2009: What Doesn't Kill Us Makes Us Stronger
Dec 29, 2008 4:00 AM PT
People don't like to change; particularly as we get older, we take comfort in the status quo and start avoiding things that are new and different. As we get older we gain more power and this generally places the most conservative people in positions of authority.
Let's look at four companies this week and how they are likely to change in 2009/2010. I'm betting Friedrich Nietzche was right and "what doesn't kill us makes us stronger," or at least I sincerely hope that this is the case. The companies we'll look at are Apple, which is struggling with succession; Microsoft, which has been fading of late; Google, which is trending for Microsoft's crown and HP, which entered 2008 strong but was trending back to old bad habits. The car companies are a reminder that things can change very quickly for good or ill during times like these.
Apple: Rebirth or Return to Slow Death?
Apple has done amazingly well since Steve Jobs' return, but largely as a result of Steve's personal involvement with almost all aspects of product development and marketing. Apple continues to out-market every other company in the segment and has enjoyed some of the strongest growth and strongest margins as a result. They have made painful, though critical, moves to Intel technology and have begun haltingly to move to the Web. But its products are currently priced too high for a recessionary market, the company has no strong succession plan for Jobs and he remains too critical to the company, and Apple's future appears more tied to the iPhone than the Mac in a market that looks a lot like the PC market did in the 80s. This last item suggests a repeat of Apple's long decline -- Steve Jobs' departure, an ever-shrinking niche in a new market, but this time Steve can't come back and save the firm.
I think that was the likely outcome before the economy collapsed -- Apple was just too comfortable and unwilling to address anything more than 12 months out. With the collapse, the company is already showing some interesting -- and risky -- changes, like dropping iPhones into Wal-Mart. I think this crucible will force Apple to make some critical decisions with regard to product pricing and development that will assure its survival. The Obama presidency, which wouldn't have happened without the crisis, will give Apple a presidential supporter who will, perhaps inadvertently, help the company come to grips with its future. We'll see some incredibly painful changes in Apple in 2009, but they wouldn't have been made timely otherwise, and I think Apple's future will be more assured as a result.
Google: Trending to Netscape or Microsoft?
Google is run by risk-takers; much like Microsoft was in the '80s. That means its executives already have been taking incredible risks to position the company against Microsoft. But they are also making a common mistake that most companies that have competed with Microsoft have made, and that is focusing too much on Microsoft and not enough on driving their own vision of the future. The Google competitor to Microsoft Office, Google Apps for Business, was a pitiful first try, and it seemed like it missed the "embrace and extend" lesson that even Microsoft seems to forget at times. Currently Google's stock price is down sharply and the company has internal issues where there are clearly very rich haves, and those with options under water, or "have nots," in what must be a very trying company to manage.
Still, the Android platform, while lagging the iPhone in applications, will exceed it significantly in platform breadth, and already Google is challenging even Microsoft, which has been slow to respond, in this critical new mobile area. Google got too big and too complex too fast and appeared destined to die under its own ponderous weight and growing debilitating problem of internal wealth inequity. It also was making the traditional mistake of eliminating entitlements one by one as the company became more inefficient and slowly killing the culture that they had so painstakingly built. A very common mistake.
Google's future isn't so certain because it has been repeating mistakes made by others, and the financial crisis could only increase their frequency, not improve the quality of those decisions. Even so, Google should hit a crisis level more quickly now and at least have the chance of pulling out before it follows others into obscurity. Sometimes all it takes is the right people and a chance to make a difference; we'll know in a few months whether they have the right people, the economy is giving them the chance.
HP: A New Age or a Return to Obscurity?
Of all the technology companies I cover, HP enters 2009 in the best of shape. The firm is diverse, there is no group that isn't being well managed, and corporate leadership sets the standard for how a complex company should be managed. Mark Hurd, HP's CEO, is probably the only guy on the planet that might be able to turn around one of the car companies -- and he runs HP.
Still, HP has had to exit digital cameras and TVs -- both critical to the future of its imaging and printing business -- and has yet to be credible with e-books, which under current conditions may now replace printers more quickly as a money- and resource-saver. HP has failed to demonstrate much in the way of interdivisional synergy of late, and divisions appear to be drifting apart rather than cooperating together. And they continue to under-fund marketing even though companies like Apple showcase the benefits of funding well executed programs. HP has demonstrated execution capability in line with Apple, but not a willingness to fund at the same level.
Before the economic collapse, HP was getting too comfortable in its success and starting to drift back into old practices which would eventually have returned it to obscurity. The economic collapse will remove, with some emphasis, this comfort, and it should force the firm back onto a path of reform. Like Google, this isn't certain, and large old companies have a tendency to be internally blind to the need for critical change, but Hurd and Shane Robison are still there and should now feel a renewed drive to complete what they started. We'll see what results.
Microsoft: Can It Repeat or Simply Slide Faster?
2007 and 2008 showcased Microsoft as a fading flower, still dominant, but increasingly losing influence and power. It failed to keep up with either Apple or Google on phones, Apple had more mind share, and it appears Google, as we exit 2008, may actually have a stronger position with original equipment manufacturers (OEMs). Vista failed to meet market expectations, and hardware OEMs were left desperately trying to find a solid plan B, but found Linux wanting. Microsoft's first truly future-looking change to Office, Equip, was discontinued, and Apple's unprecedented Mac vs. Windows campaign made fun of both the company and its founder for much of the last two years.
There were, however, some bright spots. The server and tools business strengthened and learned to embrace open source rather than badmouth it (which wasn't working anyway). Xbox soundly beat PlayStation 3 (though Wii beat both and Sony belly flopped). The company announced free antivirus software for Windows, which was the most requested new feature users wanted from the company, and it showcased (with the help of HP) touch on a PC before Apple, the touch leader, did. Redmond also repositioned MSN Direct to connect GPS navigation systems, inexpensively saving that technology and making it relevant again. They significantly strengthened their future looking Live offerings, and they recovered from a foolish merger with Yahoo by hiring one of Yahoo's top folks.
Microsoft has been making mistakes similar to IBM's before it lost leadership, and the results of those mistakes should, under the current economy, accelerate very quickly. This should force the company to rethink practices and force executive changes, as many of those who have moved into jobs they were not equipped to do fail more quickly. The examples above are signs the company was slowly making critical changes, but a lot rides on Windows 7, for if it fails, it takes IE and Microsoft Office with it, and Microsoft would be done as a market leader.
The economy puts Microsoft on notice that it is time to trim the dead weight, remember who its customers really are, and make sure it is giving them what they want. In 24 months, Microsoft will either be back in fighting form or we'll be talking about another market leader. Things can happen surprisingly fast in economic conditions like these.
With companies, change typically happens slowly, and a large successful firm may quietly drift away before it realizes it is at critical risk of failure. This economy will speed up change dramatically, and firms that needed to change (think U.S. car companies) but were ignoring that need will suddenly find this change thrust upon them.
I think this is a good thing, because every company needs a wakeup call every once in awhile, but good or not, it is happening regardless. We'll look back in 24 months and see how everyone did.
Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.