Goodbye, IBM. Seriously.(mobileopportunity.blogspot.com)
mobileopportunity.blogspot.com
Goodbye, IBM. Seriously.
http://mobileopportunity.blogspot.com/2011/04/goodbye-ibm-seriously.html
10 comments
What's mindboggling to me (and what should be the day one lecture subject in every Marketing course on the planet) is how Apple can take an increasingly commoditized market, like consumer computing, and whip people up into so much of a frenzy (in either direction) that it seems like every product release is going to start a riot.
Even when you think that selling iPads at Wal-Mart or iPhones at Radio Shack would dilute the exclusivity factor or shift the consumer attitude away from "hip, fresh, and new", it debuts another new thingie and BOOM! The frenzy starts anew.
They sold 18 Million iPhones in three months. They're selling more computers than ever (4 million now). Naysayers went from "they should just close and return all their money back to investors" to "they can't keep growing forever".
"Apple as it grows defying expectations has to both make sure that future iterations of its products can keep enchanting their customers as well and stay innovative"
Jobs perhaps won't be able to see the continued success by thinking up and touting, as if a carnival barker, their "magical" new products, but they can shift into an aggressive expansion into new spaces. Cisco is famous for doing just that, eating up companies voraciously to move into spaces like consumer networking (Linksys) and set-top entertainment (Scientific Atlanta).
If Apple can't out-innovate in the long haul, they could really shake up the consumer space with some killer acquisitions. I see them making smaller buys like TiVo to bolster their Apple TV product, then go after larger (more complicated) buys. I like them acquiring Nintendo, for example. I see them scooping up either Coinstar (for Redbox) or Netflix (or even Blockbuster, but that just has bad memories of VHS and late fees that even Apple couldn't, er... polish).
I could even see them buying a service like Kobo for eBook marketshare. Hell, they could buy Barnes and Noble for their bookstore, ebook marketplace, _and_ the low-end, low cost tablet (Nook Color). Now that would be taking a swipe at Google.
Here's where my crazy theories go full-crazy, though. I see them ridding themselves of the bloat and dependence on iTunes and buying Amazon for both the digital market, the Kindle (which will be rebranded the iBook since they already own that trademark), and the website itself becomes their "iTunes". No more plugging into a device to sync; it's all OTA over Amazon's existing cloud infrastructure. Buy books either on your device or physically. It would be the biggest coup acquisition ever IMO. Too bad it would probably never happen.
Even when you think that selling iPads at Wal-Mart or iPhones at Radio Shack would dilute the exclusivity factor or shift the consumer attitude away from "hip, fresh, and new", it debuts another new thingie and BOOM! The frenzy starts anew.
They sold 18 Million iPhones in three months. They're selling more computers than ever (4 million now). Naysayers went from "they should just close and return all their money back to investors" to "they can't keep growing forever".
"Apple as it grows defying expectations has to both make sure that future iterations of its products can keep enchanting their customers as well and stay innovative"
Jobs perhaps won't be able to see the continued success by thinking up and touting, as if a carnival barker, their "magical" new products, but they can shift into an aggressive expansion into new spaces. Cisco is famous for doing just that, eating up companies voraciously to move into spaces like consumer networking (Linksys) and set-top entertainment (Scientific Atlanta).
If Apple can't out-innovate in the long haul, they could really shake up the consumer space with some killer acquisitions. I see them making smaller buys like TiVo to bolster their Apple TV product, then go after larger (more complicated) buys. I like them acquiring Nintendo, for example. I see them scooping up either Coinstar (for Redbox) or Netflix (or even Blockbuster, but that just has bad memories of VHS and late fees that even Apple couldn't, er... polish).
I could even see them buying a service like Kobo for eBook marketshare. Hell, they could buy Barnes and Noble for their bookstore, ebook marketplace, _and_ the low-end, low cost tablet (Nook Color). Now that would be taking a swipe at Google.
Here's where my crazy theories go full-crazy, though. I see them ridding themselves of the bloat and dependence on iTunes and buying Amazon for both the digital market, the Kindle (which will be rebranded the iBook since they already own that trademark), and the website itself becomes their "iTunes". No more plugging into a device to sync; it's all OTA over Amazon's existing cloud infrastructure. Buy books either on your device or physically. It would be the biggest coup acquisition ever IMO. Too bad it would probably never happen.
I wonder, though, how well such a strategy turns out. Lets take Cisco and Microsoft as examples. Both started with a couple of core products, and quickly saturated their market. After achieving saturation, they both tried to force their way into other markets via acquisitions and organic growth. However, their acquisitions have failed to achieve the blockbuster status of their core products, and, arguably fail to do much in the way of ensuring the corporation's survival in the absence of those core products.
Cisco started out making enterprise routers and switches. They quickly gained dominance in that space, and began expanding into other areas. However, none of their acquisitions or expansions (e.g. Linksys, GoToMeeting, etc.) have achieved the same level of profitability as the core router & switch business. If Cisco loses its core router & switch business, it will still be in trouble, with or without Linksys.
The same principle applies to Microsoft. Yeah, they've expanded into a lot of new markets. There has been success in some (e.g. game consoles) and failures in others (e.g. mobile phones). But none of their expansions have resulted in products that would save the company if the Windows and Office cease generating significant revenue.
In the eyes of many investors, this strategy has actually hurt these companies. Rather than staying focused and building absolute best of breed products in one or a few categories, Microsoft and Cisco have lost focus, and are diluted their talents into a set of mediocre products across a wide range of categories.
Given that, I think it would be better for Apple to stick to making damn good PCs, MP3 players, and cell phones, rather than branch out into a wide number of product categories and lose their reputation for excellence.
Cisco started out making enterprise routers and switches. They quickly gained dominance in that space, and began expanding into other areas. However, none of their acquisitions or expansions (e.g. Linksys, GoToMeeting, etc.) have achieved the same level of profitability as the core router & switch business. If Cisco loses its core router & switch business, it will still be in trouble, with or without Linksys.
The same principle applies to Microsoft. Yeah, they've expanded into a lot of new markets. There has been success in some (e.g. game consoles) and failures in others (e.g. mobile phones). But none of their expansions have resulted in products that would save the company if the Windows and Office cease generating significant revenue.
In the eyes of many investors, this strategy has actually hurt these companies. Rather than staying focused and building absolute best of breed products in one or a few categories, Microsoft and Cisco have lost focus, and are diluted their talents into a set of mediocre products across a wide range of categories.
Given that, I think it would be better for Apple to stick to making damn good PCs, MP3 players, and cell phones, rather than branch out into a wide number of product categories and lose their reputation for excellence.
"Given that, I think it would be better for Apple to stick to making damn good PCs, MP3 players, and cell phones, rather than branch out into a wide number of product categories and lose their reputation for excellence."
Branching out into iPods (plus music), cell phones (plus apps) and tablets is what turned the company around and sent it into the stratosphere though. Prior to the launch of the iPhone and the launch of the iPad you would be hard pressed to find people who would have thought those products would have gone on to be the blockbusters that they've become.
The only problem I can see for Apple is how to continue coming up with successful products - how many cool, new consumer electronic devices could they conceivably conjure up?
EDIT: typo
Branching out into iPods (plus music), cell phones (plus apps) and tablets is what turned the company around and sent it into the stratosphere though. Prior to the launch of the iPhone and the launch of the iPad you would be hard pressed to find people who would have thought those products would have gone on to be the blockbusters that they've become.
The only problem I can see for Apple is how to continue coming up with successful products - how many cool, new consumer electronic devices could they conceivably conjure up?
EDIT: typo
While that is true, I do think that Apple runs the risk of becoming another Sony. In the 80s and early 90s, Sony was known for its great TVs and A/V equipment. Then, through the 90s and 2000s, Sony diversified into game consoles, PCs, MP3 players, movie studios and all sorts of other bits of consumer electronics and consumer content. The result was that competing priorities and diluted focus hurt Sony's dominance in its core market (TVs and A/V equipment) without contributing significantly to the bottom line. As a result, Sony has gone from being a big player in few industries to being a middling player in many industries.
The one hopeful difference that I see between Apple and Sony is that Apple is much more willing to kill off unsuccessful projects than Sony, as demonstrated by the EOL of the XServe line.
The one hopeful difference that I see between Apple and Sony is that Apple is much more willing to kill off unsuccessful projects than Sony, as demonstrated by the EOL of the XServe line.
FYI - GoToMeeting was acquired by Citrix, not Cisco.
Thanks for the correction. Unfortunately, the edit window seems to have expired for my post, so I can't insert the necessary correction.
Yeah, very good points.
Another way to look at it is that IBM is firmly associated with the fundamental technology, while Apple is associated with consumer devices. Well-designed, innovative, but still consumer stuff. It is a principal difference when it comes to the perception, and this makes IBM feel and look more valuable than Apple.
Another way to look at it is that IBM is firmly associated with the fundamental technology, while Apple is associated with consumer devices. Well-designed, innovative, but still consumer stuff. It is a principal difference when it comes to the perception, and this makes IBM feel and look more valuable than Apple.
There is tremendous growth left in the ARM/smartphone form-factor (not necessarily touch), because it will eventually disrupt the desktop.
It would seem difficult for apple to retain dominant marketshare (Android passed it already) once processors get fast enough that apple's ingenious integration isn't needed anymore, but apple will grow with it.
Apple will also still have strengths of design, marketing, installed base of apps, AppStore, developers, experience in all of that, lower costs, ahead of the engineering learning curve etc. I agree that without Steve, they'll probably find it hard to pull off the next great revolution (like many companies without their firebrand founders, eg HP).
IBM doesn't need to lose for apple to grow larger than them. You're right that their diversification gives them safety, but as Buffett says of growth: put all your eggs in one basket and watch that basket.
IBM doesn't need to lose for apple to grow larger than them. You're right that their diversification gives them safety, but as Buffett says of growth: put all your eggs in one basket and watch that basket.
Insightful comment on the page: "There are tons of companies that Apple has crushed...IBM is not one of them."
Apple and IBM compete in the same sort of way that all humans compete for oxygen: in a not-very-meaningful way.
IBM's move into PCs was defensive: As businesses started thinking about adopting these toys built from parts by neck-bearded garage trolls, the company wanted to make sure they didn't get left behind. Would every desk in corporate America have a computer on it today if IBM never got into PCs? I'm not so sure.
IBM's always been a top-down company: it sells to bosses who are telling their minions what they're going to be using, while Apple's approach has almost always been much more bottom-up.
Apple and IBM compete in the same sort of way that all humans compete for oxygen: in a not-very-meaningful way.
IBM's move into PCs was defensive: As businesses started thinking about adopting these toys built from parts by neck-bearded garage trolls, the company wanted to make sure they didn't get left behind. Would every desk in corporate America have a computer on it today if IBM never got into PCs? I'm not so sure.
IBM's always been a top-down company: it sells to bosses who are telling their minions what they're going to be using, while Apple's approach has almost always been much more bottom-up.
I don't think the main point was that Apple have crushed IBM, but to give some perspective on Apples recent success with a historical context.
IBM is still perfectly relevant in the same target market they have been dominating for the last 100 or so years. Selling things to gigantic businesses. This is their name: International _Business_ Machines.
IBM stopped selling personal computers when they stopped being uniquely relevant to big businesses. They still sell mainframes along with a long list of other things.
IBM stopped selling personal computers when they stopped being uniquely relevant to big businesses. They still sell mainframes along with a long list of other things.
Apple and IBM do different things in 2011 than they did in 1981. Apple is primarily a consumer hardware company. IBM is primarily a business-to-business software and services company. The author is right, Apple has completely crushed it over the past decade or so...but IBM hasn't been going after the consumer hardware market for awhile. The comparison is sort of apples and oranges. Over the course of 30 years, technology companies will obviously need to adapt to changes.
Also keep in mind (and this isn't meant to disparage Apple), but they were almost dead until one man, Steve Jobs took over. It's his vision that brought Apple back from the dead.
Over the long term (30 years from now), we'll have to see how that plays out. I couldn't name one specific person at IBM who's responsible for their success and they're doing very well these days too.
Also keep in mind (and this isn't meant to disparage Apple), but they were almost dead until one man, Steve Jobs took over. It's his vision that brought Apple back from the dead.
Over the long term (30 years from now), we'll have to see how that plays out. I couldn't name one specific person at IBM who's responsible for their success and they're doing very well these days too.
> I couldn't name one specific person at IBM who's responsible for their success
One (very) specific person: Louis V. Gerstner.
Like Jobs, he saved his company. Unlike Jobs, he was very much an outsider, but this apparently was what IBM needed to push change, given their hidebound culture.
From: http://en.wikipedia.org/wiki/Louis_V._Gerstner,_Jr.#IBM
"Gerstner is credited with saving IBM from going out of business in the early 1990s. In his memoir, Who Says Elephants Can't Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to disaggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues."
Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. His decision to keep the company together was the defining decision of his tenure. The subsequent refocusing on the IT services business (which grew to nearly 50% of the IBM's revenues), the embrace of the Internet as a business phenomenon, and a broad effort to revive the company's culture are widely seen as having resulted in one of the most remarkable turnarounds in business history."
One (very) specific person: Louis V. Gerstner.
Like Jobs, he saved his company. Unlike Jobs, he was very much an outsider, but this apparently was what IBM needed to push change, given their hidebound culture.
From: http://en.wikipedia.org/wiki/Louis_V._Gerstner,_Jr.#IBM
"Gerstner is credited with saving IBM from going out of business in the early 1990s. In his memoir, Who Says Elephants Can't Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to disaggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues."
Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. His decision to keep the company together was the defining decision of his tenure. The subsequent refocusing on the IT services business (which grew to nearly 50% of the IBM's revenues), the embrace of the Internet as a business phenomenon, and a broad effort to revive the company's culture are widely seen as having resulted in one of the most remarkable turnarounds in business history."
Do you think that we need companies like IBM? I mean, by the income metric Apple is obviously better than IBM. But, if there was no IBM, would the space be filled with multiple smaller and more profitable companies, or would there just be a void until some other company emerged as a "big, stable, uninnovative" behemoth?
I thought IBM was still doing some great stuff. Maybe not as profitable and cool as some more modern companies, but still very important things which actually do make the world a better place, albeit not making a huge profit. I might be wrong, ofc.
I thought IBM was still doing some great stuff. Maybe not as profitable and cool as some more modern companies, but still very important things which actually do make the world a better place, albeit not making a huge profit. I might be wrong, ofc.
What IBM does is not exciting? Granted, they might not be working on self-driving cars, or motion-controlled video games, or God forbid, a tablet.
But the scope of IBM is almost breathtaking. Look into the capabilities of mainframes, consider for one second the amount of engineering required, and you will nerdgasm. They do tons of research in electronics, semiconductors and fabrication. They are at the forefront of computer science -- they beat Jeopardy, beat chess, and sequenced the human genome. Then they sell a ton of other things like huge, robotic tape libraries. Seriously, go see one in action.
A few $billion in profit per quarter is nothing to sneeze at either. (http://www.google.com/finance?q=NYSE:IBM) I think the economies of scale play a big hand here -- I'm not sure if multiple smaller companies could eke a comparable, combined level of profitability, much less allocate resources for exploratory projects like Watson.
At the scale IBM operates at, Apple is essentially a one-hit wonder, being in a few very closely related consumer segments. It remains to be seen whether they can sustain their current momentum.
But the scope of IBM is almost breathtaking. Look into the capabilities of mainframes, consider for one second the amount of engineering required, and you will nerdgasm. They do tons of research in electronics, semiconductors and fabrication. They are at the forefront of computer science -- they beat Jeopardy, beat chess, and sequenced the human genome. Then they sell a ton of other things like huge, robotic tape libraries. Seriously, go see one in action.
A few $billion in profit per quarter is nothing to sneeze at either. (http://www.google.com/finance?q=NYSE:IBM) I think the economies of scale play a big hand here -- I'm not sure if multiple smaller companies could eke a comparable, combined level of profitability, much less allocate resources for exploratory projects like Watson.
At the scale IBM operates at, Apple is essentially a one-hit wonder, being in a few very closely related consumer segments. It remains to be seen whether they can sustain their current momentum.
What I find Surreal is that IBM is still the company to beat in 2011. I mean, by 1981 they were already the king of the hill for a good 15-20 years. To put that into perspective, who thinks apple, (or google, microsoft) will be relevant in 2061!!
Apple is not a threat to IBM's core businesses. IBM as it is currently operating is. The current awesome results to investors is at the expense of the US workforce and non-research lab innovation.
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What I love about Apple's success?
It's mostly based on design: good UI design and good aesthetic design. Apple is almost a fashion company.
It's not based on any of the things that the windup MBA idiots always harp on: marketing, performance, salesmanship, connections, etc.
Sure, Apple has those things. Apple is great at marketing, their stuff performs well, and they have plenty of salesmen. But so does everyone else. Apple's success is based primarily on aesthetics and user experience, which nearly all players in the industry have ignored completely in favor of the cliches beloved of MBAs.
It's mostly based on design: good UI design and good aesthetic design. Apple is almost a fashion company.
It's not based on any of the things that the windup MBA idiots always harp on: marketing, performance, salesmanship, connections, etc.
Sure, Apple has those things. Apple is great at marketing, their stuff performs well, and they have plenty of salesmen. But so does everyone else. Apple's success is based primarily on aesthetics and user experience, which nearly all players in the industry have ignored completely in favor of the cliches beloved of MBAs.
> Apple's success is based primarily on aesthetics and user experience.
I cannot say that Marketing and Salesmanship is not as important factor of the success of the company, which has undoubtedly the most charismatic CEO of this era, and one of the best salesman in the business.
I cannot say that Marketing and Salesmanship is not as important factor of the success of the company, which has undoubtedly the most charismatic CEO of this era, and one of the best salesman in the business.
I never get this. Sure Jobs is a good salesman. But do you think Apple would be such big news on HN if it weren't for the product. I mean just look at the damn things... some people don't like OSX or iOS, but the sheer polish of the Air, Macbook Pro and the ipad are amazing. They've come a long way from those horrible beige boxes in the mid 90s.
I am certainly not saying that Apple products are not excellent. I am just saying that Marketing/Salesmanship/PR etc. also has a part to play in Apple's success.
Steve Jobs is not in the least bit charismatic. He's obviously brilliant and a good, not great, speaker, but every other sentence out of his mouth could be "I'm better than you" and people wouldn't flinch. He's not the kind of guy you'd like to have a beer with, unless you get off on being talked down to. Jobs has a legion of followers, but not because of personal charisma.
every other sentence out of his mouth could be "I'm better than you" and people wouldn't flinch
To my understanding, that's pretty much what "charismatic" means. It's not a synonym for "friendly".
To my understanding, that's pretty much what "charismatic" means. It's not a synonym for "friendly".
I'm not interested in semantics but I always thought that a requirement of charisma is that people like you. That doesn't mean you're friendly, but enough so that people like you. We're probably hitting some grey area here as people are obviously devoted to what Jobs has created, but it's nothing like a "cult of personality" ala Porfirio Díaz.
I agree with most of your thoughts except the 'fashion company' bit. What fashion companies do is 'frivolous' design, a shirt is a shirt is a shirt. What Apple does is on a totally different level - mouse is not a scroll wheel is not a multi-touch sensor. They are all fundamentally different ways of interaction that change the things you _can_ and _cannot_ do with the device - you can't have the precision of the mouse on the iPhone but you can't do the iPhone's multi-touch gestures with the mouse. The design fashion companies do, doesn't have the same impact. Totally on-board with you on the rest of your thoughts.
As an aside, for people who are interested, at MacWorld 2007, Steve summed up the whole thing in just 1 slide... http://i.imgur.com/gMIjp.jpg
To a lot of people 'design' means white/gray rounded rectangles, but that's really not why Apple is where they are today. As Steve said 8 years ago - “Design is not just what it looks like and feels like. Design is how it works.”
As an aside, for people who are interested, at MacWorld 2007, Steve summed up the whole thing in just 1 slide... http://i.imgur.com/gMIjp.jpg
To a lot of people 'design' means white/gray rounded rectangles, but that's really not why Apple is where they are today. As Steve said 8 years ago - “Design is not just what it looks like and feels like. Design is how it works.”
I disagree that fashion is frivolous. A shirt is not a shirt is not a shirt. One whole half of the human brain seems dedicated to aesthetics. Are you saying that one half of the totality of the human intellect is worthless and frivolous?
Aesthetics are practical.
Aesthetics are practical.
Microsoft is the new IBM.
IBM has its fingers and toes in a lot of things, including SmartGrid, Healthcare IT to name a couple. It is a good bet to say that it will take more than one bad product iteration to knock them off their perch. Ripping IBM off of the enterprise market will be akin to cleaning crap off of velcro. Not easy.
Apple as it grows defying expectations has to both make sure that future iterations of its products can keep enchanting their customers as well and stay innovative (at their current click) once Jobs is no longer involved in making product decisions.