customer's computer (server or client). Either way, virtual or physical, you are delivering a copy of the software to the customer. What drives the business model is the same: very low cost to deliver each "copy" of the product to the customer.

Do not confuse subscription pricing with the SaaS versus SaaP debate. Either model can use subscription pricing. That's a phony issue. There are some important differences between a SaaS business and a SaaP business, but these do not change the fundamentals, though they can be used to confuse the SaaS-SaaP debate. True, SaaS is typically subscription priced. But in SaaS or SaaP, a subscription price means an update is realized through a subscription renewal, rather than a maintenance contract renewal or an update purchase. That is merely form, not substance.

Another consideration in the business model is the role of marketing versus sales. Some markets call for a high-touch, sales driven scheme; others call for a low-touch, marketing driven scheme. But this is mainly about which way the marketing and sales dollars get apportioned and does not change the business model fundamentals.

But there is another very important thing about the software company business model: professional services are kept to a minimum. Why? Because professional services are low margin and the ability to annuitize is at best dicey.

Professional services include customized software development, along with consulting, training, implementation and so forth. Great software companies let others perform these services around their products. They grow by the resulting network effects. They keep their own margins high and stick to what they do best: developing great software that delivers value to customers. They are rewarded for this discipline by high valuation multiples because they are so profitable. In fact, much of the productivity gains that the tech industry has pumped into the economy over the last few decades have been because of the efficient use of all varieties of capital by practitioners of the software business model.

In a future post, I'll look at how the major LMS companies (and, in fact, most so-called enterprise software companies) fail to follow the software business model and thus are doomed to low profits, or none at all, and low valuation multiples.

Why Your LMS Vendor Gets No Respect

2008-12-15T10:27:00.000-08:00

Ever wonder why the major LMS vendors, led by the two public companies Saba and SumTotal Systems, always seem to be struggling? Here we are, a decade after Cisco CEO John Chambers got the early LMS players' hearts fluttering by declaring that eLearning would make email on the web seem like a rounding error. Yet even before the current recession, Saba and SumTotal could not get their growth engines going.

A major reason for this was discussed in my last post. The enterprise LMS market is pretty saturated, and the products are mature, at least from a features-and-functions perspective. So you have limited growth options. You can grow by peer acquisition. But in a saturated market, this is just rearranging the deckchairs. SumTotal and Saba have already consolidated most of the big early players. Those that are left are not especially appealing, and, even if they were, S & S no longer have attractive enough stock to offer, nor can their performance warrant other forms of capital infusion. The current crop of second tier vendors probably believe they are better off sitting tight, or have grown weary of the dance. A number have been dressed up for the dance without suitable suitors for so long that they look and act like old maids.

Another growth strategy is the "adjacent category" play. Add Whatever Management to Learning Management. Whatever needs to be a close enough cousin of Learning to leverage at least some of your sales, marketing and services capability. You get to pick the Whatever of your choice. Human Capital? Content? Performance? The "Pick the Whatever" game has occupied, if not entertained, many LMS vendor staffers for countless hours over the years. Trouble is, the market does not seem to want to grant the LMS vendors the rights to move into any of these catagories in any meaningful way. The market can be stubborn about this: "You want to be my LMS vendor? Then I want you to be focused!"

So what is left? More mergers? Saba and SumTotal already have hairballs for product lines as a result of their prior acquistions. More would not be merrier. Get acquired by a company in another enterprise space? Even if capital were flowing, where is the value to the acquirer? Saba and SumTotal have spent hundreds of millions forming companies that cannot get to profitability in the LMS market. I know all about the greater fool theory, but really...

So here's an idea. How about becoming a real software company? SumTotal and Saba behave more like they are in the services business than the software business, and their finacial statements and market multiples reflect this. I know, being a software company is a radical idea. Regardless, I'll explore this more soon in another post.

LMS, A Zero Billion Dollar Market

2008-12-01T11:33:00.000-08:00

Led by SumTotal Systems and Saba, the two public companies who consolidated much of the market since the dot-com bust, the learning management systems (LMS) market is a classic zero billion dollar market.

(Full disclosure: I was a founder of Silton-Bookman Systems, whose Registrar product, originally released in 1984, was instrumental in launching the LMS market. Silton-Bookman Systems merged with another LMS company, Pathlore Software, in 1999. I was COO of Pathlore when it was acquired by SumTotal Systems in 2005.)

A zero billion dollar market is a market whose total revenue potential is less than $500 million, so when you round it off to the nearest billion it is zero billion dollars. Without the potential for a billion dollars of revenue, a market is unlikely to support a company with a potential market cap of over $500 million. Thus it is also a zero billion dollar market for market caps.

Many tech start-ups find themselves in zero billion dollar markets, usually with a bunch of peer competitors who got into the market for the same trendy reasons. After a while, some fail, some exit the market, some are acquired by RBCs (really big companies), and some get rolled up in a consolidation wave. When the dust clears, though, the survivors are still stuck in a zero billion dollar market, where even the biggest still have zero billion dollar market caps. Such was the path of the LMS market from the dot-com boom, through the dot-com bust, to the present.

One sure sign of a zero billion dollar market is that the major players, who all sell widgets, claim they are really not in the widget market but that widgets are just their entry point into some other, larger market. Yet years pass and they are still mainly widget companies. LMS market watchers are familiar with this, as the major players tout human capital management, talent management, anything-but-learning-management, as their "real" businesses. Still, customers seem to just want really good learning management, and the other stuff is mainly a distraction. Instead of focusing on running profitable LMS companies, the search for the key to a larger kingdom is a constant distraction.

The stocks of SumTotal and Saba have been beaten down considerably during the current economic meltdown, but even in good times the LMS market was a zero billion dollar market. What is happening now is that investors are getting feed up with the seemingly unending path to profitability (as in, "we are still getting there," even after all these years).

A note to entrepreneurs: A zero billion dollar market can be great if you are a privately and closely held company. Sure, the VCs and investment bankers will sneer at you and call you (shudder) a lifestyle entrepreneur. But you can do quite well for owners, employees and customers in markets under $500 million. You can even get rich. But be sure you have owners, not investors. You can tell the latter, they have billion dollar stars in their eyes.

Yahoo, How Do You Make Money?

2008-11-19T11:50:00.000-08:00

Since Jerry Yang announced he is stepping down as Yahoo CEO, pundits have been pouring out advice for his yet-to-be-named successor. Most center around strategy, as in "it would be good to have one, articulate it clearly, and rally your troops around it." Some I have read even claim Yahoo has a strategy, opening its myriad services to developers in order to spread their use hither and yon.

Sadly, even if this is and will be the strategy, it is woefully incomplete.

Some years ago, I was working on a presentation for a company that was being acquired. We wanted to tell our story as clearly and succinctly as possible to the board of the acquiring company. After much debate,we included a slide simply titled "How We Make Money." In a few bullet points, it made clear how our great strategy was monetized. The acquiring board paid much attention to that portion of the presentation.

When you are as big and well established as Yahoo, this is essential, else you have no credibility. You cannot get away with keeping score by eyeballs. Income and earnings matter. So here is my advice to the next Yahoo CEO. State your strategy clearly and succinctly, and explain exactly how you'll make money executing it. Rallying the internal and external folks around it will be lots easier that way.

Republicans Win Land, Democrats Win People

2008-11-15T11:11:00.000-08:00

Take a look at Newsmax.com. Newsmax displays a great map that shows the 2008 presidential vote county-by-county. There is an awful lot more red than blue. That's because John McCain mainly won sparsely populated, primarily rural counties all over the country. Barack Obama, on the other hand, mainly won in cities and their suburbs. Obama won where the people are; McCain won where people are scarce.

This was not because of a huge youth vote or black vote. These two demographic groups of voters were actually up very slightly as a percent of the electorate as compared to 2004. (The Washington Post reports that, based on exit polls, black voters made up 11% of the electorate in 2004, 13% in 2008; for young voters the figures are 17% in 2004 and 18% percent in 2008). If you take out the rural vote, the Obama victory cut across virtually all demographic groups.

In our democracy, people count in elections. Land doesn't vote. And, since the trend is towards increasing urbanization, the Republican challenge should be clear.

Microsoft Adopts Web 22

2008-11-14T10:34:00.000-08:00

Two years ago, in a post entitled Web 22 - Where Everybody Has A Share, I imagined a future in which we'd get beyond merely giving things away to attract online eyeballs. Instead, I proposed Web 22, where we pay people to come to our sites and click on stuff.

This business model was actually perfected in World War II and documented by Joseph Heller in his novel Catch-22. Milo Minderbinder, whose Nobel Prize in Economics is long overdue, is the genius behind this business model. He explains it to Yossarian, who is puzzled about why Milo buys eggs in Malta for seven cents and sells them to the mess hall for five cents, that he actually makes a profit because "everybody has a share."

Well, it seems that Steve Balmer, who almost "missed the internet" and has been playing catchup ever since through the Web 1.0 and Web 2.0 eras, has decided not to be late to Web 22. The Softies recently announced two programs that pay you to use their search engine, Live Search. The Live Search Cashback program pays you to search for products using Live Search. Live Search Perks awards you virtual tickets for each Live Search, that you can redeem for prizes.

This is, of course, another desperate attempt to yank search share away from market leader Google. It is another in a long line of flailing actions taken be a company that ought to forget about web search, online advertising and its Yahoo-like collection of disparate web properties. Microsoft needs to focus on what Ray Ozzie is working on, cloud infrastructure (the recently announced Azure) and applications seamlessly linked to a wide range of computing devices. That is what the internet means to Microsoft, the means of delivering operating system services and applications analogous to Windows and Office to masses of users and developers.

Microsoft should focus on monetizing these new offerings in innovative ways. Sure, some of that may be via ads, which they should cheerfully place through Google. But I did say "innovative" and the ability to truly innovate seems to be in short supply in Redmond.

Pick-Me-Ups and Tide-Me-Overs

2008-11-12T13:37:00.000-08:00

As our family knows, my wife and I make a sharp distinction between a pick-me-up and a tide-me-over. It struck me that this would be a useful analogy for what is happening with the federal economy bailout, oops, I mean rescue.

A pick-me-up is a snack you have when your energy is low and you want to give yourself a boost. My wife and I have a pick-me-up most evenings, as we find ourselves fading sometime between dinner and bedtime.

A tide-me-over is a snack you have when you expect that a meal will be delayed and you want to have some extra fuel to span the gap. I'm particularly sensitive to eating on schedule, so I use tide-me-overs to prevent grouchiness when I know a meal will be significantly delayed. My wife, who is particularly sensitive to my grouchiness, is vigilant in advising me when she thinks a tide-me-over is called for.

The essential point about a tide-me-over is that it is preventive. You don't wait until you run out of gas; if you do, then you need a pick-me-up. But you can rarely be certain you will actually need a a tide-me-over. You may not find your energy flagging even if a meal is late. Or the meal may arrive earlier than expected. So you could save the cost (however you measure it: time, money, calories, whatever) of the tide-me-over, and instead count on having a pick-me-up only if and when the need actually arises. Note that this does not factor in the potential loss of the pleasure from the missed tide-me-over, which may be yummy.

My experience is that pick-me-ups are usually more costly than tide-me-overs. I'm quite hungry when I find myself needing a pick-me-up, but not nearly as hungry when I indulge in a preventive tide-me-over. And when the meal arrives, I often enjoy it less after a crash pick-me-up than after a well-timed, modest tide-me-over.

So where is our economy? It is in desperate need of pick-me-ups. Companies (and many families) are running out of money and now are desperately hungry for cash. Worse, many cannot figure out when the next meal, that is, a recovery, will occur, especially as the financial news gets worse and worse.

Now, some companies (and families) that use a tide-me-over strategy are better positioned to withstand the downturn than those who eschew preventive action as a disdainful, wasteful practice of the faint-at-heart. Now the latter folks are begging for massive pick-me-ups.

I'm not optimistic about lessons being learned here. Human nature is more tuned to pick-me-ups than tide-me-overs.

Maybe we should just put my wife in charge. She has an uncanny knack for knowing when a tide-me-over is due.

Curling Up With Bookman's Kindle

2008-11-10T10:04:00.000-08:00

Sometime last century (I just love writing that), I was part of a group of tech company leaders assembled by a market research firm to explain the internet to them. This was in the early days of the Netscape-Microsoft browser wars. My big contribution to the discussion was in answer to the moderator's question: "Will people read books online?" I said, "It's hard to curl up with a good computer." It got a good laugh, and the marketers loved it because it was short and sweet and they understood it.

A bit later, the same firm asked me to give them my opinion of a device that was not yet on the market. It was a gadget with the sole purpose of reading electronic books. Though the identity of the manufacturer was kept secret, I was told that the thing would be called The Bookman. This time, my big contribution was to tell the very serious Japanese interviewer that it was a bit ironic that the device and I had the same name. He expressionlessly ignored that comment. When Sony later released The Bookman, it proved to be a device ahead of its time.

Which brings me to the Amazon Kindle. When my son gave me one as a gift nearly a year ago, I was a bit skeptical. I recalled how clunky the Sony Bookman and other equally unsuccessful clones were. But I was willing to give it a try, and now I'm sold.

The first generation Kindle is almost great. It is the right size (that of a large paperback), light, and has great battery life. The screen is incredibly crisp and readable in varying light conditions. It can store more books than I'll ever need to carry around at one time. The Amazon Kindle store makes it a cinch to order and instantly (I mean in a few seconds) download books without hooking up to a PC or doing anything to connect to a network except turning on the network switch (which you otherwise keep off to save battery life). This is truly like magic. You can also order Kindle books on a PC if you wish and then flip on the Kindle to download them. And you can upload other documents, though I have never done so.

I now prefer reading an e-book on my Kindle to a physical book. But there are some limitations. You really cannot give an e-book to someone else to read. The controls for turning pages are too big, which means it takes some practice to learn how to hold a Kindle without accidentally turning pages (this, I am led to believe, will be fixed in the next generation Kindle). And I'd love a button to press to get the time (I don't want the time displayed all the time, that would be distracting, but when I read I get absorbed and it'd be great to be able to do an instant time check).

But these are minor gripes. On the other hand, it's great to have instant, automatic bookmarking. And to be able to search in a book. And to have all the books I might read on a long international vacation in one light device.

So, yes, this Bookman now curls up with his Kindle. And loves it.

Netbook Versus Notebook

2008-11-09T13:52:00.001-08:00

Buried in the buzz about Windows 7, the recently announced successor to (well, actually, refinement of) Windows Vista, were the low end requirements for this next Microsoft OS. The specs make it clear that Win7, unlike Vista, will run on the new class of ultra-portable computers, the Netbook.

Netbooks have been around for awhile, but there is a lot of confusion about what a Netbook is, and how it differs from a Notebook. Evidence for this confusion is the higher rate of returns for Netbooks as compared to that of Notebooks. So let's look at what distinguishes one from the other.

The first thing most of us have to get over is that most people call Notebook computers laptops. The term Notebook is pretty much used by the tech industry and usually refers to a set of specifications that are now industry standard. So for all intents and purposes, Notebook is the technically correct term for a laptop.

Notebook computers are full-fledged PCs that are portable. They can do everything a desktop PC can do, and in a few years may well replace most desktop PCs.

Netbooks are designed for ultra-portability with a focus on web-based computing. These are not the NCs (Network Computers) Larry Ellison and Scott McNealy dreamed about a decade ago. Instead, they are full-fledged computers running full-blown operating systems (usually Windows XP or Ubuntu Linux). Here is how a Netbook differs from a Notebook:

Much smaller-easy to carry in one hand
Much lighter
Much smaller screen
Much smaller keyboard
Less storage-means less room for music, videos, photos, applications and games
Less processing power-means they do not run many desktop applications and games well
No DVD or other external drive-cannot pop in a movie, cannot easily install a lot of software
Longer battery life-at least four hours, often as much as twelve, as compared to two to four hours for Notebooks
Low price-$300 to $500

Notebooks are designed for web-based computing. They are great for browsing the web and running online (cloud-based) applications and games. While they are full-fledged PCs and can run desktop applications, they often do the latter quite slooooowly. They are more limited in what the can run, store and hook up to.

That Windows 7 will run on Netbooks further puts the nail in the PDA coffin, as cell phones take over their functions from one side and Netbooks do so from the other.

I think most returns of Netbooks are by those thinking they could do everything a Laptop could do, and just as well. Not so.

Some footnotes:

Apple has not yet entered the Netbook market. The expectation is that they will do so with a game-changing design, much like the iPhone changed the cellphone game.
Returns of Netbooks seem to be skewed to those running Linux, which may be because of buyers expecting Windows capability.

Will Yahoo Ask Obama For A Bailout?

2008-11-07T09:48:00.000-08:00

First, Yahoo CEO Jerry Yang turned up his nose at a buyout offer from Microsoft that was stunningly generous.

Then he turned to Google for a cockamamie advertising deal.

Then Google, not a company known for turning away from a legal challenge, got cold feet in the face of federal antitrust concerns (conspiracy theorists who claim Google made the offer knowing they'd have a later excuse to withdraw, just to further distract and decimate rival Yahoo, please go back to political blogging).

Then he turned back to Microsoft, with the epiphany that the Yahoo brand would be real valuable to the Softies and, gee, he'd love to sell out to them. (Yang described the Yahoo brand as a "consumer brand that allows people to get what they want on the Internet." He did not use the P (portal) word, but that's what he meant. See my 10/29/2008 post "Portal, Schmortal" or my 11/22/2006 post "Peanut Butter Portals." )

Then Steve Balmer said, gee, thanks but no thanks.

So here we are. Yang has told the world, and his demoralized employees, that Yahoo is hopelessly lost wandering in the internet desert if left on its own. Will Yang next try to convince the feds that Yahoo is too big to fail and seek a federal bailout? Wait, I got it! Jerry, quick, buy struggling Tesla and then join GM, Ford and Chrysler at the federal money trough.

Save! Spend!

2008-11-03T16:07:00.000-08:00

We all need to spend to get the economy going again.

We all need to save to give America a sound capital base.

Spend more and save more. How, you may ask, do I do both?

There is only one answer. Make more.

Let me expand on each of the above. The first is easy. As I said in my October 24 post, businesses and individuals are all responding to the economic crash by cutting spending. That makes the slowdown worse, so governments around the world are using the Keynesian formula for shortening the depth and breadth of the downturn: deficit government spending. But that effort cannot last and ultimately we all have to start spending again. The theory, to which I subscribe, is that targeted government spending can pump enough money into our pockets to kick-start economic activity. So, okay, when you have more cash (and confidence), you'll likely spend more.

But there is also a structural problem here in the USA. We have pretty much stopped saving. Not only has the federal government been piling up trillions of dollars of debt, companies and consumers have been doing likewise. This debt has been financed by Japan, China and OPEC. This too is unsustainable. If our savings rate rose to just 5%, which is low by historical (though not recent) and worldwide standards, we'd be able to fund much of our own annual national debt and stop borrowing trillions abroad. That means we lend the money to each other and interest is earned here at home, thus it is spent and saved at home.

History shows us how to make more so we can both spend more and save more. It is not through inflation. That route only makes it seem like we are making more, but we then find our spending buys less, so, oops, there goes the ability to save. Instead, we need to increase productivity. When we are more productive, we make more in terms of real spending power and thus can generate personal surpluses, otherwise known as savings.

Now, sure, we need to change our bad habits. We need to restore the virtues of thrift and sound personal financial management. But we don't need to get all tied up in a new culture of austerity. We do need to get focused on a new culture of productivity.

Productivity is about better education for all. It is about healthier workers (i.e. good health insurance for all of us). It is about availability of capital to businesses and consumers, with a proper balance of cost and risk. It is about government policies that encourage the development of new technologies, the true driver of high-paying jobs in the 21st century. It is about tax policies that reward both labor and capital investment. It is about balanced regulation evenly enforced.

Let's get back to growth by focusing on productivity. For the long haul.

Time For A Sunset

2008-10-30T17:04:00.000-07:00

Speaking of dinosaurs, as I was in my last post, it is time for Sun Microsystems to "explore strategic alternatives." That's MBA-speak for "figure out how to sell the sucker."

Sun's heyday has long since passed. It has no strategy. Developing cool software like Java and giving it away is not a strategy. Doing a 4-for-1 reverse-split of the stock like it did a year ago isn't a strategy. Making most of your sales in high-end servers in an era of commodity servers is not a strategy. Buying other dinosaurs like StorageTek is not a strategy (see my last post about mating dinos). And the list goes on...

The stock market has certainly spoken. A company with a run rate of around $12 billion and a market cap of $4 billion has been rejected by the stock market, the general economic downturn notwithstanding. The breakup value of the company now far exceeds any other hope of maximizing shareholder value.

Sun has for a long time been unfocused, with a penchant for sponsoring all sorts of internal science projects it cannot afford and which contribute to its internal confusion. Scott McNealy was a hoot with his Microsoft-bashing quips, but his low profile as board chair means we don't even have him for entertainment anymore. Besides, he was tilting at the wrong windmill for a workstation-turned-server company. Sun could have had a next act as a Linux platform but it missed that boat.

Time to sail into the sunset.

Portal, Schmortal

2008-10-29T09:47:00.000-07:00

My friend Lenny just bought 100 shares of Yahoo. He figures it just may have another bounce left (no dead cat jokes, please). I say don't hold your breath waiting for that.

Lenny asked me to advise Microsoft to renew its offer to buy Yahoo in my blog. So here I am doing my buddy a favor. Sure, Steve Balmer monitors my blog for strategy advice, then jumps on my every suggestion. Ditto my breath-holding comment.

There is no doubt that the Yahoos were lost in an alternate reality when they turned down Microsoft's generous offer. Today, the market values the company at a sliver of what the Softies offered. Must have been fun watching those billions disappear. So, Steve, by all means make another bid. At a small premium over today's valuation. Do it for Lenny.

This reminds me of when AOL sold itself to Time Warner. My take on that at the time was that Case and company had turned play money into real money. We saw how that worked out for Time Warner. So, Steve, maybe you should just buy Lenny's Yahoo shares at a nice premium and I'll let you off the hook about buying the rest of the company.

The problem is that the day of the web portal has long since passed. It was a transitional concept that bridged the pre-web internet era and the web era. AOL was the poster child for that bridge. But the only real need for the bridge was for users who had relied on a portal to organize the pre-web online chaos. Once the web took hold, search became the only organizing tool most folks needed. Like in Google.

Yahoo, like AOL, is a portal dinosaur. It evolved later than AOL, but both are headed for extinction. That has been slowly happening for years now. Extinction of large beasts rarely occurs instantly.

You know all this, Steve. You have your own portal dinosaur, MSN. Mating two dinosaurs will not produce a new super-dino that can dominate the web landscape. You need a completely new organizing principle for your web properties. Portal isn't it.

Sorry, Lenny, but I just couldn't give Steve Balmer bad advice. Think what that would do to my reputation...

Position Your Product For The Recession Now

2008-10-27T10:26:00.000-07:00

There is always a complex set of factors that influences purchasing decisions. But in economic downturns, especially those filled with uncertainty, managers everywhere are asked to avoid, defer or reduce costs. Perhaps "asked" is too mild. "Required" would be more accurate. So, regardless of your current value proposition, it is time to rethink how you position your product. The senior question is: "How and for whom can we reduce costs?"

Answer that question and then craft a clear message that makes the case to the target manager who is struggling for survival. Do it now, not next week. Do it before everyone climbs on the cost-cutting bandwagon. Get that message out.

This formula is especially true for B2B tech products. IT managers are already assembling lists of applications they want to get off their servers (or new ones they never want to put on them) so they can cut costs. SaaS offerings are in the sweet spot here. Low switching costs, fast implementation, and usage-based subscription pricing are perfect attributes in this climate.

Point solutions, as opposed to comprehensive enterprise applications, are especially well positioned. Make the case for how you can "snap in" your product in place of the behind-the-firewall solution currently used. Show unambiguously how you reduce costs. This is not the time to pitch soft savings. Meanwhile, assure that your user experience, from ease-of-use to support, reassures the beleaguered IT manager that moving the application to the cloud will make it pretty much disappear from his support menu.

Tech loves disruptive technology. What you want to disrupt right now is customer cost. All else is secondary.

Why Government Must Spend Now

2008-10-24T13:21:00.000-07:00

What should a CEO do in the face of the economic meltdown? The conventional wisdom, with which I agree, is cut costs. Cut deeper than you think you have to. Now. Hoard cash. History has rewarded those who have followed this formula, and punished those who have not.

Yet the consequence of this behavior is to assure that the recession is deep and long. As each company makes good defensive decisions and cuts spending, why, sure enough, economic activity slows down even more. Huh! Who would have thought that if we all reduced our spending with other businesses and cut employment, spending with us would decline? Can't we just dish it out without having to take it?

The irony here is that the surest way to reverse the slide is for all companies to spend more, not less. If everyone did that, we'd of course see economic growth, not decline. But that won't happen as each CEO makes the decisions that are in their company's self-interest. Exactly which CEO is going to increase spending for the greater good?

And consumers are behaving just like companies.

So it is not enough for government to act to restore confidence in the rules and regulations that govern economic activity. Nor it is enough to make capital available to lenders. What is needed is sustained spending, because, in the end, it is spending that defines economic activity. Only government can prime the pump with sustained spending when all other players are playing defense.

The surest way to do this is to accelerate infrastructure projects and other investments in our future that directly produce current-term spending. This is not the time for subtlety. The shortest distance between the appropriation and real spending should be the goal.

Yes, this increases deficits, especially as tax revenue slows with the slowing economy. Yes, we should have been smart enough not to run deficits when the economy was growing, so we'd be in a better position to do so now when we need it. But that is crying over spilt milk.

The house is on fire now and only government can put it out before it burns to the ground.

Chrome Is A Classic Crown Jewels Attack

2008-09-08T15:12:00.000-07:00

In my book Attacking The Crown Jewels, I describe how great companies defend their strategy by using what I call a crown jewels attack. This can be summarized as follows:

Attack away from the competitor's offering that threatens your strategy
Attack one of its offerings that is essential to its strategy, one of its crown jewels
Attack with sufficient credibility that the competitor must defend itself by diverting resources away from the offering that is threatening you in order to short up its crown jewel that you attack

Google's Chrome browser is a classic example of this defensive strategy. In spite of all of its missteps, Microsoft remains the number one threat to Google's search-monitized-through-advertising business. Chrome attacks Internet Explorer directly and Windows indirectly. Yes, Chrome threatens Windows, Microsoft's premier crown jewel.

For Microsoft, Internet Explorer exists to protect Windows. So long as Internet Explorer is the dominant browser, Microsoft can guarantee that the underlying operating system remains relevant. FireFox and Safari peck away at Internet Explorer, but Chrome attacks it in a more fundamental way. Google has made it clear that it intends to drive Chrome in a direction that will make the underlying operating system irrelevant by making the browser a powerful, unobtrusive applications platform on a wide range of computer devices.

Add this to the Google Office Bamboozle (search on those three words for more on this) and you can see how effective Google is in its strategic competitive defense.

Google's Trifecta Bamboozle

2007-11-06T12:41:00.000-08:00

Readers of this blog know that Google is the master of the bamboozle strategy (search on "bamboozle" in the Search Blog box above for more on this). The Googlers have outdone themselves lately.

Exhibit 1 is "Open Social." Objects in this mirror are really much smaller than they appear. This laugher is a thin little API that is no more open than any other API that ties you to one provider's platform. Sure, you can write a web widget to Google's specs and users go though Google's infrastructure when they use it. Woo-hoo! As one wag put it, this is only exciting to those pundits unable to spell API. And don't get me started on "so what makes this social?"

Exhibit 2 is Android and the "Open Handset Alliance." This is nothing more or less than Google's attempt to fragment the cell phone market and disrupt the oligopoly of the cell phone carriers and handset makers. Those nasty oligarchs won't let users play according to rules that favor Google. Now, I have no love for these cell phone control freaks, but they have given us a mass, reliable, no-brainer network. Bookman's rule of diminishing technology alliances is that the more members, the faster the decay into irrelevance. Note for example the stunning (lack of) success of the great Microsoft PlaysForSure alliance versus that of Apple's iPod/iTunes fortress of solitude.

Exhibit 3 is the Google stock price. Yes, Google has been and will likely continue to be a great company and a great investment. The bamboozle is the failure to split the price. Please repeat after me: ten shares of an $80 stock is not inherently more or less valuable than one share of an $800 stock. The value is in the expected future earnings of the company per share relative to the price, not the absolute stock price. But the pundits would not get nearly as breathless about Google stock hitting $74 a share as they do about it hitting $740. By not splitting the shares, Google has maintained the illusion of being even more stratospheric in its growth than it actually has been. Wait until they hit $1,000 a share, that's gotta be more newsworthy than hitting $100 after a ten-for-one split.

Watching Google is like watching the Wizard of Oz. Behind the smoke and mirrors and dazzling effects, there is much less than it appears.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google

Zune 2.0

2007-10-03T10:21:00.000-07:00

Microsoft this week announced the next iteration of its Zune music player and related services. There are lots of details which you can read about elsewhere (Microsoft unveils revamped Zunes). In particular, note that Microsoft is now offering native MP3 format with no DRM, one-upping the iTunes store, which still uses its own music format.

Reader's of this blog and my book Attacking The Crown Jewels know that Microsoft developed Zune to threaten iPod/iTunes and thus distract Apple from threatening Windows by freeing OS X to run on non-Apple PCs. This strategy has been effective (see Why Microsoft Needs Zune, The Zune Attack Is Working and Apple Inc.-The Zune Attack Is Working).

To understand the Zune strategy is to understand the crown jewels attack strategy. First, attack away from the competitor’s offering that threatens your strategy, the strategic threat. In this case, that threat is Apple's OS X if freed to run on non-Apple PCs. Second, attack one of the competitor’s offerings that is essential to its strategy, one of its crown jewels. So Microsoft attacks Apple's iPod/iTunes crown jewel. Finally, attack with enough credibility that the competitor must defend its crown jewels by diverting resources away from the strategic threat, thus reducing or eliminating the threat to you.

Just keep in mind that Zune's success is measured by the effect it has on keeping Apple from threatening Windows with OS X unchained, not how well Zune performs in the marketplace. Seen through this lens, Zune has been a roaring success.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Zune, Microsoft, Apple

Skype Hype Syndrome Wears Off

2007-10-01T15:41:00.000-07:00

On September 12 of last year, commenting on EBay's acquisition of Skype for $4.3 billion, I wrote:

Meg Whitman is one of my favorite CEOs, so it pains me to see her with what appears to now be a chronic case of Skype Hype Syndrome. In the acute phase of this delusional illness, Skype Hype causes the patient to feel compelled to dole out billions of dollars for a random collection of Internet traffic for no apparent reason. If allowed to progress to a chronic state, the patient is unable to either cut losses or refocus on her core business. Both phases of the illness are accompanied by constantly mumbling, "Synergy, synergy, synergy."

Skype the Internet telephone network pioneer, is a poster child for The Three Curses of Internet Success. Cursed with success without revenue, success without profits and success without barriers to entry, the Skypers correctly followed our prescription for such a business: "First mover or not, there is no substitute for a credible business plan that spells out a scalable business model that includes revenue and profit. Failing that, the plan should be for more of a proof-of-concept business model and to be acquired as an early exit strategy." Getting a couple of billion dollars from eBay with a potential kicker of a billion or so more was a rare coup. AOL at least had revenue and profit when Time Warner went off the deep end.

This Skype reality is soberly spelled out in the Business Week article, Skype Goes for Broke. Well after the eBay acquisition, they are still cursed with success. Henry Gomez, Skype's North America GM says of a recent price promotion, "It's really about turbocharging our growth and solidifying our market position here before others catch on." Yes, that's it! Under eBay, Skype seeks even more success without revenue or profit, before others catch on and emulate their success. What clever folks eBay's Skype managers are!

If you do not buy my Skype Hype Syndrome diagnosis, perhaps you subscribe to the more common theory for eBay's Skype acquisition, that is was caused by a different paranoid delusion. This theory comes in various formulations, but they net down to this: eBay believes it is strategically threatened by any large community of Internet traffic. Thus it had to take out Skype, and that is just the beginning. If true then eBay is doomed, because it cannot mount a strategic defense against Google, Yahoo, Microsoft, Amazon, YouTube, Baidu, Facebook, Flickr, Wikipedia, Vonage and on and on. The Internet is going to generate oodles of high traffic companies in the future. A little paranoia may be a healthy thing, but this fear is irrational because eBay has successfully erected too many impressive barriers to entry to feel so randomly threatened.

Well, today EBay announced that it was writing down the value of the deal by $1.2 billion. Skype co-founders Niklas Zennstrom and Janus Friis resigned their executive positions. This stunningly confirms that EBay paid way too much for Skype. Don't fret for Zennstrom and Friis, they made out like bandits. Meg Whitman, whom I admire greatly, really blew this one.

Copyright © 2007 Philip Bookman

Technorati: Skype, eBay

Wily Steve Jobs Wins Again

2007-09-27T11:25:00.000-07:00

Amazon.com's announcement yesterday of its DRM-free MP3 store is an amazing victory for that wily fox, Steve Jobs. Jeff Bezos has thrown the weight of the Amazon franchise behind DRM-free digital music distribution, securing the future of the iPod franchise.

Apple sells hardware. Software is strictly a way to move the iron (or the plastic, composites and silicon). To sell iPods, Jobs discovered, he needed to fix the fragmented MP3 song distribution system. Thus he begat iTunes, which is really two things: a music store, and software that organizes your electronic music.

As soon as the iPod/iTunes team dominated the market, Jobs issued his famous "DRM Sucks" missive, in which he blamed the evil music companies for forcing him to sell DRM-restricted music. Why? Because once iPod, propelled by iTunes, became synonymous with "portable music player" and had market dominance, its growth needed a robust market for songs. The more songs available in more ways, the more iPods (and other Apple music-playing gadgets like the iPhone) would sell. DRM gets in the way of music purchases which gets in the way of iPod purchases. That is why Jobs declared that DRM is evil.

So now Apple sells DRM-restricted songs for 99 cents, DRM-free songs for $1.29, and Amazon offers DRM free songs for 89 cents. Watch as prices continue to drop and volumes rise. No one knows better than Amazon how to pump online sales volume.

And notice that the graphics on the Amazon Mp3 store beta site are loaded with iPods.

What about the future of iTunes? I don't think Jobs really cares that much, but the iTunes software will remain the iPod user's music organizer of choice and the iTunes store will evolve to help shape the market for music to Apple's liking. And video...

Yes, next is the Jobs attack on the video market, which has just really begun. The video content producers would do well to get over DRM now. Copy protection has never succeeded in the marketplace. Get over it.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Apple, Amazon

The Gift Of The Windows Monopoly

2007-09-25T10:20:00.000-07:00

As the European Union gets more and more aggressive against Microsoft for abusing its Windows monopoly, Americans may be excused for not understanding the logic of EU antitrust decisions. American antitrust law is about protecting consumers. European law is about protecting jobs and companies, with only a passing nod at consumer protection.

Microsoft is not alone in its conflicts with these EU laws. Steve Jobs, whose monopolist instincts make Bill Gates blush, has railed against the EUs attack on the iTunes-iPod tie-in. Google is feeling the heat over its plan to acquire DoubleClick.

Now, there are EU rumblings that bundling an operating system with a computer is anti-competitive. By extension, the same would be true of cell phones. Oh, goody, we can get back to the old days when you bought a computer that sat like a brick until you bought an OS and figured out how to install and configure it. And who can wait to do the same with a billion or so cell phones each year.

The world has benefited greatly from the Windows monopoly. It gave developers a single target which enabled them to produce an amazing array of applications. It gave hardware manufacturers a de facto standard for developing all manner of peripheral devices. It gave all of us a mass market for PCs, driving down costs and spurring innovation. It was at the center and, I would argue, was and is a driving force behind the technological revolution of the last few decades.

One of the EUs main complaints is the bundling of Windows Media Player with Windows. This led to a European version of Windows without WMP, which no one buys. Ironically, WMP is losing usage share to iTunes, not as a result of the silly EU sanction.

The market will decide what an operating system should contain. Consumers use a wide variety of email applications, mainly web-based, event though Windows bundles an email program. Consumers expect a wide variety of capabilities to be bundled in the OS (Apple's OS X bundles most of the same types of applications as Windows). They also will decide when the want something better (Microsoft Money, often bundled with Windows, loses to Quicken by a wide margin).

The EU approach to monopolies in technology will lead to higher consumer prices and slower tech adoption.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Management

The Downward Spiral Of Suboptimization

2007-09-24T08:33:00.000-07:00

Over the summer I had the opportunity to talk to several CEOs of stall businesses. That is not a typo. A stall business is one whose growth has stalled. What I noticed is that in each case, the CEO knew why the once promising growth curve had flattened out. With a little probing from me, each was able to articulate what needed to be done to restore growth. Each saw how the fix to the growth-stalling problems was critical the their strategy, and each could articulate the strategy and how the critical change fit it. Each could see how to optimize the change to recharge the growth engine.

But in each case the CEO quickly shifted into suboptimization mode as they talked about implementing the necessary change. It was as if they had a split-personality. This shift in thinking assured that they would fail.

Here are two examples, with names changed to protect the guilty.

Sally is CEO of a well-established, well-run, effective services business in a specialty for which there is increasing demand. Growth has stalled for two reasons. First, her key service delivery staff must hold a particular credential that is not trivial to obtain. These folks are in high demand and competition for them is fierce. Sally's company needs excellent recruiting and staff retention. She also needs staff development to assist junior staff in obtaining the needed credential.

Sally's customers are increasingly demanding objective documentation of meeting service contract objectives, due in part to changes in regulations they in turn must meet. Sally needs her service delivery staff to meet these documentation requirements, something anathema to many of the old-hands who do great work but hate the paperwork. She needs to get her staff trained, their performance objectives aligned with the new customer requirements, and her managers need help in motivating their recalcitrant staff.

Sally knows her problem is her HR vice president, with whom she has had ongoing conflict about these and other issues. She is certain the HR VP cannot and will not do what needs to be done. She agrees that she needs to replace the HR VP. But (time for suboptimizing) that would be a distasteful and difficult chore, so Sally is doing all sorts of things to work around this person. This means doing things less well and causing work for others which makes them in turn less productive. Growth remains stalled.

Charlie is CEO of a small contracting firm. He runs operations and his partner runs sales. Charlie's business has stalled because he cannot generate enough profit from his contracts to fuel growth. Competition limits his pricing power. Charlie knows that he can recharge growth by getting bigger contracts, since his overhead and cost of selling are the same regardless of contract size. His strategy is to move the business into the more lucrative contracts. The stumbling block to doing this has been his partner, who needs to bring Charlie in to close bigger deals. After considering several options, Charlie concluded that the long-term strategy of the business would be best met by bringing in someone to run operations (his partner is not an operations guy) so he can focus on growing the large contract sales capability, leaving his partner of bring in the small deals.

But Charlie's approach to bringing in an operations person is to do it as cheaply as possible. This means he will have to keep true leadership of operations under his auspices, so he will only be somewhat involved in going after the big contracts. On the one hand, he is certain that if he hires a seasoned operations manager, Charlie's ability to focus on big deals will quickly more than pay the cost. On the other hand, he cannot stomach the cost of a senior operations manager and wants to hire and develop someone green but cheap. He may get a little growth, but is probably stuck in stall mode.

Stall businesses rarely stay stalled. They either resume growth or decline. The CEO who does not properly execute the steps needed to resume growth is heading for the downward spiral of suboptimization. As decline sets in, cutting costs becomes the primary focus, more and more of the business is suboptimized and the decline accelerates.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Management

Steve Balmer, Please Acquire Netflix

2007-08-15T09:09:00.000-07:00

On May 3, I suggested that Microsoft acquire Netflix and TiVo as additions to its Entertainment division, to complement Zune and Xbox.

These are both cheap right now for a variety of reasons. Both are great brands. The MS Netflix store would provide video DVDs and audio and video downloads on a subscription basis. Zune becomes just a device brand and the Netflix brand gets slapped on the Zune Store. Subscription is a Netflix forte, the content creators want it and Steve Jobs shuns it. What could be better?
TiVo brings a base of time-shifting customers and great technology and IP. TiVo becomes a service brand and Xbox the device. TiVo boxes become the low-end DVR-only Xbox.
All of this can be done right now. None of it requires legal or technological advances.

A recent post by Rick Aristotle Munarriz on Motley Fool also makes the case for a Microsoft-Netflix combination. Rather than summarize the key points of this excellent analysis here, I encourage you to read it.

Steve Balmer, are you listening? Get bold. Get unstuck. Shake things up.

Have some fun.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Microsoft

Why Now, Google?

2007-07-10T13:53:00.000-07:00

Why is Google now ending its bamboozle attack on Microsoft? Sometimes the bamboozler discovers serious revenue potential in the attack weapon and decides to make a full commitment to the market, a classic attack. Google signaled this in May when CEO Eric Schmidt announced that the company had a new tag line: "Search, Ads and Apps."

As for why now, Google has the infrastructure and the capital to get past being a one-trick pony. A "black swan" (see Nassim Taleb's excellent book, The Black Swan) could emerge in the search category at any time. Today, once you are as big and dominant as Google in a market, you need to broaden your offerings or risk being eclipsed with no warning or recourse. This is the same reason Apple is no longer Apple Computer.

So Google is now transitioning from a bamboozle attack to a classic attack on Microsoft Office/Exchange. Still with the same purpose, defending search-based advertising against the potential Microsoft threat by diverting resources to defend Office/Exchange, but also now satisfying the strategic objective of adding another major revenue stream.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google

Is The Google Office Bamboozle Over?

2007-07-10T10:06:00.000-07:00

In a May 23 post, I wrote:

...Google continues to give Microsoft fits with its bamboozle attack on Microsoft Office. This attack is intended to divert some Microsoft resources away from improving search to instead defend Office against the Google threat without taking significant Google resources and without generating much revenue. This is amplified in my book, Attacking The Crown Jewels, which also describes how a bamboozle attack may evolve:
"Bamboozle attacks can evolve into classic or proxy attacks. Sometimes the bamboozler discovers serious revenue potential in the attack weapon and decides to make a full commitment to the market, a classic attack. In other cases, the bamboozler sees an opportunity to spin off or sell the attack weapon to new owners that they are convinced they can influence to continue the attack for them as a proxy attack."
Perhaps we are seeing the beginning of this metamorphosis...at its shareholder's meeting earlier this month, Google CEO Eric Schmidt announced that the company now has a tag line: "Search, Ads and Apps." This is the first time the company has formally given applications equal billing with search and advertising.

I believe that yesterday's announcement of its acquisition of Postini marks the end of the Google Office Bamboozle. Postini is a serious, industrial strength provider of enterprise SaaS email and related data security solutions. This is the first grown-up in the Google Enterprise ecosystem. It gives Google the security chops it needs to earn credibility with businesses. Look for Postini to widen its scope to address the legal and operational concerns businesses have for securing and storing data, and look for this to be the back-end of Google Enterprise applications.

The secure data store was the missing piece of the puzzle.

But I come not to mourn the passing of the Google Office Bamboozle, but to honor it for giving us so much pleasure. And, as noted yesterday, those scampy Googlers have replaced it with their eBay Bamboozle, lest we turn our attention elsewhere.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google, Postini

Google Bamboozles eBay

2007-07-09T09:48:00.000-07:00

In my book Attacking The Crown Jewels, I describe in detail the bamboozle attack used in strategic competitive defense. Here is the condensed version:

The objective of a bamboozle attack, one of four styles of a crown jewels attack, is to divert your competitor's resources away from the action you fear. You do this by attacking one of his crown jewels, a product so important to his strategy that it must be defended at all costs.
A bamboozle attack is used when you want to own the attack weapon but do not see much revenue potential for your company in its market, usually because the attack weapon does not fit your overall business strategy and model. The idea is to have a lightweight offering that costs you relatively little to keep alive, and that threatens to become a heavyweight competitive threat but never quite gets there.
A bamboozle attack is primarily a marketing activity. For a bamboozle attack to succeed, you must confuse your competitor about your future intentions and make them take the attack seriously because of what it might become, rather than what it actually is. Bamboozle attacks often rely on enthralling industry analysts and pundits with the potential you have to do something wonderful should you ever seriously enter the market. They then become your propaganda squad. It often helps to coyly deny that you intend to compete with your target, all the while making small moves that could be interpreted as heading in that direction. Bamboozle attacks are smoke-and-mirrors ploys, cheered along by a bewitched audience. As in the Wizard of Oz, there is less behind the curtain than you are led to believe.

Google is the master of the bamboozle attack, used to perfection against Microsoft (for more about this, use the blog search function at the top of this page to search for bamboozle). Now those madcap Google bamboozlers have set their sights on eBay. Google wants to divert eBay's resources away from search and search-based advertising. So it attacks eBay's PayPal with Google Checkout and attacks eBay's Skype with its purchase of GrandCentral Communications. This leads to endless commentary by breathless analysts about the wondrous things Google could do with these two attack weapons. The operative word in the last sentence is, of course, "could." Do not hold your breath. Google is all about ad-supported search. All else either feeds that or is one of Google's hobbies, and when a hobby can be used to bamboozle a competitor, all the better.

Meg Whitman, eBay CEO, is familiar with bamboozle attacks. Amazon's Jeff Bezos, that rascal, has been attacking eBay with the unrealized threat of seriously entering its auction business for years. The correct response for eBay to this Google bamboozle is to execute its own strategic plans for search and advertising and not succumb to throwing resources into PayPal and Skype at the expense of those plans. Breath normally, Meg.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google, eBay

iPhone Therefore I Am

2007-07-05T09:02:00.000-07:00

Most of the iPhone activation issues can be attributed to AT&T's difficulties with unprecedented volume over its inaugural weekend and problems with switching phone numbers between cell phone service carriers. These are regrettable but to be expected. But I think Steve Jobs is positioned to do to the cell phone carriers what he did to the recording industry. Embrace and betray.

First, Steve Cool came out with iTunes, signed up all the major labels and sold individual tunes. Later (quite a bit later) he shook his fist at them for the burden of digital rights management. You see, he never wanted it, the evil music studios forced it on him. Perhaps. Perhaps he also realized that he made most of his money selling iPods (and replacement batteries), not tunes.

This could play out in the cell phone market. Apple makes 100% profit on the iPhone. It chose arguably the worst performing cell phone network. Steve Cool could, after a modest interval, issue a manifesto cursing the evil cell phone industry and demanding they free their networks for unlocked, unfettered cell phones. Hero to the masses, Steve Jobs!

In both cases, Apple is the anti-Gillette, making its money on the razors and advocating that others give away the blades.

On the other hand, the most common knock against the iPhone design is the non-replaceable battery, which could set you back a pretty penny and a lot of inconvenience every year or two. This "feature" is borrowed from the iPod. Are batteries the real Apple razor blades?

Item: A number of blogs have reported that the iPhone makes a real good iPod. Call it the iPod Maxi. Who needs the icky phone service?

Item: Another view is that the iPhone makes a great handheld internet computer if you are near a WiFi hotspot. Call it the iNewton. Again, who needs the phone service?

The next generation of Apple devices could be very interesting.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, iPhone, Apple

The Golden Rule Of The Big Thing

2007-07-02T09:38:00.000-07:00

The lemming-like behavior of those in the Silicon Valley software startup ecosystem (which has branches around the world) is based upon the golden rule of the Big Thing:

There must always be one, and only one, Big Thing.

The lemmings, err, sorry, the VCs and software entrepreneurs then flock to that Big Thing.

The last Big Thing was The Web, now known as Web 1.0. If you could spell www, you could get funded. The Valley had a crisis of confidence when Web 1.0 crashed and burned in 2000 and there was no successor Big Thing to take its place. Was the Golden Rule violated? Was the universe as we know it at risk of imploding? Thankfully, Google emerged to save us, assuring us by its madcap growth and willingness to scoop up (often ditzy) software startups that the dream was still alive. By 2004, this begat Web 2.0, the AJAX, social networking, and user-generated content Big Thing. But the interregnum between Web 1.0 and Web 2.0 was painful and shook the Valley's confidence.

But we're back now, and to show we are in control, we are working on the Next Big Thing. We have learned that we must get this in place before the Current Big Thing starts to fade. Thus there are two questions to answer:

Has Web 2.0 peaked?

What shall we anoint as its successor?

The hubris, of course, is in the second question. Note that Web 2.0 was already ascendant when it was anointed the Big Thing three years ago. No such successor is currently obvious, though there are some pundits lobbying for the semantic web as Web 3.0, the Next Big Thing. But it doesn't work that way. Picking the Next Big Thing is like picking hot stocks. By the time the third major analyst initiates coverage on the stock with a buy, it is probably time to sell. The Next Big Thing will already be on its way to bigness before the lemmings pile on.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Google Office Bamboozle Adds PowerPoint

2007-06-20T10:25:00.000-07:00

Google last week added a PowerPoint viewer to Gmail, then this week announced the acquisition of Zenter, developer of a web-based PowerPoint-like application. This follows CEO Eric Schmidt's April announcement that a presentation component was coming to Google applications by year-end.

As we have previously discussed (Google Bamboozles Microsoft, Bamboozle Update, Bamboozle Update 2), Google continues to give Microsoft fits with its bamboozle attack on Microsoft Office. This attack is intended to divert some Microsoft resources away from improving search to instead defend Office against the Google threat. This theme is amplified in the previous posts on this subject and in my book, Attacking The Crown Jewels.

I bet someone in Google is responsible for assuring that Steve Balmer and Ray Ozzie have at least one bad night each month as the result of a Google Office bamboozle announcement.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google

Fuzzy Strategy Fells Yahoo CEO

2007-06-19T11:20:00.000-07:00

Yesterday, Yahoo replaced CEO Terry Semel with co-founder Jerry Yang. The consensus is that Semel, who joined Yahoo as CEO in 2001, was axed because Google galloped past Yahoo is search volume, revenue, share price performance and market cap during his watch. While true, the root cause of his demise is that he failed to focus Yahoo on a clear strategy, which, to me, is CEO job one.

In a February post, I wrote:

On Tuesday, Yahoo announced to journalists with a bit of fanfare that it had a new mission statement it had developed last year as part of its management restructuring. Here is the previous Yahoo mission statement:
"Our mission is to be the most essential global Internet service for consumers and businesses."
This was vague enough to cover just about any Internet activity and what makes a service "essential" is surely in the eyes of the beholder. No one could operate on the basis of this fuzz, though it could be used with slight tweaking as a vision statement.
Now here is the new Yahoo mission statement:
"Yahoo's mission is to connect people to their passions, their communities, and the world's knowledge. To ensure this, Yahoo offers a broad and deep array of products and services to create unique and differentiated user experiences and consumer insights by leveraging connections, data, and user participation."
A mission statement must communicate three essential ideas:
What the organization does
Who it does it for
How it does it differently from others
The new Yahoo mission statement attempts to do this. It drops the reference to businesses and aims at consumers, so there is a bit more clarity as to the "who."
The first "what" is "connect to passion." This surely is intended to imply entertainment, but the Yahoos could not simply say that. Then again, perhaps they did not want to limit themselves and intend to appeal to other forms of passion, which I leave to the reader's imagination.
The second "what" is "connect to communities," which again casts a wide net, though it is likely a pitch for Web 2.0 relevance.
The final "what" is "connect to the world's knowledge," which is so Google-esque that we get that it means "compete effectively with Google in search."
As for the "how," the Yahoos used 31 words in their second sentence to be as fuzzy and broad as possible. They will do almost anything for which the Internet can be used.
Mission statements beg for clear, unambiguous language. If you work for Yahoo, how do you use this mission statement to help you make decisions? By trying to be the sun, the moon and the stars, Yahoo has crafted a mission statement that assures continuing lack of focus. They continue to suffer from a grandiose fuzziness of mission, as we discussed last November in Peanut Butter Portals.

Lack of focus kills careers and companies. But don't cry for Semel. He made $72 million last year and remains non-executive chairman of Yahoo's board. It is that very board of director's that deserves castigation.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Yahoo

Safari Trips Over Steve's Quips

2007-06-13T11:05:00.000-07:00

Steve Jobs is a marketeer par excellence. And as long as the Mac was a closed system, he could get away with all sorts of hype. Problem is, iTunes and now Safari also run on Windows, which allows real head-to-head comparisons with other software. Apple software does not always compare well under the harsh light of the other 95% of the PC market.

Consider the just-released Safari for Windows beta. Frankly, it does not show well compared to either Internet Explorer or Firefox.

Item: Jobs announcement this week of Safari for Windows hyped speed as one of its advantages. Wired News reports benchmark tests showing that Safari on Windows is slower on average than IE and Firefox.

Item: Jobs touts Safari as "secure from day one." As of this writing, researchers have already found ten security flaws in Safari for Windows, several of which are catastrophic, allowing exploits that gives the attacker complete control of your computer.

Item: Jobs brags that Safari is the gold-standard for browsing. Safari displays many simple web pages incorrectly (including my own). This is not new. It is due to flaws in its rendering engine, long known and documented. Web designers know workarounds for these bugs, though they are cumbersome and most web sites do not bother to chase these issues that less than 5% of visitors (Mac users) experience. These errors will become more glaring as Safari is used on Windows. Simply put, IE and Firefox observe the W3C standards and Safari does not.

Of course, Safari for Windows is not about being the web browser of choice for Windows users. This is instead about iPhone. Jobs this week announced that third parties could develop iPhone applications that run in the iPhone's version of the Safari browser. The Safari for Windows strategy is to provide all those Windows-based software developers a development platform for iPhone applications. Safari becomes the analog of Visual Studio for iPhone.

None-the-less, as Safari is exposed to "the rest of us," it may need to actually live up to its hype.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Safari, Apple

A Simply Strategy For Services Growth

2007-06-13T09:19:00.000-07:00

The June issue of Harvard Business Review reports on research by Gary Davies and Rosa Chun, professors at the Manchester Business School, that confirms a simple strategy for driving growth in service organizations: sell your staff and they will sell your customers.

Davies and Chun set out to follow up on the ideas in their 2003 book Corporate Reputation and Competitiveness. If your company's reputation among customers is vital to your success in the market, how do you best influence this perception? They found that when a company's service employees thought more highly of the organization than customers, customer perception and sales rose. When a company's service employees thought less of the organization than customers, customer perception and sales fell.

The researchers get into the reasons for this, a phenomenon called emotional contagion. This means that a service person's feelings are inevitably transmitted to customers through all sorts of cues. Customers absorb these emotional signals and are influenced to feel the same way.

This means marketing needs to turn its attention internally. More importantly, management needs to focus on demonstrating to staff that theirs is a great company, on an ongoing basis. All too often, companies focus on what customers think and then do all sorts of things, mainly led by marketing, to change their views. But in services organizations, customer views trend towards staff views. So if you want to sell your customers, sell your staff. Perpetually.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

The Effect Of Globalization On Human Services

2007-06-07T09:05:00.000-07:00

Economists have long understood that direct services--services provided hands-on, person-to-person--are inherently inflationary. The reason for this is that such services are not subject to productivity gains. A hair dresser can dress only so many heads in a day. A therapist can serve only so many clients in a day. And so forth. When other kinds of work benefit from improved productivity and you can thus buy more widgets with a dollar, that dollar still buys the same amount of direct services. As productive capacity rises and real earning power increases, direct service providers increase their charges to keep pace but the service remains pretty much the same. Now your dollar buys more goods but less services.

Globalization--an inevitable process, not a political one--increases general productivity by driving production to low cost producers. This in turn encourages innovation, in particular the use of technology, as producers worldwide battle to drive their costs ever lower, maintain quality and thus increase their productivity. The global battle of globalization is ultimately not the exploitation of low wage, poor regions. This is a temporary phenomenon. It is the total global productivity battle.

Human services, dominated by directly delivered services, thus becomes increasingly inflationary as the rest of the economy benefits from the productivity gains driven by globalization. It certainly means that all the activities that surround the person providing the direct service must be focused on for productivity gains, in particular through the use of technology. But the bottom line inflationary nature of these services will continue to be the dominating trend. This has profound implications for public policy and service providers.

Copyright © 2007 Philip Bookman

Technorati: Globalization, Strategic Planning

Zero Billion Dollar Markets

2007-06-04T08:28:00.000-07:00

I was talking to the VP of marketing for a Silicon Valley startup recently. He was lamenting that he believed his company was in too small a market. "We can't meet the projections we've made to the VCs. We have a few peer competitors and none of us can get enough traction. I just don't think the market is big enough."

This is a familiar theme. I call it the zero billion dollar market. That is a market whose total potential is less than $500 million, so when you round it off to the nearest billion it is zero billion dollars. In the hyped up VC funded high tech pressure cooker, a market of at least a billion dollars is critical. Without that potential, a market is unlikely to support a company with a potential market cap of over $500 million (which rounds off to a billion dollars). This is now the magic threshold for a successful IPO and VC nirvana.

Many tech startups find themselves in zero billion dollar markets, usually with a bunch of peer competitors who got into the market for the same trendy reasons. After a while, some fail, some exit the market, some are acquired by RBCs (really big companies) and some get rolled up in a consolidation wave. When the dust clears, though, the survivors are still stuck in a zero billion dollar market. The biggest still have zero billion dollar market caps.

One sure sign of a zero billion dollar market is that the major players, who all sell widgets, claim they are really not in the widget market but that widgets are just their entry point into some other, larger market. Yet years pass and they are still mainly widget companies.

Entrepreneurs, a zero billion dollar market can be great if you are a privately and closely held company. Sure, the VCs and investment bankers will sneer at you and call you (shudder) a lifestyle entrepreneur. But you can do quite well for owners, employees and customers in markets under $500 million. You can even get rich. But be sure you have owners, not investors. You can tell the latter, they have billion dollar stars in their eyes.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Dell Does Retail About Face

2007-05-25T09:18:00.000-07:00

In a post last September, I urged Dell to get into retail:

The big-box electronics retailers are exactly where you should be. Get into lots of them. Best Buy and Costco and Office Depot. You need retail saturation and volume fast, not boutiques rolled out at a leisurely pace. Support these retailers by focusing on brand advertising that extends your old "Easy as Dell" theme to the consumer who wants to see it, talk to a salesperson about it, take it right home and use it. Advertise simple product choices with simple names that convey ease and reliability. Think "computer as appliance." Back this with execution. Keep your costs down and your product and customer service quality high. Stick to Dell's traditions. Stay with what has made Dell great. Just add the distribution channel that extends your reach to today's home and small business consumer.
Your CEO Kevin Rollins said that Dell was "reevaluating every element of the business model. We want to do things more effectively." He called it Dell 2.0. That is fine, but choose wisely what you change. Preserve your core, it is who you are. Do not give up on being the low-price leader in brand name computers. Become great at retail distribution.

I then got a snarky email from someone at Dell telling me that, ahem, retailing through others was just not Dell's thing. This ignored the availability of Dell laptops in Costco, but lets not quibble details.

Well, Kevin Rollins is gone and Michael Dell is back at the helm. With its market share plummeting and rival HP now the leader in PC shipments, Dell has done an about-face and decided to enter the messy retail fray in a bigger way. It will sell two low-end desktop models through Wal-Mart as the first step in "a global retail strategy that you're going to hear a lot more about."

Just keep it simple, fellas. Simple choices, simple branding, well-configured. Make it a real appliance buy.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Dell

Is The Google Bamboozle Evolving?

2007-05-23T09:44:00.000-07:00

As we have previously discussed (Google Bamboozles Microsoft, Bamboozle Update, Bamboozle Update 2), Google continues to give Microsoft fits with its bamboozle attack on Microsoft Office. This attack is intended to divert some Microsoft resources away from improving search to instead defend Office against the Google threat without taking significant Google resources and without generating much revenue. This is amplified in my book, Attacking The Crown Jewels, which also describes how a bamboozle attack may evolve:

Bamboozle attacks can evolve into classic or proxy attacks. Sometimes the bamboozler discovers serious revenue potential in the attack weapon and decides to make a full commitment to the market, a classic attack. In other cases, the bamboozler sees an opportunity to spin off or sell the attack weapon to new owners that they are convinced they can influence to continue the attack for them as a proxy attack.

Perhaps we are seeing the beginning of this metamorphosis. First, at its shareholder's meeting earlier this month, Google CEO Eric Schmidt announced that the company now has a tag line: "Search, Ads and Apps." This is the first time the company has formally given applications equal billing with search and advertising. Then on Monday the Wall Street Journal reported that Google and Salesforce.com were discussing teaming up in some fashion. One possibility of such a hookup is to tie Google's applications to the Salesforce CRM suite. This could jump-start Google applications as a serious alternative to Microsoft Office and Exchange in the business world.

Salesforce, the poster child for on-demand business applications, would be a perfect ally for Google's "office in the clouds" applications, from instant messaging to email to word processing to calendaring to spreadsheets to ...

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google, Salesforce

Microsoft Self-FUD

2007-05-11T11:43:00.000-07:00

Microsoft's announced this week that it would reduce the feature set of its "Viridian" virtualization software for the Longhorn release of the Windows server operating system. This has provoked good deal of pundit commentary. Yes, it once more demonstrates how you cannot count on any Microsoft development schedule or roadmap; this is Vista redux, with the boilerplate spin from the Softies. But it begs another question: what exactly is behind Microsoft's virtualization strategy?

For a great analysis of this strategy, read Alessandro Perilli's March 1 post. But what exactly is motivating Microsoft? As one reader wrote:

"Exactly what is Microsoft's business strategy here? They seem to really need focus. They certainly are not attacking VMware to prevent VMware from creating an OS or an office like suite. Are they in the space simply to be in the space?"

The answer is, I believe, self-FUD. This is not the usual fear, uncertainty and doubt propaganda ploy that is used to freeze the market. Self-FUD is fear, uncertainty and doubt directed internally within an organization, as in "Omigod I dunno what this means but the sky could fall." For the Softies, it is now a conditioned response to any new technology that seems platform-like and whose impact on the future revenue from their crown jewels -- Windows, Office, SQL Server -- is not well understood. The mantra is simple: when in doubt, seek to control.

We saw this play out in the browser wars with Netscape. Failing to have their own vision for Windows, Office and SQL Server in an Internet world, failing in fact to "get" the Internet in the 1990s, Microsoft crushed Netscape. Now they have Internet Explorer, which produces no revenue, as a development resource-hogging albatross. Windows Media Player is a similar story, leading directly to Microsoft's woes with European regulators. And so forth.

What would it be like for Microsoft if they did not have these defensive products that produce little or no revenue and for which their are viable alternatives? What would it be like if the resources these and other similar efforts consume were directed elsewhere? Perhaps we would get incremental releases of Windows, Office and SQL Server on an annual basis. Perhaps we would be able to upgrade to a new release as painlessly as Macintosh users. Perhaps we would see some real innovation coming from the Softies, some new offering that would knock our socks off, some real technology leadership. Not to mention that Microsoft, once it crushes a competitor, puts the attack weapon on the back-burner, customers be damned.

But no, we get stewardship instead. And development motivated by fear. They are too busy trying to stop the likes of VMware from, er, well, they are not sure what exactly the threat is but if they can control it they can contain it. That is the Microsoft knee-jerk reaction to self-FUD.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Microsoft, VMware

Why So Quiet About IE 8?

2007-05-04T10:10:00.000-07:00

Mix '07, Microsoft's annual conference for web developers, is wrapping up this week in Las Vegas. The big news was Silverlight, Microsoft's new platform for rich web development. Development tools and platforms are what the Softies do best, and if you are a web developer Silverlight is important news. It promises to do for rich web development what Visual Studio did for Windows development.

Notably missing from the Mix hoopla was any detail about the next release of Internet Explorer. The Softies had promised that we would not have to wait another five years for an IE release, like we did with IE 7. They had said that they were looking at more like an 18 month release cycle. So many were expecting some pretty definite information about IE 8 at Mix. This was not forthcoming. Instead, there were murmurs about improved security, improved standards compliance and improved developer capabilities. If this sounds familiar, it is. This is the rubber stamp Internet Explorer release description, dusted off from the same kit used for the last few releases.

Why no details? Because the Softies have nothing to copy that will excite anyone. With IE 7, they had tabbed browsing to copy from Firefox and others. The Softies are just not good at inventing user interface improvements, though they are great at copying and improving on those of others. There is nothing new on the browser UI front to copy at the moment, thus there is no "wow" for the Softies to embrace and extend.

We'll have to wait for the other browser vendors to release UI improvements so Microsoft knows what to tell us will delight us about IE 8.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Microsoft

Free Advice For Steve Balmer

2007-05-03T09:04:00.000-07:00

The most interesting news out of Microsoft in a long time was its Silverlight announcement at Mix '07 in Las Vegas.

"Whazzat?" you ask. "Silverwhat? Some kind of mix? In Vegas?"

This is the sad state of the Softies. Google burps and the press reports it as a gastronomic breakthrough that will change digestion forever. Steve Jobs hiccups and they go gaga over his visionary diction. Microsoft announces a technology that could become the platform for most future web development of all kinds, and they scratch their heads and yawn.

Rather than diving into this new technology and its implications, I am here to offer some free strategic advice to Steve Balmer and his gang that, if followed, will get gobs of ongoing press and consumer attention. It is time, Steve, to make the Microsoft Entertainment division (yes, it is all about ME) a force to be reckoned with. It is time to add the other pieces of the puzzle to Zune and Xbox.

Acquire TiVo and Netflix. These are both cheap right now for a variety of reasons. Both are great brands. The MS Netflix store would provide video DVDs and audio and video downloads on a subscription basis. Zune becomes just a device brand and the Netflix brand gets slapped on the Zune Store. Subscription is a Netflix forte, the content creators want it and Steve Jobs shuns it. What could be better?

TiVo brings a base of time-shifting customers and great technology and IP. TiVo becomes a service brand and Xbox the device. TiVo boxes become the low-end DVR-only Xbox.

All of this can be done right now. None of it requires legal or technological advances.

And it would be great fun.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Microsoft

Help For Henny Penny

2007-04-30T10:00:00.000-07:00

I was talking with the CEO of a pretty good size company recently about my book, Attacking The Crown Jewels. "It's about strategic competitive defense," I said. "Well," he said, "please don't tell my VP of Sales about it. He worries enough about competition already and doesn't need any new ideas."

I asked him to tell me more about the VP of Sales (let's call him Henny Penny). It seems that Henny is like a magnet for any information about any possible competitive product. Once in possession of a nugget of competitive information, Henny alerts anyone and everyone he can think of, pummelling them with questions, announcing his worries and fears and asking if the sky is in fact falling. Needless to say, Henny's near daily missives are largely ignored by his coworkers, but do serve to keep his sales staff in a near constant state of panic. When confronted about this, Henny told his boss it was "motivating" for his troops.

I then pointed out that the strategic competitive defense planning process spelled out in Attacking The Crown Jewels might actually help Henny and his beleaguered staff. This step-by-step process lets you assess competitive threats, select the ones to focus on and plan defenses against them in an orderly, systematic fashion. Properly used, it makes the competitive threat assessment a routine activity. Thus Henny would know when his worries would be handled and how to feed the process. He would also be a part of the process that soberly assessed threats to determine those that are truly strategic -- that are severe, robust and credible -- and demand executive attention and action.

Henny did not get to be a successful VP of sales for a major company because he was a fool. Henny just sees that the woods are full of lurking threats and needs assurance that the organization is handling them for him and his team.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Zune Attack Update

2007-04-06T10:19:00.000-07:00

Reader's of this blog and my book Attacking The Crown Jewels know that Microsoft developed Zune to threaten iPod/iTunes and thus distract Apple from threatening Windows by freeing OS X to run on non-Apple PCs. This strategy has been effective (see Why Microsoft Needs Zune, The Zune Attack Is Working and Apple Inc.-The Zune Attack Is Working). Now the Softies are considering a move that would increase the Zune threat against Apple. Taking a page out of the cell phone service provider play book, Zune would be offered at very low prices if you subscribed to the Zune store on a multi-year contract.

To understand the Zune strategy is to understand the crown jewels attack strategy. First, attack away from the competitor’s offering that threatens your strategy, the strategic threat. In this case, that threat is Apple's OS X if freed to run on non-Apple PCs. Second, attack one of the competitor’s offerings that is essential to its strategy, one of its crown jewels. So Microsoft attacks Apple's iPod/iTunes crown jewel. Finally, attack with enough credibility that the competitor must defend its crown jewels by diverting resources away from the strategic threat, thus reducing or eliminating the threat to you.

Collapsing the price of music players would put Apple in a quandary about its lack of subscription pricing. This strategy makes complete sense. It is a much better idea than trying to load Zune with differentiating features and functions. A music player is a music player (OK, I also believe a cell phone is a cell phone). More, Microsoft is much better at letting others experiment with features and functions and then copying the most successful ideas. I say go with your strength, Softies.

Just keep in mind that Zune's success is measured by the effect it has on keeping Apple from threatening Windows with OS X unchained, not how well Zune performs in the marketplace.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Zune, Microsoft, Apple.

The Right Strategy, Part 3

2007-03-29T10:27:00.000-07:00

In The Right Strategy, Part 1, we looked at the situation of the newly hired coach whose charge is to build a team that is a perpetual winner. Assuming that the two most important things a coach can manipulate are the team's talent and the system under which they play, we described four possible strategies: Talent Driven, System Driven, Competitive Talent Driven and Competitive System Driven. In Part 2, I asserted that there is no absolute right strategy. There is, rather, a right ownership-coach fit, analogous to a board and CEO fit.

There are, however, strategies that are more or less likely to succeed. But we cannot discuss how to succeed without first discussing how to measure success. As Yogi Berra said, "You've got to be very careful if you don't know where you're going, because you might not get there."

Specific, measurable criteria for success are a key element of any strategy. Consider the opening sentence from President John F. Kennedy’s speech entitled “Special Message To Congress On Urgent National Needs” delivered in 1961: "I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth." He then went on to outline the space strategy for the next decade. From the start, he left no room for confusion about how to measure the success of this strategy. The result of this audacious clarity propelled the nation on a course to success.

Recall our coach whose goal is to build a team that is a perpetual winner. What exactly would a perpetual winner look like? Have a winning record every year? Get to the finals every year? Win the championship every year? Our coach needs to know what the owner means by "perpetual winner." Only then can he can present cost-time tradeoffs and get buy-in on "the best strategy" to achieve the goal.

This can be an iterative process. The vision stays fixed, e.g. "a perpetual winner." The mission -- how to move towards the vision over the next few years -- depends upon the ownership's appetite for cost-time tradeoffs and other considerations. Crafting a mission that ownership and management agree to is therefore the essential step to selecting the "best strategy."

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

The Right Strategy, Part 2

2007-03-26T11:19:00.000-07:00

In The Right Strategy, Part 1, we looked at the situation of the newly hired coach (let's make him a basketball coach) whose charge is to build a team that is a perpetual winner. Assuming that the two most important things a coach can manipulate are the team's talent and the system under which they play, we described four possible strategies: Talent Driven, System Driven, Competitive Talent Driven and Competitive System Driven.

I contend that each of these strategies can be successful. Each has its own pluses and minuses. They differ in how they trade off short-term improvements against how quickly they reach the ultimate goal. They differ in short-term cost versus cost over time, short-term fan satisfaction versus long-term fan satisfaction. These and other considerations can be analyzed. But I believe the main factors that determine which of these is the "best" strategy are which one the coach believes in and which one the ownership is willing to support over the long term. Focus, tenacity, commitment and endurance are the essential success factors.

This means that getting ownership and management on the same page is critical (I have intentionally oversimplified and left out the general manager who sits between ownership and coach to make the example less complicated). Ownership's task is then to find a capable coach whose strategy they will support over the long term. The coach's task is to work for a team whose management will support his strategy.

Some coaches are flexible and can implement different strategies given different ownership priorities. Some cannot. Some owners can back different strategies and handle the trade offs they imply. Some cannot.

There is no absolute right strategy. There is a right ownership-coach fit. The analogy to a board and CEO is if course the point of the example.

There are, however, strategies that are more or less likely to succeed. Stay tuned for more on this.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

The Right Strategy, Part 1

2007-03-20T14:11:00.000-07:00

Strategic planning is not the quest for the "right strategy." There is no such thing. Let me illustrate this by a sports example that should be familiar to most sports fans.

A new coach is hired to take over a floundering team. The vision is to build a team that is a perpetual winner. Let's assume that the two most important things a coach can manipulate are the team's talent and the system under which they play. There are many strategies this coach can use that can succeed. Here are some of them:

Talent Driven
Using a talent-driven strategy, the coach assesses the talent the team has and designs a system that takes maximum advantage of that talent, utilizing their strengths and minimizing their weaknesses. As the team's roster changes over time, the coach adapts the system to the changing pool of talent.

System Driven
In a system-driven strategy, the coach implements a system that he believes is superior. Players who do not or will not fit into the system are replaced with those who can and will. The roster is continually adjusted to better implement the system.

Competitive Talent Driven
The competitive-talent-driven coach assesses how the team matches up with the talent of the best teams in the league, then works on roster changes that improve those matchups. The coach then designs a system that takes maximum advantage of that talent, utilizing their strengths and minimizing their weaknesses. As the nature of the competition changes over time, the coach changes personnel and, as a consequence, the system.

Competitive System Driven
The competitive-system-driven coach assesses the strengths and weaknesses of the other teams in the league, then devises a system that exploits the weaknesses and defends against the strengths of the best teams. Players that do not or will not fit into the system are replaced with those who can and will. The roster is continually adjusted to better implement the system. As the nature of the competition changes over time, the coach changes the system and, as a consequence, the personnel.

Each of these four strategic approaches can work. Each can fail. No one of them is the "right strategy." Which to chose? We'll look at that in a future post. Stay tuned.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Complementing Your Strategic Leadership Style

2007-03-13T12:27:00.000-07:00

Your Strategic Leadership Style describes how you behave as a leader with regard to strategy. An honest assessment is important because, face it, you are who you are and this is but one measure of your leadership traits. The first reaction of CEOs who do not fall in the Strategist quadrant is often to vow to improve ("Every day in every way I will be more farsighted and proactive") or deny the importance of the whole issue.

These are unhelpful responses. As the article "In Praise of the Incomplete Leader" in February's issue of Harvard Business Review well states:

It's time to end the myth of the complete leader. Those at the top must come to understand their weaknesses as well as their strengths. Only by embracing the ways in which they are incomplete can leaders fill in the gaps in their knowledge with others' skills.

Missionary
If you fall into the Missionary quadrant, you are in the company of most successful business leaders. Complement your skills by adding a Mystic or Strategist to your senior management team. Partner with them to marry your proactive inclinations with their ability to craft a farsighted vision of where your planning efforts are taking the business. The hard work for you will be to get this person on the same page with you and commit to the vision they can visualize and express better than you can. Let them articulate the vision, much as you let your CFO articulate the financial state of the company.

Mystic
Similarly, CEOs who are Mystics should partner with a Strategist or Missionary. You have the vision and need them to craft the plans needed to make it happen. This often turns out to be the classical CEO-COO relationship. Getting and staying on the same page is your chore here.

Caretaker
If you are a Caretaker you are also in the company of many successful CEOs. You need help with vision and planning, and your success is due to other areas in which you excel that are not related to strategic leadership style. Your ideal executive partner is a Strategist. Your challenge is to let them lead in both areas and focus on your other strengths.

Keys To Success
The keys to success in complementing your strategic leadership style are getting and staying on the same page and letting each of you do what you do best. This implies a high level of mutual trust and respect, excellent communication between the two of you, and clarity on roles and responsibilities. These relationships require ongoing attention and management, and rock-solid commitment.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Is It PC To Call It Tribble Traffic?

2007-03-12T09:48:00.000-07:00

"More and more Web 2.0 start-ups are running into a surprising problem: too many customers." So starts an article in last Friday's San Jose Mercury News. The article goes on to focus on the problem of sites that are popular with people in countries advertisers are not interested in. Their traffic clogs the site and thus adds costs. It is also discounted when valuing the company because advertisers want to pay only for desirable segments.

These companies do not like to talk about this problem. As the article asks, "who wants to suggest some users are less valuable than others--even though it may be true?" It seems it is not politically correct to call undesirable web traffic Tribble Traffic. Tribble Traffic is web traffic that grows like crazy and consumes huge amounts of infrastructure resources, but is maddeningly hard to monetize.

When the entrepreneurs who build these companies finally figure out how to monetize their ideas, they discover that they can build a viable business model around only a subset of their users. The problem is that they cannot segment the valued traffic without alienating most all of their users. They similarly cannot capture enough demographic information to segment their traffic for advertisers without user rebellion. The Tribble Traffic is increasingly costly to serve due to diseconomies of scale.

The web places no physical barriers to who comes into your store. You are open to the world. Worse, one man's tribble is another man's target customer. In dealing with this and being shy about discussing it, the online industry shows its immaturity.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Labels: Business Strategy, Strategic Planning

Attacking The Crown Jewels Is Released

2007-03-06T09:50:00.000-08:00

I am very pleased to let you know that my new book on competitive strategy, Attacking The Crown Jewels, is now available on Amazon.com. This book introduces the Strategic Competitive Defense Planning process and the Crown Jewels Attack strategy. Highlights of the book include:

The dangers of competitive self-delusion, and the three-step cure
The three key factors that determine which competitive threats are truly strategic
How to use the Crown Jewels Attack to divert your competitor’s resources away from the threat you fear
How to use the step-by-step Strategic Competitive Defense Planning process
The eleven steps to assuring attack success

I also want to let you know that my company, the Crown Jewels Group (http://www.crownjewelsgroup.com/), provides consulting services for the Strategic Competitive Defense Planning process and the Crown Jewels Attack strategy. Please visit our web site and subscribe to our free newsletter.

Readers of Bookman's Business will find some of the material in this book familiar. Some of the ideas and examples were originally developed in this blog. I greatly appreciate all of you who have provided feedback. It has sharpened and expanded my thinking. I trust that will continue.

Click here for more information about Attacking The Crown Jewels.

Click here to order Attacking The Crown Jewels.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Attacking The Crown Jewels

Strategic Leadership Style

2007-03-05T10:02:00.000-08:00

What traits make some leaders strategists while others who talk of strategy fall short of the mark? I've wondered about this ever since I read Mike Robert's book The Strategist CEO about 20 years ago. I got to thinking about this more seriously while I was writing my book on competitive strategy, Attacking The Crown Jewels. While it did not fit in the book, I do think I have an answer.

There are many traits that are common to effective leaders and models that can be used to understand various leadership styles. Two traits stand out as predictors of strategic leadership: vision and planning.

Vision is about creating an inspiring sense of purpose. Visionary leaders answer the "why" question clearly and simply. They articulate a long-term, overarching goal and stick to it. Those low in this trait answer the "why" question in various ways that net down to this: "we do it to survive."

Planning is about proactively answering the "what, who, when, where and how" questions. Planning leaders spell out a clear roadmap of how to move forward over the next few years. Those low in this trait are reactive and take a tactical approach. They wait to see what happens before committing the troops to a course of action and repeat this again and again.

A leader who is high in vision and planning is a strategic leader. This leader inspires the organization with a worthy goal and shows them how they collectively are going to advance towards it.

A leader high in vision but low in planning is a mystic. This leader can inspire followers with a worthy goal, but cannot reveal how to get there. The path is defined by following the leader, who is making it up as they go along.

A leader high in planning but low in vision is a missionary. They lay out a clear roadmap that the organization can follow but do not inspire passion except in those who love to follow a roadmap regardless of the destination.

A leader low in vision and planning is a caretaker. They deal tactically with each issue as it unfolds with no sense of purpose other than to keep going, wandering aimlessly where momentum takes them.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Odds and Ends

2007-03-02T10:02:00.000-08:00

Some updates on topics we've been following:

Google's JetBlue Stumble
Many Google service users yesterday experienced hours of outages or slow service, many for up to ten hours. This seems to especially have impacted Gmail and Blogger users. Google's statements about this were vague and lame. They neglect to mention that some Gmail users lost messages.

Google does not seem to understand how to handle this sort of thing. There is no single place a user can go to get clear, accurate, understandable network or service status information for Google services. When information is made available, it is vague. This comes as Google rolls out "Google Apps Premier Edition" in an attempt to get businesses to switch from Microsoft Office. This will go nowhere as long as Google leaves its users stranded on the runway for hours or cancels their flights--oops, sorry, wrong company, right analogy

Oracle Buys Hyperion
Larry Ellison continues to bulk-up Oracle with the $3.3 billion purchase of performance management leader Hyperion Solutions. This move further expands the depth and breadth of Oracle enterprise business applications. Oracle continues its role as the consolidator in this market. After absorbing rivals Seibel Systems and PeopleSoft, Ellison has methodically added targeted capability in niche after niche. His buying spree has resulted in thirty deals and cost over $20 billion. Meanwhile, rival SAP seems stuck looking inward at its management succession and development issues.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google, Oracle

Odds and Ends

2007-02-21T19:38:00.000-08:00

Some updates on topics we've been following:

The Google Bamboozle Continues
Google has added Google Docs and Spreadsheets to "Google Apps for Your Domain" and has renamed the suite "Google Apps Premier Edition." GAYD included Gmail, Google Calendar, Google Talk, and Page Creator. This new incarnation of "Google Office" thus bundles word processing, spreadsheet, email, calendar, instant messaging and web page authoring at a per user subscription cost of $50 a year, targeted at small businesses. There is also a free ad-supported version available to the general public.

As we have previously discussed (Bookman's Business: Google Bamboozles Microsoft, Bookman's Business: Bamboozle Update, Bookman's Business: Bamboozle Update 2), Google continues to give Microsoft fits with its bamboozle attack on Microsoft Office. This attack is intended to divert some Microsoft resources away from improving search to instead defend Office against the Google threat. This theme is amplified in the previous posts on this subject.

This announcement tweaks the Softies just as Office 2007 is rolling out. Google does not care about making much money on this venture. They do care about protecting their crown jewels, advertising-supported search. Distracting Microsoft with the Google Office bamboozle is a great way to do this at little cost to Google.

Apple and Cisco Agree To Share
Cisco Systems has agreed to allow Apple to use its trademarked iPhone name for its new cell phone. According to the announcement, Cisco continues to also be able to use the iPhone name. Cisco won some concessions for future interoperability with Apple products, though the details were vague. Apple does not have a history of playing well with others, so I suspect Cisco won some major concessions from the Cupertino control freaks. For background on this, see Bookman's Business: Perhaps It Is Cisco That Is Silly.

Attacking The Crown Jewels Is Off To Be Printed
My new book on strategic competitive defense, Attacking The Crown Jewels, had gone gold and is in the printing process. It should be available in about a month. For more information, see AttackingTheCrownJewels.com.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Google, Microsoft, Apple, Cisco

Strategy 101 - Mission Without Vision

2007-02-14T10:00:00.000-08:00

Mission without vision is surviving. If you can craft a mission statement but cannot articulate a vision, don’t try to force one. There is no value in a vision statement that is either disconnected from the reality of what the business does or that no one, in particular the organization’s leadership, believes is real. This sort of disconnect only sows confusion and cynicism.

Indeed, many companies do just fine without vision but with solid mission(s). They just lack inspiration and the motivating passion vision can arouse. Some company leaders are not visionaries, they are missionaries. These leaders can drive successful businesses that are characterized by a relatively short-term focus. If your try to impose a vision on such a leader, it will not stick for long. They must come to it by themselves or not at all.

Mission without vision is common in two kinds of companies. Start-ups are predominately mission driven. It takes incredibly short-term focus to birth a business. True vision often comes later as the business takes hold and finds its identity and customers.

Established companies with more than one distinct mission frequently cannot develop a vision statement because there is not much of a common thread that links product lines. Such businesses are often run as financially-focused conglomerates, even if they are very small. Such conglomerates should separate out their parts and allow each to develop its own vision and mission.

When it comes to running a business, mission trumps vision. There is something to be said for survival.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning

Strategy 101 - Vision Without Mission

2007-02-13T09:59:00.000-08:00

Vision without mission is dreaming. If you have a vision statement that spells out a clear, inspirational, long-term goal, but cannot come up with a mission statement, what to do depends upon the stage of your business.

If you have not yet started the business or are in early start-up mode, vision without mission means you have a dream but have not worked out how to pursue it. Focus on developing a mission to launch you on your quest.

If you have an ongoing business, follow these steps:

1. Analyze what the business actually does, who it does it for and how it does it differently from others. Write a mission statement for each set of "what, who and how" you come up with. Each of these describe your current actual mission or missions. You may find you are pursuing several missions, some of which may have little to do with your vision.

2-a. If you have multiple mission statements, ask which of these lead towards your vision and which do not. Those that do are the ones your strategy should focus on and enhance. Those that do not should be sold, treated as cash cows or phased out. Once you have gone through this thinking, you should be able to write your current mission statement, embracing those current activities that move you towards your vision. Yes, this means omitting those product lines and activities that need to be de-emphasized as you move forward.

2-b. If you have a single mission statement but it does not connect with your vision, you have a decision to make. Either the actual mission needs to drive a new vision, or the actual vision dictates transitioning out of the current mission and into a new one that advances toward your dream.

Caution: be careful not to rationalize espousing a fuzzy vision for the sake of hanging on to your current mission(s). It would be better to have no vision at all.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning.

Samsung Trumps iPhone

2007-02-09T11:35:00.000-08:00

Apple's much ballyhooed iPhone announcement last month left many wondering how people would react to typing on a touch-screen with no tactile feedback. Samsung yesterday announced a new touch-screen phone that directly addresses that issue. The Samsung Ultra Smart F700 uses technology called VibeTonz from Immersion Corporation that sends tiny vibrations to your fingertips when you touch on-screen keys.

The F700 looks a lot like an iPhone, with a similar form factor. The front has one small button below a large screen. It also sports a slide-out keyboard, which makes me think that Samsung is responding to iPhone by accelerating implementation of VibeTonz in a phone that was originally intended to be more traditional.

Samsung's announcement, coupled with last month's LG Prada touch-screen phone announcement, makes it clear that Apple has no corner on the touch-screen smartphone market. Steve Jobs may have announced the next generation in cell phones, gotten our attention and given its form legitimacy, but Apple will have a lot of competition from established vendors who are not intimidated and actually think Apple has something to prove on their turf, not vice-versa.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Apple, Samsung, SmartPhone, iPhone.

The Year The Video World Changed

2007-02-08T09:41:00.000-08:00

2007 looks like it will mark a turning point in video content distribution. In January, Microsoft announced that Xbox 360 will be able to download IPTV content by the end of this year, Apple announced more details of AppleTV, a box that will let you download iTunes video, and NetFlix announced its video download service for PCs. This week, Wal-Mart announced a PC video download service. Yesterday, Amazon and Tivo announced Amazon Unbox on Tivo, a service that will enable Tivo users to download video content from Amazon.

By the end of this year, you should be able to download content to your HVB (Home Video Box - think DVR on steroids) and play it on your TVs and computers. It will not be neat and clean. Some HVBs will only work with certain devices (Windows PCs but not Macs, or vice-versa, for example). Some will only handle content from certain sources. DRM issues will be ugly, and Steve Jobs will not jawbone the problem away. But the market will rule, and those who build annoying limitations into their systems will ultimately lose out to those who are open. Network effects trump proprietary considerations.

TVs, PCs and ultimately any electronic device with a video display will function as home network appliances that can be used to play content from your HVB. HVBs will proliferate with varied capabilities. Some will also serve as game consoles, some as home network backup devices, some as wireless routers and hubs for the home (dare I say "server?"). Look for lots of innovation and confusion as this all sorts itself out over the next few years.

This has immense implications for any business that touches the home video market. From the broadcast and cable networks, to the cable and phone service providers, to the advertisers and production studios, to the PC, TV, game console, handheld device and network firms, the world changed in 2007.

And it's only February.

Copyright © 2007 Philip Bookman

Business Strategy, Strategic Planning, Video Technology.

Strategy 101 - Vision And Mission Example

2007-02-07T09:50:00.000-08:00

Opera Software is based in Oslo, Norway. It develops web browser software for a wide variety of devices, from PCs to cell phones. Here are Opera's vision and mission statements, as they appeared on their web site in 2007:

Vision
Our vision is to deliver the best Internet experience on any device on all major platforms.

Mission
We strive to develop a superior Internet browser for our users through state-of-the-art technology, innovation, leadership and partnerships.

The vision is simply and clearly stated. Whatever the state of the art is in Internet technology, Opera's goal is to provide the best "experience" pretty much everywhere ("on any device on all major platforms"). Today, that experience means a web browser, but note that the vision is more open ended. The implication of always being the best also implies forever leading in innovation.

The mission statement spells out how Opera is pursuing its mission now. The "what" and "who" are directly stated in the phrase "a superior Internet browser for our users." The "how" is equally straightforward: "through state-of-the-art technology, innovation, leadership and partnerships."

This is an excellent example of how vision drives mission. If you work for Opera, the vision statement makes clear where your company is going and the mission statement is an unambiguous guide you can use in the present to make decisions and focus on what is important to the company's success.

Copyright © 2007 Philip Bookman

Business Strategy, Strategic Planning, Opera Software.

Yahoo Announces New Fuzzy Mission

2007-02-02T09:40:00.000-08:00

On Tuesday, Yahoo announced to journalists with a bit of fanfare that it had a new mission statement it had developed last year as part of its management restructuring. Here is the previous Yahoo mission statement:

"Our mission is to be the most essential global Internet service for consumers and businesses."

This was vague enough to cover just about any Internet activity and what makes a service "essential" is surely in the eyes of the beholder. No one could operate on the basis of this fuzz, though it could be used with slight tweaking as a vision statement.

Now here is the new Yahoo mission statement:

"Yahoo's mission is to connect people to their passions, their communities, and the world's knowledge. To ensure this, Yahoo offers a broad and deep array of products and services to create unique and differentiated user experiences and consumer insights by leveraging connections, data, and user participation."

A mission statement must communicate three essential ideas:

What the organization does
Who it does it for
How it does it differently from others

The new Yahoo mission statement attempts to do this. It drops the reference to businesses and aims at consumers, so there is a bit more clarity as to the "who."

The first "what" is "connect to passion." This surely is intended to imply entertainment, but the Yahoos could not simply say that. Then again, perhaps they did not want to limit themselves and intend to appeal to other forms of passion, which I leave to the reader's imagination. The second "what" is "connect to communities," which again casts a wide net, though it is likely a pitch for Web 2.0 relevance. The final "what" is "connect to the world's knowledge," which is so Google-esque that we get that it means "compete effectively with Google in search."

As for the "how," the Yahoos used 31 words in their second sentence to be as fuzzy and broad as possible. They will do almost anything for which the Internet can be used.

Mission statements beg for clear, unambiguous language. If you work for Yahoo, how do you use this mission statement to help you make decisions? By trying to be the sun, the moon and the stars, Yahoo has crafted a mission statement that assures continuing lack of focus. They continue to suffer from a grandiose fuzziness of mission, as we discussed last November in Peanut Butter Portals.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning, Yahoo.

Strategy 101 - Mission Examples

2007-02-01T11:11:00.000-08:00

A strategic vision is a desired end result with a decade-long time horizon. The strategic mission describes how the organization intends to move toward that goal with a three to five year time horizon. Just as there are many different ways to get from San Jose to New York City, organizations with identical visions can have very different missions.

Consider this example from the Vision post: Our vision is a world without hunger.

Recall that a mission statement communicates three essential ideas:

What the organization does
Who it does it for
How it does it differently from others

Here are mission statements that three different organizations might have to implement this vision:

A Multinational Agricultural Supplier
"We provide farmers worldwide with seed, fertilizer, pesticides and related products to increase their productivity. We are the largest and most geographically diverse manufacturer and distributor of these products. We use our volume, distribution network and research capability to assure that our products are the most cost effective a farmer can buy."

An International Non-Profit Program Developer
"We develop localized, culturally relevant model programs for feeding poor and hungry people all over the world. We help local groups implement these programs by providing information, training, hands-on start-up management assistance, monitoring and networking."

A Global Grocery Superstore Chain
"We operate a global chain of grocery superstores. We use our vast distribution network and purchasing power to drive down the cost of groceries and assure fresh, high quality and wholesome products to all our customers. We strive to be the low price leader in all our markets."

Each of these organizations has a very different idea about how to eliminate hunger in the world.

(The examples used above are made up by the author unless explicitly attributed. Any similarity of these fictional examples to those used by actual organizations is coincidental and unintentional.)

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning.

Strategy 101 - Mission

2007-01-30T10:32:00.000-08:00

The vision statement tells why the organization exists and has a multi-decade time horizon. The mission statement lays out the way the company will move toward the vision, with a three to five year horizon.

The mission statement communicates three essential ideas:

What the organization does
Who it does it for
How it does it differently from others

This can usually be done in no more than three sentences.

Here is an example. This is Google’s mission statement as of 2007, quoted from their web site: "Google's mission is to organize the world's information and make it universally accessible and useful." It says what they do, though at a pretty abstract level. It only implies both who they do it for and how they do it that is special. It is misnamed. This is a vision statement.

Here is our version of a Google mission statement: "We provide the fastest, most useful, and easiest-to-use web search results for anyone with Internet access. We monetize web search through advertising targeted to search results. We provide Internet users with free or low cost web based services that leverage our computing infrastructure and provide us with opportunities to extend the reach of search and targeted advertising."

Like the vision statement, the mission statement is declarative. It starts with "we" or "our" so that it is clear that it belongs to the organization and that everyone in the organization is part of the effort to achieve the mission. It uses no extra words to describe the "what, who and how."

The mission statement tells the organization what it needs to focus on in the near-term in order to make the vision happen.

(The examples used above are made up by the author unless explicitly attributed. Any similarity of these fictional examples to those used by actual organizations is coincidental and unintentional.)

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning.

Strategy 101 - Vision

2007-01-29T09:41:00.000-08:00

Business strategy begins with a vision. The vision is often that of the founder of the business, but many companies do not find their vision until they have been in business for years when the founder may no longer be active in the organization. Regardless of when the vision is spelled out, it is only lofty words unless it is the vehicle for the company's leader to drive the entire organization forward, as summarized perfectly by Jack Welch, who said:

"Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion."

The vision is articulated in a vision statement. The vision statement sets a clear, specific, inspirational goal. It does not matter if the goal is achievable so long as it is worth striving toward. The vision statement spells out the desired goal in unambiguous terms.

Here are examples of effective vision statements:

Our vision is a world without hunger.

We network the world.

We put you in control of your finances.

Our vision is clean, affordable energy for everyone.

We serve the best pizza in Chicago.

The vision statement is a single declarative sentence. It starts with "we" or "our" so that it is clear that it belongs to the organization and that everyone in the organization is part of the effort to achieve the vision. It uses no extra words to describe the desired end state. It presents a unifying idea that can endure over decades. It should be stable over long periods of time.

The vision statement tells the organization why it exists. The mission statement tells it what it needs to focus on in the near-term in order to make the vision happen. This is the next subject in Strategy 101.

(The examples used above are made up by the author unless explicitly attributed. Any similarity of these fictional examples to those used by actual organizations is coincidental and unintentional.)

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Strategic Planning.

Meebo Needs Milo

2007-01-23T10:36:00.000-08:00

Instant messaging company Meebo last week announced that it had raised at least $9 million in another round of venture funding. Meebo is an instant messaging company with some cute technology but it is in a commodity market with little to differentiate its service that cannot and will not be copied by the heavyweights, AOL, Microsoft and Yahoo.

According to VentureBeat, "Meebo exchanges 75 million messages per day, with average sessions of 70 minutes — a length of time that becomes significant if you can advertise creatively during the session." To me, this is a classic case of a Startup in Wonderland generating Tribble Traffic. Tribble Traffic is web traffic that grows like crazy and consumes huge amounts of infrastructure resources, but is maddeningly hard to monetize. Perhaps the Meebos are hoping for their neighbor, Google, to buy them in order to beef up its laggard IM offering, Google Talk. But I advise Meebo to adopt the Web 22 - Where Everybody Has A Share model.

In the Web 22 model you pay people to visit your site, pay them more to click on ads, and pay more again if they then actually buy something. Venture capital is used by Web 22 startups to fund the visitor payments. The VCs raise their funds from the companies that might become advertisers. Advertisers pay the web sites for the clicks, and the sites share that revenue with the clickers. Advertisers also offer rebates to clickers who actually make purchases. This all works because everyone involved in the process has a share!

This business model was actually perfected in World War II and documented by Joseph Heller in Catch-22. Milo Minderbinder, whose Nobel Prize in Economics is long overdue, is the genius behind this business model. In Web 22, no one gets any real money, which is derisively referred to as "old money." All payments are made to a virtual account. The unit of currency is the milo. Milos are usable in any part of the Web 22 economy.

Meebo needs Milo.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Meebo, Venture Capital.

Why iPhone Is Good For Microsoft

2007-01-22T09:29:00.000-08:00

While iPhone raises the bar for Microsoft’s Zune clone-and-hone strategy, one aspect of Apple’s iPhone announcement is particularly good for Microsoft. The iPhone will use a version of the Macintosh OS X operating system. Apple has made it clear that this will be a full-function operating system with a touch screen interface replacing the Mac GUI. It will be a closed system, meaning that Apple will control the applications that can run on it. Don't expect to be downloading apps except as carefully controlled extensions of some Apple base application.

Why is this good news for Microsoft? Windows CE is the version of Windows designed for small memory devices. In its most familiar form, Windows CE powers Windows Mobile, which runs PDAs and SmartPhones. Think of Windows Mobile as Windows CE with an interface designed for cell phones and PDAs.

Hmm, that sure sounds similar to OS X with an interface for cell phones, doesn't it? It is. The main difference is that Windows Mobile is implemented by hardware vendors, and they can and most often do allow installation of third party applications. That follows the Microsoft Windows strategy on the PC platform. It is how they got 95% of that market.

The iPhone will raise the expectation of what a cell phone can and should do and how it should do it. This will increase the market for Windows Mobile phones, because Windows Mobile is the best way for phone manufacturers to get full operating system functionality. The bonus is that users get the benefit of adding innovative applications from all sorts of sources. Like games, which were noticeably missing from the iPhone entertainment package. Windows Mobile frees you from dependence on a single software vendor. Apple simply cannot be all things to all people.

Microsoft and others are working feverishly to extend the seasoned capabilities of Windows Mobile to add iPhone-like goodies. The main work will be in extending the touch screen interface, long a part of Windows Mobile, to an on-screen keyboard interface, coupled with button-free capability and a consistent application look-and-feel. This just like what Windows 3.0 brought to the DOS application user interface Tower of Babel when it mimicked the Macintosh user interface in 1990. For the hardware makers, their investment in Windows Mobile implementation skills can be leveraged over a wide range of devices, with or without keys and buttons, with large and small screens and a range of available packaged applications targeted at audience segments large and small.

With 50% gross margins, the iPhone will be very successful for Apple if it gets 5% of the cell phone market of a billion units a year (Apple is looking for just 1% in the first year). Guess who covets the other 95%? Could it be just like in the PC market, Apple extends the envelope and Microsoft gratefully delivers those advances to "the rest of us?"

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Microsoft, iPhone, Apple.

LG Prada Is iPhone Prequel

2007-01-19T12:05:00.000-08:00

Yesterday LG Electronics, the number four cell phone maker, announced the LG Prada Phone. It looks like an iPhone. Same form factor. No buttons. Touch-screen. Designed jointly by Korea-based LG and Milan-based fashion house Prada, it is targeted at the well-heeled phone-as-fashion-statement set and will be priced at about $800 when it becomes available in Europe next month. No US availability has been announced yet.

So who copied what from whom? Who innovated? Serendipity?

The vaunted Mac interface was largely inspired in the '80s by work done at Xerox PARC, the infamous lab where Xerox researchers made many technology advances that Xerox never figured out how to take advantage of. Steve Jobs did. He also apparently found inspiration for iPhone from a tablet PC. One now wonders where else the Apple folks found inspiration.

The LG Prada demonstrates that the iPhone design will not be limited to Apple products, Apple's 200 patents notwithstanding. Regardless, the iPhone will still provide the ceiling for the mass market, as discussed in my last post.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Apple, LG, Prada, iPhone.

iPhone A Gift To Cell Phone Manufacturers

2007-01-17T11:29:00.000-08:00

Apple's much ballyhooed iPhone could be a real gift to Nokia, Motorola, Samsung and the other cell phone companies. The iPhone may set a boutique ceiling under which the rest can freely harvest large market segments with targeted offerings.

iPhone will be very successful. Apple has made some wonderful design breakthroughs. Ditching keys and making the whole phone into a touch screen is brilliant. But about a billion cell phones are sold each year. Apple is targeting 10 million units in iPhone's first year. That is just one percent of the market. The iPhone will come in two models, one priced at $499 and the other at $599. Those prices require a two year Cingular cell phone service contract. Most cell phones are sold for under $100 and many are free or nearly free with cell phone service contracts. The iPhone thus leaves a lot of customers and a lot of pricing room for the traditional cell phone companies to emulate its form factor and interface, but with reduced functionality aimed at the mass of users with more simple expectations of their phones.

On the other hand, watch for Apple to exploit the iPhone’s high-end niche with offerings aimed at the BlackBerry and Treo market. RIM, Palm and their clones are duly concerned. They need a strategic competitive defense against Apple.

Expect this ceiling to endure. Even as Apple inevitably lowers prices, directly or indirectly, and widens distribution outside the Cingular (AT&T) network, its traditional high-margin appetite will keep it away from the low-end mass cell phone market. Unlike the iPod/iTunes franchise, where Apple controls the entire ecosystem, the cell phone service providers have a lock on services delivered to cell phones. So think about the Macintosh model rather than iPod. Mac too provides a ceiling, in its case for Windows PCs. And we know how that worked out.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Apple, Nokia, Samsung, Motorola, iPhone.

Perhaps It Is Cisco That Is Silly

2007-01-15T14:46:00.000-08:00

Here is the latest in the silly tale of the iPhone trademark, as reported on ZDNet.

It seems Cisco, which had acquired the trademark when it bought Infogear in 2000, let the trademark expire. You have to file a "declaration of use" every six years for a federally registered trademark, showing that in fact you have been using it continuously during that period. Cisco failed to do this when it was due in November of 2005. They did file in May of 2006, just under the wire for the six-month grace period the feds allow. It seems, however, that their filing was disingenuous. The just slapped a label that said iPhone on a box of a voip phone they sell. Worse, they put the label outside the shrink wrap. They did not start actually using the name for a phone product until last December.

So it seems they let the trademark lapse. It seems they abandoned it through disuse. It seems they revived it in order to get something from Apple in return for it. It seems they did that too late. It seems they committed perjury in their federal filing.

I accused Apple and Steve jobs of silliness when an Apple spokesperson called Cisco's trademark claims "silly." I may have been the silly one. Then again, there may be more twists as the facts of this silliness unfold.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Apple, Cisco, iPhone.

Five Questions For Steve Jobs

2007-01-11T09:29:00.000-08:00

I want to thank Lenny Greenberg, CEO of the Greenberg Technology Group, for suggestions that I have used to formulate the following questions I'd like to ask Steve Jobs in response to his MacWorld keynote in which he announced iPhone, re-announced Apple TV and changed the company's name from Apple Computer to Apple Inc.:

Is Apple a consumer entertainment company or a consumer electronics company? Sure, the iTunes store sells content, but Apple produces none of it. No music, no video, no games. Maybe you forgot you sold Pixar to Disney. Apple seems to now be a gadget shop emphasizing coolness and design.

Where is the game component? Apple TV, described by one wag as "an expensive box that lets you play TV shows on a TV," seems weak. Game consoles rule the living room. Xbox seems to be heading towards adding the same functionality as Apple TV. I had earlier suggested that Apple acquire Nintendo to fill this hole. Ah, well, once again you did not listen to me.

Who will produce the iPhone "for the rest of us?" As Lenny says, "The big mistake is the Cingular [pun intended] relationship with one cell phone provider." There is a huge opportunity for the traditional cell phone makers to fill this void for Verizon and Sprint/Nextel users. And how about a Zune phone that serves them?

Where are the games for iPhone? This seems like a big hole in the iPhone announcement. A game would have been great iCandy (sorry, could not resist) for your keynote. Will Apple provide the support game makers need to develop titles for the iPhone? Your history supporting developers is not especially good.

Why did you let the iPhone name problem occur? I can forgive backdating stock options, but this distracting controversy is inexcusable. It is not like it sneaked up on you. Even Cisco figured you must have agreed to their terms when you announced iPhone and just forgot to tell them so. But, no, your minions are now calling Cisco's ten-year-old trademark "silly." Yup, those Cisco goobers think that owning the name iPhone for phones just might apply to cell phones. Steve, you should have either reached agreement with Cisco or used your vaunted creativity to come up with another name. Silly is as silly does.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Apple.

Apple Inc.-The Zune Attack Is Working

2007-01-10T10:41:00.000-08:00

Readers of this blog know what I think the strategic value of Zune is to Microsoft (see Why Microsoft Needs Zune). Zune is Microsoft's weapon designed to keep Apple focusing its resources on iPod and not on freeing OS X to compete generically with Windows. The threat to Microsoft is that OS X sold separately from Mac hardware could break the Windows monopoly hold on 95% of the PCs sold worldwide. The Zune attack on iPod is designed to divert Apple resources to defending iPod and away from even contemplating such a move with OS X.

Steve Jobs yesterday verified that this attack is working. His MacWorld keynote was not about Mac. The Mac was mentioned only in passing. It was not about the great new features coming in the next OS X release. Not a word. It was about iPhone. It was about Apple TV. It did not skewer the latest Windows release, Vista, by comparing it unfavorably to OS X, a traditional part of the Jobs MacWorld performance. No, this year, Jobs skewered Zune. That's what Apple is paying attention to.

It was about Apple transitioning from a computer company to focusing on becoming a consumer entertainment powerhouse, a goal well within its reach. Jobs announced this formal strategy change as the reason Apple Computer was changing its name to Apple Inc. He said Apple now has four product lines: Mac, iPod, iPhone and Apple TV.

What he did not say is that Apple was becoming a software company determined to put OS X on everyone's PC. In Redmond, there were sighs of relief from the executive suite. Vista has been launched with no OS X attack. The Zune attack is paying off.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Zune, Microsoft, Apple.

Apple iPhone Raises Zune Clone-and-Hone Bar

2007-01-09T10:40:00.000-08:00

Yesterday, Robbie Bach, president of Microsoft's entertainment and devices division, dismissed the idea of an Apple iPhone. The gist of his comments was that there were too many design problems getting a phone and music player to both work well on the same device. Today, Steve Jobs announced Apple's iPhone with a slick new touchscreen interface and other innovative advances that seem to solve all of those nagging design problems, and then some.

This episode sums up the Microsoft clone-and-hone approach (see yesterday's post for more on clone-and-hone). For all its virtues, Microsoft does not innovate core design. Apple does. Microsoft sees problems. Apple sees opportunities to be creative.

In fact, the main Microsoft challenge is to figure out how to clone the innovations of others without paying too much for intellectual property violations. Let us look to history for an example:

In the 1980s Apple’s Macintosh operating system, with its graphical user interface, gave it a distinct competitive advantage over Microsoft’s character based DOS interface. To hamper Microsoft’s efforts to develop its own GUI, Apple asserted copyright ownership of the "look and feel" of its interface. This included 189 specific elements, like the use of icons, rectangular windows and overlapping windows. Apple then licensed Microsoft the rights to use certain of these elements, but with severe limitations. For example, Microsoft was not permitted to use a trash can metaphor for deleting files; windows had to be arranged side-by-side ("tiled") and not overlapped. These restrictions made the first release of Microsoft Windows clunky and it was notably unsuccessful. That was Apple’s intention.

Microsoft fought back by re-interpreting its license agreement with Apple and pretty much ignoring any restrictions. The Windows GUI soon became very Mac-like. In a series of expensive legal actions starting in 1988, Apple attempted to assert copyyright and contractual violations by Microsoft, finally dropping all claims in 1997 when Microsoft invested $150 million in a then-struggling Apple. In the interim, Windows achieved monopoly status, generating billions of dollars of annual revenue, and the payment to Apple was a trifle to Microsoft.

It will be interesting to see how the Softies do with the iPhone intellectual property. Early in his MacWorld presentation, Jobs was clear, stating, "Boy, have we patented it!" Later, he added that Apple had "filed for over 200 patents for all the inventions in iPhone, and we intend to protect them." This clone won't be quite as easy for the Softies to pull off as the Mac clone was. It should be fun to watch this story unfold.

A footnote: it seems that Apple has reached an agreement with Cisco Systems to use the iPhone brand name, for which Cisco owns the trademark. Chalk up another negotiating coup to Jobs.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Clone-and-Hone, Zune, Microsoft, iPhone, Apple.

Microsoft, Masters of Clone-and-Hone

2007-01-08T12:30:00.000-08:00

While many in the tech gadget world gather at the annual Consumer Electronics Show in Las Vegas this week, most attendees are waiting anxiously to hear what wonder Steve Jobs will announce at MacWorld in San Francisco. Speculation centers on the long-awaited iPhone (though, when it comes, it won't be called that because Cisco Systems owns the iPhone name). Zune watchers wonder what Microsoft's response will be if Apple integrates phone and iPod functionality on a single device.

Which brings up the subject of Microsoft's Zune strategy. I've already written about why I think Microsoft needs Zune (see Why Microsoft Needs Zune). Zune is Microsoft's weapon designed to keep Apple focusing its resources on iPod and not on freeing OS X to compete generically with Windows. Today I'd like to focus on how Microsoft goes about entering a market once it has decided to do so.

Microsoft uses a strategy I call clone-and-hone. In clone-and-hone, you copy the leading market entry (clone), then modify it by learning from the competitor’s mistakes and limitations, and, later, your own experience in the market (hone). When Microsoft attacked Netscape, this became euphemistically known as "embrace and extend." Clone-and-hone is a particularly good strategy when there is a well-established market leader and disruptive innovation is not your strong suit. In Microsoft's case, their strengths are distribution, marketing, wealth and brand.

Thus, Microsoft cloned iPod and iTunes with Zune, with minor attempts at honing. Now they are in the serious honing phase. The problem they face is that pesky Apple keeps innovating. This makes iPod a moving target. So Microsoft needs to wait for the next round of iPod innovation before it does more honing. They need to wait and see what Apple does with this phone thing.

I think this explains why some of the details of Zune are so lame (see, for example, Looney Zune Decision Stifles Gift Sales). Microsoft does not want to sell too many Zunes too soon. They want a more stable target. Of course, the more Apple innovates with iPod, the more it pulls resources away from unleashing OS X against Windows, which is good for the Softies...

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Clone-and-Hone, Zune, Microsoft.

Deja Vu All Over Again

2007-01-03T12:11:00.000-08:00

If imitation is the sincerest form of flattery, IBM continues to flatter Microsoft with effusive sincerity.

I was reading an interview on MIT's Technology Review site today with Kristof Kloeckner, the vice president of strategy and technology for IBM's software group. He discusses IBM's "Information On Demand" concept. This is software that lets you see patterns, trends and other meaning in data. It is IBM's version of the visualization innovations that many companies are now pursuing to make it easier to sift through the vast amounts of data available today for useful, reliable information. (Here is a great example of this.)

Hmm, "Information On Demand" sounds vaguely familiar. Why, yes, it was way back at Comdex in 1990 that Bill Gates gave his famous "Information At Your Fingertips" speech. I dug up some articles about that speech. In it, Gates said:

"Someone can sit down at their PC and see the information that's important for them. If they want more detail, they ought to just point and click and that detail should come up on the screen for them...All the information that someone might be interested in, including information they can't even get today."

Gates spoke of the PC as an aggregator of data. He spoke of search. He spoke of applications that could exchange and share data. He made the case that the PC was ideal for displaying and making sense of all of this, and he did so before there was a worldwide web.

Gosh, those marketing types at IBM are worth every cent they are paid. Substituting "on demand" for "at your fingertips" is certainly a vast leap forward.

I know that "on demand" is a trendy phrase for software-as-a-service and utility computing offerings and such, and IBM has done a lot of branding with it, but really, where has all the creativity gone?

Copyright © 2007 Philip Bookman

Technorati: IBM, Microsoft

Thoughts of Peace

2006-12-22T11:13:00.000-08:00

Wislawa Szymborska, a Polish poet, was awarded the Nobel Prize in Literature in 1996. She was born in 1923.

The End and the Beginning
by Wislawa Szymborska

After every war
someone has to clean up.
Things won't
straighten themselves up, after all.
Someone has to push the rubble
to the sides of the road,
so the corpse-laden wagons can pass.

Someone has to get mired
in scum and ashes,
sofa-springs,
splintered glass,
and bloody rags.

Someone must drag in a girder
to prop up a wall.
Someone must glaze a window,
rehang a door.

Photogenic it's not,
and takes years.
All the cameras have left
for another war.

Again we'll need bridges
and new railway stations.

Sleeves will go ragged
from rolling them up.
Someone, broom in hand,
still recalls how it was.
Someone listens
and nods with unsevered head.
Yet others milling about
already find it dull.

From behind the bush
sometimes someone still unearths
rust-eaten arguments
and carries them to the garbage pile.

Those who knew
what was going on here
must give way to
those who know little.
And less than little.
And finally as little as nothing.

In the grass which has overgrown
causes and effects,
someone must be stretched out,
blade of grass in his mouth,
gazing at the clouds.

Razors, Blades, Tunes and Ink

2006-12-18T10:45:00.000-08:00

Forrester Research issued a report about iTunes sales last week that was widely misinterpreted. Many reported that iTunes sales had collapsed in 2006. This notion came from a superficial reading of the report by a few, and then the piling-on effect of online reporters who only read derivative reporting. This furor of misinformation even coincided with a 3% drop in the price of Apple stock. Lemmings abound, it seems.

In 1903, Gillette adopted the strategy of "giving away the razors and selling the blades." In the 21st century this strategy was adopted by HP, selling printers for low margins, toner and ink cartridges for high margins. Other printer manufacturers have followed suit. Apple has turned this around. The iPod/iTunes strategy is to make money selling the razors (iPods) and to hook customer in with cheap blades (iTunes songs). What Forrester actually found was that the number of iTunes songs purchased by iPod owners had risen only slightly during 2006, from 20 to 23. At the same time, sales at the iTunes store have plateaued at about $1 billion annually, only a portion of which goes to the music providers. This is not a problem for Apple, whose iPod sales and profits continue to climb. It is a disaster for the music industry, for whom CD sales are collapsing to the tune of billions of dollars annually.

This is why Microsoft and Universal Music Group recently announced an agreement under which Microsoft will pay Universal $1 for every Zune music player sold (see Zune And Universal Make Friends). The content folks have to make money somehow.

As the iPod/Zune Google/YouTube world is showing us, in the digital age content may be king, but the money is made by those who deliver it, not those who produce it.

Copyright © 2006 Philip Bookman

Technorati: Business Strategy

The Zune Betrayal, Part Two

2006-12-13T11:05:00.000-08:00

First, let us recall the first Zune betrayal.

In 2004, Microsoft launched a logo and testing initiative called PlaysForSure. This was intended to assure customers that PlaysForSure music and video content would work on PlaysForSure devices, and bring order out of the chaos of competing digital rights management schemes and player technologies that befuddled them. Windows Media Player would be the hub, connecting PlaysForSure content with PlaysForSure devices. Hardware and content vendors climbed on board, including BestBuy, Gateway, Napster, Samsung, Linksys, Audiovox, Virgin Electronics, Wal-Mart, Dell and HP.

It took the various vendors a long time to get all the pieces of the puzzle to line up properly. Before the PlaysForSure ecosystem had a decent number of devices and a good supply of content, Apple’s iPod and iTunes had captured seventy percent of the market. A key to Apple’s iPod success was iTunes. Unlike Microsoft’s Media Player that ran only on Windows, free iTunes software ran on Windows and Macintosh computers. Where Microsoft had to count on myriad vendors to all get PlaysForSure right, Apple controlled all the parts of the system, from the iTunes content store to the iPod players, and thus could assure it all worked together seamlessly.

In 2005, Microsoft decided it had to change attacks. Learning the lesson of this marketplace from Apple’s example and PlaysForSure’s difficulties, it cloned the iPod/iTunes model and announced Zune. The Zune device looks like an iPod. Content comes from an online store called Zune Marketplace, like the iTunes store. Zune software running on Windows glues it all together, like the iTunes software. In doing this, Microsoft left its PlaysForSure partners in the lurch.

It appears likely that this kind of partner abandonment will happen again in 2007. Apple has lots of buzz about its impending iPhone, expected to be a heavenly blend of iPod and cell phone (please note, everything Steve Jobs announces for Apple is, by cosmic definition, heavenly). The Microsofties responsible for Zune have also acknowledged that they are planning a Zune phone, as they better be, since they must not cede any advantage to the iPod. This means going into competition with all the PDA and cell phone providers that use Windows CE as the operating system for some or all of their phones. Windows CE has a substantial market presence and is used by most of the major manufacturers. So when Microsoft betrays them by going into direct competition with them, it will be no small thing. Some, like Samsung, will have the honor of being twice spurned. This is a problem Apple does not have.

It will be interesting to see the impact these betrayals have on the willingness of other companies to partner with Microsoft initiatives in the future.

Fooled twice, shame on me.

Copyright © 2006 Philip Bookman

Technorati: Zune, Microsoft

Looney Zune Decision Stifles Gift Sales

2006-12-07T11:56:00.000-08:00

Microsoft's silly decision to make its Zune software only run on Windows XP SP2 (with Vista support coming the end of January) has had an interesting unintended consequence. Before you buy a Zune for someone as a gift, you have to know which operating system they use. If they have a Mac, forget it. If they use an older release of Windows, forget it. It is particularly funny that iTunes can run on more Windows computers (Windows 2000 SP4, all XP releases and Vista) than Zune.

The iPod has become a favorite gift choice, particularly for Christmas. My anecdotal evidence is that many such shoppers have no idea of the operating system used by many of the folks they are shopping for. So how many holiday shoppers who might consider a Zune choose an iPod simply to avoid this foolishness?

I think this falls into the "we didn't think this through" category. Microsoft has made it harder to choose a Zune than an iPod as a gift. If they do not release Mac software, this problem will continue.

This bonehead move ranks with the goofy way the Zune store requires you to buy points that you then use to buy content. But that's another rant for another day...

Microsofties, please repeat after me: we will create no dopey obstacles to someone choosing our product.

Now port the Zune software to the Mac's OS X. I've run out of adjectives that are synonymous with stupid.

Copyright © 2006 Philip Bookman

Technorati: Zune, Microsoft

The Binary Stars of High Tech

2006-11-30T11:44:00.000-08:00

The following is an excerpt from Wikipedia:

A binary star is a stellar system consisting of two stars orbiting around their center of mass. For each star, the other is its companion star…The components of binary star systems can exchange mass, bringing their evolution to stages that single stars cannot attain.

Microsoft and Apple. Cisco and Juniper. Intel and AMD. IBM and HP.

The universe of high-tech has many binary stars. Sometimes the binary stars form a duopoly, where the pair account for most of the revenue in the market. Even when they do not, the defining characteristic of the binary pair is that they focus on each other as the main competition. This produces a curiously beneficial result as the two spur each other to improve their offerings and keep prices in check.

This may seem counter-intuitive. Duopolies have often been guilty of tacit price fixing, sometimes dividing up customer segments between them. But in high-tech that just does not work because the binary pair are always threatened by the prospect of some upstart coming into the market with a better value proposition should they stop innovating and improving price-performance.

It seems that a company that perceives that it has but one major competitor tends to develop a healthy hatred of the enemy. This antipathy drives it to compete ever more fiercely, and its binary partner reciprocates. This focus is highly motivating for an organization. When there are several perceived major competitors, focus is diffused among them and you do not get the same competitive fervor.

There also seems to be a preference in some markets to focus on a binary pair of market leaders. We understand head-to-head competition, enjoy picking a favorite, become a fan and root for our team. It is easier to choose between two clear rivals than among a bunch of them. Multi-star systems are inherently unstable, thus a multi-vendor market may trend towards natural duopoly as economies of scale develop and promote consolidation. On the other hand, when a monopoly forms, some markets seem to naturally spawn a challenger to restore the binary equilibrium.

I believe that high-tech binary star systems, much like their astronomical cousins, evolve in ways that a single star in a market cannot. We should all encourage them to "exchange mass" and compete ferociously.

HP and Dell. Microsoft and Sony. Oracle and SAP. And on and on…

Copyright © 2006 Philip Bookman

Technorati: software strategy, web strategy

Google Answers Its Question

2006-11-29T11:41:00.000-08:00

Google yesterday announced that it is closing down Google Answers. This four year old service provided online access to researchers who developed answers to questions for a fee. It appears that the demand for such a service was low, even at bargain rates (you could get a question answered for as little as $2.50). With no scalable revenue model, there was no business case for continuing the service.

CNET notes that "Bloggers wondered whether the move was a rare misstep by the search engine giant, or a sign that Google was trying to focus more energy on its core business, and stop futzing around with test projects." Neither of these ideas seems right to me. True, Google is trying to tighten the focus of its experimental projects and rationalize its seemingly perpetual beta offerings, but shuttering Google Answers is nothing more than ending a completed experiment.

The purpose of an experiment often seems to mystify many in the business press. The fundamental purpose of any experiment is to do something and observe what happens. Ask a question, get an answer. Sometimes there is an hypothosis to test, but even then the overarching design is simply to do something and see what happens. There is no wrong result of an experiment. There is only accurate observation of what happens under a known set of conditions.

Businesses do experiments all the time. They often strive to keep them under the radar of the business press precisely because of the goofy reporting that occurs. Google for one is refreshingly honest about its experiments, though it creates some confusion with its proliferation of beta services. Perhaps it would be better served if it made a clear distinction between an experiment and a beta offering, where the latter was reserved to mean "early release for those who like to fool around with something before it is made generally available." Trouble is, it is hard to get people to participate in an experiment but easy to get them to try a beta offering.

The reason Google Answers is closing is that the experiment is over. Google gave it enough time to find out what happened. Now it knows. It got its answer.

Copyright © 2006 Philip Bookman

Technorati: software strategy, web strategy, Google

AGLOCO Launches Web 22 Site

2006-11-27T08:50:00.000-08:00

A few weeks ago in a post entitled Web 22 - Where Everybody Has A Share, I said that "In the next web era, which I call Web 22, we will pay people to visit web sites, pay them more to click on ads, and pay more again if they then actually buy something." It did not take long for Silicon Valley start-up AGLOCO to run with this idea. Last Monday, they launched their Web 22 site that embodies the Web 22 mantra, "Where everybody has a share."

AGLOCO stands for "A Global Community" that the home page says is "entirely owned by its users" and where you can "get your share of the Internet." Here is how it works. You register and provide personal information like name, email address, age, city, state and zip code. You also must agree to allow AGLOCO access to your browsing history and install the AGLOCO viewbar in your browser. The viewbar displays ads targeted to you based on the web page you are viewing and what AGLOCO knows about your browsing history and demographics. You get shares in AGLOCO for surfing the web. You also get shares for referring people to AGLOCO and for their surfing activity. Yes, everybody has a share.

Shares, shares, shares! AGLOCO is owned by it members. It makes money by signing deals with companies that give it a cut of the purchases you make when those targeted AGLOCO ads direct you to their sites. You share that revenue for each such purchase with AGLOCO. And, as a shareholder, you share AGLOCO's profits that come from its cut of all member generated revenue, less, of course, expenses. Everybody has a share.

Milo would love this.

Copyright © 2006 Philip Bookman

Technorati: software strategy, web strategy, AGLOCO

Peanut Butter Portals

2006-11-22T09:11:00.000-08:00

A few days ago the Wall Street Journal published "An internal document by Brad Garlinghouse, a Yahoo senior vice president, [that] says Yahoo is spreading its resources too thinly, like peanut butter on a slice of bread." This memo presents a mixture of operational and strategic problems and solutions. If you remove just a few very Yahoo specific words, much of it could apply to a vast number of bureaucratic companies lacking effective operational leadership and strategic focus, regrettably common problems. What I would like to focus on is the specific strategic issue facing Yahoo and its rivals: attempting to be an Internet portal is the root cause of the peanut butter problem.

The portal concept is an anachronism from the pre-web days when AOL, Compuserve, Prodigy and others pioneered the online era. Lacking a common protocol to link content, they had no choice but to create self-contained online destinations accessed with proprietary software that captured the user within their online world. The advent of the web and its underlying protocols signaled the end to that era. The portal concept, embodied by Yahoo, MSN and AOL, somehow lives on, fighting a losing battle to the forces of extinction.

The very word portal gives us a clue to the problem. A portal is a doorway. In today's online world, that doorway is the web browser. The current generation of browsers organizes bookmarks and history, tabs and feeds, and provide direct access to powerful search engines. The online doorway is wide open and easy to use.

The portal concept has been hijacked and its meaning morphed from online doorway into "a place where we try to capture the user and hang on to them for dear life by offering a dizzying array of services and content. We then try to monetize them through advertising, premium services and such." This is of course sabotaged by the lead service offered by the major portals, web search, which takes the user out of the portal. It is as if you walk into Nordstrom and the greeter asks, "May I direct you to another store?"

Google knows this and has not tried to be a peanut butter portal. It is all about search monetized through advertising. The Google home page is clean, simple and useful. True, Google has yet to figure out how to do anything but dabble in any other offerings. This leads us to the solution to the peanut butter problem. You have to think product, not portal. If you have multiple products, then run your company that way. Google knows this but has thus far chosen to pay attention only to search. YouTube will force this to change and then perhaps Google will take the next step and start capitalizing on some of the other offerings it has thus far only dabbled with.

Think of a web site as a product with appropriate features and functions to satisfy a specific customer need. What the portal players have instead are a set of products mashed together into a Swiss army knife, with its attendant problems of being bulky, confusing and cumbersome. The prescription for the peanut butter portals is to learn from product companies. Separate and segregate the offerings, package and brand them, and give them their own top-level domains. Treat each as a line of business and align the organization to that principal. Get serious about product line P&L.

I like my peanut butter chunky.

Copyright © 2006 Philip Bookman

Technorati: software strategy, web strategy

Apple Computer Strategy Rx

2006-11-13T11:32:00.000-08:00

In recent posts, I've suggested two strategic moves for Apple Computer. Today I add the third leg of the strategy to move Apple from its perpetual niche as an interestingly different but second-tier player in the computer industry to the ranks of the super-heavyweights: acquire Nintendo.

The first leg of this strategy, detailed in Apple, Lose The Hardware, Free The Software, is for Apple to get out of the business of manufacturing computers and free the Macintosh operating systems, OS X, to compete head-to-head with Windows on all Intel compatible PCs. Now that Mac's operating system has been ported to Apple's Mac-specific Intel platform, this last step should be a fairly simple task. Apple would then sell OS X like Microsoft sells Windows, with the initial price hidden for most customers in the price of PCs delivered with it. Brand the operating system with the Mac name. Make moving (of course, call it upgrading) from Windows to Mac easy. Expand Apple's software business beyond this, focusing on categories where Apple's customer savvy and design prowess can add value and differentiation. Major manufacturers like Dell and HP would benefit as well, offering Windows or Mac PCs (same hardware, different pre-installed OS). Add virtualization and the options become even more intriguing.

The second leg is for Apple to acquire Adobe Systems (Apple Should Acquire Adobe). Adobe's offerings would give Apple, the premier design-focused technology company, an unmatched array of content design and delivery tools. Apple and Adobe already have large, committed followings of web site and graphic designers, and both of their respective camps should feel at home with the combined company. Apple would then propel the web to a new standard of rich, entertaining content authored by anyone and everyone.

Leg three completes the picture of an entertainment technology powerhouse with the acquisition of Nintendo. This brings Apple the game platform it needs. The Apple-Nintendo combination would make the game console race with Sony and Microsoft much more interesting and could move Nintendo to the head of the pack.

Apple's high-flying stock and iPod-pumped revenue give it the currency and comparative valuation it needs to do these deals. This is a window of opportunity that could close.

These three strategic moves, added to the iPod/iTunes empire, would pave the way for Apple, the entertainment technology company, to move into the $50 billion dollar club and beyond.

Copyright © 2006 Philip Bookman

Technorati: Apple Computer, Mac, software strategy, Nintendo, Adobe Systems

Zune And Universal Make Friends

2006-11-09T09:56:00.000-08:00

Microsoft and Universal Music Group today announced an agreement under which Microsoft will pay Universal $1 for every Zune music player sold. In return, Microsoft gets to sell Universal's music library at its Zune Marketplace online music store. I've read several commentators who see this deal as a desperate Microsoft caving in to a greedy music company. I think they have it wrong on all counts.

Let's start with Universal. It has a 30%-35% share of the worldwide market for music sales. A recent study revealed that Apple sells 20 songs per iPod. The rest of the music on iPods, at least 95% percent, are songs customers say they have copied from previously purchased CDs. Anecdotal evidences suggests that those "previously purchased CDs" are often "borrowed" from a "friend." At iTunes prices, neither Apple nor the music companies are making much from iTunes sales, even with the large sales of iPod's. Apple makes its money from the razors, not the blades. In the long run, it is better business for Universal to get revenue from music player sales and lighten up on worrying about digital rights management. Universal's position is sensible and forward looking.

For Microsoft, we must remember Why Microsoft Needs Zune. Zune serves Microsoft two purposes. First, it is a weapon Microsoft uses to attack iPod/iTunes and divert Apple resource away from unleashing OS X against Windows on PCs. Second, it is a long term investment in a new growth line of business. Microsoft does not need Zune to be a great success right away. It can wait three, five or more years for Zune to become a true iPod competitor. Remember the history of Xbox (Why Microsoft Needs Xbox). Microsoft is patient, willing to invest for the long term, and relentless.

What Microsoft needs now are friends in the music industry, where Apple has tense relations and uses its iPod success as a club. The new, improved Steve Ballmer sees Microsoft's future better served by cooperation and trust than the less admirable traits Microsoft was known for as it rose to dominate the software industry. He has made peace with Sun, entered an alliance with Novell, settled numerous lawsuits, accommodated regulators, and on and on.

As Abe Lincoln said: "The best way to destroy an enemy is to make him a friend."

Copyright © 2006 Philip Bookman

Technorati: Zune, Microsoft

Who Will Take Linux To The Prom?

2006-11-07T09:11:00.000-08:00

Like a couple of adolescent boys who suddenly discover that ugly duckling, 15 year-old, redheaded Susan Linux, known to her friends as "Suse" or "Red," has turned overnight into a swan, Oracle and Microsoft have suddenly discovered that Linux has sex appeal. Those boys are falling all over themselves trying to be the one to take her to the prom.

Larry Ellison, CEO of Oracle, made the first cool move about two weeks ago, when he announced support for the gal he prefers to call Red, and his intentions of making her his own. Red, blushing furiously, has been all aflutter ever since. Such attention from such a rich, good-looking boy! As her friends warned her, he has a bad, playboy reputation, and her stock has gone down. No one believes her when she says she will retain her virtue now that Larry is in the picture.

Then last week Microsoft CEO Steve Ballmer announced his intentions towards the young lady, who he a bit more formally, but still familiarly, calls Suse. Steve has been working hard to change his reputation for being an overbearing bully to that of a mature, slightly geeky, good guy who may be a bit clumsy but wants to get along with everyone. He told Suse he just wants to get to know her better and work together on building a proper relationship. The sensible side of Ms. Linux finds that very attractive. And he's rich too! Oh my!

Meanwhile, all of her girlfriends are very upset. They fear that the old Suse they knew seems to be gone forever. Sweet, playful, easygoing Red is growing up, and they don't like it. They don't know what her future will look like, but they know they are losing influence to the big boys. Ms. Linux is becoming a grown up woman and leaving her girlhood behind. What, they ask apprehensively, will the future bring?

Copyright © 2006 Philip Bookman

Technorati: SUSE, Novell, Microsoft, Oracle, Linux, Red Hat, software strategy

Web 22 - Where Everybody Has A Share

2006-11-02T09:09:00.000-08:00

There is a trend among analysts, consultants and commentators to advise Web 2.0 Startups in Wonderland to focus on attracting Tribble Traffic and worry about monitizing it later. Whatever you offer on your site, they say, make lots of people want to use it frequently, preferably for free. "Don’t worry, be happy" goes the refrain, "a business model is sure to emerge sooner or later."

It is time to get beyond the limitations of "free." Here in Silicon Valley, we know how to motivate lots of people to work their butts off for virtual money. We were just warming up during the Web 1.0 days by letting stock option flow like water so that nearly everyone in the Valley was a paper millionaire at one point or another. In the next web era, which I call Web 22, we will pay people to visit web sites, pay them more to click on ads, and pay more again if they then actually buy something.

Venture capital will be used by Web 22 startups to fund the visitor payments. The VCs will raise their funds from the companies that might become advertisers. Advertisers will pay the web sites for the clicks, who will share that revenue with the clickers. Advertisers will also offer rebates to clickers who actually make purchases. This will all work because everyone involved in the process will have a share!

This business model was actually perfected in World War II and documented by Joseph Heller in Catch-22. Milo Minderbinder, whose Nobel Prize in Economics is long overdue, is the genius behind this business model. This is how he explains it to Yossarian, who is puzzled about why Milo buys eggs in Malta for seven cents and sells them to the mess hall for five cents:

"I do it to make a profit."

"But how can you make a profit? You lose two cents an egg."

"But I make a profit of three and a quarter cents an egg by selling them at four and a quarter cents an egg to the people in Malta I buy them from for seven cents an egg. Of course, I don't make the profit. The syndicate makes the profit. And everybody has a share."

Yossarian felt he was beginning to understand. "And the people you sell the eggs to at four and a quarter cents a piece make a profit of two and three quarter cents a piece when they sell them back to you at seven cents a piece. Is that right? Why don't you sell the eggs directly to you and eliminate the people you buy them from?"

"Because I am the people I buy them from," Milo explained. "I make a profit of three and a quarter cents a piece when I sell them to me and a profit of two and three quarter cents apiece when I buy them back from me. That's a total profit of six cents an egg. I lose only two cents an egg when I sell them to the mess halls at five cents apiece, and that's how I can make a profit buying eggs for seven cents apiece and selling them for five cents apiece. I pay only one cent a piece at the hen when I buy them in Sicily."

"In Malta," Yossarian corrected. "You buy your eggs in Malta, not Sicily."

Milo chortled proudly. "I don't buy eggs from Malta," he confessed... "I buy them in Sicily at one cent apiece and transfer them to Malta secretly at four and a half cents apiece in order to get the price of eggs up to seven cents when people come to Malta looking for them."

In Web 22, no one will get any real money, which will be derisively referred to as "old money." All payments will be made to a virtual account. The unit of currency will be the milo. Milos will be usable in any part of the Web 22 economy.

Where everybody has a share.

Copyright © 2006 Philip Bookman

Technorati: software strategy venture capital web strategy

Second Life Tribble Trouble

2006-11-01T12:39:00.000-08:00

Tribble trouble is coming to Second Life, the "online society within a 3D world, where users can explore, build, socialize, and participate in their own economy." You play in this world by adopting an avatar, a virtual identity complete with three dimensional body. Playing is free, but owning land is not. Second Life's owner, Linden Labs, primarily makes money by selling and then charging monthly maintenance fees for virtual property.

Second Life just announced a substantial price increase for some virtual land, the so-called "private islands." These islands are more desirable than property on the "mainland." The site has become very popular, with over 1.2 million users, and big companies like IBM, Starwood and GM have gotten into the game as private island owners. The new fee structure comes on the heels of a new $9.95 charge for users who add accounts. Second Life has also publicly floated the idea of charging for technical support.

All of this has started to make some Second Life players, landowners and those who provide them with services (it is quite a complex virtual world) nervous. While the fee increases for private island owners are a kind of "tax-the rich" ploy that mainly hits those with deep pockets, the "community" is correctly concerned about what may happen as Linden Labs furthers its efforts to increase its revenues and profits. What is happening is that Linden Labs and the Second Life community are facing the problem I described in Tribble Traffic.

When the entrepreneurs who build these companies finally figure out how to monetize their ideas, they often find they are trapped by tribble traffic. They discover that they can build a viable business model around only a subset of their users. The problem is that they cannot just beam the rest of the traffic into space. They cannot segment the valued traffic without alienating most all of their users. They similarly cannot capture enough demographic information to segment their traffic for advertisers without user rebellion. The tribble traffic is increasingly costly to serve due to diseconomies of scale. They must often finally sell to a big, well established concern, which can afford to dump the tribbles, reframe the proven concept and reap its value.

As Second Life's new CFO, John Zdanowski, said, "I'm not sure we know yet how it [the fee increase] will affect resident behavior and growth patterns, and I think anybody who thinks they can doesn't understand how complex the system that the in-world economy is."

It isn't easy being a tribble. As Captain Kirk discovered, hosting them can be tricky too.

Copyright © 2006 Philip Bookman

Technorati: Second Life software strategy venture capital web strategy

OOPS Challenge Conclusions

2006-10-30T11:01:00.000-08:00

OOPS stands for Optional Operating system Perfect Storm. For those unfamiliar with the OOPS Challenge, please read the original challenge and the challenge update.

Utilities and Applets
As discussed in the OOPS Challenge Update, I am surprised at the small number of Windows applications I use routinely. I am equally surprised at the large number of Windows applications I rely on though I use them infrequently. Some of the latter applications are more or less operating system utilities, some device driver enhancers, yet the fact that they are not built into Windows implies that in a Windows-Linux duopoly, hardware vendors will be faced with developing all these programs for two platforms. Examples include the HP applications for my scanner, the Acronis program for disk backups and a Quicken utility for online backup.

Then there are the applets. These include the various graphic editing programs I use from time to time, like Microangelo for icons, FastStone screen capture and the often overlooked Office component, Microsoft Picture Manager. There are also the handy set of widgets that I use powered by the Yahoo Widget Engine, which I actually use all the time but that seem like part of the background. And ePrompter, that lovely little email aggregator that I rely on for monitoring the status of my various email inboxes. I suppose there would be Linux versions of these, but that got me thinking about how many other applets are built in to Windows itself, like Paint, Write and Media Player, and how much leaner Linux is in its definition of what is in the OS and what that means for Linux users. I'm sure this hole will ultimately be filled by one or more web-based services that aggregate a complete set of robust open source applets such that they seem to the average user to be part of the OS. Some may ultimately become browser-based.

Reader Comments
Quite a few readers pointed out that they cannot easily separate their personal computing from their work-related computing. Thus the infrastructure of their employer drives them to Windows for various applications, most notably Microsoft Office and Visual Studio. This is the flip-side of one of the forces driving Linux towards achieving duopoly status, the strategic defection of large organizations to Linux. These are currently mainly governmental and outside the US (see Windows Versus Linux Part 1: How Do You Compete With Free). Employer infrastructure cuts both ways.

I have also heard from a number of you that there are others who are already "OOPSing." See Harry McCracken’s PC World article for an example.

Some readers were stymied by the fact Internet connectivity is not yet 100% available everywhere with sufficient reliability and performance, and at a low enough price. Some found themselves missing a viable browser-based alternative for an essential application. Others found that, like me, the file system remain a stumbling block. These added fuel to my conclusions.

Conclusions
My first conclusion was that we got the gating conditions right for the perfect storm that will usher in the Linux-Windows duopoly. These are the following:

1. Universal broadband Internet access, affordable by everyone with superb reliability and performance

2. Robust, full-featured browser-based applications in all categories that make the operating system GUI irrelevant

3. The evolution of the file system into a browser-based, search-based, location-independent paradigm, where local and online storage distinctions move to the background

From reader comments and my own experience, all three are necessary. All of my issues using browser-based applications in place of the major Windows applications I rely on would go away if these three conditions were met. Except for certain employer requirements, the issues raised by readers would also be taken care of.

I also believe that the network effect of widespread strategic Linux adoption, as discussed in my "Windows Versus Linux" posts, will handle the driver, utility and applet concerns.

The issue that emerged as something of a surprise, though it should not have been in retrospect, was the question of who I would trust with my data. If I were to use online applications and if the data were stored online, I realize that I need a high degree of confidence in the vendor. I want to feel sure that my data files will be available, private and secure. This means two things. First, I want to deal with solid providers who I believe are properly funded and will be around in the future. Second, I really want that evolved file system so I can store my files where I want, including locally.

Bottom line: it is only a matter of time.

Copyright © 2006 Philip Bookman

Technorati: Windows versus Linux Microsoft OOPS webtop

Apple Should Acquire Adobe

2006-10-27T09:29:00.000-07:00

While we are on the subject of Apple Computer's strategy (well, I was, last Thursday in Apple, Lose The Hardware, Free The Software), let's complete the advice. I said that Apple should stop selling computers and free the Mac operating system, OS X, to run on generic PCs. Today I add this: Apple should also acquire its Silicon Valley neighbor, Adobe Systems. Adobe's offerings would give Apple, the premier design-focused technology company, an unmatched array of content design and delivery tools. Apple and Adobe already have large, committed followings of web site and graphic designers, and both of their respective camps should feel at home with the combined company. Add the iPod/iTunes franchise to the mix, and an audio-video design and delivery powerhouse emerges.

Adobe is a well run, focused company which nicely strengthened the breadth and depth of its offerings with its 2005 acquisition of Macromedia. What Adobe lacks is marketing pizzazz and fussiness about the details of its products (how long did we suffer with Adobe Reader's interminable load times?). These are both Apple strengths. Apple needs a broad, coherent product line to unleash on both the Windows and Mac OS platforms. This is what Adobe brings to the party.

Let Microsoft have Office, which it produces for Windows and Mac OS and whose presence would just help the unleashed Mac OS gain market share. Office is old news, a mature suite that has nowhere much to go, all the so-called Office 2.0 hoopla notwithstanding. Important, yes, but boring. The new Apple would focus on hip, easy-to-use content design and delivery systems. Very Web 2.0. Who exactly would be its serious competition?

Besides, it would be great fun to watch.

Copyright © 2006 Philip Bookman

Technorati: Apple Computer Mac software strategy Adobe Systems

Oracle Stole It Fair And Square

2006-10-26T09:56:00.000-07:00

At its OpenWorld conference in San Francisco, Oracle yesterday announced that it is stealing Red Hat Linux, fair and square. OK, I stole that phrase from former California Senator Hayakawa, who in a 1977 debate on the Panama Canal treaty said, "Why, it's ours, we stole it fair and square." But back to Oracle. Oracle is now offering full support for Red Hat Linux and will provide its own version of Linux based on Red Hat's. It will simply take Red Hat's source code (it's open source, you see) and base its future Linux version on it. It will owe Red Hat not a cent for this (it's open source, you see).

Larry Ellison promises that Oracle's support costs will be half of Red Hat's. He also pledged to fix bugs and back-fill fixes for Oracle Linux customers who are tardy in updating to future releases. To complete the rule of three bullet points per slide, Ellison said that Oracle will indemnify customers against intellectual property claims related to Oracle's Linux (it's open source, you see).

This move should come as no surprise. In an April interview with the Financial Times, Ellison said he intended to have a "full stack" of enterprise software, which just might include Linux, since a full stack requires an operating system. Ellison has also said in public on a number of occasions that if the open source community is intent on developing software for free, Oracle ought to take advantage of it. Long time Ellison watchers may be fooled into thinking he is jawboning when he says things like that, but that was the 20th century Larry Ellison who loved to say provocative things that were never seriously followed up. The 21st century version says what he means, means what he says, and then does it (see Oracle's Unsubtle Strategy). Those who fail to pay heed when Larry Ellison speaks will suffer the consequences.

Copyright © 2006 Philip Bookman

Technorati: Oracle Linux Red Hat software strategy

Apple, Lose The Hardware, Free The Software

2006-10-19T10:54:00.000-07:00

In a just released report entitled Apple Should License the Mac to Dell, the analysts at Gartner got it partially right. They say that Apple cannot get much beyond its current market share of under 5% of PC shipments and maintain its historically fat margins, which are running at 40%. They reason that to further grow share would require becoming price competitive with Windows PCs. At the same time, Intel and other component providers are tiring of giving Apple price concessions that they normally reserve for much higher volume customers such as HP and Dell. A partnership with Dell in which Apple provided the Mac software and Dell manufactured and distributed the computers would, Gartner argues, be the route to a 20% market share.

My advice for Apple is bolder. Quit the computer business. Now that Mac's operating system, OS X, has been ported to the Mac-specific Intel platform, finish the job and free OS X to run on generic Intel compatible PCs. Sell OS X like Microsoft sells Windows, with the initial price hidden for most customers in PCs delivered with it. Make Mac the name of the OS. Make moving (of course, call it upgrading) from Windows to Mac easy. Expand Apple's software business beyond this, focusing on categories where Apple's customer savvy and design prowess can add value and differentiation. Why settle for 20% share?

At Apple's last annual meeting, Steve Jobs, referring to the PC market, said, "One of the nice things about having four or five percent market share is you don't really care if the market is down." Get off it, Steve. Are you just waiting for Zune to be out so you can ratchet down iPod sales to reduce Apple's share of that market to 5%?

Lose the hardware. Free the software. This move would be as bold as Intel's move in the 1980s to quit the memory business and focus on CPUs. Go for it!

Copyright © 2006 Philip Bookman

Technorati: Apple Mac software strategy

The Zune Attack Is Working

2006-10-18T09:49:00.000-07:00

In Why Microsoft Needs Zune, we saw that Zune serves Microsoft two purposes. First, it is a weapon Microsoft uses to attack iPod/iTunes and divert Apple resource away from unleashing OS X against Windows on generic PCs. Second, it is a long term investment in a new growth line of business.

The first purpose is already being served. Music player news and analysis reports are now dominated by the iPod versus Zune debate at a time when not a single Zune has been shipped. Steve Jobs, who to my knowledge has never publicly even mentioned the existence of another MP3 player, discussed Zune in a recent Newsweek interview. He had cute quotes, like this one about Zune's wireless music sharing capability: "It takes forever. By the time you've gone through all that, the girl's got up and left! You're much better off to take one of your earbuds out and put it in her ear. Then you're connected with about two feet of headphone cable." Analysts and reporters have mainly focused on the choice of brown as one of Zune's color choices, and other silly transitory details.

This must be music to Steve Ballmer's ears. This is exactly what he wants at this stage, a feature discussion. That implies that consumers should compare Zune and iPod features. That's all he wants now, for the word Zune to appear close to the word iPod, in whatever context, as often as possible. Microsoft knows not to worry about feature issues at this stage. Does anyone remember how clunky Word was for the first few years? Excel? Windows? Microsoft wrote the book on focused, relentless, continuous improvement. What they want now is what is happening, Apple focusing on them as the competition and the press and analysts pumping the idea of a two-horse race.

Microsoft is content to wait for several years before they find their groove in this market, so long as Apple focuses on them as a strategic threat. They trust in their proven ability to win over time. Microsoft can wait years to master the music player market. Microsoft can wait years for Zune to be profitable. Apple has neither luxury.

Copyright © 2006 Philip Bookman

Technorati: Zune Microsoft

OOPS Challenge Update

2006-10-16T09:45:00.000-07:00

For those unfamiliar with the OOPS Challenge, please read about it here.

Here is a summary of my own experience since issuing the challenge on October 4.

It was interesting for me to discover how few Windows applications (as defined by the OOPS Challenge rules) I routinely use: Quicken, Word, Excel, Outlook, TextPad and Wise FTP. There are a bunch of infrequently used applications, but first I want to focus on the major ones.

Quicken
I immediately gave myself a pass on Quicken. I had tried Quicken's web version not too long ago and it was painfully slow and missing some of the slick features and functions of the Windows Quicken that I rely on. But I did realize that I am willing to give up on having my Quicken data on my PC. In reality, all of the data is already "in the cloud" on the web somewhere. I can access all my financial transactions online, I just have to use a different site for each bank, brokerage and credit card company. Quicken, as Lenny Greenberg pointed out to me, is where I aggregate all of this data in one convenient place. That place happens to be my hard drive, but I would willingly give that up. I could not find a web based alternative to Quicken that would import all my Quicken data and that I would also trust with my data.

Word
I started using Google's Writely, which changed its name to Google Docs a few days ago. Not bad! I could use it for everything I use Word for, with one major exception. I am writing a book and Word has all of the capability I need to publish it, without using a pure desktop publishing application. Google Docs falls short in about a dozen major functions and many minor ones. I could live without these for routine word processing, but even if I could find a web-based desktop publisher, I do not want a separate application for what to me are a continuum of word processing uses.

Excel
Google Spreadsheets, now linked at the hip with Google Docs, can handle my modest Excel chores. I'd have to give up some of the charts I use, but I could live with that. Yes, there are other spreadsheet applications that do charts as well, but I realized I would not trust them with my data.

Outlook
I use Outlook for just two things, my calendar and contacts. I sync it with my cell phone. I could give up Outlook for a web-based calendar and contact manager, but I do not have web access on my phone because I have no need for it. I do not use my phone for email or web browsing and do not want to.

TextPad
If you assume that a text editor is really part of any OS, then I could use Notepad and finesse this issue. I like TextPad better than Notepad because it has features that make it a better tool for developing and maintaining web pages. Yes, I use a text editor to do that, I want the control I get when I author the html and javascript myself. I develop my web sites on my desktop, then upload to a web server host for production. If I changed my approach, using a hosted development environment, I could use the hosting service's editor instead of TextPad.

Wise FTP
Because of the way I develop web sites, I need a good FTP client. I could use Windows Explorer's FTP capability, but Wise is easier to use. This too would go away if I changed the approach I use to developing web sites.

Stay tuned for another OOPS update in which I will discuss the applications I use infrequently, some reader comments and my conclusions.

Copyright © 2006 Philip Bookman

Technorati: Windows versus Linux Microsoft OOPS webtop software strategy open source

Bamboozle Update 2

2006-10-11T12:35:00.000-07:00

Google continues its bamboozle campaign against Microsoft. As we discussed in Google Bamboozles Microsoft, Google uses a diversionary attack strength defense against Microsoft's search capability by attacking Microsoft Office. They do this by creating just enough of a potential threat to affect Microsoft's plans without much real Google investment.

The bamboozle continued today, when Google launched a new product called Google Docs & Spreadsheets. This is the old Writely word processor acquired from Upstartle combined with the old Google Spreadsheets. They both lose their separate identities. So what exactly is new? The awkward name is about it.

The other parts of what could become a Google Office suite are trapped in the equally artlessly named Google Apps For Your Domain, as discussed in Bamboozle Update 1. "Will they ever come together?" the analysts ask breathlessly, and Ray Ozzie scratches his head and wonders, "Do I take this threat seriously?"

Meanwhile the Googlers smile primly and deny that this is in any way a precursor to Google Office. It is different, say the Googlers. The wonderful thing is that their denials only make the analysts more breathless and Ray Ozzie's scalp more itchy.

Copyright © 2006 Philip Bookman

Technorati: Google Microsoft

YouTube MeToos

2006-10-10T10:07:00.000-07:00

The rumor we reported Friday has become fact. Google announced Monday that it is acquiring YouTube for $1.65 billion. Expect this to lead to ever more Startups in Wonderland, aiming to become the next YouTube by attracting Tribble Traffic. I call them the YouTube MeToos.

To save MeToos a lot of time, here is the prototype for the business concept section of a MeToo business plan:

[company name] will develop a web site which [optional adjectives] people can use to share [plural noun] for free. We will focus on building traffic to the exclusion of all other considerations. We will delay as long as possible attempting to monetize our traffic because that might get in the way of building it. Our exit strategy is to be acquired by a large established company that believes it can monetize the traffic, before we reach the point where the cost of scaling up our infrastructure to handle our traffic becomes prohibitive.

Fill in the company name. Add optional adjectives to describe the subset of the human race you expect to turn into tribbles, or leave them out and the whole world is your audience. Fill in the plural noun that names the bait for the tribbles. Then seek venture funding.

Here is an example:

StartupsInWonderland will develop a web site people can use to share MeToo business plans for free. We will focus on building traffic to the exclusion of all other considerations. We will delay as long as possible attempting to monetize our traffic because that might get in the way of building it. Our exit strategy is to be acquired by a large established company that believes it can monetize the traffic, before we reach the point where the cost of scaling up our infrastructure to handle our traffic becomes prohibitive.

I’m off to Sand Hill Road to pitch my plan…

Copyright © 2006 Philip Bookman

Technorati: Google YouTube software strategy venture capital