Strategy 2.0: Winning in a Network Era

Getting Back to this Blog...

2009-05-03T09:43:00.000-04:00

Over the last four months, my students and I have been blogging around many themes related to IT Strategy. The course blog is here. I designed the course around how IT transforms business operations and what lessons can we learn by looking at strategies of a set of technology companies such as Microsoft, Apple, IBM, Sony, Amazon, Facebook, Google and others. We also took a look at a set of sectors that are undergoing transformations now--automotive, healthcare, media and entertainment, retail, financial services and telecoms. It was interesting to see a mix of rapid shifts in some sectors (media and entertainment) and slow changes (e.g., automotive). Teaching the course has allowed me to develop better clarity on some of the challenges of crafting strategies in a network era. It has energized me to do more writing this summer. And, needless to say that I will be using this blog as a vehicle to get draft ideas out.

Zune Phone?

2008-12-12T05:54:00.000-05:00

I read this column that there will be no Zune phone at CES. I am not disappointed because I was not expecting a Zune phone..

It got me thinking.
Why would Microsoft launch a Zune phone and cannibalize its Windows Mobile OS? It is better off not launching the phone in this crowded, competitive market and capitalize on the network effects of third-party developers licensing Windows Mobile. Has Microsoft--which practically wrote the book on how to set up third-party ecosystems to win with Windows and Office--moves away from what has made it successful so far? I doubt that Microsoft seriously considered launching Zune phone because it will be counter to their playbook. But again, who said that strategy is always rational?
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How will newspaper industry transform for the network era?

2008-12-02T13:26:00.001-05:00

I think the newspaper industry is about to be transformed in some radical ways. Here are some good overview data from NAA that can serve as raw material for research. Also, I found this blogpost to be well written and timely. I will develop a more detailed analysis of the transformation underway in the media and newspaper industry in due course.
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GM versus Toyota

2008-11-21T11:02:00.000-05:00

Who could have seen this in the beginning of 2008?
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Today, the stock market levels could not be sharper. Toyota is worth about $ 97B and GM is worth about $ 2 Billion!
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I think it is time to rethink not only the car industry but also the overall transportation systems and patterns of use in the US. So, I do not support the bailout if the money is to be used just to rectify past mistakes but if it is to be used to jump start the new (transformed) auto industry. It will be interesting to see how it evolves and shapes up in the coming months.

Making Search Personal, Social and Dynamic

2008-11-21T05:27:00.001-05:00

I think this is a useful feature to make search personal, social and dynamic.

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Nice feature!
For more details, see this link.

WiFi in the Car

2008-11-17T03:12:00.002-05:00

GM may be in trouble but that does not mean that technology developments pertaining to auto industry are slowing down any dramatically.
Here's an update on Autonet that Walt Mossberg reviews.

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I see this as a starting point. I also wonder if GM OnStar should have partnered with them. Autonet could learn so much from OnStar.

GM CEO Goes to YouTube

2008-10-10T10:48:00.000-04:00

Here's an interesting move by GM CEO, Richard Wagoner to go direct to the public about GM.. It's stock is at a 50-year low in the midst of the current global financial crisis.

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Effective? Desperate? What's the purpose..??
Just wondering.... what GM may look like by 2010..

Financial Crisis

2008-10-06T18:59:00.001-04:00

It is scary to see the gyration in the markets.....

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Some thoughts going through my mind are--
Is this the end of investment banking as we know it? Is this the end of uncontrolled deregulation? Is this the result of herd mentality? or Blind leading the blind..? What happened to creative checks-n-balances in markets? Does this represent a turning point in business school education? business school as a place for smart young people to study? etc. etc..
One this I know is that we have not seen the end of this crisis....

Suddenly, It's All About Network Connections

2008-09-12T02:53:00.002-04:00

Of late, there have been a lot of discussions about network connections of different kinds. They all point to framing strategic opportunities and challenges from a network-centric points of view.
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1. Mobile App Stores. Apple, Google and Microsoft are jockeying to get third-party developers to write applications on their mobile platforms. All three have mobile application stores with different names (naturally!). Not be left behind, RIM announced relationships with TiVo, Ticketmaster and MySpace. It will be interesting to see how Handango responds to these recent shifts. Till now, Handango served as a multi-platform aggregator of applications. Its role is now challenged by each of the major mobile companies seeking to establish their own proprietary app strore.

2. Yahoo opens up. The battle between Yahoo and Google continues despite their attempted relationship, which may be running into problems. Yahoo is striving to create the platform so that third-party widgets can be created to enhance its services.

Yahoo plans to open up more with the first major redesign of its home page since May 2006. The changes will enable Yahoo users to plant more mini-applications known as "widgets" on personalized versions of the home page, said Ash Patel, executive vice president of the company's audience product division.

WSJ is reporting that:

On Friday, Yahoo is hosting a "Hack Day" for developers to start building versions of their service that integrate with its home page or that can be used by Yahoo Mail's 275 million monthly users...... [and....]

Scott Moore, head of Yahoo's media group, said Yahoo's media sites, which include heavily trafficked staples like Yahoo Finance and Yahoo News, have strong track records of drawing on outside content but see opportunities to expand. "We are not just doing this open thing because it is the flavor of the month," he said. "This open approach is really in our DNA."

3. Apple iTunes patches things up with NBC. When Apple launched its new Nano earlier this week, it also announced that it was patching things up with NBC. As reported in NY Times,

Mr. Jobs also announced that NBC, a division of General Electric, was bringing its television lineup back to iTunes, 10 months after the two parties clashed over how much flexibility NBC would have on the pricing of new NBC programs. Both sides now say they got what they wanted. Television shows from NBC and other networks will all cost $1.99 for standard video quality, and $2.99 for high-definition video quality. Older shows like “Kojak” will sell for 99 cents...... [and..]

Mr. Jobs said in an interview that the resolution came through personal discussions with Jeff Zucker, the chief executive of NBC Universal. “We both knew we wanted to get this together, and our mutual customers wanted us to get this together,” he said. “They let us know, we worked it out, and everyone is happy.”

These three examples tell a lot about the challenges of developing winning strategies in the network era.
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1. The criticality of attracting key developers as complementors to platforms. The mobile applications is now a major battle front and all the key companies are seeking to attract complementors. What is important is to see who links preferentially to one platform like iPhone compared to another.

2. Yahoo (somewhat belatedly) is opening up its platform. Perhaps it lost some valuable time because of the deal/counter-deal with Microsoft but its value hinges on how vibrant its third-party community becomes in the coming months. It is not just competing againt Google and Microsoft. It is competing against Facebook and MySpace. The one way that Yahoo can survive and be counted is if it attracts the requisite number (and exclusive) applications that make Yahoo a must-visit destination site. If that happens, Yang would have succeeded and its stock might be re-energized.

3. The NBC-Apple reengagement shows the criticality of mutual dependence. NBC needs Apple and Apple needs NBC and they have to mutually work out their differences. And they have done so. Often such skirmishes derail successes and both companies do not recover. It is refreshing to see that these two have worked out their disagreements.

Microsoft's Ad Campaign: Not Just for End-Customers but for the Ecosystem

2008-09-09T07:30:00.000-04:00

The Fall seasons opens with a new advertising campaign.

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At a first blush, one may think this is just about getting end-consumers to not give up on Windows, That is partly true. It is equally about keeping its business network (ecosystem) excited and committed to the Windows platform. We have come a long way from the tight network of Wintel (Windows and Intel) architecture embraced by companies such as Dell, HP, Sony, Adobe and others. Intel chips power Macintosh computers. Sony competes against Microsoft. Dell and HP are looking for ways to add their own flavor to their branded machines.

Business Week ran an interesting story recently about the activities within HP.

HP's "customer experience group"—formed nine months ago and headed by vice-president Susie Wee, a former director in the company's research labs—is developing software that can complement Microsoft's Windows operating system to make it accessible to more users. Wee's team is tackling touchscreen technology and software that lets users circumvent Vista to watch movies or view photos, as well as transferring ideas from HP's Halo videoconferencing system to mass-market products. "Our customers are looking for insanely simple technology where they don't have to fight with the technology to get the task done," says Phil McKinney, chief technology officer in HP's personal systems group. "For us, it's about innovating on top of Vista."

It went on to say that:

Others in HP's PC division are exploring the possibility of building an HP operating system for mainstream desktop and notebook computers based on the open-source Linux system, which competes with Windows, say people familiar with the company's plans. The goals may be to make HP less dependent on new releases of Windows, and to strengthen HP's hand against Apple, which has gained market share with computers that boast innovative features and inspire a loyal following of users.

This points to the inevitable tension about the roles of different entities in an ecosystem over time. During 1995-2005, Microsoft and Intel orchestrated the ecosystem and others played supporting complementary roles. Dell and HP were happy to ride the wave of network effects enjoyed by the Windows platform--acting as 'branded resellers' of Wintel machines (assembled through Asian contract manufacturers). Now, that Vista has received rather lukewarm support, they are examining ways to create differentiation on top of Vista. If that differentiation sticks, then they can run Linux or any other variant. If that differentiation is marginal, they are consigned to be branded resellers within the Windows ecosystem.

Networks are dynamic and roles continually shift and evolve. Examining alternative trajectories of network evolution is key to crafting winning strategies for the network era.

Reflecting on Amazon's VOD Initiative

2008-09-05T10:01:00.000-04:00

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So, we now have a new alternative to Apple iTunes, Netflix and Hulu. Amazon has launched its video on demand service. It will stream to Windows, Macs, Sony TVs with Internet conenctions, TiVo devices as well as Xbox 360. Now, we will have to wait till next Tuesday (Sept 9) to see what Steve Jobs will announce to further shift the goal-post.
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From a network-strategy point of view, what's key is how well does Amazon orchestrate multiple networks? So, I am interested in the following indicators besides the obvious one about pricing and advertising-supported subsidy.
1. How extensive is Amazon's content library?
2. How exclusive is the content? (What content--if any--is only available here?
3. What content is not available? (for example some of the NBC shows are not available on iTunes because of prior contract disputes)
4. How sticky are Amazon's customers with this service compared to being part of two or more services?
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Then, there is the technical issue of seamlessly moving content across multiple devices within home and portability of content (cell phone, laptop etc.) without violating digital rights. The media and entertainment network is changing fast and Amazon's initiative is significant because of its distinctive recommendation engine. Sure, Netflix is good at recommending possible movies that may interest me. But, Amazon may be able to do across all my purchases and interactions on its website. Google may be able to recommend based on my broader searching profile and so on. So, what will Apple do to close this gap? Apple has clear design lead but how good is it in recommending movies? I have not seen a good systematic comparison of the different recommendation engines but winners in the converged network will have distinctive advantage based on consumer preferences and habits....

Reflecting on the Scorecards on Multiple Wars Underway

2008-09-03T07:14:00.002-04:00

Just reflections on the scorecards on multiple wars underway--not in Iraq or Afghanistan or Georgia. I mean the wars relating to (1) search; (2) browser and (3) mobile apps. These three wars (and related ones) will define--in the short term--who will dictate and specify the rules for winning in the network era.

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The Search Wars: Advantage, Google. Yahoo and Microsoft are behind but hardly threatening Google for now. But as search morphs and evolves with social networks, Google may face competition from Facebook, MySpace and others.

The Browser Wars: Advantage, Microsoft. Microsoft's Internet Explorer is the leader, by far. Firefox is catching up and Apple's Safari is a distant third. Apple is trying to get Safari into Windows through iTunes but that is not gaining much traction. Now, Google has launched Chrome, which redefines the battle.

The Mobile Apps War: Advantage Apple. Apple led the way with third-part applications on the mobile phone with its App Store. This is the strategy that Microsoft has followed successfully with Windows and Office but has not somehow followed it in the mobile arena till now. Google has followed suit with Android Market and Microsoft has SkyMarket to support the Windows Mobile 7 platform. Will RIM--makers of Blackberry be far behind?

The three wars are all connected to the broader shift about how we search, access, consume, transact, share and store things on the network. Moves by these companies and others are worth tracking and watching to understand the pattern of evolution and shifts in competitive positions.

The New Front on Google-Microsoft Battle: Browser-Wars

2008-09-01T22:53:00.001-04:00

WSJ is reporting that Google is launching its own browser, Chrome. Specifically, the WSJ article notes that:

Google executives have expressed concern that existing browsers might fail to support the sort of new Web-based applications they want to develop as they seek to expand the company's influence beyond search. By building its own Web-browsing software, Google is ensuring that it will have a platform for its Internet services that needn't conform to other companies' standards.

Microsoft and Google battle each other in Internet search and in applications. Google leads in search while Microsoft is the leader in the applications with its Office Suite. They also fight in the mobile OS arena with Microsoft spearheading Windows Mobile while Google is orchestrating its Android OS ecosystem.

One may have thought that the browser war is long-over but it is not as it continues to be an important part of the tecnology architecture shaping business strategies and practices in the network era. Apple is slowly making Safari important not only for its Macintosh computers but also for its iPhones. It will be interesting to see the link between Chrome and Android. Here's a link to the comic book that explains Chrome. This is a quick overview video.

The following paragraphs from Google's blog provides some more details--mainly their rationale to create their own browser to maintain their distinctive edge in related areas.

All of us at Google spend much of our time working inside a browser. We search, chat, email and collaborate in a browser. And in our spare time, we shop, bank, read news and keep in touch with friends -- all using a browser. Because we spend so much time online, we began seriously thinking about what kind of browser could exist if we started from scratch and built on the best elements out there. We realized that the web had evolved from mainly simple text pages to rich, interactive applications and that we needed to completely rethink the browser. What we really needed was not just a browser, but also a modern platform for web pages and applications, and that's what we set out to build.

On the surface, we designed a browser window that is streamlined and simple. To most people, it isn't the browser that matters. It's only a tool to run the important stuff -- the pages, sites and applications that make up the web. Like the classic Google homepage, Google Chrome is clean and fast. It gets out of your way and gets you where you want to go.

Under the hood, we were able to build the foundation of a browser that runs today's complex web applications much better. By keeping each tab in an isolated "sandbox", we were able to prevent one tab from crashing another and provide improved protection from rogue sites. We improved speed and responsiveness across the board. We also built a more powerful JavaScript engine, V8, to power the next generation of web applications that aren't even possible in today's browsers.

This is just the beginning -- Google Chrome is far from done. We're releasing this beta for Windows to start the broader discussion and hear from you as quickly as possible. We're hard at work building versions for Mac and Linux too, and will continue to make it even faster and more robust.

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In network-era, the scope and shape of competition continually evolve. The playground is far from static. What will Microsoft do next? And, will this further cool the historically strong relationship between Google and Apple?

Google Map Maker: User-Driven Innovation of Content and Evolution of the Product Itself

2008-08-30T17:51:00.001-04:00

How to tap into local, distributed user-expertise to create high quality content? Google Map Maker is an interesting example of a product that is in the spirit of collective user-generated content. It is also an example of a product created by specific local need to have high quality, rich data in countries like India that may not have reliable digital data sources.

It is now available in about 57 countries. I see it as an example of emergent user-driven innovation where the product itself may evolve as users in these 57+ countries experiment and adapt the Map Maker. As Google's own blogpost indicated:

We hope Google Map Maker will result in rich local data which will benefit Google users both on the web and on mobile. The creation of base maps where there were previously none will encourage many mashups, mapplets and other cool applications that make use of this data. We're also excited to see Google Map Maker create a new breed of local map experts who bring their passion for their neighborhoods and communities into the online world, adding to local commerce, tourism and investment.

In the network era, customers and consumers are not external to the business system--but integral to it--continually shaping and evolving product characteristics and user experiences. And, corporations like Google create economies-of-expertise by leveraging local innovations for global advantage.

Widgets for Television: Can Yahoo and Intel Control the Architecture?

2008-08-21T10:26:00.009-04:00

One of the holy grails of Web 2.0 is about the integration of television and Internet. The reason is obvious: the currency for monetizing Web 2.0 is advertising and major players are jockeying to be part of the shifts underway in the advertising business network. Microsoft's interest in Yahoo is part of this broader transformation underway.
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Intel and Yahoo announced a new business relationship focused on creating the Widget Channel. It is a "TV application framework optimized for TV and related consumer electronics devices that uses the Intel architecture."

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Why is this development interesting?

The Widget Channel will allow consumers to enjoy rich Internet applications designed for the TV while watching their favorite TV programs. The Widget Channel will be powered by the Yahoo! Widget Engine, a fifth-generation applications platform that will enable TV watchers to interact with and enjoy a rich set of “TV Widgets,” or small Internet applications designed to complement and enhance the traditional TV watching experience and bring content, information and community features available on the Internet within easy reach of the remote control. The Widget Channel will also allow developers to use JAVASCRIPT, XML, HTML and Adobe® Flash® technology to write TV applications for the platform, extending the power and compatibility of PC application developer programs to TV and related CE devices. In addition to supporting the Yahoo! Widget Engine, Yahoo! will also provide consumers Yahoo!-branded TV Widgets that are customized based on its category-leading Internet services.

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It can allow for the creation of new formats and new models for TV viewing.

Underlying the Widget Channel will be a powerful set of platform technologies, including the Yahoo! Widget Engine and core libraries that expose the powerful functions enabled by the Intel Architecture. The Widget Channel framework will use established Internet technologies to dramatically lower the barrier of entry for developing applications optimized for TV. To help create new TV Widgets for the Widget Channel, Intel and Yahoo! plan to make a development kit available to developers, including TV and other CE device makers, advertisers and publishers. The Widget Channel will also include a Widget Gallery, to which developers can publish their TV Widgets across multiple TV and related CE devices and through which consumers can view and select the TV Widgets they would like to use.

Intel and Yahoo! are working with a range of industry-leading companies that are planning on developing and deploying TV Widgets, including Blockbuster*, CBS Interactive*, CinemaNow*, Cinequest*, Comcast*, Disney-ABC Television Group*, eBay*, GE*, Group M*, Joost*, MTV*, Samsung Electronics Co., Ltd.*, Schematic*, Showtime*, Toshiba* and Twitter*. These and other companies and individuals will be able to innovate, differentiate and deploy TV Widgets across multiple TV and related CE devices using the Widget Channel framework.

Here's a good overview video on the Next-Generation TV Experience.

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The other attempts at integrating Internet and Television seem to be mor closed and proprietary--different from the business logic of Web 2.0.

For example, as Walt Mossberg reviewed in WSJ, Sony Bravia

"adapter is the Bravia Internet Video Link. This is a $300 module that attaches to certain Sony HDTV models. It can either be set up beside the TV or snapped onto the back of the set. Once it's connected to your TV and to your home network for Internet access, a new menu appears on the TV allowing you a choice of videos from numerous online sources, including YouTube, Yahoo, Blip. TV, Sports Illustrated, AOL, Wired, and the Web sites of CBS, Showtime and more.

But more important is that it does not work on non-Sony TV sets. Do we need another proprietary format from Sony?
Mossberg also reviewed the Netflix player by Roku.

The Netflix Player by Roku is much simpler. In fact, it was the simplest set-top box I have ever tested. It costs just $100 and does just one thing: It allows Netflix subscribers to view its movies and TV shows via the Internet on a television set instead of on a computer. It can't get you any other video content from the Internet.

Again, closed connections in an era where the consumers clamor for openness.
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Apple's iPhpne 3G App Store is leading the way to create a broader network of applications from third-party developers. What Intel and Yahoo are trying to do is create a compelling Widget Channel for integrating TV and Internet. Will that succeed? It's too early to say but we will surely see lot more initiatives to influence the way we access, consume and share rich multi-media content.
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Yahoo and Intel may have launched this as a way to establish their technical architecture. There will be other competing architectures and the shape of the business system will evolve, morph and shape over time.

From Bluetooth and WiFi to WiTricity: Will It Happen Soon?

2008-08-21T09:12:00.005-04:00

I am not a big fan of wires (especially for charging electricity). There are just too many of them--different ones for different devices. Just as we have now taken WiFi for granted at many places, I have often wondered when might we have wireless charging of devices. NY Times is reporting that a demonstration may be forthcoming tomorrow.

On Thursday, the chip maker plans to demonstrate the use of a magnetic field to broadcast up to 60 watts of power two to three feet. It says it can do that losing only 25 percent of the power in transmission.
“Something like this technology could be embedded in tables and work surfaces,” said Justin Rattner, Intel’s chief technology officer, “so as soon as you put down an appropriately equipped device it would immediately begin drawing power.”

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The label WiTricity come from the MIT project.

The MIT group refers to the idea as WiTricity, a play on wireless and electricity. Both the M.I.T. group and the Intel researchers are exploring a phenomenon known as “resonant induction,” making it possible to transmit power several feet without wires.

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We are evolving towards a network era with Bluetooth, WiFi and WiTricity!

Sliderocket--an interesting presentation tool for the network era

2008-08-19T09:08:00.002-04:00

Sliderocket seems to be an interesting application to create compelling presentations--particularly suited for the collaboration requirements for the network era. It is in private-beta stage now.
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Google=Apple?

2008-08-14T14:54:00.003-04:00

From a market capitalization point of view, Apple and Google are roughly equal in value (around $159 billion). That is a creditable achievement for Apple for sure. I doubt few could have made this prediction a year or so back.

John Henderson and I derived a typology of business model innovations in the network era. For that typology, Apple is prototypical of Design-and-Dominate approach and Google as reflecting the Explore-and-Exploit approach.
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It is interesting to see that these two companies pursuing two different approaches to crafting winning strategies in the network era have arrived at the same level of market capitalization today. I expect to see Apple do well in the coming months with further enhancements to its design-and-dominate strategy with Macs, iPhone and iPod. I also expect to see a rejuvenated Google dominate the online advertising and related areas (and finally develop monetized business models with YouTube and Android mobile phones).

Apple's Product Launch Cycle in the Age of Blogosphere

2008-08-13T07:51:00.005-04:00

This is an interesting description of the hype (and reality) of Apple's product launch cycle in the age of blogosphere!. Enjoy reading it here.
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So what will Jobs announce in September? or in January? If you cannot wait, here are two places to track--AppleInsider and Macrumors. Or watch one of many videos of new product launches and mock-ups created by enthusiasts eager to be part of the web 2.0 movement!

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Olympics-Opening Ceremony

2008-08-09T20:09:00.001-04:00

Rise of China as a Global Power--Opening Ceremony 2008 Olympics

Exclusive Summer Olympics news & widgets at NBC Olympics.com!

Global Collaboration: Emergent Tools (1)

2008-08-09T17:32:00.004-04:00

One of the biggest opportunities and challenges in the network era is global collaboration--not just standard outsourcing of structured tasks but unstructured tasks involving pooled interdependence of tacit knowledge among workers distributed globally. This tool provides a glimpse of how network-based global collaboration could happen.

Aurora (Part 1) from Adaptive Path on Vimeo.
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I am looking forward to seeing future parts of this series.

Yahoo's 'Hanging Chad'

2008-08-06T07:07:00.002-04:00

The final result stands but the credibility of Yang and Bostock weakened by the recount. Under ordinary circumstances, such error-corrections are footnotes and not news. But, Yahoo's Aug 1 meeting was supposed to be anything but ordinary. With Icahn and Yahoo settling beforehand, the meeting was supposed formality of re-electing the Board without much fanfare.
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So what happened after the recount? Yang got 65% instead of 85%. Bostock got 60% instead of 80%. While both got re-elected, they hardly got the mandate to lead Yahoo with strong support from the shareholders. What Yang and Bostock needed on August 1 was a mandate and endorsement from the shareholders to lead Yahoo in the coming months and years. The recount puts further pressure on Yahoo to come up with a credible strategic plan and execute it to unleash shareholder value--a tall challenge given the stock is hovering around $20.
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Time to focus on the future and regain shareholder credibility.

Yahoo: One Chapter Ended; Has a New Chapter Begun?

2008-08-02T08:25:00.002-04:00

As I expected, there were no fireworks at the Yahoo meeting on August 1. Yahoo shareholders approved the expanded slate of directors. My guess is that they figured that this expanded Board has the best knowledge and mandate to get Yahoo going again after the Microsoft saga. I think the Microsoft saga is mostly over although some words were exchanged over whether or not Microsoft was really seriously interested in taking over Yahoo.
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What Yahoo needs is to deliver on the financial guidance for 2008. It is interesting that Yahoo is now capitalized at less than $20 Billion. At this price, will Yahoo get any new suitors? Only if Carl Icahn can orchestrate a different coalition to boost up the market value and make sure that his investments are not in the red.
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Yahoo's Much-Delayed 'Meeting' on August 1: Much Ado About Nothing or Articulating a Compelling Strategic Vision?

2008-07-31T12:24:00.005-04:00

The much delayed meeting at Yahoo is tomorrow. Nothing newsworthy may come out tomorrow because most thorny issues have either been already settled or need to be settled after August 1.

Question 1. What role for Yang? Icahn has patched up and he along with two members are on Yahoo's Board now. Now, he is not an activist outsider. He needs to steer, lead and guide Yahoo to be a force in the online space. That will take time and patience. The unanswered question then is--Will Yang be forced out by the Board not simply because of Icahn but because the company may need new blood and new energy?

Question 2. How will the Google relationship evolve? As of now, that relationship is still in play. No negative information from the Government; So, I expect that to continue as both assess the business value (and risk) of the experiment while they wait for the Government verdict (or inaction).

Question 3. Does Microsoft have any serious part in Yahoo's strategy going forward? All indications are that the story is over. But, it is safe to say that a big chapter (and many be a big section) is over but the story may not be over. It is simply because any serious challenge to Google should involve Yahoo (which is still capitalized at around $28B). If the stock price falls much below today's price of about $20, all options and all price levels are in play.

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Tomorrow's meeting marks the beginning of Yahoo's next phase of evolution. While we may not see new news or theatrics (Carl Icahn will not even be present and T. Boone Pickens has sold his yahoo stake at a loss), we should watch for what Yang & Co. lay out as strategic directions and milestones. The market desperately is looking for some clarity now that the merger talks have ended. Will the expanded Board deliver on that expectation?

Microsoft--Facebook Connection Gets Closer and Deeper (?)

2008-07-24T18:16:00.003-04:00

I have always felt that Microsoft was seeking the wrong partner in wooing Yahoo. After all, Yahoo had failed to capitalize on the potential and was losing ground fast to Google. The new kid on the block is Facebook--which is winning handsomely against MySpace. And, Microsoft essentially provided a public valuation for the privately-held Facebook when it invested $240 Million in October 2007. Essentially that investment valued Facebook then at $15 Billion. At that time, Kevin Johnson--who has since left Microsoft--made the following comments:

“Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world, and is a great win for not only for our two companies, but also our collective users and advertisers,” said Kevin Johnson, president of the Platforms & Services Division at Microsoft. “We have partnered well over the past year and look forward to doing some exciting things together in the future. The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership.”

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On the day after Kevin Johnson's departure, Microsoft announced that it is deepening the relationship with Facebook. Satya Nadella made the following comment as part of Steve Ballmer's segment at the 2008 Financial Analyst Meeting today.

One last thing I wanted to also talk about is an extension of our Facebook relationship where we are extending it to Search and Page Search. We will be providing an API to Facebook where they will create a rich search experience, including a Web search for the Facebook users. And that's something that they will launch in the fall, working with us, and it'll carry both our Web results as well as our Page Search advertising. So we're excited about even using that as an opportunity to further extend the Live Search reach.

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To me, this is an important relationship that Microsoft should nurture and grow. It is potentially as important as the relationship that Microsoft had with Intel during the heydays of the Wintel architecture dominating the PC sector. Microsoft-Facebook could evolve to be a powerful social network advertising platform that could potentially attract Yahoo, AOL and others to be part of the ecosystem that might one day be a dominant credible competitor to Google. I think Microsoft can do without the distractions of Yahoo for now. This cooperation is worth watching and tracking.

Kevin Leaves and Ballmer Refocues

2008-07-23T22:39:00.004-04:00

Kevin Johnson is leaving Microsoft to run Juniper. This is big news... A game-shifting news, I think. Fortune recently profiled him as the Man Who Would Run Yahoo. His departure signals a shift in strategy and tactics at Microsoft.

This also means that Carl Icahn will have a relatively uninterested lukewarm Ballmer when it comes to any discussions post August 1. It also means that Kevin Johnson calculated the odds of a credible alternative that Microsoft and Yahoo will combine in any meaningful way to achieve the requisite scale to be rather slim. he is moving to the infrastructure part of the network business--far away from the content and online advertising--possibly because of the complex non-compete clauses in his employment contract.
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What does this mean? I think finally, Microsoft will focus on its core and not on its periphery. The memo from Ballmer (reproduced below) seems to indicate that rather clearly.
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From: Steve Ballmer
Sent: Wednesday, July 23, 2008 4:30 PM
To: Microsoft–All Employees
Subject: FY09 Strategic Update

With FY08 complete, I want to discuss my priorities for the year ahead and share my thoughts about the key strategic topics that are on everybody’s mind, including Windows, competition with Apple and Google, our software plus services strategy, and Yahoo.

I also have news about an organizational change and a transition in our Senior Leadership Team.

First, I want to thank you for your hard work and the dedication you showed during the past 12 months. FY08 was a milestone year. Our revenue jumped $9.3 billion to more than $60 billion. Operating profit grew 21 percent to $22.5 billion.

These outstanding numbers are the direct result of your commitment to the priorities I outlined last July. A lot has happened since then, but our fundamental strengths, challenges, and strategic goals remain largely the same. Therefore, my priorities are consistent with last year. In FY09 we must continue to:

1. Invest in the right opportunities;

2. Expand our presence with Windows, Office, and developers;

3. Drive end user excitement for our products;

4. Embrace software plus services; and

5. Focus on employee excellence.

By focusing on these five areas, we can continue to grow revenue, increase profit, and expand our market share. These priorities are also critical as we work to address key issues surrounding our business in the coming year:

· Windows: The success of Windows is our number one job. With SP1 and the work we’ve done with PC manufacturers and our software ecosystem, we’ve addressed device and application compatibility issues in Windows Vista. Now it’s time to tell our story. In the weeks ahead, we’ll launch a campaign to address any lingering doubts our customers may have about Windows Vista. And later this year, you’ll see a more comprehensive effort to redefine the meaning and value of Windows for our customers.

We also have to drive developers to create rich applications for Windows. With Internet Explorer and Silverlight, we have great tools for creating applications that run everywhere. But we also need to make sure developers have the .NET skills to write unique Windows applications using Windows Presentation Foundation. To keep today’s Windows applications alive, vibrant, and exciting, we need both—applications that run everywhere and rich client applications.

· Apple: In the competition between PCs and Macs, we outsell Apple 30-to-1. But there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete, while our commitment to choice often comes with some compromises to the end-to-end experience. Today, we’re changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We’ll do the same with phones–providing choice as we work to create great end-to-end experiences.

· Business and enterprise: Our enterprise and server business has never been stronger–today we are on the verge of becoming the number one enterprise software company. We need to continue to push on all fronts–mail with Exchange, business intelligence with PerformancePoint, virtualization with Hyper-V, and databases with SQL Server. We have to drive our enterprise search capabilities, our unified communications solutions, and our collaboration technologies. And we must continue to compete against Linux in key workloads such as Web servers and high performance computing.

· Software plus services: Some people think software plus services is all about search. But it’s really about changing the way software is written and deployed. The future is about having a platform in the cloud and delivering applications across PCs, phones, TVs, and other devices, at work and in the home. It’s also about driving change in business models through advertising, subscriptions, and online transactions. Software plus services is a huge opportunity for us to deliver new value on the desktop and the server to all of our customers. This year at PDC, you’ll hear more about our cloud platform initiatives and the next versions of our Live and Online technologies.

· Google: We continue to compete with Google on two fronts–in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it’s an area where we’ll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas–we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation. We’ll introduce new approaches that move beyond a white page with 10 blue links to provide customers with a customized view of their world. This is a long-term battle for our company–and it’s one we’ll continue to fight with persistence and tenacity.

· Yahoo: Related to Google and our search strategy are the discussions we had with Yahoo. I want to emphasize the point I’ve been making all along–Yahoo was a tactic, not a strategy. We want to accelerate our share of search queries and create a bigger pool of advertisers, and Yahoo would have helped us get there faster. But we will get there with or without Yahoo. We have the right people, we’ve made incredible progress in our technology, and we’ll continue to make smart investments that will enable us to build an industry-leading business.

As I mentioned earlier, I have important organizational news. Today we are announcing that the Platforms and Services Division will be split into two businesses: Windows/Windows Live and Online Services. We are also announcing that Kevin Johnson will leave the company. He will work to ensure a smooth transition.

Since 1992, Kevin has been a key contributor to many of this company’s most important achievements. As president of the Platforms and Services Division, Kevin has built an incredibly talented organization and laid the foundation for the future success of Windows and our Online Services Business. Over the last 16 years, through everything from his work as head of the company’s worldwide sales, marketing, and services efforts, to his leadership in transforming our field operations and repositioning the company to focus on opportunities in emerging markets, Kevin has played a vital role in this company’s success. There is no doubt that his passion and dedication will be missed.

Effective immediately, Steven Sinofsky, Jon DeVaan, and Bill Veghte will report directly to me to lead Windows/Windows Live. In the Online Services Business, we will create a new senior leadership position and conduct a search that will span internal and external candidates. In the meantime, Satya Nadella will continue to lead Microsoft’s search, ad platform, and MSN engineering efforts, and Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group. Both Windows/Windows Live and the Online Services Business are led by a strong group of executives on the technical and business side who have the talent and experience to address the challenges we face and drive the next generation of growth and success.

Looking ahead, I see an incredibly bright future for our company. As I said at the June 27th Town Hall for Bill, we are the best in the world at doing software and nobody should be confused about this. It doesn’t mean that we can’t improve, but nobody is better than we are. Nobody works harder than we do. Nobody is more tenacious than we are. We’re investing more broadly and more seriously than anybody else. Our opportunities to change the world have never been greater.

I look forward to working with all of you as we focus on our five priorities in FY09.

Steve

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His memo is worth reading in detail. The five points are right dead-on for Microsoft to be taken seriously as a global technology leader and more importantly, if Microsoft is to be a true innovator in the network-era. Job#1 is Windows and if Microsoft loses that game, they will be marginalized for sure. What is also interesting in dissecting the memo is that he places Google as #5 (last on his list). Gaining a credible traction against Apple in the mobile phone arena is higher. And Enterprise is #3, ahead of Google. I have always maintained in my previous blog post that Microsoft should focus on Windows and use that dominance to win in the mobile space with Windows Mobile and then go deeper within enterprises. (may be rekindle a deal with SAP perhaps?).
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I was baffled by Ballmer lending support to Icahn in his proxy fight few weeks back. Now that issue is settled with Kevin's departure. This memo is one of the clearest and compelling strategic logic that I have seen from Microsoft in totality in a longtime. It recognizes their strengths (software) and the need to refine and adapt their business practices including how they work with their partners to improve and enhance the end-user experience (#3 and #4). I also agree with the point that Yahoo is a tactic and not a strategy. I look forward to seeing this strategic vision expanded and refined over the next few months.
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Score: Advantage Ballmer.!

Icahn and Ballmer's Week-end Moves

2008-07-14T10:06:00.002-04:00

In high stake coreporate games, the action does not stop for the week-end. The news over the week-end is that Microsoft and Icahn made a 'take-it or leave-it offer' set to expire within 24 hours. The idea was that Microsoft and Icahn will guarantee Yahoo about $2.3 Billion dollars in revenue, Microsoft will buy the advertising engine and Icahn will own the rest of Yahoo. The following from Yahoo's Press Release is worth highlighting.

Roy Bostock, Chairman of Yahoo! said, "This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind. Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders. Yahoo's Board of Directors will not allow that to happen. Yahoo!'s Board remains open to any transaction that delivers full value to our stockholders - we just do not believe such a transaction should be dictated by Microsoft and a single short-term investor."

Mr. Bostock continued, "After negotiating among themselves without the involvement of Yahoo!, Carl Icahn and Microsoft presented us with a 'take it or leave it' proposal under which we would be required to restructure the Company, hand over to Microsoft Yahoo!'s valuable search business and to Carl Icahn the rest of the Company, giving us less than 24 hours to respond. It is ludicrous to think that our Board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."

Mr. Bostock also noted that Microsoft's position that it would not deal with, or otherwise engage with, Yahoo!'s management to reach agreement on this proposal or to implement it, is completely absurd and irresponsible given the complexity of the deal - one that requires the removal of half of Yahoo!'s business from Yahoo! and then the integration of it into Microsoft.

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The parameters of the 24-hour offer are totally puzzling to me. Why would the current Board that is being effectively ousted by this offer accept this offer under such tight time frame over a week-end? There are NO upsides for them to accept such a poorly crafted offer. It is not that Ballmer wants to keep Yang & Co. Carl Icahn had previously urged Yahoo not to break up the advertising engine and sell it, knowing that such a break-up will destroy Yahoo's value even further. And, Ballmer does not want to directly negotiate with Yahoo's current board but is joining with Icahn in pressuring the Board. Why give a 24-hour take-it or leave-it offer with no room for negotiations after wanting to negotiate to make this work before?

It's just one more stunt in the proxy battles.

Apple iPhone 3G: iPocalypse or Not So Bad Given the Hype?

2008-07-14T09:34:00.004-04:00

Sure, there were problems. They were to be expected with so much hype and so many wanting to upgrade at the same time. The headlines in the blogosphere was 'iPocalypse Now.' Clearly, those that wanted their hands on the new phone on Friday were frustrated and irritated. I do not know if the fault lies with AT&T or Apple or both but in any co-created and co-delivered new product launch, it does not matter. Both are responsible for the fiasco. Nothing is gained by each party blaming the other.
But, on balance I say that it is a minor fiasco for a simultaneous global product launch. I do not have one yet but will get one later this week when the hype is settled down. But, if you are tracking Apple's strategy, the early indicators are upbeat and promising--Apple sold 1 million units over the week-end. Steve Jobs said that:

iPhone 3G had a stunning opening weekend... It took 74 days to sell the first 1 million original iPhones, so the new iPhone 3G is clearly off to a great start around the world.

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What other indicators to track?
1. Percentage of current iPhone owners converting to 3G within the first month (strength of customer loyalty)
2. Number of applications (free versus fee) downloaded from the appstore within the first month (breadth of complementary network effects)
3. Number of new customers switching from other carriers to Apple 3G locally in the USA and globally (depth of positive churn).
4. Number of Enterprises that officially embrace Apple iPhone beyond the early endorsers such as Disney (degree of inroads into new markets).
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We can add many more to the above list. To me these four indicators provide good insights into how far Apple may go in dominating the mobile phone sector. It has clearly captured the imagination of many but the real question is--will it be as widely successful and as pervasive globally as its iPod? I think Apple is off to a good start.

Yahoo's BOSS

2008-07-10T15:18:00.002-04:00

No. Yahoo does not have a new Boss yet. It may still happen after July 1. Yahoo announced a new initiative today. BOSS stands for "Build Your Own Search Service." NY Times reported that:

on Thursday Yahoo is opening its search technology and powerful data centers to other companies, allowing them to build new or customized search engines without having to make the huge investments needed to develop a search service from scratch. Yahoo, in turn, will sell ads on those new search engines; if some grab even small slivers of the search market, Yahoo will share in their success.

Yahoo is embracing principles of innovation in networks. It is striving to capitalize on network effects involving its customers embracing this platform to create more customized search than possible with Google.
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Erik Schonfeld has a good blogpost on this. He observes that:

All of this forms just the first half of Yahoo’s intentions with BOSS. In a few months, Yahoo will also release APIs for what it’s calling “BOSS Custom”. This version of BOSS will allow developers to actually push data to Yahoo’s servers for indexing, and then perform highly customizable search queries against them.
So in a way, BOSS starts by opening up web search to 3rd parties, but it will go far beyond that by providing cloud-based search for all imaginable types of data. Yahoo has already enlisted a handful of partners for BOSS Custom, including us here at TechCrunch. We’re working on a search implementation that will enable readers to conduct searches across the entire network and retrieve results that have been weighted using a custom relevance model. Readers will also be able to drill down by author, comments, date, and other criteria.
BOSS is the second concrete product to come out of Yahoo’s Open Strategy. The first was SearchMonkey back in April.

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This is a brilliant strategy for the #2 player. It is in line with network-strategy thinking. However, for Yang & Co., the timing is all wrong. On the one hand, they want to partner with Google (after the fiasco with Microsoft) and then they want to create an alternative model. Different modes of experimentation (that are mutually conflicting) may be OK when the company is doing well. But, when the company is under attack as Yahoo has been, such initiatives may come across as incoherent. I am waiting to see how Yang & Decker will convince their shareholders to retain their slate of directors against Icahn. What they need is a simple-yet-powerful strategic vision and credible numbers that people can rally behind. The first six months have been nightmarish for them. Will the next six months be significantly better? All will depend on August 1. This is a good piece of the larger and compelling vision that Yang & Co. need to unveil...
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Clearly, this strategy has risks. As NY Times reported:

Yahoo executives acknowledged that the new strategy, if successful, could cannibalize Yahoo’s own search business. But they said that if a search start-up became popular, it would probably take more users away from Google than from Yahoo, as Google has a far larger share of the market.
“We did a lot of analysis,” said Bill Michels, senior director for Yahoo’s open search platform. “We are comfortable with the risks associated with it.”

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In the coming days, we will continue to see more announcements detailing Yahoo's strategy. Otherwise, Yang & Co. have their days numbered and Ballmer & Icahn may be trying to work out a deal.

Yahoo's Future: Carl Icahn Reveals His Hand (and Ballmer's Support)

2008-07-07T15:15:00.003-04:00

Just after the three-day long week-end, Carl Icahn revealed his hand and his purpose is crystal clear--to get the shareholders to support his slate of directors. He does not want to lose his proxy fight and he does not want his billion dollar investment to tank. So, he revealed that he has the support of Steve Ballmer as long as his slate of directors are elected. In his letter to shareholders he boldly states that:

Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board.

So, Carl Icahn's message is clear: It's time for Yahoo shareholders to reject the current Board.
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He goes on even more persuasively to make a case to get his slate elected.

Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected. While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years. If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase "Search" with large guarantees. I hope to continue to be speaking to Steve over the next few weeks; however, since I do not as yet represent the Yahoo! board, both Steve and I do not wish to get into details over price, or even which of these transactions makes the most sense.

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Carl Icahn's intent is blatantly obvious: get rid of the current Board, engage Microsoft and engineer a transaction that maximizes shareholder value. I have always maintained that a deal with Microsoft (with some decent premium over the current share price) is good from the point of view of Yahoo shareholders (except Yang, Filo, Decker and other senior managers). I have also maintained that Microsoft should not spend in the vicinity of $40 + billion for Yahoo. However, Steve Ballmer's explicit support for Carl Icahn is a clear signal that he wants Yahoo (minus the current leadership team that he accuses of mismanaging Yahoo!).
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David Kirkpatrick writing in Fortune is convinced that Yahoo will finally end up with Microsoft. He is basing it on the fact that Microsoft needs to create a credible alternative marketplace for search-linked-advertising to compete against Google. My interpretation is that Microsoft needs Yahoo's scale (share of the search market--currently a distant #2 to Google but above its own Live.com). Steve Ballmer does not want anything to do with the leadership team and he gets Carl Icahn to do the tough job of ousting the current board. If Icahn gets a price higher than whate he paid for Yahoo, he wins. If Ballmer gets Yahoo on his terms that serves as a catalyst for Microsoft to seriously take on Google, he wins. So, how will the proxy battle turn out? I do not think that we have to wait till August 1. I expect to see hints, leaks and more memos and letters in the coming months.
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Microsoft has made its position clear in its statement released today.

We respect the right of Yahoo!'s shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo!'s shareholder meeting......While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo!'s shareholder meeting if a new board is elected.

Yahoo's statement reiterates that the current management is still committed to negotiating with Ballmer.

If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.

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Score (following from yesterday's epic Wimbledon 2008 Finals): Advantage Ballmer and Icahn against Yang and Decker.

Meanwhile, Google waits for the winner to emerge.

Business Model Innovations in the Network Era

2008-07-02T07:17:00.002-04:00

Recently John Henderson and I published a paper on business model innovations in a network era. I have posted this paper here.
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We are working on expanding and refining the ideas and would very much welcome comments and suggestion on this work.

Countdown to August 1 (Yahoo's D-Day): What's Microsoft Seeking Now?

2008-07-02T04:08:00.003-04:00

We are on the homestretch towards Aug 1 shareholder meeting at Yahoo. Yahoo is fighting Carl Icahn and that seems to be intensifying on a daily basis. Now, WSJ has written a detailed article on the moves, counter-moves and gamesmanship in the Microsoft-Yahoo takeover saga. As I blogged earlier, Microsoft's interest in Yahoo is far from over. Why?
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Microsoft's obsession with Google is strong and deep. WSJ reports that:

Yahoo executives were unimpressed with Mr. Ballmer's vision. If anything, they regarded the Yahoo pursuit as a crude solution to quell his obsession with Google. They would later refer to Mr. Ballmer's plan as "filling his Internet hole." Indeed, Mr. Ballmer spent much of the meeting discussing the threat Google posed to the two companies.

So, the end game is not about walking away from Yahoo but also figuring out how Google may gain or lose with (or without) Yahoo.
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The interesting part of the WSJ article beyond illuminating some of the inner workings of the deal is about what Microsoft is pursuing now. Not happy to be a passive participant, Microsoft is pursuing to put together an ecosystem involving Time Warner, News Corp and others. It appears that Microsoft is not responding to overtures from others but is taking the role of the orchestrator of such an ecosystem. Why? Again, to ensure that if it cannot beat Google by acquiring Yahoo, it can at least create a credible alternative by pooling together online advertising strengths (and weaknesses) of second-tier competitors.
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Yahoo has about four weeks to show its shareholders that its current management team is capable to lead the company and has a credible and compelling vision. What Yang & Co. need is cold, hard facts (financial and operating numbers) that support the clear vision. What Microsoft is trying to do is to make sure that it scores a minor victory. Will that minor victory come at the expense of Yahoo's market value? Or will it be a central part of Yang and Decker's compelling vision? I doubt that July will be dull and boring--at least from Yahoo and Microsoft vantage points.

When Partnerships Drift....

2008-06-26T04:38:00.003-04:00

Those dealing with partnerships know well that the strength of a relationship evolves over time. It could get closer and more hierarchy-like Or, it could get more distant and more market-like.
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One of the best known examples of partnerships in recent years is the one between Microsoft and Intel (dubbed Wintel). Both companies rode the evolutionary trend in computing (Moore's Law) by introducing hardware-software combination in a coordinated fashion. As Intel designed its next generation chip, Microsoft released next version of its operating system. This trend had to stop sometime, somewhere. Well.. it looks like it has.
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NY Times is reporting that an internal analysis within Intel has concluded that Intel may not upgrade all their 80,000 computers to Vista OS! Specifically,

the company made its decision after a lengthy analysis by its internal technology staff of the costs and potential benefits of moving to Windows Vista.

One of the tricky aspects of strategies in a network-era is that one partner does not carry out such analysis if the outcome is likely to significantly affect the performance and position of its tightly-linked allies. Intel's internal analysis to assess cost-benefit of Vista is not like analysis carried out by other big corporations or by so-called third party analysis from Gartner and Forrester.
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Managing partnerships in a network-ear calls for understanding mutual-dependence and coordinating product launches. Unilateral decisions signal more arms-length relationship and this move--if it indeed is followed through--signals that Intel and Microsoft are drifting away from each other.

Symbolic versus Substantive Support Within Ecosystems

2008-06-25T09:44:00.004-04:00

Over the last two days, two news items caught my attention: (1) Nokia buying out partners in the Symbian venture to make the software available free; and (2) Google is delaying the launch of Android-powered mobile phones. There is a connection between these two stories: it's about the fundamental differences between symbolic versus substantive commitment to ecosystems in network-based competition.
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Nokia--which had 48% equity stake in Symbian--clearly wanted to make Symbian OS to be made available free to developers and operators so that they can be persuaded to be part of the Symbian Foundation ecosystem. It paid $400 (plus) million dollars to the other equity holders in Symbian and then is spinning it off into an open source foundation. Other equity holders may still support Symbian but nevertheless took their share of Symbian in cash from Nokia. It is not that the equity holders collectively pledged to change Symbian from a profit-motivated entity into a not-for-profit foundation. That was Nokia's call. They were symbolically supported by many of their erstwhile shareholders. Two quotations that I have reproduced from the Press Release is illustrative.

SonyEricsson:

The complete, consistent platform that the Foundation plans to provide will allow manufacturers to focus on their unique differentiation at a device level” said Dick Komiyama, President of Sony Ericsson. “Sony Ericsson believes that the unified Symbian Foundation platform will greatly simplify the world for handset manufacturers, operators and developers, enabling greater innovation in services and applications to the benefit of consumers everywhere.

AT&T:

Mobile phones have turned into sophisticated multimedia computers and smart phones continue to grow in popularity," said Kris Rinne, Senior Vice President of Architecture and Planning at AT&T. "The Symbian Foundation will reduce fragmentation in the industry and holds the promise of incorporating leading technology and the most mature software into a unified platform for the entire industry. This will create an environment that will encourage and enable developers to build compelling applications that will positively affect our customers' lives and support AT&T in offering its differentiated services to consumers.

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Such symbolic support is welcomed to signal commitment from the ecosystem for the new idea. But the real strength of the ecosystem lies in the substantive support provided by the ecosystem members: How many new models will Sony Ericsson design and launch with the Symbian OS? What will be the share of Symbian OS within Sony Ericsson's portfolio in 2009? 2012? Similarly, where will AT&T place Symbian-operated mobile phones relative to RIM (Blackberry), WindowsMobile (Microsoft), Apple iPhone (remember that AT&T was an exclusive, first-of-its-kind launch partner for Apple iPhone in 2007) and Palm?
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Why is this distinction relevant? For that, let us turn to Google and Android. On November 5, 2007 Google announced the launch of Open Handset Alliance with 34 members. Two companies are common with the Symbian Foundation--Motorola and NTT DoCoMo.

It will be interesting and worthwhile to watch how these two companies balance their commitments to Symbian and Android.
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Google's initiative with Android is a classic example of network-based competition. Wired Magazine ran a story recently about Google's Android. This paragraph from the article is illuminating.

So far, Android has been able to persuade only T-Mobile and Sprint Nextel to join the Open Handset Alliance. Neither is a surprise: T-Mobile partnered with Rubin on the Sidekick, and as one of the smaller carriers it's more willing to take risks. Sprint, suffering from massive consumer churn and almost junk-rated debt, seems game for anything that might help. But the two biggest players, Verizon Wireless and AT&T, have passed. "There wasn't anything viable we were willing to entertain," says Verizon Wireless spokesperson Jeffrey Nelson. This spring, the carrier even backed an Android competitor, an open source consortium called the LiMo Foundation.

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Google needs to use revenue-sharing to convince network operators to join the Android ecosystem since 'free software' does not seem to have done the trick. Nokia is catching up to the free software rule-of-the game.
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This ecosystem is evolving and many different players are jockeying to be the orchestrator of core mobile business models. In such ecosystems, we need to see more than symbolic quotes on press releases. We need to see who commits substantively. We need to see how Motorola and NTT DoCoMo navigate the competing requirements from the different ecosystems. We need to see how developers navigate the pulls from different OS such as Apple iPhone, Symbian, Microsoft Windows Mobile and Android. When will Verizon and AT&T support Android? How significant will be their support? Only when we see the actual moves, we will know who is leading and who is lagging. This network-based competition is just starting out; 2009 will be just the beginning but we will see who is gearing up for the long haul and who has fallen by the wayside.

Nokia Takes Control of Symbian

2008-06-24T15:21:00.004-04:00

Mobile Software wars are heating up. I can count at least five major competitors now: RIM (Blackberry), Apple (iPhone), Palm, Microsoft (Windows Mobile) and Symbian (till now a consortium with Nokia as the largest shareholder).
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Today, Nokia announced that it is investing $410 Million to take full control of Symbian and give the software away royalty-free. Microsoft charges around $10 per phone and Symbian supposedly charges around $5 per phone now. Google's android platform is still in development and Nokia is striving to aggressively compete on price.

The first two paragraphs of the press release are worth reading in its original form:

LONDON, UK; June 24, 2008 - Nokia, Sony Ericsson, Motorola and NTT DOCOMO announced today their intent to unite Symbian OS™, S60, UIQ and MOAP(S) to create one open mobile software platform. Together with AT&T, LG Electronics, Samsung Electronics, STMicroelectronics, Texas Instruments and Vodafone they plan to establish the Symbian Foundation to extend the appeal of this unified software platform. Membership of this non-profit Foundation will be open to all organizations. This initiative is supported by current shareholders and management of Symbian Limited, who have been actively involved in its development. Plans for the Foundation have already received wide support from other industry leaders.

To enable the Foundation, Nokia today announced plans to acquire the remaining shares of Symbian Limited that Nokia does not already own and then contribute the Symbian and S60 software to the Foundation. Sony Ericsson and Motorola today announced their intention to contribute technology from UIQ and DOCOMO has also indicated its willingness to contribute its MOAP(S) assets. From these contributions, the Foundation will provide a unified platform with common UI framework. A full platform will be available for all Foundation members under a royalty-free license, from the Foundation’s first day of operations.

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From a network-era strategy perspective, this move is important as it signals the importance of orchestrating an ecosystem of hardware players, chip makers and operators who simultaneously both compete and cooperate. As of now, it has an impressive set of smartphones. My belief is that Symbian's current governance may have been somewhat complex and complicated with a mandate to make profit while it competes against Google and other open source movements. It is also a signal that Nokia is shifting the locale of competition away from software to design, features, interfaces etc. It also may allow Symbian to more aggressively court third-party applications and compete against Apple's iPhone platform that seems to have attracted many third-party developers.
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But more important is the question: What does commitment to this foundation mean? What will Vodafone do to support Symbian while it also has to deal with Apple iPhone and support devices running Windows Mobile?
What will Microsoft do? What will hardware makers like Sony Ericsson and LG do? Worth watching as Google's android platform evolves in the coming months and years.

And the Rumor is: Microsoft and Yahoo are Back Talking!

2008-06-24T15:04:00.003-04:00

I am not surprised because there is no reason to not think that Yahoo will still explore every option before the upcoming Annual Shareholders meeting. TechCrunch reports that the talks are back on but no clear details are forthcoming. So, what can we expect?

I do not see a full-fledged merger unless Microsoft can get Yahoo close to current price [without paying a premium anywhere close to what it offered in 2007 or even a few weeks back]. If Ballmer gets Yahoo at around $21, he will declare that it is a win for MSFT shareholders and reiterate that Yahoo fits in with Microsoft's long-term vision because it can help Microsoft achieve the requite scale quickly (and underplay any post-merger integration problems). I doubt that Microsoft will get such a bargain because that price is even lower than what Carl Icahn paid to accumulate his near 5% stake. He may not be willing to sell his stake for such a short-term loss unless he is prepared to accept MSFT shares under the belief that they are under-valued and may go back up at a faster rate!

If the discussions are about selling or combining on-line advertising business to create a separate entity with some sort of notional value, then Yang may be able to go in front of his shareholders and claim that he has salvaged a bad situation but without selling away the crown-jewels.
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This story is far from over. Microsoft said: 'No Comment." For Yahoo, I believe that every option is on the table till Aug 1.

Yahoo's Reorganization: Is it Like Shuffling the Deck Chairs on the Titanic?

2008-06-19T22:19:00.004-04:00

Yahoo announced a major reorganization--essentially centralizing the various product division under Susan Decker. Reorganization sometimes may appear like 'rearranging the deck chairs on the Titanic.' While it may not be true in the case of many restructuring moves, in the case of Yahoo, it appears so.
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WSJ headline for the story was: "Planned Yahoo Reorganization May Spark Executive Departures." I think it is a response to past departures and it could trigger future exodus. These managers may have wanted to stay on and cash in on the lucrative poison pill for the management cadre that was put in place when Microsoft was in the picture. Now that Microsoft is out, these executives may not get big payout, they have seen their stock price plummet (many of them may have their options 'under water'). The key resources that Yahoo has (or more precisely, had) is people--talented and experienced professional. As they start to leave (a good early warning signal in a knowledge-based economy), you can bet that they are unlikely to be successful in recruiting talent to replace those leaving--even under current economic conditions.

Yang & Co. have about six weeks before they face the shareholders at the Annual Meeting on August 1. I do not think the angry shareholders could be pacified by detailed presentations on reorganization!

Remember the age-old strategy axiom? "strategy before structure or structure follows strategy.' It's so true in the case of Yahoo.

Yang Needs More than Google to Pacify Shareholders on August 1

2008-06-13T10:25:00.002-04:00

Yahoo announced late yesterday evening that it is entering into a non-exclusive relationship with Google. The title of the announcement itself is curiously strange:

Yahoo! to Strengthen Competitive Position in Online Advertising Through Non-Exclusive Agreement With Google

How does a company strengthen its competitive position by allying with its biggest, direct competitor? On the face of it, it fits with Yahoo's 'Open' strategy but this is not a long term solution. This is not enough to pacify the shareholders who feel let down by the missed opportunity to be acquired by Microsoft.

Both Google and Yahoo are cautious by saying that they will wait to see how the regulators react to this agreement:

Although Google and Yahoo! are not required to receive regulatory approval of the deal before implementing it, the companies have voluntarily agreed to delay implementation for up to three and a half months while the U.S. Department of Justice reviews the arrangement.

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So, who benefits from the deal? I think Google does for two important reasons.
1. Yahoo gives one more prominent site(s) for Google's AdSense. It's better to be placed alongside Yahoo's advertisements than be totally excluded from those sites.
2. Google and Yahoo "agreed to enable interoperability between their respective instant messaging services, bringing easier and broader communication to users." Google's IM client has not been a blockbuster success and Yahoo has a significant number of users and this combination helps Google.
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Yahoo claims that "this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow." This is an estimate and we will see the results when we see the results!
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Yahoo has been exploring many 'strategic options' since Microsoft's public offer earlier this year. What they have come up with so far is a potential increase of $450 million operating cash flow by working with its most direct, dominant competitor. How will the shareholders react on August 1?

Microsoft's Final (?) Answer to Yahoo--No, Not Interested. Thanks!

2008-06-12T15:58:00.003-04:00

So, it appears that Ballmer gave Yahoo a final answer and it is "NO, Not Interested. Thanks." The announcement was made by Yahoo (and not Microsoft):

The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.

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It appears that Microsoft realized that it was paying a premium for second-rate competencies that were further protected (diluted) by expensive poison pills. So, Microsoft wanted to cherry pick what it wanted most--Yahoo's search business but not all other unrelated weaker assets. That would have made Microsoft a winner in the deal. Yahoo rightly said No. So, the deal is off. The discussions are off. Yahoo loses in the short-term (shared dropped by 11%--so we know where the market sentiment is). Microsoft's shared were up about 4% (the market clearly happy that MSFT was not blindly and foolishly pursuing YHOO and overpaying for it!). --
So, what next for Yahoo. In the same press release, Yahoo said the following:

Yahoo! remains focused on maximizing value for stockholders by continuing to execute on its strategy of being the "starting point" for the most consumers on the Internet and a "must buy" for advertisers. The online advertising industry is projected to grow from $40 billion in 2007 to approximately $75 billion in 2010 and the company believes it has the right assets, strategic plan, Board of Directors and management team to capitalize on this growth opportunity.

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As I parse this statement, what I see is (1) we (Yahoo) are in the right industry at the right time because the industry is poised for growth; and because we are in a growth industry, we will also grow--trust us! and (2) We (the current Board and management team) want to execute on the strategy for being the 'starting point' for consumers to search; and hence a 'must buy' for advertisers. Both these are not strategies but business directions and aspirations. Yahoo hopes and aspires that advertisers will consider Yahoo as a must buy and the consumers will continue to spend sufficient time on Yahoo properties.

Carl Icahn believes that the current management team has been soundly beaten by Google. And, Yahoo seems to be now wanting to enter into some business arrangement with Google (assuming that FTC will look the other way and that Microsoft will somehow keep quiet there).
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As I blogged earlier, we know what Icahn wanted Yahoo to do. But, now Microsoft is not interested. My guess is that even he cannot persuade Ballmer to reconsider. They have been at it for a while and they have made their final decision. Now Yang & Co. have the clock ticking as we approach the upcoming annual shareholders meeting and proxy fight is looming. Carl Icahn's Yahoo shares are in the red as of today. We can bet that he is not a happy camper today.

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If Icahn's slate of directors were to get elected, he needs a strategy different from 'Let's sell to Microsoft for a premium and go home.' His team will have to develop winning value propositions for consumers, advertisers and shareholders.

I say: Good Luck to Yahoo's current Board and Icahn's alternative Board.

Microsoft--while walking away from Yahoo--has kept its cash in the bank. But, it needs a compelling strategy for its future with its core business appearing to be weakened by lukewarm reception to Vista by enterprise customers.

Is Eric Schmidt having the final laugh (smirk, perhaps)?

Microsoft--Weakened Core?

2008-06-12T10:15:00.004-04:00

Is Microsoft trying to enter into new areas with its core businesses (cash cows) strong or weak? There is a general consensus that Microsoft can milk its cash cows (Windows and Office) for at least a few years, while it positions itself in the post-Gates post-desktop network era. This core assumption seems to be somewhat shattered by a report about Microsoft Vista.
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BusinessWeek reported that:

According to a Bernstein Web survey of 372 information technology professionals fielded in May, companies expect just 26% of their PCs to be running Vista by the beginning of 2011, down from an estimate of nearly 68% of computers by respondents to a similar survey a year ago....
Companies expect to install Vista on only about 10% of the PCs they already own, compared with estimates last year that they'd be able to do so on 27% of their machines.

The stock performance is showing a downward trend in 2008 just as Gates is leaving.

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Most companies that tried to create radically different business models that bear no core connections to historical core competencies have failed. Microsoft seems to be in that position now. Sure, there are hopes and high expectations for the next version of Windows simply called Windows 7 for now (after a rather ambitious label, Vista!) with cool touch interfaces. But, the core constituencies for Microsoft are the enterprise customers and they seem to be--for the first time--not embracing Windows as enthusiastically as in the past. Is this an early warning signal of major shift underway for Microsoft's performance potential?
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As Ballmer takes over from Gates, Microsoft needs a compelling and clear strategy. Here's my unsolicited advice on priorities.

1. Focus on Enterprises: All Sizes, All Sectors and All Continents. Vista is a major lesson and use that experience to reposition Windows for the enterprise and co-create the next generation OS with leading enterprises.
2. Forget Zune but focus on Xbox. use xbox as the platform to encourage the next-gen consumers. Use search and search-related advertising using xBox. It's futile to take on Google (even with Yahoo) as it will only siphon valuable resources away from other critical priorities.
3. Make Windows Mobile a Leader: Apple, RIM, and Google are formidable but Microsoft has established relationships and demonstrated interoperability before.
4. Experiment Selectively: Explore specialized, high-value extensions such as Microsoft Automotive (e.g., Sync) and HealthVault.
5. Research on Next-gen Applications (and user experience). Search and search-related advertising is today's battleground. What's tomorrow's opportunity in the global network-era where software will be at the core of value creation?

IBM wisely moved away from markets where it lost its historical prominence to seek a leadership position in an emerging market arena (services). What Microsoft should do is to stake a position in tomorrow's stream of value-creation than be caught up in yesterday's and today's battles. Easier said than done. But, that's what differentiates great leaders from mere mortals like me!

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This video reinforces my recommendations as well!!

Microsoft Surface in Las Vegas

2008-06-12T09:56:00.002-04:00

Here's a KillerApp from Microsoft that is tailor-made for Las Vegas. But seriously, looking beyond the obvious, what I see is Harrah's continued focus on using IT functionality to understand customer behavior at a micro-level. So, this is not technology for the sake of technology but a powerful example of using IT for capturing digital footprints of the customers and translating that into competitive advantage through superior service.
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Worth tracking to see who else deploys Microsoft Surface.

We Know What Icahn Will do with Yahoo; But Do We Know What Jerry Yang Has in Mind for his Yahoo?

2008-06-09T13:49:00.004-04:00

It's tough leading the company you start once it reaches a critical threshold as a public company. That's what Jerry Yang must be feeling in the weeks coming up to the Annual Meeting.
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First, there is public disclosure that he and his Board rejected a Microsoft offer of $40-a-share in 2007--which represented about 60% premium over the closing price when Ballmer made the offer. Terry Semel rejected it.
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Second, Yahoo rejected a $31-a-share in February. Apparently, Microsoft may have paid up to $34 late April but again, Yahoo leadership--this time, Jerry Yang--said No. The official Press Release at that time commented:

Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. added, "I am incredibly proud of the way our team has come together over the last three months. This process has underscored our unique and valuable strategic position. With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."

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Third, Carl Icahn starts acquiring Yahoo shares and there is proxy battle underway. Yahoo responds angrily to the first letter from Icahn. Then, he send further letters--all focused on getting Yahoo and Microsoft to enter into discussions of merger. Yahoo again responds angrily to Carl Icahn--essentially indicating that he has no vision for Yahoo. The following is from their June 6 statement:

Leaving aside Mr. Icahn's inaccurate interpretation of our retention plan, we again note that he has no credible plan to operate Yahoo!. We believe that Mr. Icahn's suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo! and would clearly not be in the best interests of our shareholders. Furthermore, his suggestion that we put out a price publicly to see if Microsoft will alter its stated position is ill-advised. As we have stated numerous times publicly and privately, we are open to any transaction including a sale to Microsoft if it is in the best interests of shareholders.

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Carl Icahn's vision for Yahoo is clear: Yahoo has failed in its competitive quest against Google; Yahoo does not seem to have a credible vision to organically grow and innovate to be a leader and that it should sell itself to Microsoft. His vision is right from the point of view of shareholders who have seen their intrinsic value in Yahoo plummet. Semel rejected $40-a-share offer from Microsoft in Feb 2007 but Yahoo did not subsequently offer any new compelling vision or avenues for growth. Semel was ousted but the Board seems preoccupied with defending itself against takeovers rather than crafting a winning strategy on its own.

Indeed, my analysis of the initiatives pursued by them (a much publicized trial with Google and discussions with AOL, NewsCorp and others) leads me to conclude that they were looking at strategic linkages to have a credible basis to negotiate a higher price with Microsoft. Unless Yang & Co come up with a credible vision (supported by a workable execution plan), they have no basis to say that Carl Icahn has no 'credible plan to operate Yahoo.' Icahn may not have a plan to operate Yahoo--he never claimed that he has one. He is simply claiming that there is a better way to maximize shareholder value that what the current team is pursuing. He has even given a public figure for Microsoft to consider.

Instead of accusing Carl Icahn of not having a credible plan to operate Yahoo, Yang & Co. should lay out the vision and plans that the shareholders and employees can rally behind. If they do, they even Icahn may support the current management team.

It's time to go beyond letter and press releases; it's time for laying out compelling visions and detailing credible operating plans. Will Yang & Co. deliver that before the upcoming Annual Meeting? It's a do-or-die situation for sure--even for the ones that founded the company.

Did You Know 2.0: An Updated Version

2008-06-06T22:40:00.001-04:00

This is an updated version that is easy for many to follow along with graphics from xplanevisualthinking.

Multi-media Search

2008-05-30T20:04:00.002-04:00

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

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

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

2008-05-23T16:29:00.004-04:00

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

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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.

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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.

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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?

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

2008-05-22T05:32:00.002-04:00

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.
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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?
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What will Google's next move be?
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I find these moves interesting because they illuminate the complex challenges of crafting winning strategies in a network-era.

Microsoft's Overture to Facebook?

2008-05-19T16:05:00.003-04:00

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

2008-05-19T11:18:00.003-04:00

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.”

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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).
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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.
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The story is far from being finished.

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

2008-05-16T08:15:00.002-04:00

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.

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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.
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Could Ballmer ultimately get Yahoo at an even lower price that $34? Will key Yahoo talent take flight?

Carl Icahn and Yahoo: What's the Deal?

2008-05-14T09:21:00.007-04:00

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.

Google in a Network Era

2008-05-13T11:40:00.003-04:00

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.

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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.

HP + EDS = A Leading Global IT Services Player?

2008-05-12T21:20:00.005-04:00

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.
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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

2008-05-12T11:34:00.006-04:00

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

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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 www.dell.com/art.

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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?

The 'Shift Happens' Presentation is Still Relevant

2008-05-09T10:28:00.002-04:00

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

| View | Upload your own

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Useful for many different types of audiences.

Some Thoughts on Microsoft's Next Act

2008-05-08T08:14:00.003-04:00

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 Salesforce.com. 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 Salesforce.com 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.
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Just some thoughts as I reflect on the opportunities and challenges facing Microsoft.

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

2008-05-04T09:32:00.003-04:00

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.
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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.
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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.

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

2008-05-01T08:40:00.003-04:00

Today's WSJ reported that the negotiations (or non-discussions) between Microsoft and Yahoo is about the price.
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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.
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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!
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As I said before, walk way and see what overtures Yahoo makes.

Internet in the Car--BMW Style

2008-04-30T08:11:00.005-04:00

One of the sectors that I spend following, studying and teaching is the automotive sector--especially telematics. There's GM's OnStar and there's Ford's Sync (in partnership with Microsoft). There are also third-party offerings as after-market add-ons like Garmin, TomTom and Dash.
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Now BMW has brought true Internet into the automobile with its 'idrive.'

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An article in the German Car Scene reports the following:
BMW ConnectedDrive brings the complete World Wide Web into the car on the display, offering more functions all in one go than the driver will usually enjoy on the internet in his office or on his PC at home. This is made possible by the unique BMW iDrive control system activating and masterminding all telecommunication, entertainment, navigation and air conditioning functions via the Controller on the centre console and the centre display in the dashboard.

In using the internet, the BMW iDrive Controller acts in the same way as a conventional computer mouse: Moving the Controller in various directions, the user is able to move the mouse on the internet site shown in the display. Then, pressing the Controller, the user clicks the mouse on the PC to select links or specific items in the menu. By turning the Controller, finally, the user scrolls up and down to the appropriate internet site.

The display presents internet sites in high resolution, an additional function serving to enlarge specific sections on the display by a factor of 1.5 or 2.
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The following video provides a high-level overview.

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The design details are available in this article. I wonder what the safety implications are since it seems to be accessible from the front seat. Also, it looks like it may be available in Europe first. Will we face regulatory hurdles before we see this in the USA? And from a strategic point of view, what are the implications for GM, Ford and others?

High-tech Self-service: Microsoft Surface's First Commercial Look@AT&T Store

2008-04-28T11:57:00.005-04:00

Microsoft Surface has potential to be attractive to those customers that prefer high-tech self-service to interacting with those service reps that do not seem to know much beyond basic features and functions! I am sure you know what I am talking about.
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I was impressed with Microsoft Surface when it was first launched.
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Now AT&T seems to have been one of the first to roll out Surface in a retail setting.

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Here's another video:

It seems like a logical application. I am sure we will see more retailers exploring this interface as a serious alternative to attract younger, high-tech consumers in the retail stores. Here's the announcement about the Microsoft-AT&T initiative that gives some details of the intent.

An Unsolicited Advice to SteveB@Microsoft

2008-04-28T07:51:00.004-04:00

For whatever it's worth, here's my advice to Steve Ballmer at Microsoft. You do confront tough choices.
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Just walk away from Yahoo.
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My reasons are simple and straightforward.

1. You made a good faith bid with a substantial (more than generous) premium when most had written off Yahoo as having stumbled. Yahoo has repeatedly rejected your offer--although no other credible offer has shown up. Even the latest deadline passed without any overture from them.

2. Your reason for acquiring Yahoo is to create a credible alternative to Google's monopoly on the online advertising space. To rebuff you more directly, Yahoo tried to initiate a trial with Google. Even the antitrust authorities do not like the smell of it. Yahoo did that just to irritate you and your company--as nothing really serious or substantive would have come off that trial to shore up an alternative bid for Yahoo.

3. You can clearly go the proxy fight route. That's meant for those seeking to make a financial restructuring or get the Board to act decisively (such as Carl Icahn at Motorola). Do you really want to take on a fight and distract your valuable time and resources?

4. I think you should look creatively how to invest the $41 + billions of dollars to assemble a portfolio of capabilities on a global basis to prepare for the network era competition that is still in its early days. Instead of looking at entities that may have passed its prime (but may not recognize it yet!), look for gems that are undiscovered. In your history, you have always found those gems (Hotmail, Powerpoint, Groove etc.) and those gems have allowed Microsoft to adapt well..

5. Lastly, post-merger integration is thorny and problematic even under friendly conditions. Winning Yahoo through a proxy fight will only worsen that.

The marketplace for global advertising online is heating up and timeliness is key. You are better off walking away from Yahoo and assembling a credible alternative through other avenues of friendly acquisitions and alliances. You can show that you can win against both Google and Microsoft on your own!

Yahoo's Q1 Results: Where's the New Value?

2008-04-22T17:29:00.002-04:00

Those of us who waited anxiously to see if Yahoo would reveal extraordinary shifts in its performance trajectory, we must be disappointed for sure. As Reuters reported:

Despite beating expectations of earnings before special items, the results did not immediately convince the market that Microsoft's unsolicited $43 billion offer undervalues the beleaguered Internet company.

For several weeks, Yahoo has been claiming both directly (through Press Releases) and indirectly (pursuing possible corporate combinations with AOL or exploring business relationships with Google) that Microsoft's generous offer in the vicinity of $41 Billion is somehow low.
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Now that Google and Yahoo have both released their Q1 results, we know that there is no new information that alters the parameters of Microsoft's offer. If anything, I may be tempted to revise the offer downward due to the inordinate delay-tactics exhibited by Yahoo board. I am not sure what Microsoft may do short of taking the fight to the shareholders and gain control of the Board.

Yahoo's results today vindicate Microsoft's offer (very generous, as I said before!). It's time for both companies to put animosity behind and work towards creating a credible advertising platform to compete against Google. Even a delay of few months can prove costly for both companies.

Yahoo+ Google: Serious Threat or a Ploy to Get Microsoft to Raise its Bid?

2008-04-09T19:16:00.004-04:00

Today's news is that Yahoo and Google are exploring ways to work together. Reuters is reporting that Yahoo is exploring options with both AOL and Google as ways to show that its value is more than what Microsoft has offered so far.

This move by Yahoo just does not make sense for many reasons.

One: Any type of business linkages between Google and Yahoo will face lot more regulatory review than the proposed Microsoft-Yahoo deal.

Two: Even if there is no regulatory barrier, Yahoo's stockholders will have to decide that this deal will generate value more than the 60% premium that Microsoft has offered.

Three: In the long-term Yahoo will lose since Google will always have an upper-hand in the relationship. Google is strong and Yahoo is reaching to Google from a position of weakness, not one of strength. And finally,

Four: If Yahoo seriously thinks that the Microsoft offer is seriously undervalued, there is only one way to get Microsoft to raise its bid--sit down together and show in a systematic way how a higher price can be justified for Microsoft's shareholders (in addition to Bill G. and Steve B.). Going about in a roundabout way through half-baked pursuits with Google and AOL is not the way to get closer to potential colleagues.

Yahoo--Do not kick a gift horse in its mouth!

YouTube: Monetization Opportunities and Challenges

2008-04-09T15:36:00.002-04:00

I have been wondering when and how YouTube will incorporate advertising. Here's a good video that provides some information on how YouTube may start monetizing its dominant position in this network.

Globalization 3.0: Opportunities and Challenges

2008-04-02T13:44:00.003-04:00

Yesterday, I gave a talk to a group of Boston University alumni in New York on the topic of Globalization 3.0. This presentation frames some of the challenges that companies face as they recognize how best to exploit the opportunities of global collaboration that go beyond narrowly defined mechanisms of offshoring and outsourcing.
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Would appreciate any comments and feedback on this overview presentation.

| View | Upload your own

Microsoft-Yahoo: Closer or Still Far Apart?

2008-03-31T13:37:00.001-04:00

This is still the $41 billion question, I say.

Here's a video that provides some speculative insights on where the deal may stand.

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I still think that this deal is good from Yahoo's point of view. Are they simply working out the finer details??

Third International Case Competition at Boston University

2008-03-28T21:48:00.002-04:00

This year, we are hosting the Third Annual International Tech Strategy Business Case Competition based on a real live case from Ericsson. I briefed the teams this morning. We are so thrilled to host 16 teams (including Boston University). The case copetition blog is located here.
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Presentations from the last two years have been first-rate and I am looking forward to seeing what the teams come up in terms of insights for the evolving multi-media marketplace.

Motorola's Governance Move--For Icahn's Sake?

2008-03-26T17:00:00.006-04:00

Why did Motorola now decide to split itself into two parts--spinning off the unprofitable mobile phone (handset) business to investors (hopefully on a non-tax basis)? Well, there could be several reasons why Greg Brown, Motorola's CEO might have done this now.
One: To boost up Motorola's sagging share price but the market reacted very lightly boosting the stock by 27 cents to little over $10. That's hardly a ringing endorsement.
Two: To attract top leadership talent to the mobile phone unit so that it can strive to be #2 in a brutally competitive business. Samsung is the present #2 and it is unlikely that Motorola can regain the lost #2 spot anytime soon. If someone actually gets Motorola to be #2 by 2009, it will indeed be a great achievement! It does not look like Motorola has found such a person because the market would have reacted far more positively if the two announcements were made together.
Three: TO eventually sell the unit to Samsung or LG Electronics or some other Asian companies that may be hungry to use such an acquisition to enter USA (think Lenovo in the PC business!). US$ is weak and some companies may see this as a good reason to acquire US companies.
Four: To pacify Carl Icahn--who has sued Motorola to obtain internal documents and has insisted on such a split for sometime now. CEO Brown insists that this decision was independent of the pressures put on by Carl Icahn but that seems to ring somewhat hollow.
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Motorola is in the midst of transformation.

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Motorola needs more than a governance shift. The industry--including Nokia-Siemens, Alcatel-Lucent, Ericsson, Nortel and others--is in the midst of profound strategic shifts. Successful transformation calls for more than governance shifts--which may be necessary given Carl Icahn's moves but are not sufficient to develop a clear vision of the future.
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Update: Carl Icahn's response is a further support to my argument that the move is reall for Icahn's Sake..

Microsoft-Yahoo Battle--It's still all about the money!

2008-03-26T13:36:00.002-04:00

So, as we come to the end of March 2008, where are we on the proposed acquisition of Yahoo by Microsoft? As I noted in an earlier blog, it is (still) all about money. Reuters reported that Citigroup analyst believes that Microsoft will raise the bid.

The brokerage also raised its price target on Yahoo's stock to $34 from $31, saying it believed Microsoft remained committed to its offer and "is capable of and willing to" increase that bid to conclude the deal.

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I am not sure whether the Citigroup analyst is right or not about the $34 price target (I am loathe to accept any analyst predictions on target price after Bear Stearns collapse!). We will know in due course at what price the deal is finally struck. I still strongly believe that Microsoft's original offer is fair and that Yahoo really does not any convincing alternative bids that can be shown to the shareholders to woo them away from Microsoft's bid. Microsoft may propose a different financial structure that more accurately reflects the stock prices of the two companies and also takes into account Yahoo's latest performance results. But, in the end, it will be in the same ballpark--not significantly higher!
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From my point of view, as I wrote earlier, Yahoo should refrain from any more delay tactics. A combined Microsoft-Yahoo entity still faces regulatory challenges and post-merger integration hurdles. Time's of the essence!

Bebo for $850M: Reshaping the Social Networking Space

2008-03-14T10:12:00.003-04:00

The news this morning is that AOL (Time Warner) has acquired Bebo for $850 Million. WSJ reported that:

The transaction is rooted in the belief that social networking is becoming a major gateway for how people use media and services on the Web, including email, search and video. "People are using social networks as their prism to the online world," said Bebo President Joanna Shields, a former Google Inc. executive who joined Bebo last year and is expected to remain at the helm.

AOL's business model is under transformation. Their revenue-mix is shifting away from subscriptions to advertising. This bet is a further signal that they have to have global scale to compete against first-tier companies.

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This announcement further means that Yahoo-AOL deal is unlikely. Rupert Murdoch appears to have walked away. Will Yahoo finally realize that it has few options left? When will the deal be consummated?

Microsoft--Yahoo Link: What's Next?

2008-03-14T00:52:00.006-04:00

Wall Street Journal reported that Microsoft made another presentation of its vision for the combined entity to Yahoo executives on March 10. It is over a month now that Microsoft made its unsolicited bid to acquire Yahoo. Since then, the price has dropped (since Microsoft shares have been trading mostly lower); Yahoo has postponed the date to nominate Board members; and more importantly, no other plausible suitors have emerged. Rupert Murdoch said: “We’re not going to get into a fight with Microsoft, which has a lot more money than us.” So, there goes one serious alternative that Yahoo might have possessed.
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Market Watch reported that: Unless Yahoo management has an alternative plan or is expecting stellar results, either of which we see as a remote possibility, this strategy opens up a risk that Microsoft could withdraw its bid and reinstate it later at a lower price," analyst Jeffrey Lindsay of Bernstein Research.... Bernstein added, however, that he expects Yahoo to report "another mediocre quarter."
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If Yahoo played its cards wrong, it could end up getting a lower value. Then, Yahoo shareholders will be really displeased. Yahoo managers may get de-motivated and the combined entity (which relies mostly on the creative ability of its people--whose compensation may be tied to the upside of Microsoft stock!) may not have the collective capability to develop a coordinated strategy to fight Google (which incidentally is a step closer to acquiring DoubleClick).
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One month may not be a longtime for negotiations to combine physical assets but is an eternity when striving to pool knowledge assets to compete against a formidable leader such as Google. Yahoo may lose talent and so could Microsoft.
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Yahoo should now declare that Microsoft's offer is fair, open its books in good faith. Then, explore if it can get a higher price by showing Microsoft its hidden jewels. I believe that if Microsoft were to up-end its offer, it will be because Yahoo has under-leveraged hidden assets that it could not value from the outside and not because there are competitive offers that top Microsoft's offer of about $41 Billion.

Yahoo--Make up your mind. Delay only weakens you and the combined entity.

How strong will Yang & Co. be after the results of Q1 2008 are declared? Will they still claim that Microsoft undervalued its assets? I doubt it.

Facebook--How far can it go?

2008-03-11T18:24:00.001-04:00

Here's an interesting video about why Mark Z. turned down the $1 Billion from Yahoo.

Steve Jobs, John Doerr and the iPhone Ecosystem

2008-03-07T12:21:00.005-05:00

I have always maintained that Apple's future success depends on its ability to orchestrate the iPhone business ecosystem if it is to become more than a niche player. With iTunes and iPod, Apple evolved from being a niche player to be a mainstream player in the music sector. The critical decision was to make iPod and iTunes compatible with Windows. In doing so, Apple could potentially include and involve the multiple millions of Windows users--without such a large network to tap into, Apple would have been a marginal player in music.
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Now it is trying to be a rule-maker in the smart phone sector using a different approach: It is linking with John Doerr of Kleiner Perkins (the company that funded Amazon, Netscape and Google). The VC firm has established a $100 million fund (dubbed the iFund) to spearhead software development. This fund will prime the network in terms of motivating the developers to write applications for iPhone.
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Steve Jobs laid out the iPhone Software Roadmap on March 6. Time will tell if Apple succeeds with iPhone and be a viable competitor to RIM (Blackberry) and Microsoft (Windows Mobile), not to mention Symbian and Palm.

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Apple's move shows the importance of priming the network through investment dollars to gain preferential attention from third-party developers. The incentive has been announced. We will wait and see how the developer community responds.
Update: March 13, 2008
Here's a good video

Yahoo's Delay Tactics is Simply Wrong

2008-03-06T09:28:00.002-05:00

Yahoo is floundering in the face of getting what I think is more-than-fair price to be acquired.

First, it says the price is too low and floats an 'acceptable' price. Microsoft does not counter offer.

Second, it tries to explore other possible avenues to see if it can get a reasonably competitive offer. It does not get anyone to make an offer anywhere close to the Microsoft offer.

Third, it tries to find creative ways to combine pieces of TimeWarner (AOL), NewsCorp (MySpace) and perhaps others that may not be publicly disclosed to show its shareholders that its value is much more than what Microsoft offered. Nothing remotely close in terms of a viable business model.
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And Now...
Fourth, Yahoo has mended its bylaws to extend the deadline for nominating new board members. It is afraid that the shareholder--who have already started filing law suits--may accept Microsoft's point of view.

I--for one--believes that Microsoft offered a fair (may be bordering on excessive) price to acquire Yahoo. In this industry--more that anywhere else--timing is critical. If Microsoft-Yahoo as a combined entity is to be competitive against Google, it must act fast. Real fast. Post-merger integration will not be easy--it is not about combining factories and supply chains to gain economies of scale in production. It is about combining smart talent and R&D proficiency to reap economies-of-expertise in delivering software-enabled services in a new marketplace. Protracted delays will diminish the potential synergies of the combined entity and dilute the value to yahoo shareholders--who will receive part of the purchase price in Microsoft stock. So, it is better to figure a way to make it happen or both should walk away from the deal. Nuanced boardroom games will hurt both and only help Google to march ahead.

So Yahoo--Why are you kicking the gift horse in its mouth? I am not saying that this is best for Microsoft but for Yahoo shareholders, this is a sweet, sweet offer.

Google Experiments in the Healthcare Field

2008-02-23T12:31:00.002-05:00

Finally, we have the details of Google's experiment in the healthcare arena. Google announced that it is working with the Cleveland Clinic on this initial experiment--which seeks to put patients in charge of their own health information. Cleveland Clinic announced that:

Today, more than 100,000 Cleveland Clinic patients benefit from Cleveland Clinic’s electronic personal health record (PHR) system called eCleveland Clinic MyChart®. The pilot, an invitation-only opportunity offered to a group of Cleveland Clinic PHR users, plans to enroll between 1,500 and 10,000 patients.

It will test secure exchange of patient medical record data such as prescriptions, conditions and allergies between their Cleveland Clinic PHR to a secure Google profile in a live clinical delivery setting. The ultimate goal of this patient-centered and controlled model is to give patients the ability to interact with multiple physicians, healthcare service providers and pharmacies.

The CIO of Cleveland Clinic remarked that: "Patients are more proactively managing their own healthcare information.. At Cleveland Clinic, we strive to participate in and help to advance the national dialogue around a more efficient and effective national healthcare system....Utilizing Cleveland Clinic’s PHR expertise, this collaboration is intended to help Google test features and services that will ultimately allow all Americans (as patients) to direct the exchange of their medical information between their various providers without compromising their privacy."

From Google's point of view: According to Marissa Mayer, Vice President, Search Products and User Experience:

We believe patients should be able to easily access and manage their own health information.. We chose Cleveland Clinic as one of the first partners to pilot our new health offering because as a provider, they already empower their patients by giving them online tools that help them manage their medical records online and coordinate care with their doctors.

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Microsoft has earlier launched its Healthvault with its network of partners.

Now, here is another area of head-to-head competition between Microsoft and Google with little information available now about how the two companies plan to monetize theses initiatives or whether their approcahes will be different.

Transformations in Media: Newspaper Advertising

2008-02-15T16:28:00.004-05:00

Newspaper industry shifts underway. What will the transformed business model look like?

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I think this is a fertile setting to study patterns of business transformations from the industrial age definitions and approaches to one reflecting a network point of view.

This data from the NY Times article is interesting to reflect:

Revenues are falling even as readership of major newspapers climbs sharply because of the Web. Most major papers set records for Internet traffic last month, Nielsen/NetRatings reported Thursday; the Web site of The Times had more than 20 million unique visitors, more than any other newspaper site.

It goes beyond the recent layoffs announced by NY Times today and the formation of QuadrantOne for newspaper advertising. It is about the logic of people will search, access, consume and share content in a network era.

Is NewsCorp Deal Serious for Yahoo to Reject Microsoft Offer?

2008-02-13T18:49:00.002-05:00

The latest (mostly rumor) news is that News Corp (yes--the one who owns WSJ and MySpace among other properties) is interested in pooling MySpace with Yahoo. On the face of it, it makes sense for News Corp. to try to get into this game: MySpace + Yahoo will be a formidable competitor against Facebook (5% owned by Microsoft). But, I do not see how this could yield $40 plus billion dollars in valuation to seriously reject Microsoft's offer.
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It is more of the mating dance to up the ante. As I said before, the real question is: How high will Ballmer & Co. go to acquire Yahoo (and not make the same mistake that AOL made).

Microsoft-Yahoo Battle--It's all about the money!

2008-02-11T11:58:00.000-05:00

Yahoo's counter offer of $40 is a smart move. Microsoft needs Yahoo. From Yahoo's perspective, this is the best of the strategic options available to them. They are simply trying to find an acceptable price.

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It will be interesting to watch how high will Ballmer go to get Yahoo?

Bill Gates--Last day at his Job (not that he will ever retire!)

2008-01-30T12:44:00.000-05:00

This is a funny video. One worth seeing.

BBC_MySpace TV Link

2008-01-24T09:20:00.001-05:00

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BBC TV content will be available through MySpace TV starting today. BBC announced that:
BBC Worldwide, the commercial arm of the BBC and MySpace, the world's largest social networking platform, today announced the launch of a ground-breaking partnership to bring new and archived short form BBC content to MySpaceTV.
The announcement marks the first global agreement of this type between MySpaceTV and a major broadcaster. Under the partnership, the best BBC video content will be made available online globally via MySpaceTV, the social networking site's popular new video platform. MySpace users will be able to visit and subscribe to the BBC Worldwide's MySpaceTV video channel in order to view, embed and virally share BBC content across the MySpace community. Under the deal, current and archived video content from BBC Worldwide programmes will be available on MySpaceTV including some classic moments in TV: Robbie Williams and Russell Crowe being interviewed by Parkinson, Jeremy Clarkson and his team on Top Gear and some breathtaking clips from Attenborough's natural history series. Also available will be some gripping moments from classic series such as Doctor Who, Robin Hood and Torchwood in addition to some hilarious sketches from The Catherine Tate show, Red Dwarf and The Mighty Boosh."
Moreover, this "represents a further move by BBC Worldwide, the BBC's commercial arm, to broaden the reach of its content to new channels and outlets, to engage with audiences around the world and to promote content which will be available on Kangaroo in the UK and BBC Worldwide's commercial media player internationally."
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Media network is becoming viral, modular and global.

Three Horses Orchestrating the Health Network

2008-01-24T08:05:00.000-05:00

Now, we are beginning to see what the network era may mean for the healthcare sector.
First, there is WebMD, part of HLTH Corporation. It has evolved over the years to be a significant place on the network for people to access information as well as make connections. Its role is simple: "WebMD provides valuable health information, tools for managing your health, and support to those who seek information. You can trust that our content is timely and credible." It has two interdependent networks--one focused on consumers and the other focused on healthcare professionals.
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Then there is Microsoft Healthvault. As the website states: "Imagine controlling the flow of your health information. Whether you need to search the Web for the most up-to-date treatments, catalog existing health records, receive test results, or monitor current physical readings — HealthVault gives you the control you need." And in a typical Microsoft way, it leverages the power of complimentary partners to make the service attractive to users. Here is a list of websites that have already signed on to experiment with Microsoft. There is also a growing list of devices that are compatible with MS Healthvault.
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Now it looks like Google Health is about to be launched.

Details may be forthcoming in due course.

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I see these three as complimentary and not competitive. All three have important roles. I will be watching this space to get a better understanding of the evolution of networks in healthcare--an important part of the economy.

IBM Commercials--Importance of Implementation and Actions

2008-01-20T13:45:00.000-05:00

IBM's commercials are on the mark..
Here's one that I could find online.

ideate from ax09001h on Vimeo.
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I am looking to find others.
If you find it, please provide links here. Thanks.

Blogger as an OpenID provider

2008-01-19T17:14:00.000-05:00

One of the frustrating things is to have to create multiple ids for commenting on different blogs. It is bad enough that we have different email ids, bank ids, magazine subscription ids etc. I am happy to see that Blogger (Google) has finally introduced this feature. Now, I can enable my blogger id as an OpenID and use it on blogs that accept it. Just as any other feature in networks, this will only be as successful as the number of sites (and members) that embrace it. It will be interesting to see the success of this initiative against inevitable alternatives that will emerge.

Innovations Shaping the Future--IBM's View

2008-01-04T12:01:00.000-05:00

Here are some videos that summarize what IBM sees as innovations for the future.

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Netflix: Adapting to the Network Era

2008-01-03T10:56:00.000-05:00

It is always refreshing when we see a company adapting its business model to new requirements. NetFlix is one of those companies whose business model of DVD distribution through mail-order is under attack. It has taken proactive steps to adapt its business model top the network era.

The following moves are noteworthy signals of the shift underway.

1. On November 29, 2007, Netflix and NBC Universal entered into an agreement about the hit series Heroes.

The deal follows NBC Universal's announcement with G4 and Mojo as the off-network cable homes for "Heroes" and makes Netflix the exclusive SVOD outlet for the series and the third arm of the studio's syndication deal. In addition, Netflix also offers prior season episodes of other popular NBC series including "30 Rock," "Friday Night Lights" and "The Office." For these shows, Netflix subscribers will have the option of enjoying them on DVD or watching them instantly on their PCs at Netflix.com. "We are pleased to expand our relationship with NBC Universal Domestic Television Distribution and be part of their innovative distribution strategy," said Robert Kyncl, Vice President of Content Acquisition for Netflix. "We have a shared interest in granting fans expanded access to and strengthening the network's key franchises." "We are excited to establish Netflix as a part of our off-network syndication strategy for 'Heroes,'" said Frances Manfredi, Executive Vice President & General Sales Manager, NBC Universal Domestic Television Distribution. "This deal reflects the changing landscape of the entertainment marketplace and our objective of finding new buyers that complement our traditional customers."

2. On January 3, 2008, it entered into an agreement with LG Electronics to "develop a set-top box for consumers to stream movies and other programming from the Internet to HDTVs -- bypassing the need to use a personal computer." According to Netflix, this "technology collaboration supports the Netflix core strategy of offering a multi-dimensional, or "hybrid," service that gives its more than 7 million members a variety of ways to receive movies and TV series for one, low monthly fee."

According to an article in the New York Times, "the deal with LG is something of a strategy shift for Netflix. The company had been experimenting with building its own Netflix-brand set-top box. Last spring, to help create the device, the company hired Anthony Wood, the founder of ReplayTV and a pioneer of the digital video recorder." I for one agree that it does not make sense to create a specifically branded set top box and compete against Motorola and Cisco. It is far better to figure out a hook to the television sets directly. In that sense, this experiment with LG Electronics is a good way to experiment and learn.

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Netflix is experimenting with on-line streaming as well as rethinking how it delivers content to consumers. Strategic shift to a network era is challenging and complex. Wal-Mart experimented with online downloading but scrapped its initiative, partly because its technology partner Hewlett Packard decided to discontinue essential infrastructure for the service. Whatever be the real reason, Wal-Mart has decided to focus on maintaining its leadership in selling physical DVDs and not expand its strategy to online downloads (that call for entirely different set of capabilities and relationships).

The only way to succeed is to explore multiple avenues and experiment plausible avenues of new business models. While, we cannot be certain that Netflix will succeed, the good news is that they have recognized the potential obsolescence of their traditional business models and are responding to the shift.

The transformation in the media network is underway and the moves by current players and new entrants are worth watching.

Global Outsourcing--Multiple Points of View

2007-12-30T13:13:00.000-05:00

Here is an interesting video from an European point of view.

Find more videos like this on www.truveo.com.

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This is the link for the ABC News Video on Rise of India.
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Here's a video on software offshoring to Vietnam.

Netscape Navigator: Fading Out But Hopefully Not Forgotten

2007-12-29T11:03:00.000-05:00

NY Times reported today that: Netscape Navigator, the world’s first commercial Web browser and the starting point of the Internet boom, will be pulled off life support Feb. 1 after a 13-year run.Netscape Navigator, the world’s first commercial Web browser and the starting point of the Internet boom, will be pulled off life support Feb. 1 after a 13-year run. ...

“While internal groups within AOL have invested a great deal of time and energy in attempting to revive Netscape Navigator, these efforts have not been successful in gaining market share from Microsoft’s Internet Explorer,” the director of Netscape, Tom Drapeau, wrote in a blog entry on Friday.

Full details are in this blog entry.
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It is clear that whenever the history of the transformation from the industrial age is written, there will be always a place for Netscape and specifically Navigator--which is more than a tool to access web pages on WWW.

One: it ushered in the network-era with so many different modes to connect to the network from all over the world.

Two: It challenged us to think about different pricing models for the network-era. (Free is OK as long as we know where revenue and margins come from!).

Three: Netscape helped create Mozilla and the Firefox browser. AOL nurtured support but now has not the resources to divert away from its core business mission of focusing on ad-supported business models.

Four: While Navigator may be fading out, Firefox is very much alive and thriving.

In my view Netscape (and Navigator) unleashed something that we may not fully comprehend for a while. Just as we did not fully understand the power and impact of steam engines till much much later. Or for that matter telephone or telegraph.

Dell and WPP Restructure Marketing Services

2007-12-08T08:32:00.001-05:00

I remember the time (1989) when Kodak outsourced its IT operations to IBM: The IT outsourcing industry was at its early days, some companies saw outsourcing as a way to restructure their operations and focus on their core competencies while others saw it as a misplaced strategy that gives away the corporate crown jewels. The Fortune magazine story started out as follows:

"WHY NOT FARM OUT YOUR COMPUTING? Hiring another company to do your data processing can save you big bucks. Some say it's the biggest trend since the PC burst on the scene a decade ago..." and went on to quote Kathy Hudson, Kodak's IT Director at that time: "IBM is in the data- processing business, and Kodak isn't. IBM runs our computer center as it's supposed to be run -- as a profit center rather than a cost center."

My doctoral student, Lawrence Loh at MIT Sloan School of Management wrote his award-winning thesis on IT Outsourcing and we wrote a scholarly article in Information Systems Research on the "Kodak effect."
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Now we may have the Dell Effect when it comes to [out]sourcing marketing services. The following post from a Dell blog is worth reading and reflecting.
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Dell announces new agency agreement with WPP valued at $4.5 billion in agency billings over three years

Dell is announcing today that it will partner with WPP, who will join Dell to create a new global integrated marketing and communications agency.

Together with the WPP agency, Dell is creating a new marketing model designed to further propel Dell's growth. We've been calling this ‘Project Da Vinci' because we've been looking for the combination of artist and scientist—an agency that has both the creative horsepower and ability to measure the business impact of their work.

The agency will be charged with building shareholder value via programs that are centered on "creativity with a business purpose". We believe this is the first time a global client and agency have come together to redefine the "agency" on such a scale.

The process started with Vice President of Global Marketing, Casey Jones, joining Dell eight months ago and discovering that the Company was working with more than 800 agencies worldwide. Project Da Vinci was soon started and, as Casey has often said, "Instead of dating 800 agencies, we are creating a partnership with one firm. We want our partner to spend 100% of their time thinking about our customers, rather than how they will get the next assignment."

We've made several observations together during the agency review process that will guide our effort going forward. Here are a few as well as additional commentary on this vlog (link) from Casey, who is our leader of Da Vinci.

Key Observations

The rationale for one partner - A "partner" is someone who works with you not for you. Shares your business goals and is invited into the heart of your marketing process. By combining our agencies we can invest in the long term, in the people and tools to unlock far greater results than a patchwork quilt.
Why Dell and why now? - Dell is known for simplifying PCs and the supply chain beginning 23 years ago. It's in our DNA to simplify all we do and now we are going to apply our expertise to simplify marketing at Dell.
The Internet revolution - When you have one billion people online and another one billion joining them over the next four years, it becomes very important for us to have the right analytics, the right team and the ability to build campaigns in days, rather than months.
The importance of agency talent - We want Dell's agency to be the agency of choice for the most talented people in the world.
How we will coordinate - Most agencies integrate by gluing teams and people together within their holding company with a completely separate P&Ls. Da Vinci will have one global P&L. One great team at WPP to match up with our team, so we can create magic together. One team that is known for highly productive relationships between those who create and those who manage the daily work. Pretty simple stuff.
The importance of analytics - Improving shareholder value is the ultimate award for all of us to win. Yes, we don't mind winning industry awards, but our customers and our shareholders are our focus, not what we can win in Cannes. A combination of great analytics and creative is key.
The centralization of new relationships - We will empower our new agency to handle all subcontracting relationships with talented professionals and firms who want to work with Dell. They will be encouraged to join our Da Vinci team.
The investment in our future - WPP will invest in our relationship as much as we do in them. It's mutual from day one.

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I see it as another key building block in thinking about strategy in a network era as a portfolio of capabilities obtained through relationships.

Ford--Microsoft Sync: Videos

2007-11-29T17:15:00.000-05:00

Here are more commercials featuring a service that is the result of a joint initiative between Ford and Microsoft called Sync. I have put all the videos relevant to discussing this case in one blog.

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I wonder if anyone has used this as a business case example to understand the opportunities and challenges of competing in a network era.

Ads in Adobe PDF Documents Inserted by Yahoo

2007-11-29T16:44:00.000-05:00

By now, everyone (well, nearly everyone!) is all familiar with what Google has done to online contextual advertising--search, maps, GMail, etc. As we do more things online, it is just a matter of time that every interactions on the web will be facing potential onslaught of contextual advertising. So, here's the latest: Advertisements contextually inserted into PDF documents created on the Adobe website. According to an article in The Advertising Age:

The service with a mouthful of a name -- it's called "Ads for Adobe PDF Powered by Yahoo" -- targets the growing stable of publishers focused on online formats, many of whom are moving to web-only models. Under the program, which is in test mode, publishers can insert contextual text-based ads within Adobe's Adobe Reader and Adobe Acrobat brands.

The benefits are obvious. Again as summarized in the article...

For publishers, the program may be an additional source of revenue, potentially offering readers more free content. Advertisers, meanwhile, can tap into a new type of content and will have the ability to track advertising performance the same way they do with web-placed ads.

According to Adobe's press release, the process works as follows:

To join the program, publishers must register online, and then simply upload their Adobe PDF content so that it can be ad-enabled before distributing PDFs as they do today. Ads can only be displayed within Adobe Reader and Adobe Acrobat, in a panel adjacent to the content so that they do not disrupt the viewing experience. Every time the PDF content is viewed, contextual ads are dynamically matched to the content of the document. The publisher can then monitor performance through detailed reports. Publishers already committed to participating in the Ads for Adobe PDF Powered by Yahoo! beta program include: IDG InfoWorld, Wired, Pearson’s Education, Meredith Corporation, Reed Elsevier and many more.

“Since moving to a Web-only format earlier this year, we at InfoWorld have been able to apply a laser focus to cutting-edge solutions for the electronic distribution of our content,” said Allen Fear, director of Online Content at InfoWorld. “The unique combination of Adobe PDF and Yahoo! ads presents a new way of generating revenue from many of our existing products. We are excited about the opportunity to work with Adobe and Yahoo! on what we believe is a solution that significantly enhances the value of PDF distribution.”

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I find this interesting as it is another example of business ecosystem in formation with Google and Yahoo offering alternative advertising platforms. In the case of Yahoo, this particular initiative is an attempt at expanding its advertising platform scope by joining together with a document platform architect, Adobe. Will this initiative attract massive network effects? The marketplace will judge whether this offering is compelling enough to compete effectively against Google. Welcome to the content network!

Media 2.0: Two Network Connections to Track

2007-11-27T11:56:00.000-05:00

One of my interests is to make sense of the shifts underway in the media space. This is a leading edge laboratory for understanding strategies for a network era. The competitive space is becoming complex and there are huge changes in the consumption of media (place-shifting, time-shifting and device-shifting just to mention a few). Business models in the media space are under attack.
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Two announcements about corporate connections caught my attention and I think these are potentially very significant.

October 24, 2007: Google announced a relationship with The Nielsen Company.

...the companies have established a multi-year, strategic relationship. As a first step, the relationship leverages Nielsen’s experience in television audience measurement to bring demographic data to the Google TV Ads™ advertising platform. By combining Nielsen demographic data with aggregated set-top box data, Google can provide advertisers and agencies with comprehensive information to help them create better ads for viewers and maximize the return on their advertising spending.

Google TV Ads is an online platform for buying, selling, measuring and delivering television ads. The platform, which has been operational since May, includes advertising inventory across hundreds of channels and all dayparts. A key benefit of Google TV Ads is the ability to report second-by-second set-top box data so advertisers can evaluate the reach of an ad and only pay for actual set-top box impressions. Advertisers can better understand exactly how their ad is performing and make near real time changes to their TV advertising campaigns to deliver better ads to viewers. Data derived from Nielsen’s representative television ratings panels will provide Google TV Ads advertisers with the demographic composition of the audience.

This is the first time that advertisers and agencies will have this level of detailed measurement available in a single place and at such a large scale. This information is available through the existing Google AdWords™ report center

Moving forward, Google and Nielsen will explore a number of other opportunities to work together to measure online and other media.

November 27, 2007: NBC and TiVo announced a relationship. WSJ reported that:

The agreement, announced today, reflects rising demand in the TV industry for detailed audience viewing information. TiVo, a provider of digital video recorders, about a year ago started offering advertisers second-by-second ratings of programs and commercials based on the viewing habits of its subscribers, as well as other services. Earlier this month, the Alviso, Calif., company added demographic data about the viewers themselves, such as age, income, marital status and ethnicity.

NBC Universal's agreement with TiVo will give the TV concern's networks, such as NBC, Telemundo and Bravo, as well as its NBC owned-and-operated TV stations, access to TiVo's ratings data.

The deal comes as advertisers, media buyers and TV executives continue to grapple with a changing TV ad landscape, where an increasing number of viewers are using digital video recording devices to fast-forward through ads.

With its research, TiVo is competing with industry giant Nielsen Media Research, which also offers commercial-ratings and demographic data. Advertisers, media buyers and TV networks have made many of their ad deals this year based on Nielsen ratings of TV commercials.

So, what are we seeing here?

The set-top box is a critical point of control--whether it is TiVo box or one provided by the cable/satellite operator--for advertisers. Both the relationships (Google-Nielsen and NBC-TiVo) are jockeying to extract valuable data from the set top box. Nielsen has the potential to integrate a broader array of information but Tivo is more widely deployed. It will be interesting to see what other relationships are formed with other entities in the media space (for example: what role if any for Motorola and Cisco/Scientific Atlanta that make the set top boxes--are they simply hardware providers or can they expand to play critical roles here?). There are also huge privacy issues and challenges that both TiVo and Google have dealt with before.

These are not just two random announcements of corporate connections. They reflect the shifts underway and by no means will they be the last ones we see in this space.

Google's GDrive as a Holiday Treat?

2007-11-27T11:44:00.000-05:00

Will we see GDrive (or by some other name) soon--possible in times for the holidays?
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WSJ reported today (Nov 27) that:

Google is preparing a service that would let users store on its computers essentially all of the files they might keep on their personal-computer hard drives -- such as word-processing documents, digital music, video clips and images, say people familiar with the matter. The service could let users access their files via the Internet from different computers and mobile devices when they sign on with a password, and share them online with friends. It could be released as early as a few months from now, one of the people said.

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Why is this interesting and relevant? Simply because it is another piece of the puzzle about the shift to a network era. Sure, there are others that provide such a service (some free, some for a fee). But, Google's move is interesting and potentially important since we use its services (and applications) so often and on such a regular basis. Sure, GMail now gives me 5GB data storage and I can get huge data for my photos on Picasa (by paying a fee) but these are stored in silos (which is so yesterday!).
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I think this will be a welcome gift for the holiday season!

Sync--TV Commercials

2007-11-23T22:16:00.000-05:00

Ford and Microsoft have started running television advertisements to get consumers to think about Sync in Ford cars. Here's one:

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It will be interesting to watch how well the consumers embrace Sync and whether this will allow Ford to gain a higher market share than otherwise. Is this a killer-app? Will this be more of a competitive advantage for Ford than what OnStar has been for GM?

Imagine this Number--$12.3 Billion for Digital Maps!

2007-11-18T12:15:00.000-05:00

Yes, it is true. TomTom of Netherlands will acquire TeleAtlas (also of Netherlands) for $4.2 billion. And, Nokia has paid $8.2 Billion for Navteq--another global map maker. Garmin abandoned its attempt to buy TeleAtlas and I am not sure if there are any other digital map makers up for grabs for Garmin. It is clear that recently, there have been intense jockeying to garner this critical content. Clearly, we will see lot more maps-based products and services sp that TomTom and Nokia realize the value from these investments.
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These acquisitions are happening at the periphery of the telematics market where GM continues to push OnStar and Ford and Microsoft are working together on Sync. Clearly telematics is simply one setting to extract value from digital maps. The maps will come handy as more mobile phones deploy applications that are location-based and Google brings its advertising expertise into the mobile arena through its software platform.
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The network boundaries are blurring. This space is worth watching as we better understand how companies better leverage location of customers as a critical anchor for product-service strategies.

Ford--Microsoft Sync

2007-11-09T14:01:00.000-05:00

One of the cases that I have enjoyed teaching over the years is GM OnStar. I have written several version of the case over the years. Recently, I have resorted to using the website to get the students (and executives) to get a feel for the offering and then discussing the strategic challenges of competing in a network era using OnStar as a case in point. The videos provide a good overview of the features for the student to get a good working understanding of the offering (more than perhaps reading a dry case!).
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The discussions invariably turn to competitive reactions and responses. Ford created a joint venture with Qualcomm a few years back called Wingcast but that did not last too long. Recently, Ford and Microsoft have joined together to create Sync.

Sync is available on a wide range of Ford model automobiles in 2008.

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Here's a good review of Sync by Walt Mossberg of Wall Street Journal.

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I am looking forward to the next opportunity to discuss telematics as an example of the network era with interesting developments from auto companies such as GM and Ford. In addition, there is a lot of excitement in the telematics space with Nokia acquiring Navteq for over $8 billion. Garmin and Tom Tom are bidding in the $3 billion-plus range for TeleAtlas. The business networks are evolving and morphing in important ways--which make this a challenging arena to examining the nuances of competing and succeeding in a network era.

Gphone Announcement: 'Google Inside Mobile Phones'

2007-11-06T09:35:00.001-05:00

Finally, we go from rumor to an announcement. Google has now provided some details on its phone initiative. Adam Rubin, who is the mastermind behind Google's mobile platform initiatives has a blog entry that has all the relevant details for now. Some may be disappointed that Google has not announced another glitzy device (I am still partial to Apple iPhone!). But, their announcement makes far more sense than launching a phone in a competitive market. Why go after the commodity-end of the market anyway? It is far better to make software available for monetizing advertising on as many phones as possible than create a distinct brand of devices. It's smart thinking for the network era.
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How successful will it be? That's a multi-billion dollar question (stock market valuations are based on Google's ability to be a dominant force in the mobile handsets). This strategy requires Google to become a leader in orchestrating an ecosystem and that is a new area for Google. This is an area that Microsoft has more experience and has historically done well. What Google is trying to do is to become 'Google Inside' the mobile phones of tomorrow. It is a strategic move that is brilliant but requires flawless execution. Intel succeeded with this strategy with a broad set of personal computer makers that were creating Wintel (Windows-Intel) computers and laptops. Can Google succeed with 'Google Inside' mobile phones? Worth watching since it marks a shift in its strategy that calls for new capabilities for orchestrating a portfolio of relationships.

Social Networking and the Bottom of the Pyramid

2007-10-30T10:55:00.000-04:00

Here's an inspiring story in New York Times about how social networking is made available for the societal good in India. It refers to an initiative--babajob.com-- that seeks to

bring the social-networking revolution popularized by Facebook and MySpace to people who do not even have computers — the world’s poor. And the start-up is just one example of an unanticipated byproduct of the outsourcing boom: many of the hundreds of multinationals and hundreds of thousands of technology workers who are working here are turning their talents to fighting the grinding poverty that surrounds them.

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As I blogged earlier, the ultimate power of networking is to ensure that it impacts those at the bottom of the pyramid.
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This initiative may spawn other such efforts--using the power of networks for societal good and also elevate the standard of living for many.

Network Era--What's the Impact on the Bottom of the Pyramid?

2007-10-22T10:26:00.000-04:00

Professor CK Prahalad has challenged corporations to focus on serving the bottom of the pyramid. His book is a very inspiring read.
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I have often wondered how to link his ideas to the broader shift to a network era that allows knowledge-workers to participate in the global development. What we need are applications that specifically focus on the value that can be delivered to those that can be characterized as being at the bottom of the pyramid. Here's a video of an experiment underway in rural parts of South India. This is impressive. We need to scale up such initiatives. We need to learn from these initiatives and adapt the applications so that they continue to deliver superior value. We cannot afford to have the network era worsen the digital divide. Network era has the opportunity to close the divide between the rich and the poor and this should be pursued.

Google Pontiac Television Ad Trial-- Just an experiment or shape of things to come?

2007-10-19T19:36:00.000-04:00

I have seen a few reference to this advertisement run by Pontiac with the ending... "Google Pontiac"

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I started to wonder: "How many other advertisements have followed this trend? what has been the impact?"
Then I started thinking if Google may be using this as an experimental probe to assess the attractiveness of getting into television audience measurement business, competing against Nielsen? Or as an ally to the television networks that are struggling to better understand their audience viewing habits?
I should look at this issue in more detail soon.

Apple iPhone and Third Party Applications

2007-10-19T19:07:00.000-04:00

At one level, it is easy and straightforward to leverage the power of independent software developers to make your platform more attractive. We know that the attractiveness of a platform like Windows is largely based on the strength of complementary applications (just as XBox and Sony PS3 etc..).
We also know that Apple has been relatively closed and only cautiously leverages third-party developers. It does not mean that Apple has not recognized (or understood) the power of indirect, complementary network effects. I see it as Apple selectively deciding when and how to bring the power of third-party developers to maximize the attractiveness of Apple products to its users. If Apple had not made iPod and ITunes compatible with Windows, Apple would have surely remained as a niche player in the music sector.
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In the case of iPhone, Apple is also being selective and cautious. Sure, there are a lot of people wanting Apple to open up its architecture to third-party application developers. Yes, we all want to be able to customize the look-n-feel of our phones. But, we also want stable and robust applications that are reliable (and do not just hang!). So, as an Apple iPhone user, I welcome what Steve Jobs has announced as his intention to bring the power and creativity of third party developers.
Third Party Applications on the iPhone

Let me just say it: We want native third party applications on the iPhone, and we plan to have an SDK in developers’ hands in February. We are excited about creating a vibrant third party developer community around the iPhone and enabling hundreds of new applications for our users. With our revolutionary multi-touch interface, powerful hardware and advanced software architecture, we believe we have created the best mobile platform ever for developers.

It will take until February to release an SDK because we’re trying to do two diametrically opposed things at once—provide an advanced and open platform to developers while at the same time protect iPhone users from viruses, malware, privacy attacks, etc. This is no easy task. Some claim that viruses and malware are not a problem on mobile phones—this is simply not true. There have been serious viruses on other mobile phones already, including some that silently spread from phone to phone over the cell network. As our phones become more powerful, these malicious programs will become more dangerous. And since the iPhone is the most advanced phone ever, it will be a highly visible target.

Some companies are already taking action. Nokia, for example, is not allowing any applications to be loaded onto some of their newest phones unless they have a digital signature that can be traced back to a known developer. While this makes such a phone less than “totally open,” we believe it is a step in the right direction. We are working on an advanced system which will offer developers broad access to natively program the iPhone’s amazing software platform while at the same time protecting users from malicious programs.

We think a few months of patience now will be rewarded by many years of great third party applications running on safe and reliable iPhones.

Steve

P.S.: The SDK will also allow developers to create applications for iPod touch.

[Oct 17, 2007]

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Orchestrating an ecosystem is a a core competence for success in a network era. I am one who argues for seriously recognizing how complementary capabilities can be brought to bear in business innovations. In such cases, every company should ensure that the benefits of a vibrant network outweighs the downside risks.
Apple's success with iPhone depends on how well it ensures that its distinctive signature--design and elegance--are enhanced (not detracted) by its partners (including network operators such as AT&T, O2, Orange and others) and third-party application developers.

Social Retailing: Social Networks + Next Generation Retailing

2007-10-18T17:12:00.000-04:00

It is fascinating to see applications of social networking in different fields. Here's an initiative (social retailing) that could appeal to the generation that cannot live without mobile phones...

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I wonder what the initial reactions are from users that have tried this out..