Zune Phone?

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?

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

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

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

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

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

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

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

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. 

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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. 

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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. 

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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

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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

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. 

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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.

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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?  

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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

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.  

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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.

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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

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.

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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.

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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?

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?

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

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?

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

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

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)

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'

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?

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?

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 (?)

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

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

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?

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

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)

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

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?

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....

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

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

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!

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?

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

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!

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?

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!!