Will Obama’s Presidential Legacy Be Ruined by a Website?

"A horse, a horse, my Kingdom for a Horse" King Richard cried out just before he was murdered (Richard III by Billy Shakespeare ~ 1592.)

King Richard of England was really, really unpopular.  He was accused of ascending to the throne via various Michiavellian behaviors.  Eventually he was trapped on the battlefield by his enemies, his horse was slain, and he uttered the above line – metaphorically begging for a way out of the trapped world that was his kingdom.  He didn't get the horse – and he died.

After over 20 years of fighting about health care the U.S. Congress passed the Affordable Care Act and the President signed it into law in 2010. About the only agreement in the country was that the ACA appealed to almost no one due to the compromises required to get it passed.  It was fought by wide ranging constituencies, until in 2012 the Supreme Court upheld the law. 

But not even that was the end of the fight, because in October, 2013 Congress shut down the government as groups fought about whether the act would receive any funding to implement its own provisions.  Eventually an agreement was reached, the government re-opened, and it looked like the ACA was going into practice.

Oh, but wait…

In today's world everyone uses the internet.  Face-to-face meetings are largely gone, and forests by the score are being saved as we refuse to use paper when a digital screen will accomplish our tasks.  So it only made sense that when the U.S. population was to sign up for the benefits of this new law they would do so on the World Wide Web. 

Folks would buy health insurance just like they buy books and clothes, and download movies, from a web site.  Billions of transactions have happened over the web the last decade.  Why, Google alone does over 5 billion searches each and every day.  So it seemed easily practical, and doable, for implementation to be as easy as opening a new web site.  We all expected that come November we'd simply hit the search button, go to the web site, price out the options and make our health insurance decisions.

Of course we all know how that worked out.  Or didn't.  The site didn't work for spit.  Apple may be able to track about a million apps on its site, and it seems able to deliver about 4 million per day at an average price of about a buck.  But the U.S. government web site – after spending over $400million (maybe even $1B) – couldn't seem to process but a few thousand applications a day.  So Congressional hearings started – cries for firing Secretary Sebelius rang out – and President Obama's favorability plummeted faster than the failed effort messages came up in browsers at Healthcare.gov.

You could almost hear the President on the steps of the White House "A web site, a working web site, my Presidency for a working web site."

There was a Chicago mayor who lost an election because he couldn't clear the streets of snow.  Something as simple as removing snow in a 1979 blizzard overtook everything Mayor Bilandic's administration did, and wanted to do, for his great city.  When Chicagoans couldn't access their streets for 3 days they "threw the bastard out" by electing a new candidate (Jane Byrne) in the next primary – and she went on to be the next mayor.

And the only thing anyone remembers about Mayor Bilandic was he didn't get the snow off the streets.

This lesson is not lost on any local mayor.  You can have grand plans, and vision, but if you can't keep the streets clean you get thrown out. 

We've entered a new era of political expectations.  Citizens now expect their politicians to build and operate functional web sites.  They expect their government to do as least as good a job as private industry at everything digital.  And if politicians, or administrators, flub a web implementation it can have signficant, damaging implications.

Failure to build a functional web site, meeting the average person's expectations, is a terrible, terrible falure these days.  Perhaps enough to lose the voters' trust.  Perhaps enough to breath new life into those who want to overturn your "landmark legislation."  And perhaps enough to kill your place in history.

 

Vision Beats Numbers – How Apple Showed Intel A Better Way to Grow

Can you believe it has been only 12 years since Apple introduced the iPod?  Since then Apple's value has risen from about $11 (January, 2001) to over $500 (today) – an astounding 45X increase. 

With all that success it is easy to forget that it was not a "gimme" that the iPod would succeed.  At that time Sony dominated the personal music world with its Walkman hardware products and massive distribution through consumer electronics chains such as Best Buy, and broad-line retailers like Wal-Mart.  Additionally, Sony had its own CD label, from its acquisition of Columbia Records (renamed CBS Records,) producing music.  Sony's leadership looked impenetrable.

But, despite all the data pointing to Sony's inevitable long-term domination, Apple launched the iPod.  Derided as lacking CD quality, due to MP3's compression algorithms, industry leaders felt that nobody wanted MP3 products.  Sony said it tried MP3, but customers didn't want it.

All the iPod had going for it was a trend.  Millions of people had downloaded MP3 songs from Napster.  Napster was illegal, and users knew it.  Some heavy users were even prosecuted.  But, worse, the site was riddled with viruses creating havoc with all users as they downloaded hundreds of millions of songs. 

Eventually Napster was closed by the government for widespread copyright infreingement.  Sony, et.al., felt the threat of low-priced MP3 music was gone, as people would keep buying $20 CDs.  But Apple's new iPod provided mobility in a way that was previously unattainable.  Combined with legal downloads, including the emerging Apple Store, meant people could buy music at lower prices, buy only what they wanted and literally listen to it anywhere, remarkably conveniently.

The forecasted "numbers" did not predict Apple's iPod success.  If anything, good analysis led experts to expect the iPod to be a limited success, or possibly failure.  (Interestingly, all predictions by experts such as IDC and Gartner for iPhone and iPad sales dramatically underestimated their success, as well – more later.) It was leadership at Apple (led by the returned Steve Jobs) that recognized the trend toward mobility was more important than historical sales analysis, and the new product would not only sell well but change the game on historical leaders.

Which takes us to the mistake Intel made by focusing on "the numbers" when given the opportunity to build chips for the iPhone.  Intel was a very successful company, making key components for all Microsoft PCs (the famous WinTel [for Windows+Intel] platform) as well as the Macintosh.  So when Apple asked Intel to make new processors for its mobile iPhone, Intel's leaders looked at the history of what it cost to make chips, and the most likely future volumes.  When told Apple's price target, Intel's leaders decided they would pass.  "The numbers" said it didn't make sense.

Uh oh.  The cost and volume estimates were wrong.  Intel made its assessments expecting PCs to remain strong indefinitely, and its costs and prices to remain consistent based on historical trends.  Intel used hard, engineering and MBA-style analysis to build forecasts based on models of the past.  Intel's leaders did not anticipate that the new mobile trend, which had decimated Sony's profits in music as the iPod took off, would have the same impact on future sales of new phones (and eventually tablets) running very thin apps.

Harvard innovation guru Clayton Christensen tells audiences that we have complete knowledge about the past.  And absolutely no knowledge about the future.  Those who love numbers and analysis can wallow in reams and reams of historical information.  Today we love the "Big Data" movement which uses the world's most powerful computers to rip through unbelievable quantities of historical data to look for links in an effort to more accurately predict the future.  We take comfort in thinking the future will look like the past, and if we just study the past hard enough we can have a very predictible future.

But that isn't the way the business world works.  Business markets are incredibly dynamic, subject to multiple variables all changing simultaneously.  Chaos Theory lecturers love telling us how a butterfly flapping its wings in China can cause severe thunderstorms in America's midwest.  In business, small trends can suddenly blossom, becoming major trends; trends which are easily missed, or overlooked, possibly as "rounding errors" by planners fixated on past markets and historical trends. 

Markets shift – and do so much, much faster than we anticipate.  Old winners can drop remarkably fast, while new competitors that adopt the trends become "game changers" that capture the market growth.

In 2000 Apple was the "Mac" company.  Pretty much a one-product company in a niche market.  And Apple could easily have kept trying to defend & extend that niche, with ever more problems as Wintel products improved.

But by understanding the emerging mobility trend leadership changed Apple's investment portfolio to capture the new trend.  First was the iPod, a product wholly outside the "core strengths" of Apple and requiring new engineering, new distribution and new branding.  And a product few people wanted, and industry leaders rejected.

Then Apple's leaders showed this talent again, by launching the iPhone in a market where it had no history, and was dominated by Motorola and RIMM/BlackBerry.  Where, again, analysts and industry leaders felt the product was unlikely to succeed because it lacked a keyboard interface, was priced too high and had no "enterprise" resources.  The incumbents focused on their past success to predict the future, rather than understanding trends and how they can change a market. 

Too bad for Intel.  And Blackberry, which this week failed in its effort to sell itself, and once again changed CEOs as the stock hit new lows.

Then Apple did it again. Years after Microsoft attempted to launch a tablet, and gave up, Apple built on the mobility trend to launch the iPad.  Analysts again said the product would have limited acceptance. Looking at history, market leaders claimed the iPad was a product lacking usability due to insufficient office productivity software and enterprise integration.  The numbers just did not support the notion of investing in a tablet.

Anyone can analyze numbers.  And today, we have more numbers than ever.  But, numbers analysis without insight can be devastating.  Understanding the past, in grave detail, and with insight as to what used to work, can lead to incredibly bad decisions.  Because what really matters is vision.  Vision to understand how trends – even small trends – can make an enormous difference leading to major market shifts — often before there is much, if any, data.

 

Why Apple Investors Are Deservedly Worried

Apple announced the new iPhones recently.  And mostly, nobody cared.

Remember when users waited anxiously for new products from Apple?  Even the media became addicted to a new round of Apple products every few months.  Apple announcements seemed a sure-fire way to excite folks with new possibilities for getting things done in a fast changing world. 

But the new iPhones, and the underlying new iPhone software called iOS7, has almost nobody excited. 

Instead of the product launches speaking for themselves, the CEO (Tim Cook) and his top product development lieutenants (Jony Ive and Craig Federighi) have been making the media rounds at BloombergBusinessWeek and USAToday telling us that Apple is still a really innovative place.  Unfortunately, their words aren't that convincing.  Not nearly as convincing as former product launches.

CEO Cook is trying to convince us that Apple's big loss of market share should not be troubling. iPhone owners still use their smartphones more than Android owners, and that's all we should care about.  Unfortunately, Apple profits come from unit sales (and app sales) rather than minutes used.  So the chronic share loss is quite concerning. 

Especially since unit sales are now growing barely in single digits, and revenue growth quarter-over-quarter, which sailed through 2012 in the 50-75% range, have suddenly gone completely flat (less than 1% last quarter.)  And margins have plunged from nearly 50% to about 35% – more like 2009 (and briefly in 2010) than what investors had grown accustomed to during Apple's great value rise.  The numbers do not align with executive optimism.

For industry aficianados iOS7 is a big deal.  Forbes Haydn Shaughnessy does a great job of laying out why Apple will benefit from giving its ecosystem of suppliers a new operating system on which to build enhanced features and functionality.  Such product updates will keep many developers writing for the iOS devices, and keep the battle tight with Samsung and others using Google's Android OS while making it ever more difficult for Microsoft to gain Windows8 traction in mobile. 

And that is good for Apple.  It insures ongoing sales, and ongoing profits.  In the slog-through-the-tech-trench-warfare Apple is continuing to bring new guns to the battle, making sure it doesn't get blown up.

But that isn't why Apple became the most valuable publicly traded company in America. 

We became addicted to a company that brought us things which were great, even when we didn't know we wanted them – much less think we needed them.  We were happy with CDs and Walkmen until we discovered much smaller, lighter iPods and 99cent iTunes.  We were happy with our Blackberries until we learned the great benefits of apps, and all the things we could do with a simple smartphone.  We were happy working on laptops until we discovered smaller, lighter tablets could accomplish almost everything we couldn't do on our iPhone, while keeping us 24×7 connected to the cloud (that we didn't even know or care about before,) allowing us to leave the laptop at the office.

Now we hear about upgrades.  A better operating system (sort of sounds like Microsoft talking, to be honest.)  Great for hard core techies, but what do users care?  A better Siri; which we aren't yet sure we really like, or trust.  A new fingerprint reader which may be better security, but leaves us wondering if it will have Siri-like problems actually working.  New cheaper color cases – which don't matter at all unless you are trying to downgrade your product (sounds sort of like P&G trying to convince us that cheaper, less good "Basic" Bounty was an innovation.) 

More (upgrades) Better (voice interface, camera capability, security) and Cheaper (plastic cases) is not innovation.  It is defending and extending your past success.  There's nothing wrong with that, but it doesn't excite us.  And it doesn't make your brand something people can't live without.  And, while it keeps the battle for sales going, it doesn't grow your margin, or dramatically grow your sales (it has declining marginal returns, in fact.)

And it won't get your stock price from $450-$475/share back to $700.

We all know what we want from Apple.  We long for the days when the old CEO would have said "You like Google Glass?  Look at this…….  This will change the way you work forever!!" 

We've been waiting for an Apple TV that let's us bypass clunky remote controls, rapidly find favorite shows and helps us avoid unwanted ads and clutter.  But we've been getting a tease of Dick Tracy-esque smart watches. 

From the world's #1 tech brand (in market cap – and probably user opinion) we want something disruptive!  Something that changes the game on old companies we less than love like Comcast and DirecTV.  Something that helps us get rid of annoying problems like expensive and bad electric service, or routers in our basements and bedrooms, or navigation devices in our cars, or thumb drives hooked up to our flat screen TVs —- or doctor visits.  We want something Game Changing!

Apple's new CEO seems to be great at the Sustaining Innovation game.  And that pretty much assures Apple of at least a few more years of nicely profitable sales.  But it won't keep Apple on top of the tech, or market cap, heap.  For that Apple needs to bring the market something big.  We've waited 2 years, which is an eternity in tech and financial markets.  If something doesn't happen soon, Apple investors deserve to be worried, and wary.

Microsoft’s $7.2B Nokia Mistake

Just over a week after Microsoft announces plans to replace CEO Steve Ballmer the company announced it will spend $7.2B to buy the Nokia phone/tablet business.  For those looking forward to big changes at Microsoft this was like sticking a pin in the big party balloon!

Everyone knows that Microsoft's future is at risk now that PC sales are declining globally at nearly 10% – with developing markets shifting even faster to mobile devices than the USA.  And Microsoft has been the perpetual loser in mobile devices; late to market and with a product that is not a game changer and has only 3% share in the USA. 

But, despite this grim reality, Microsoft has doubled-down (that's doubled its bet for non-gamblers) on its Windows 8 OS strategy, and continues to play "bet the company".  Nokia's global market share has shriveled to 15% (from 40%) since former Microsoft exec-turned-Nokia-CEO Stephen Elop committed the company to Windows 8.  Because other Microsoft ecosystem companies like HP, Acer and HP have been slow to bring out Win 8 devices, Nokia has 90% of the miniscule market that is Win 8 phones.  So this acquisition brings in-house a much deeper commitment to spending on an effort to defend & extend Microsoft's declining O/S products.

As I predicted in January, the #1 action we could expect from a Ballmer-led Microsoft is pouring more resources into fighting market leaders iOS and Android – an unwinnable war.  Previously there was the $8.5B Skype and the $400M Nook, and now a $7.2B Nokia.  And as 32,000 Nokia employees join Microsoft losses will surely continue to rise.  While Microsoft has a lot of cash – spending it at this rate, it won't last long!

Some folks think this acquisition will make Microsoft more like Apple, because it now will have both hardware and software which in some ways is like Apple's iPhone.  The hope is for Apple-like sales and margins soon.  But, unfortunately, Google bought Motorola months ago and we've seen that such revenue and profit growth are much harder to achieve than simply making an acquisition.  And Android products are much more popular than Win8.  Simply combining Microsoft and Nokia does not change the fact that Win8 products are very late to market, and not very desirable.

Some have postulated that buying Nokia was a way to solve the Microsoft CEO succession question, positioning Mr. Elop for Mr. Ballmer's job.  While that outcome does seem likely, it would be one of the most expensive recruiting efforts of all time.  The only reason for Mr. Elop to be made Microsoft CEO is his historical company relationship, not performance.  And that makes Mr. Elop is exactly the wrong person for the Microsoft CEO job! 

In October, 2010 when Mr. Elop took over Nokia I pointed out that he was the wrong person for that job – and he would destroy Nokia by making it a "Microsoft shop" with a Microsoft strategy.  Since then sales are down, profits have evaporated, shareholders are in revolt and the only good news has been selling the dying company to Microsoft!  That's not exactly the best CEO legacy. 

Mr. Elop's job today is to sell more Win8 mobile devices.  Were he to be made Microsoft CEO it is likely he would continue to think that is his primary job – just as Mr. Ballmer has believed.  Neither CEO has shown any ability to realize that the market has already shifted, that there are two leaders far, far in front with brand image, products, apps, developers, partners, distribution, market share, sales and profits. And it is impossible for Microsoft to now catch up.

It is for good reason that short-term traders pushed down Microsoft's share value after the acquisition was announced.  It is clear that current CEO Ballmer and Microsoft's Board are still stuck fighting the last war.  Still trying to resurrect the Windows and Office businesses to previous glory.  Many market anallysts see this as the last great effort to make Ballmer's bet-the-company on Windows 8 pay off.  But that's a bet which every month is showing longer and longer odds.

Microsoft is not dead.  And Microsoft is not without the ability to turn around.  But it won't happen unless the Board recognizes it needs to steer Microsoft in a vastly different direction, reduce (rather than increase) investments in Win8 (and its devices,) and create a vision for 2020 where Microsoft is highly relevant to customers.  So far, we're seeing all the wrong moves.

 

Why Tesla Beats GM, Ford, Nissan

The last 12 months Tesla Motors stock has been on a tear.  From $25 it has more than quadrupled to over $100.  And most analysts still recommend owning the stock, even though the company has never made a net profit. 

There is no doubt that each of the major car companies has more money, engineers, other resources and industry experience than Tesla.  Yet, Tesla has been able to capture the attention of more buyers.  Through May of 2013 the Tesla Model S has outsold every other electric car – even though at $70,000 it is over twice the price of competitors! 

During the Bush administration the Department of Energy awarded loans via the Advanced Technology Vehicle Manufacturing Program to Ford ($5.9B), Nissan ($1.4B), Fiskar ($529M) and Tesla ($465M.)  And even though the most recent Republican Presidential candidate, Mitt Romney, called Tesla a "loser," it is the only auto company to have repaid its loan. And did so some 9 years early!  Even paying a $26M early payment penalty!

How could a start-up company do so well competing against companies with much greater resources?

Firstly, never underestimate the ability of a large, entrenched competitor to ignore a profitable new opportunity.  Especially when that opportunity is outside its "core." 

A year ago when auto companies were giving huge discounts to sell cars in a weak market I pointed out that Tesla had a significant backlog and was changing the industry.  Long-time, outspoken industry executive Bob Lutz – who personally shepharded the Chevy Volt electric into the market – was so incensed that he wrote his own blog saying that it was nonsense to consider Tesla an industry changer.  He predicted Tesla would make little difference, and eventually fail.

For the big car companies electric cars, at 32,700 units January thru May, represent less than 2% of the market.  To them these cars are simply not seen as important.  So what if the Tesla Model S (8.8k units) outsold the Nissan Leaf (7.6k units) and Chevy Volt (7.1k units)?  These bigger companies are focusing on their core petroleum powered car business.  Electric cars are an unimportant "niche" that doesn't even make any money for the leading company with cars that are very expensive!

This is the kind of thinking that drove Kodak.  Early digital cameras had lots of limitations.  They were expensive.  They didn't have the resolution of film.  Very few people wanted them.  And the early manufacturers didn't make any money.  For Kodak it was obvious that the company needed to remain focused on its core film and camera business, as digital cameras just weren't important. 

Of course we know how that story ended.  With Kodak filing bankruptcy in 2012.  Because what initially looked like a limited market, with problematic products, eventually shifted.  The products became better, and other technologies came along making digital cameras a better fit for user needs. 

Tesla, smartly, has not  tried to make a gasoline car into an electric car – like, say, the Ford Focus Electric.  Instead Tesla set out to make the best car possible.  And the company used electricity as the power source.  By starting early, and putting its resources into the best possible solution, in 2013 Consumer Reports gave the Model S 99 out of 100 points.  That made it not just the highest rated electric car, but the highest rated car EVER REVIEWED!

As the big car companies point out limits to electric vehicles, Tesla keeps making them better and addresses market limitations.  Worries about how far an owner can drive on a charge creates "range anxiety."  To cope with this Tesla not only works on battery technology, but has launched a program to build charging stations across the USA and Canada.  Initially focused on the Los-Angeles to San Franciso and Boston to Washington corridors, Tesla is opening supercharger stations so owners are never less than 200 miles from a 30 minute fast charge.  And for those who can't wait Tesla is creating a 90 second battery swap program to put drivers back on the road quickly.

This is how the classic "Innovator's Dilemma" develops.  The existing competitors focus on their core business, even though big sales produce ever declining profits.  An upstart takes on a small segment, which the big companies don't care about.  The big companies say the upstart products are pretty much irrelevant, and the sales are immaterial.  The big companies choose to keep focusing on defending and extending their "core" even as competition drives down results and customer satisfaction wanes.

Meanwhile, the upstart keeps plugging away at solving problems.  Each month, quarter and year the new entrant learns how to make its products better.  It learns from the initial customers – who were easy for big companies to deride as oddballs – and identifies early limits to market growth.  It then invests in product improvements, and market enhancements, which enlarge the market. 

Eventually these improvements lead to a market shift.  Customers move from one solution to the other.  Not gradually, but instead quite quickly.  In what's called a "punctuated equilibrium" demand for one solution tapers off quickly, killing many competitors, while the new market suppliers flourish.  The "old guard" companies are simply too late, lack product knowledge and market savvy, and cannot catch up.

• The integrated steel companies were killed by upstart mini-mill manufacturers like Nucor Steel.  
• Healthier snacks and baked goods killed the market for Hostess Twinkies and Wonder Bread. 
• Minolta and Canon digital cameras destroyed sales of Kodak film – even though Kodak created the technology and licensed it to them. 
• Cell phones are destroying demand for land line phones. 
• Digital movie downloads from Netflix killed the DVD business and Blockbuster Video. 
• CraigsList plus Google stole the ad revenue from newspapers and magazines.
• Amazon killed bookstore profits, and Borders, and now has its sites set on WalMart. 
• IBM mainframes and DEC mini-computers were made obsolete by PCs from companies like Dell. 
• And now Android and iOS mobile devices are killing the market for PCs.

There is no doubt that GM, Ford, Nissan, et. al., with their vast resources and well educated leadership, could do what Tesla is doing.  Probably better.  All they need is to set up white space companies (like GM did once with Saturn to compete with small Japanese cars) that have resources and free reign to be disruptive and aggressively grow the emerging new marketplace.  But they won't, because they are busy focusing on their core business, trying to defend & extend it as long as possible.  Even though returns are highly problematic.

Tesla is a very, very good car. That's why it has a long backlog. And it is innovating the market for charging stations. Tesla leadership, with Elon Musk thought to be the next Steve Jobs by some, is demonstrating it can listen to customers and create solutions that meet their needs, wants and wishes.  By focusing on developing the new marketplace Tesla has taken the lead in the new marketplace.  And smart investors can see that long-term the odds are better to buy into the lead horse before the market shifts, rather than ride the old horse until it drops.

 

 

6 Best Apps for Business on the Go

If you're frequently on the go, then your smartphone or tablet is a simple tool that can keep you connected to work from virtually anywhere. However, your device is hardly useful without the right apps; consider downloading these top useful apps for business people on the go.
 

1. Dropbox


 Image via Play.Google.com 

Dropbox  is perhaps the best data storage app available for mobile devices, and with over 50 million downloads, it's one of the most popular on the market. Using this app, users can access documents anywhere and from any device, similar to Apple’s iCloud. Use 2GB of free storage or upgrade to 16GB per account. Don’t worry about the security of important documents as this app features permission settings, account access information and a two-step verification process. You can store any file on Dropbox that you can store on your computer, making it convenient for any type of work. It's also easy to get extra space by recruiting friends and coworkers  to sign up for this app as well. 

2. Flipboard
Flipboard is a simple personalized news app that keeps you on top of the latest stories. With more than 10 million downloads, it's a popular app rated at 4.5 out of 5 stars on the PlayStore.  What makes Flipboard so great is that users can choose which topics the app should show, and then users can post their favorite stories in a "personal magazine" which can share these magazines on social media sites. With a syncing feature, users can access the news topics on any device.

3. Expensify


Image via Play.Google.com

Expensify  is a wonderful app for business people who travel frequently, consistently earning the number one spot on lists of the best apps for business travelers.  Expensify allows users to track expenses, log mileage, upload receipts with their device's camera, file expense reports and perform various other functions to make organizing business travel simple. Use this app on an iPhone, iPad, Android device, WebOS, or Blackberry device – and download it for free.

4. Google Hangouts
With a quality video chat app, you can easily stay in touch with colleagues and business partners no matter where you are. Available on PC, Android, and Apple devices, the Google Hangouts app  is easily accessible, making it simple to talk with other business people while users are out and about. It's free to use, allows multiple simultaneous conversations and with the right Internet provider users can collaborate with coworkers even if their offices are in a rural area.  Google Hangouts downside is the user base is still small.

5. Priority Matrix
Priority Matrix is a simple-to-use organizational app that can help users stay on top of all their business responsibilities. With it, users can:

• Organize lists and agendas
  
• Set target dates
  
• Make a pro and con list
  
• And more!
  

 

6. TripIt


Image via Play.Google.com

If you're a business person who travels often, TripIt  is a must-have app. TripIt links to a user's email account and automatically picks up trip confirmation numbers for any hotel, flight, or dinner reservation then organizes it into a simple itinerary. If users encounter last-minute changes or flight delays notified via email, the app automatically updates the itinerary.

Whether you travel often or just need to stay connected when you're away from work, these apps are excellent ways to make your life a bit easier.

This blog was written as a guest blog by Peyton Spencer.  I appreciate her insights into apps that can make all of our lives easier.

Peyton Spencer is a graduate of Concordia University in Saint Paul. She studied Communication with an emphasis on marketing and journalism. Her writing is featured on reputable blogs such as Dom's Tech Blog  and now The Phoenix Principle . In her spare time, Peyton loves experimenting with the newest technology, helping small businesses market their brand, and volunteering for non-profit organizations that are close to her heart such as Locks of Love, The Humane Society and Samaritan's Purse. 

Microsoft ReOrg – Crafty or Confusing?

Microsoft CEO Steve Ballmer appears to be planning a major reorganization. The apparent objective is to help the company move toward becoming a "devices and services company" as presented in the company's annual shareholder letter last October. 

But, the question for investors is whether this is a crafty move that will help Microsoft launch renewed profitable growth, or is it leadership further confusing customers and analysts while leaving Microsoft languishing in stalled markets?  After all, the shares are up some 31% the last 6 months and it is a good time to decide if an investor should buy, hold or sell.

There are a lot of things not going well for Microsoft right now.

Everyone knows PC sales have started dropping.  IDC recently lowered its forecast for 2013 from a decline of 1.3% to negative 7.8%.  The mobile market is already larger than PC sales, and IDC now expects tablet sales (excluding smartphones) will surpass PCs in 2015.  Because the PC is Microsoft's "core" market – producing almost all the company's profitability – declining sales are not a good thing.

Microsoft hoped Windows 8 would reverse the trend.  That has not happened.  Unfortunately, ever since being launched Windows 8 has underperformed the horrific sales of Vista.  Eight months into the new product it is selling at about half the rate Vista did back in 2007 – which was the worst launch in company history.  Win8 still has fewer users than Vista, and at 4% share 1/10th the share of market leaders Windows 7 and XP. 

Microsoft is launching an update to Windows 8, called Windows 8.1 or "blue."  But rather than offering a slew of new features to please an admiring audience the release looks more like an early "fix" of things users simply don't like, such as bringing back the old "start" button.  Reviewers aren't talking about how exciting the update is, but rather wondering if these admissions of poor initial design will slow conversion to tablets.

And tablets are still the market where Microsoft isn't – even if it did pioneer the product years before the iPad. Bloomberg reported that Microsoft has been forced to cut the price of RT.  So far historical partners such as HP and HTC have shunned Windows tablets, leaving Acer the lone company putting out Windows a mini-tab, and Dell (itself struggling with its efforts to go private) the only company declaring a commitment to future products.

And whether it's too late for mobile Windows is very much a real question.  At the last shareholder meeting Nokia's investors cried loud and hard for management to abandon its commitment to Microsoft in favor of returning to old operating systems or moving forward with Android.  This many years into the game, and with the Google and Apple ecosystems so far in the lead, Microsoft needed a game changer if it was to grab substantial share.  But Win 8 has not proven to be a game changer.

In an effort to develop its own e-reader market Microsoft dumped some $300million into Barnes & Noble's Nook last year.  But the e-reader market is fast disappearing as it is overtaken by more general-purpose tablets such as the Kindle Fire.  Yet, Microsoft appears to be pushing good money after bad by upping its investment by another $1B to buy the rest of Nook, apparently hoping to obtain enough content to keep the market alive when Barnes & Noble goes the way of Borders.  But chasing content this late, behind Amazon, Apple and Google, is going to be much more costly than $1B – and an even lower probability than winning in hardware or software.

Then there's the new Microsoft Office.  In late May Microsoft leadership hoped investors would be charmed to hear that 1M $99 subscriptions had been sold in 3.5 months.  However, that was to an installed base of hundreds of millions of PCs – a less than thrilling adoption rate for such a widely used product.  Companies that reached 1M subscribers from a standing (no installed base) start include Instagram in 2.5 months, Spotify in 5 months, Dropbox in 7 months and Facebook (which pioneered an entire new marketplace in Social) in only 10 months.  One could have easily expected a much better launch for a product already so widely used, and offered at about a third the price of previous licenses.

A new xBox was launched on May 21st.  Unfortunately, like all digital markets gaming is moving increasingly mobile, and consoles show all the signs of going the way of desktop computers.  Microsoft hopes xBox can become the hub of the family room, but we're now in a market where a quarter of homes lead by people under 50 don't really use "the family room" any longer. 

xBox might have had a future as an enterprise networking hub, but so far Kinnect has not even been marketed as a tool for business, and it has not yet incorporated the full network functionality (such as Skype) necessary to succeed at creating this new market against competitors like Cisco. 

Thankfully, after more than a decade losing money, xBox reached break-even recently.  However, margins are only 15%, compared to historical Microsoft margins of 60% in "core" products.  It would take a major growth in gaming, plus a big market share gain, for Microsoft to hope to replace lost PC profits with xBox sales.  Microsoft has alluded to xBox being the next iTunes, but lacking mobility, or any other game changer, it is very hard to see how that claim holds water.

The Microsoft re-org has highlighted 3 new divisions focused on servers and tools, Skype/Lync and xBox.  What is to happen with the business which has driven three decades of Microsoft growth – operating systems and office software – is, well, unclear.  How upping the focus on these three businesses, so late in the market cycle, and with such low profitability will re-invigorate Microsoft's value is, well, unclear. 

In fact, given how Microsoft has historically made money it is wholly unclear what being a "devices and services" company means.  And this re-organization does nothing to make it clear. 

My past columns on Microsoft have led some commenters to call me a "Microsoft hater."  That is not true.  More apt would be to say I am a Microsoft bear.  Its historical core market is shrinking, and Microsoft's leadership invested far too much developing new products for that market in hopes the decline would be delayed – which did not work.  By trying to defend and extend the PC world Microsoft's leaders chose to ignore the growing mobile market (smartphones and tablets) until far too late – and with products which were not game changers. 

Although Microsoft's leaders invested heavily in acquisitions and other markets (Skype, Nook, xBox recently) those very large investments came far too late, and did little to change markets in Microsoft's favor. None of these have created much excitement, and recently Rick Sherland at Nomura securities came out with a prediction that Microsoft might well sell the xBox division (a call I made in this column back in January.)

As consumers, suppliers and investors we like the idea of a near-monopoly.  It gives us comfort to believe we can trust in a market leader to bring out new products upon which we can rely – and which will continue to make long-term profits.  But, good as this feels, it has rarely been successful.  Markets shift, and historical leaders fall as new competitors emerge; largely because the old leadership continues investing in what they know rather than shifting investments early into new markets.

This Microsoft reorganization appears to be rearranging the chairs on the Titanic.  The mobile iceberg has slashed a huge gash in Microsoft's PC hull.  Leadership keeps playing familiar songs, but the boat cannot float without those historical PC profits. Investors would be smart to flee in the lifeboat of recent share price gains. 

How Samsung Changed the Game on Apple

The iPad is now 3 years old.  Hard to believe we've only had tablets such a short time, given how common they have become.  It's easy to forget that when launched almost all analysts thought the iPad was a toy that would be lucky to sell a few million units.  Apple blew away that prediction in just a few months, as people demonstrated their lust for mobility.  To date the iPad has sold 121million units – with an ongoing sales rate of nearly 20million per quarter.

Following very successful launches of the iPod (which transformed music from CDs to MP3) and iPhone (which turned everyone into smartphone users,) the iPad's transformation of personal technology made Apple look like an impenetrable juggernaut – practically untouchable by any competitor!  The stock soared from $200/share to over $700/share, and Apple became the most valuable publicly traded company on any American exchange!

But things look very different now.  Despite huge ongoing sales (iPad sales exceed Windows sales,) and a phenomenal $30B cash hoard ($100B if you include receivables) Apple's value has declined by 40%! 

In the tech world, people tend to think competition is all about the product.  Feature and functionality comparisons abound.  And by that metric, no one has impacted Apple.  After 3 years in development, Microsoft's much anticipated Surface has been a bust – selling only about 1.5million units in the first 6 months.  Nobody has created a product capable of outright dethroning the i product series.  Quite simply, there have been no "game changer" products that dramatically outperform Apple's.

But, any professor of introductory marketing will tell you that there are 4 P's in marketing: Product, Price, Place and Promotion.  And understanding that simple lesson was the basis for the successful onslaught Samsung has waged upon Apple in 2012 and 2013. 

Samsung did not change the game with technology or product.  It has used the same Android starting point as most competitors for phones and tablets.  It's products are comparable to Apple's – but not dramatically superior.  And while they are cheaper, in most instances that has not been the reason people switched.  Instead, Samsung changed the game by focusing on distribution and advertising!

 

Chart courtesy Jay Yarrow, Business Insider 4/2/13 and Horace Dediu, Asymco

The remarkable insight from this chart is that Samsung is spending almost 4.5 times Apple – and $1B more than perennial consumer goods brand leader Coca-Cola on advertising! Simultaneously, Samsung has set up kiosks and stores in malls and retail locations all over America.

Can you imagine having the following conversation in your company in 2010?:

"As Vice President of Marketing I propose we take on the market leader not by having a superior product.  We will change the game from features and function comparisons to availability and awareness.  I intend to spend more than anyone in our industry on advertising – even more than Coke.  And I will open so many information and sales locations that our products will be as available as Coke.  We'll be everywhere.  Our products may not be better, but they will be everywhere and everyone will know about them."

Samsung found Apple's Achilles heel.  As Apple's revenues rose it did not keep its marketing growing.  SG&A (Selling, General and Administrative) expense declined from 14% of revenues in 2006 to 5% in 2012; of course aiding its skyrocketing profits.  And Apple continued to sell through its fairly limited distribution of Apple stores and network providers.  Apple started to "milk" its hard won brand position, rather than intensify it.

Samsung took advantage of Apple's oversight.  Samsung maintained its SG&A budget at 15% of revenues – even growing it to 24% for a brief time in 2009, before returning to 15%.  As its revenues grew, advertising and distribution grew.  Instead of looking back at its old ad budget in dollars, and maintaining that budget, Samsung allowed the budget to grow (to a huge number!) along with revenues. 

And that's how Samsung changed the game on Apple.  Once America's untouchable brand, the Apple brand has faltered.  People now question Apple's sustainability. Some now recognize Apple is vulnerable, and think its best times are behind it.  And it's all because Samsung ignored the industry lock-in to constantly focusing on product, and instead changed the game on Apple.

Something Microsoft should have thought about – but didn't.

Of course, Apple's profits are far, far higher than Samsung's.  And Apple is still a great company, and a well regarded brand, with tremendous sales.  There are ongoing rumors of a new iOS 7 operating system, an updated format for iPads, potentially a dramatically new iPhone and even an iTV.  And Apple is not without great engineers, and a HUGE war chest which it could use on advertising and distribution to go heads up with Samsung.

But, at least for now, Samsung has demonstrated how a competitor can change the game on a market leader.  Even a leader as successful and powerful as Apple.  And Samsung's leaders deserve a lot of credit for seeing the opportunity – and seizing it!

 

Why Yahoo Investors Should Worry about Marissa Mayer

Marissa Mayer created a firestorm this week by issuing an email requiring all employees who work from home to begin daily commuting to Yahoo offices.  Some folks are saying this is going to be a blow to long-term employees, hamper productivity and will harm the company. Others are saying this will improve communications and cooperation, thin out unproductive employees and help Yahoo.

While there are arguments to be made on both sides, the issue is far simpler than many people make it out to be – and the implications for shareholders are downright scary.

Yahoo has been a strugging company for several years.  And the reason has nothing to do with its work from home policy.  Yahoo has lacked an effective strategy for a decade – and changing its work from home policy does nothing to fix that problem.

In the late 1990s almost every computer browser had Yahoo as its home page.  But Yahoo long ago lost its leadership position in content aggregation, search and ad placement.    Now, Yahoo is irrelevant.  It has no technology advantage, no product advantage and no market advantage.  It is so weak in all markets that its only value has been as a second competitor that keeps the market leader from being attacked as a monopolist! 

A series of CEOs have been unable to develop a new strategy for Yahoo to make it more like Amazon or Apple and less like – well, Yahoo.  With much fanfare Ms. Mayer was brought into the flailing company from Google, which is a market leader, to turn around Yahoo.  Only she's been on the job 7 months, and there still is no apparent strategy to return Yahoo to greatness. 

Instead, Ms. Mayer has delivered to investors a series of tactical decisions, such as changing the home page layout and now the work from home policy.  If tactical decisions alone could fix Yahoo Carol Bartz would have been a hero – instead of being pushed out by the Board in disgrace. 

Many leading pundits are enthused with CEO Mayer's decision to force all employees into offices.  They are saying she is "making the tough decisions" to "cut the corporate cost structure" and "push people to be more productive." Underlying this lies thinking that the employees are lazy and to blame for Yahoo's failure. 

Balderdash.  It's not employees' fault Yahoo, and Ms. Mayer, lack an effective strategy to earn a high return on their efforts. 

It isn't hard for a new CEO to change policies that make it harder for people to do their jobs – by cutting hours out of their day via commuting.  Or lowering productivity as they are forced into endless meetings that "enhance communication and cooperation." Or forcing them out of the company entirely with arcane work rules in a misguided effort to lower operating costs or overhead.  Any strategy-free CEO can do those sorts of things. 

Just look at how effective this approach was for

• "Chainsaw" Al Dunlap at Scott Paper
• "Fast Eddie" Lampert at Sears
• Carol Bartz at Yahoo
• Meg Whitman at HP
• Brian Dunn at Best Buy
• Gregory Rayburn at Hostess
• Antonio Perez at Kodak

The the fact that some Yahoo employees work from home has nothing to do with the lack of strategy, innovation and growth at Yahoo.  That failure is due to leadership.  Bringing these employees into offices will only hurt morale, increase real estate costs and push out several valuable workers who have been diligently keeping afloat a severely damaged Yahoo ship. These employees, whether in an office or working at home, will not create a new strategy for Yahoo.  And bringing them into offices will not improve the strategy development or innovation processes. 

Regardless of anyone's personal opinions about working from home, it has been the trend for over a decade.  Work has changed dramatically the last 30 years, and increasingly productivity relies on having time, alone, to think and produce charts, graphs, documents, lines of code, letters, etc.  Technologies, from PCs to mobile devices and the software used on them (including communications applications like WebEx, Skype and other conferencing tools) make it possible for people to be as productive remotely as in person. Usually more productive removed from interruptions.

Taking advantage of this trend helps any company to hire better, and be more productive.  Going against this trend is simply foolish – regardless the intellectual arguments made to support such a decision. Apple fought the trend to PCs and almost failed.  When it wholesale adopted the trend to mobile, seriously reducing its commitment to PC markets, Apple flourished.  It is ALWAYS easier to succeed when you work with, and augment trends.  Fighting trends ALWAYS fails.

Yahoo investors have plenty to be worried about.  Yahoo doesn't need a "tough" CEO.  Yahoo needs a CEO with the insight to create, and implement, a new strategy.  And a series of tactical actions do not sum to a new strategy.  As importantly, the new strategy – and its implementation – needs to augment trends.  Not go against trends while demonstrating the clout of a new CEO. 

If you've been waiting to figure out if Ms. Mayer is the CEO that can make Yahoo a great company again, the answer is becoming clear.  She increasingly appears very unlikely to have what it takes.

Dell – Take the Money and Run! Innovation trumps execution.

Michael Dell has put together a hedge fund, one of his largest suppliers and some debt money to take his company, Dell, Inc. private.  There are large investors threatening to sue, claiming the price isn't high enough.  While they are wrangling, small investors should consider this privatization manna from heaven, take the new, higher price and run to invest elsewhere – thankful you're getting more than the company is worth.

In the 1990s everybody thought Dell was an incredible company.  With literally no innovation a young fellow built an enormously large, profitable company using other people's money, and technology.  Dell jumped into the PC business as it was born.  Suppliers were making the important bits, and looking for "partners" to build boxes.  Dell realized he could let other people invest in microprocessor, memory, disk drive, operating system and application software development.  All he had to do was put the pieces together. 

Dell was the rare example of a company that was built on nothing more than execution.  By marketing hard, selling hard, buying smart and building cheap Dell could produce a product for which demand was skyrocketing.  Every year brought out new advancements from suppliers Dell could package up and sell as the latest, greatest model.  All Dell had to do was stay focused on its "core" PC market, avoid distractions, and win at execution.  Heck, everyone was going to make money building and selling PCs.  How much you made boiled down to how hard you worked.  It wasn't about strategy or innovation – just execution. 

Dell's business worked for one simple reason.  Everybody wanted PCs.  More than one.  And everybody wanted bigger, more powerful PCs as they came available.  Market demand exploded as the PC became part of everything companies, and people, do.  As long as demand was growing, Dell was growing.  And with clever execution – primarily focused on speed (sell, build, deliver, get the cash before the supplier has to be paid) – Dell became a multi-billion dollar company, and its founder a billionaire with no college degree, and no claim to being a technology genius.

But, the market shifted.  As this column has pointed out many times, demand for PCs went flat – never to return to previous growth rates.  Users have moved to mobile devices such as smartphones and tablets, while corporate IT is transitioning from PC servers to cloud services.  iPad sales now nearly match all of Dell's sales.  Dell might well be the world's best PC maker, but when people don't want PCs that doesn't matter any more.

Which is why Dell's sales, and profits, began to fall several years ago.  And even though Michael Dell returned to run the company 6 years ago, the downward direction did not change.  At its "core" Dell has no ability to innovate, or create new products.  It is like HTC – merely a company that sells and assembles, with all of its "focus" on cost/price.  That's why Samsung became the leader in Android smartphones and tablets, and why Dell never launched a Chrome tablet.  Lacking any innovation capability, Dell relied on its suppliers to tell it what to build.  And its suppliers, notably Microsoft and Intel, entirely missed the shift to mobile.  Leaving Dell long on execution skills, but with nowhere to apply them.

Market watchers knew this. That's why  Dell's stock took a long ride from its lofty value on the rapids of growth to the recent distinctly low value as it slipped into the whirlpool of failure.

Now Dell has a trumped up story that it needs to go public in order to convert itself from a PC maker into an IT services company selling cloud and mobile capabilities to small and mid-sized businesses.  But Dell doesn't need to go private to do this, which alone makes the story ring hollow.  It's going private because doing so allows Michael Dell to recapitalize the company with mountains of debt, then use internal cash to buy out his stock before the company completely fails wiping out a big chunk of his remaining fortune.

If you think adding debt to Dell will save it from the market shift, just look at how well that strategy worked for fixing Tribune Corporation. A Sam Zell led LBO took over the company claiming he had plans for a new future, as advertisers shifted away from newspapers.  Bankruptcy came soon enough, employee pensions were wiped out, massive layoffs undertaken and 4 years of legal fighting followed to see if there was any plan that would keep the company afloat.  Debt never fixes a failing company, and Dell knows that.  Dell has no answer to changing market demand away from PCs.

Now the buzzards are circling.  HP has been caught in a rush to destruction ever since CEO Fiorina decided to buy Compaq and gut the HP R&D in an effort to follow Dell's wild revenue ride.  Only massive cost cutting by the following CEO Hurd kept HP alive, wiping out any remnants of innovation.  Now HP has a dismal future.  But it hopes that as the PC market shrinks the elimination of one competitor, Dell, will give newest CEO Whitman more time to somehow find something HP can do besides follow Dell into bankruptcy court.

Watching as its execution-oriented ecosystem manufacturers are struggling, supplier Microsoft is pulling out its wallet to try and extend the timeline.  Plundering its $85B war chest, Microsoft keeps adding features, with acquisitions such as Skype, that consume cash while offering no returns – or even strong reasons for people to stop the transition to tablets. 

Additionally it keeps putting up money for companies that it hopes will build end-user products on its software, such as its $500M investment in Barnes & Noble's Nook and now putting $2B into Dell.  $85B is a lot of money, but how much more will Microsoft have to spend to keep HP alive – or money losing Acer – or Lenovo?  A billion here, a billion there and pretty soon it adds up to a lot of money!  Not counting losses in its own entertainmnet and on-line divisions.  The transition to mobile devices is permanent and Microsoft has arrived at the game incredibly late – and with products that simply cannot obtain better than mixed reviews.

The lesson to learn is that management, and investors, take a big risk when they focus on execution.  Without innovation, organizations become reliant on vendors who may, or may not, stay ahead of market transitions.  When an organization fails to be an innovator, someone who creates its own game changers, and instead tries to succeed by being the best at execution eventually market shifts will kill it.  It is not a question of if, but when.

Being the world's best PC maker is no better than being the world's best maker of white bread (Hostess) or the world's best maker of photographic film (Kodak) or the world's best 5 and dime retailer (Woolworth's) or the world's best manufacturer of bicycles (Schwinn) or cold rolled steel (Bethlehem Steel.)  Being able to execute – even execute really, really well – is not a long-term viable strategy.  Eventually, innovation will create market shifts that will kill you.

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