Friday, May 30, 2008

Multi-media Search

I think this is a great idea--searching images (not using key words or tags).

I have signed up for a test and hope to try it out when I am accepted!

Friday, May 23, 2008

Sir Howard: Time to Focus on the Top-Line Growth (and Innovation)

Sir Howard has achieved impressive turnaround of Sony's bottom-line position since taking over Sony. This picture from WSJ says it succinctly.

WSJ reported that at a recent management meeting, Sir Howard strongly urged the managers to be "bold" "energetic" and "imaginative."
At the management meeting, Mr. Stringer implored the audience to "not be complacent," said the people who attended the meeting. At times, he employed his trademark humor, showing a slide of a big fork sticking in the middle of a road. He told them that Sony was "at a fork in the road," in which its various units needed to step up their combined efforts further to come up with new products.

His challenge is to go beyond bottom-line efficiency. Sony is being squeezed from two ends--at the lower end, margins are squeezed by competitors such as LG and Samsung (in consumer electronics). At the high-end, he faces competition from Apple and Microsoft. Even in Hollywood, Sony Entertainment faces strong competition. The stock price comparison from the time that Sir Howard took over Sony mapped against Apple tells a compelling story.

It's time for Sir Howard to show that Sony can truly lead in one or two markets beyond winning the standards battle against HD DVD. The media and entertainment landscape is ripe for someone to claim leadership. Will it be Sony? Will it happen under Sir Howard's watch?

Thursday, May 22, 2008

Microsoft's Plan [C]: Cash for Consumer Search and Loyalty

Microsoft's Plan (A) was to buy Yahoo. They could not agree on a price. That is shelved--at least for now.

Microsoft's Plan (B) is to get a part of Yahoo. They seem to be in discussions and Carl Icahn may provide support if the price is right from his point of view.
Now we see Microsoft's next move--Plan[C]--give consumers cold, cash incentives to search through Microsoft Live. Moreover, it gives the advertisers an opportunity to improve the return on their advertising with charges based on cost-per-acquisition. At one level, Microsoft's approach builds off its core strengths and experience--orchestrate two complementary networks. Windows and Office succeeded because they both created two interconnected networks of application developers and consumers (users). Microsoft advertising also seeks to interconnect two complementary networks--advertisers (sellers) and consumers (buyers).

At another level, there is a big difference. Windows and Office created huge stickiness and consumers were locked-in to these platforms with successive versions of Wintel architecture roadmap. It is not the case with search. There is little lock-in unless the cash incentives are so vastly different from what they may get from other sources (why would not Google respond to match this offer with their superior algorithms and insights>). Even, Google seems to have only a small percentage of its users who search when logged with their unique ids. Can Microsoft succeed in this area based on cash-back incentives?

By wanting to play with cash rebates based on transactions, they are signaling an ambition to be a major player in the cut-throat world of ecommerce and compete more directly against Google (which has its Checkout service). . And, they may need strong partnerships with eBay and Amazon if they are to reduce the friction in commerce and still make a decent return to their hungry shareholders.

Plan[C] may well succeed if they can build off successful loyalty programs (Airline and Credit-card companies are best-in-class examples now). If Microsoft creates a new currency that can be used to buy products and go on vacations, they may succeed but again, they need to link up with those credit card companies that have already created stickiness with the consumers. Will a major relationship with Visa/MasterCard be in the works? or possible link with eBay?
What will Google's next move be?
I find these moves interesting because they illuminate the complex challenges of crafting winning strategies in a network-era.

Monday, May 19, 2008

Microsoft's Overture to Facebook?

The news on the wires is that Zuckerberg refused to comment:"Asked specifically about the prospect of a sale, Zuckerberg declined to comment." No comment is news when there is so so much speculation about what Microsoft may do next. If Microsoft indeed enters into a 'transaction' with Yahoo, it may not need all of $40 plus Billions. So, given Steve Ballmer's need for ;building scale' quickly, it will not surprise me if Microsoft also explores either a 'transaction' with Facebook. For Microsoft to create a credible alternative to Google, it needs to shore up not only the advertising platform (Pandora from Yahoo helps here) but also recognize the emerging role of social networks (Facebook's Beacon platform helps here). Microsoft can then use these pieces to create a compelling and credible alternative and hope that the Street will give them a boost and not the boot.

Microsoft-Yahoo: The Next Chapter

Over the week-end, a new chapter in the Microsoft-Yahoo combination began. Microsoft Corp. issued the following statement:

“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.
“There of course can be no assurance that any transaction will result from these discussions.”
I see it as Microsoft wanting its make and eating it too. It may have a chance to acquire Yahoo through Carl Icahn's proxy battle while seeking to create a friendly 'transaction' so that they can explore other options at the same time. Such a transaction clearly involves Yahoo's search-linked-advertising platform (Panama). It is brilliant because I am sure that Yahoo Board is now not interested to antagonize either Icahn or Ballmer by pursuing any discussions or explorations with Google. At minimum, this move forestalls Yahoo's any desire to examine links with Google or others. It also allows Yang, Icahn and Ballmer to discuss behind-the-scenes strategy for a possible corporate combination (read: acquisition) at a price that may be acceptable to all. If Ballmer gets Yahoo at the price that e offered ($34, I believe), he will declare victory. If Yahoo & Co. sell at $34, they can still declare victory since the official position seems to be that Ballmer never gave that offer formally in writing. At that price, Carl Icahn is a big winner (with may be $9/share gain in about a month or so--assuming that some deal will happen before the July Shareholders Meeting).
Ballmer gets the options to still play with Yahoo till early July without much cost. And he may be able to use Carl Icahn to do the fighting while he has his managers work out ways to figure out the best way to combine the complementary capabilities of Microsoft and Yahoo to establish a dominant #2 position against Google.
The story is far from being finished.

Friday, May 16, 2008

Icahn-Yahoo Fight: Common Slate Members May Hold the Clue

It is no longer a rumor that Carl Icahn wants to shake up Yahoo. The first two paragraphs of his letter to Roy Bostock, Chairman of Yahoo makes his intent and tone very clear:
Dear Mr. Bostock:

It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.
During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered Thursday to Yahoo under separate cover.
Microsoft has stayed silent and has not publicly commented on Carl Icahn's move. Previsouly, Steve Ballmer disbanded his slate of Directors. What we know is that there are at least two members common to both slates. They are: John Chapple, Former CEO of Nextel Communications and Ed Meyer, Former CEO of Grey Global Group. By selecting at least two members from the slate that Baller assembled for possible proxy fight before, Carl Icahn is signaling his intenstion to restart the negotiations with Microsoft. These two serve as the conduit for communication between Carl Icahn and Steve Ballmer.
Could Ballmer ultimately get Yahoo at an even lower price that $34? Will key Yahoo talent take flight?

Wednesday, May 14, 2008

Carl Icahn and Yahoo: What's the Deal?

I had blogged earlier about Icahn's role in Motorola. he put pressure on Motorola's Board to make some governance changes. Nearly a week after Microsoft walked away from Yahoo, news emerges that Carl Icahn has amassed Yahoo shares to the tune of about $1 Billion. NY Times reported that:
Mr. Icahn has told associates that he bought as many as 50 million shares of Yahoo — worth more than $1 billion — in anticipation of pressing for seats on its board. He has also inquired at Microsoft, through various friends, whether he could help bring that company back to the negotiating table, these people said. He has received little encouragement, these people said, because Microsoft has insisted that it has “moved on.”

In the case of Motorola, Icahn has been a longstanding critic of the Board and the previous Chief Executive, Ed Zander. In Yahoo's case, it appears that he has not had much involvement or interest before. He is now likely to be a key player at least up until the upcoming Annual Shareholder Meeting on July 3--where most expect Yahoo shareholders to show their displeasure.

I do not think he will be able to get Microsoft to re-engage in the deal but I am sure that he will compel Yahoo Board to explore other strategic alternatives to boost the competitive position (and market value) of Yahoo. I only hope he does not force yahoo to make rash moves that destroys its long-term value while seeking to shore up the stock price in the short term. Yahoo's moves till July 3 will be closely watched and monitored by many shareholders including Carl Icahn. Yang needs to have a compelling story by July not just in terms of what it can do by itself but also announce a set of strategic initiatives with leading firms such as Google, AOL, MySpace and others to convince the shareholders that it has a comprehensive plan to accelerate revenue and profit growth. Otherwise, he will surely face angry rebellious shareholders. Icahn's move is just one more serious pressure on him and his Board.

Tuesday, May 13, 2008

Google in a Network Era

Nearly two years, I wrote this article for CSC Leading Edge Forum. I was using the article to lay out the logic of how strategy can be thought of as a portfolio of capabilities assembled through relationships and that networks can be used for both experimentation (innovation) and execution (implementation). The startegic challenge calls for recognizing two types of tensions: one invoving resource allocations across experimentatiuon (future) and execution (present) and another involving internal (firm-centric) and external (network-centric) activities.

I am working on elaborating on these two tensions now. These are dynamic, interdependent and call for rapid reallocation of resources. I used Google as illustration in the article (published in 2006). I think the framework is inherently sould and Google is still a good illustration of the framework. The article is available as a pdf here.

Monday, May 12, 2008

HP + EDS = A Leading Global IT Services Player?

Now that Microsoft has withdrawn the $40 plus billion offer to buy Yahoo, we hear about another acquisition in the tech space. HP is supposedly in talks to buy EDS for about $13 billion. EDS shares jumped 28% to give it a market capitalization of over $12 billion today. On the face of it (and assuming that HP actually consummates the deal without much prolonged proxy battle), this is a great coup for HP and its chief, Mark Hurd. HP has been slowly gaining on IBM but has been lagging in the services segment. In fact, HP's services was mostly wrapping services around its products--far different from global IT services companies such as IBM, Accenture, Tata Consulting Services, Infosys and Wipro.
How should we think about this corporate combination? If it is purely gaining scale on the established model of outsourcing, this may not do much for HP. The domestic, local outsourcing model (i.e., shifting employees to service providers to reap benefits of specialization and economies of scale) is giving way to delivering services on a global footprint. Local outsourcing model is too expensive and the corporate buyers know it too well.

So, this is more than gaining high-margin customers that EDS currently service. What Mark Hurd needs to do is to use this acquisition such that HP + EDS becomes a leading global IT services player. I was half-expecting EDS to be acquired by TCS, Infosys or Wipro to expand their traditional Indian roots. But they do not have the same level of market capitalization as HP. Infosys and Wipro are capitalized at around $25 B and @20 B respectively. Now that HP (capitalized around $115 B) seems to be closing in on the deal, it will be interesting to see if the combined entity simply continues the old outsourcing model or whether Hurd is able to innovate a new form of global services that combines different types of skills and competencies on a global basis. Given Hurd's penchant for ruthless efficiency, I expect this to be driving HP's globalization plans.

Hurd seems to be remaking HP the way Lou Gerstner transformed IBM in the 1990s.

Dell: Embracing and Inspiring through Art

Laptop designs and art--No, I am not talking about Apple. I am talking about Dell.


This is a recent initiative to push the frontiers of custom-creation. As one of Dell's bloggers put it:
Using a new Dell manufacturing technique, every color and brushstroke come alive on the laptop’s cover, bringing the same fluid, graffiti-inspired tattoo effect that you find on Ming’s canvas. You can check them out, and an exclusive video on the inspiration behind these pieces of art, at

Will it generate a new wave of customization and self-expression beyond color? Will we see laptops with personalized photographs engraved using the same process?

Friday, May 9, 2008

The 'Shift Happens' Presentation is Still Relevant

This presentation is still relevant and useful as we think about the shifts underway.

Useful for many different types of audiences.

Thursday, May 8, 2008

Some Thoughts on Microsoft's Next Act

So, what should Microsoft do next?

I think Ballmer exhibited a stroke brilliant gamesmanship on Saturday last to walk away from the deal with Yahoo. He made a fair offer and even upped it a bit (about $5 billion!) and Yahoo was more greedy. It was a great deal from Yahoo's perspective but the management team did not see it and may regret that decision in the not-so-distant future. I see three possible options for Microsoft:

One: Develop the Online Offering Alone. It is a sensible, rational approach since Microsoft can commit significant financial resources. It can also selectively make smaller acquisitions to plug-in the gaps. This option requires patience and sustained commitment to develop the capabilities for the long-haul. Microsoft has shown that it can adopt a long-term orientation before--look at XBox, Zune, Windows Automotive and Windows Mobile. In these arenas, Microsoft shied away from making acquisitions (I am sure it could have made bids for Nintendo or Sony or Garmin or Motorola). Except for Zune, Microsoft is a credible competitor in the other three. So, if it pursued this option, it will be following strategic routines that it has established over the last decade.

Two: Pursue Facebook. On the face of it, Microsoft and Facebbok seem to have friendly relations. Facebook rejected an offer to sell out to Yahoo a few years back but accepted a minor equity stake by Microsoft. Facebook is successfully wooing executives from Google and seems to be an attractive magnet for top-talent. Microsoft seems to have lost that coveted position. By creating some clever combination with Facebook (including acquisition if Mark Z is willing to sell), Microsoft is showing that it is betting on the next wave of online commerce (rooted in social networks). Here, Google is behind for sure. By walking away from Yahoo and aligning with Facebook, Microsoft is embracing a future vision that goes beyond today's model of online advertising (defined by Google and Yahoo). It could be like Microsoft buying Hotmail for $650 million during the very early days of email.

Three: Pursue I know it is a radical recommendation but it is not inconceivable. One can put aside bitter animosity and enmity for creating a powerful business model. Microsoft tried (somewhat half-heartedly, I believe) to acquire SAP but gives Microsoft the building blocks to port its traditional business to the new network-era business infrastructure. Its traditional cash-cows need protection and redefinition. Microsoft may not only have to pay a premium (it is today valued around $ 8 billion) but more importantly persuade Marc Benioff to see the value of combining (or at least working in strong partnership) with Microsoft. Bill Gates could appear even more statesmanlike as he leaves the day-to-day operations by signaling that he is created a solid foundation for Microsoft to win in the software-as-services (SaaS) arena.
Just some thoughts as I reflect on the opportunities and challenges facing Microsoft.

Sunday, May 4, 2008

Microsoft-Yahoo: One Chapter Closed But the Story is Not!

I had written earlier that Steve Ballmer should walk away from Yahoo. On Saturday, May 1 Steve made what I think is the right decision. It's the right decision because:

(1). Microsoft raised the offer by another $5 billion (without any credible counter-offer from any other entity and without any new information on why the initial offer-despite a 60% premium is supposed to be undervaluing Yahoo!) and Yahoo rejected it again.

(2). Yahoo pursued plausible business arrangement with Google--clearly to irritate Microsoft and Steve Ballmer; and

(3). Winning Yahoo through hostile and protracted proxy battle will only complicate post-merger integration and mitigate against potential value gains.
But, is the story over? I doubt it. Let us play out what could happen in the coming months (beyond lawsuits filed by some angry stockholders). Yahoo and Google will continue with some sort of business arrangements along the lines of the business arrangement that was tried out recently--which may get renewed attention from the Federal Trade Commission (FTC). Yahoo share may drop further, thereby attracting attention from Time Warner and News Corp. Microsoft will pursue other options including rapidly building up an offering against Google and Yahoo.
It will not surprise me at all that Microsoft gets Yahoo (or some part of Yahoo) at a much lower price within the next year or two. For now, the victor is Steve B.

Thursday, May 1, 2008

Microsoft--Yahoo: If the Battle is ONLY About Price, the Game is Lost!

Today's WSJ reported that the negotiations (or non-discussions) between Microsoft and Yahoo is about the price.
On the basis of yesterday's (April 30) closing price, Microsoft's offer is about $29 but the rumor is that Steve B is willing to pay about $33 while major Yahoo shareholders are wanting in the range of $35-$37.
While mergers and acquisitions are always about the fair price, this is different. This is about the fundamental commitment from Yahoo managers to want to work with Microsoft to create a compelling alternative to Google and win. What I have not seen is any discussion of constructing new business models and changing the online advertising landscape. Instead, the news is about extracting higher value from Microsoft. In the absence of any credible alternative offer, Microsoft is not compelled to raise the price--especially if Steve B encounters a less than enthusiastic Yahoo workforce!
As I said before, walk way and see what overtures Yahoo makes.