February 21, 2011 § Leave a comment
A few months ago, I had written about the slow yet defined remaking of Cisco. Since then, the Silicon Valley stalwart has delivered three lukewarm quarters and has seen its stock stagnate against its nimbler competition. The Wall Street Journal wrote an interesting article questioning some of the very moves it had lauded over the years. Analysts have also questioned Cisco’s slowing its pace of innovation against its competitors in its core area of expertise, routers. I figured the time is ripe to revisit my post and see if anything has changed fundamentally.
For starters, some of the niche acquisitions have not panned out as planned. Some of this is obvious. While the Flip camera product line was extremely popular at the time of purchase, it is now challenged by smart phones that do everything the Flip does and more. In addition, the Flip is a relatively pricey single purpose device while smart phones are multi-utility and carry a similar price of entry (excluding monthly service costs, of course). Cisco has been releasing newer models at a steady clip but the question is if the product has outlived its utility.
Cisco announced a tablet product, the Cius to capitalize on the popularity of the iPad. It wanted to target the product for businesses and enterprises that were well entrenched into the Cisco family of tools and services. On the face of it, this was a smart move. It still is, if Cisco can deliver not just a business solution but a universally appreciated productivity tool. Android tablets are expected to be all over the place this year and Cisco needs more than its suite of applications to sell the Cius. One of the Cius’s biggest selling points namely video conferencing might soon become a feature of iOS with the rumored front facing cameras in iPad 2. Also, when the Cius was announced, enterprises were still evaluating the iPad. Almost 8 months since then, the iPad is a certified blockbuster in board rooms and executives are clamoring for their own iPad. This, coupled with Apple’s increased attention to business customers and the Cius has indeed a big wall to climb.
Cisco continues to sell its routers and lots of them. In recent quarters, they have complained of a stagnant government segment (which might not improve much for the next few quarters considering how much of a budget hole most states are in). In addition, HP has started encroaching on some of the lower end router business. Cisco itself entered the server business recently with their Unified Computing System (UCS) and has made slow but steady inroads there. The pricey acquisition of Scientific Atlanta for its set-top box business gave a new business area for Cisco to get into but they have been reporting lower sales in the segment, where the main competitor Motorola has been doing well the last few quarters.
Overall, Cisco is going through a rough patch the last few months. It would be easy to blame its strategy of expanding into hitherto unknown segments but there was not much more to gain in their primary router business and the expansion made sense. Eventually, Cisco might shrug off a few of these acquisitions and settle down with just a few select successful ones. Until then, the San Jose behemoth deserves the benefit of doubt.
October 28, 2010 § Leave a comment
A Subscriber Identity Module (SIM) does a lot of cool things it doesn’t get credit for. It allows you to actually connect to a network, make calls, download music, browse, chat…and lots of other stuff. I will refrain from going into details and let Wikipedia do the honors. All phones that use the GSM/GPRS/EDGE/WCDMA/HSPA technologies use the SIM to do all the cool stuff. One of the best things about the SIM is that it is removable and replaceable with another from a different carrier, thus allowing a user to travel the world and not necessarily pay exorbitant roaming charges. Much of Europe and Asia uses the kind of networks that require handsets to use a SIM card and hence makes it easy for people to invest on a cool phone and use prepaid SIM cards wherever they go.
Now Apple, being the pioneer it is, wanted to curb the rampant jail-breaking and use of the iPhone without Apple getting its dues, one way or the other. It was only a natural approach to protect what is probably the most profitable single product of the decade. Thus entered a sibling of the SIM with the iPhone 4 (and subsequently the iPad), the microSIM. To be clear, the microSIM is an ETSI ratified and designed entity but didn’t attain legitimacy of use with mobile phone manufacturers until it was embraced by the iPhone 4. There are a lot of hacks to circumvent the iPhone 4 microSIM issue
And to kick it up a notch, there are rumors floating around that a popular SIM manufacturer Gemalto and Apple are collaborating on a new kind of SIM. This is supposed to be embedded entity taking away the need or means to swap SIMs. Apple and Apple alone would control the carrier the device can connect to and make it well, interesting for hackers and jail-breakers. For now, this report is only a rumor but if it were to be true (gigaOM is fairly well reputed and doesn’t make stories up for the sake of traffic) it would give the industry a new way of locking a customer up and make it harder to jail-break the handsets.
As a parting note, it is interesting to see how much the mobile phone industry has been and is being revolutionized by the good people at Cupertino. Regardless of the implications to customers and carriers, they surely have made their mark in just 3 years of being in the mobile phone business.
October 7, 2010 § Leave a comment
In May, Google announced Google TV with much fanfare. It was announced as the second coming of television and the true marriage of the web and television. After many leaks and official sprinkling of information, the product is ready to go with a select set of partners (Sony, Logitech, Intel, DishTV,…). With official products now unveiled, I am not sure if I see the value in adding more hardware to my living room. Google TV may still thrill me by being a complete experience, but early videos and press has me skeptical about its real impact.
Take for example one of the early Google TV experience products, the Logitech Revue. It promises the complete web in your couch plus access to web enabled TV content. Cool stuff. But is it worth spending $299 on? I could see a $49 app or maybe a $99 hardware unit that almost disappears from view in the living room as enabling this cool stuff. But do I really need the $299 product (with extra for the camera and mini controller and many other useless accessories?). Maybe in the future, the add-on hardware will become a minimal unit that is essentially a commodity. Cool gear has a way of becoming a commodity fairly quickly.
Second example to illustrate my point is the Sony Bravia line of Google TV enabled HDTV’s. These already expensive TV’s might not be worth spending any extra money on unless its a small price point over its non-Google TV enabled counterpart. Sony could do this if the product takes off well and an integrated experience without extra hardware and significant markup would be appealing.
By lowering the cost of its hobby TV product, Apple has set the price benchmark that Google and its partners need to reach to make it appealing against the competition. Given the ubiquity of the iOS fans and the success of iTunes, Apple TV will have a strong headstart in this nascent business and Google will have a challenging task ahead to one up the iOS product.
The most critical element to all of this is the programming. Google (and to a degree, Apple) is having problems convincing networks to participate and offer Google TV enabled programming. Until this happens, the connected tv/entertainment box industry will be segmented and thus minimally successful. Even Apple with its huge popularity hasn’t had much success selling Apple TV to the networks and thus to the consumer. If Google can change this status quo, it will be a huge difference maker. Early tidings aren’t very good but hopefully things will change for Google’s sake.
For now, Google and Apple just opened up yet another battleground and it will be an interesting one in the coming months to see how it goes. As always, the great folks at Ars Technica, have a nice writeup on the launch of Google TV.
August 4, 2010 § Leave a comment
Google announced today that its experimental product, Google Wave will be discontinued in the near future and that development had ceased on it. It was a surprise although not a shock. The Wave had a much heralded launch[link 1][link 2] last year at the Google I/O conference. Attendees tweeted and blogged about this spectacular new Google offering that could and would change the way we communicate forever.
As an early adopter of the tool, I was unsure of how to make good use of it. Soon I found out that I was not alone. The Wave was an excellent and cool product that had no obvious use. I am sure creative people found ways to make best use of this cool piece of software but for the lay person like me, it was a challenge to figure out what to do with it. I forced myself to migrate some common Google Docs and Gmail related tasks to the Wave hoping for a productivity boost. No such luck. The Google Wave link languished in my bookmarks waiting for the day it will be chosen to be used.
To be fair to Google, this was an experimental product whose ideas and code probably will creep into other Google offerings and make them better. But as a standalone product, the Wave did not create a wave. Instead, it will go down as one of the more high profile failures of Google. For what its worth, it was definitely an interesting approach to online communication and integrating its static and dynamic forms into one seamless unit.
July 30, 2010 § Leave a comment
Often times we see something odd in the marketplace that doesn’t make sense at first glance – a glaring deficiency in one product does not translate to lower sales when compared to a better engineered and a more wholesome offering. It took me a while of looking at such examples to understand the critical common thread that causes it – product relevance. In what is a first for this blog, I hope to do a detailed analysis of this phenomenon over examples spread across multiple posts. The first of these examples is the story behind the rise of the Xbox360 gaming console from Microsoft overtaking the incumbent home console champion, Sony.
Alive after Death: The 360 degree perspective on the Microsoft’s success
Back in 2000, Sony introduced the Playstation 2 gaming console to unparalleled expectations and eventually tremendous success. Microsoft which had realized that it needed to get into homes for the next digital revolution brought out its own console in the form of the original Xbox a year later. The original Xbox was a decent console with some interesting features like an inbuilt HDD and a fledgling online service for gamers titled Xbox Live. The Xbox was a poor cousin to Playstation 2’s in most homes and non existent in many others. Publishers continued to release console exclusives on the PS2 and shoddy ports for the Xbox. Most Japanese publishers stayed away from it completely. Losses on the Xbox continued to mount and shareholders called for an early exit from the business.
Years passed and Sony and Microsoft were getting ready to launch their next generation consoles. This time, Microsoft had enough market data and experience in the US market to tailor its offerings to the right audience. They knew the relevance of their product to the right consumers. In the meantime, Sony had gotten cocky with the success of the PS2 and assumed they could do no wrong with the PS3. What followed was a true David vs. Goliath episode (although calling MS a David isnt entirely correct considering their 40 billion dollars in the bank). Microsoft launched the Xbox 360 a year ahead of the PS3 and garner critical early audience. They also targeted the console squarely at the best audience- teenage first person shooter loving players that spent countless online hours on the console playing death matches and shoot outs. With Halo and Gears of War franchises, the 360 sucked up all the key buyers before the PS3 even launched. It also helped that Sony priced their console so high to recover a portion of the cost of the expensive blu ray drive included in every unit.
Drunk with initial success, Microsoft kept the hits coming by tailoring their partnerships, games and offerings to the target audience. More FPS’s followed. More exclusive relationships and improvements continued on their online offering, Xbox Live. The most interesting part about the ascendancy of the 360 was the fact that the product was inherently defective with a reported 30% of units replaced. For any other product with that level of defective units, the reception would be non-existent. But the strong teenage FPS loving audience lapped up even a defective console. On the other hand, the PS3 had very minimal defects, a Blu-ray drive built in and free online gaming. None of this lured as many buyers as the 360. Price cuts on the PS3 and a slimmer version have improved sales but it still does not match those of the 360.
The only rational explanation is that the early mover advantage worked for the 360 and the deluge of core gamer audience friendly titles kept them coming. For the PS3, until recently, there has been little thought given to the relevance of the product in the marketplace. Until the release of the cheaper Slim model backed by blockbuster titles, it was languishing in stores without many takers. So there is something to be said about how Microsoft spent time to understand its audience and tailored its product accordingly.
Yes, I did not talk about the tremendously successful Wii in this post. It was not the topic of this post because Nintendo took a risk in building a console for non-gamers. They succeeded but could well have failed and we would be talking otherwise in that context. The PS3-360 case study could be extended to the Nintendo DS-PSP situation but the circumstances are different with the DS being the successful incumbent and the PSP being a still challenging competitor.
More on this topic with additional case studies in the coming weeks.
June 16, 2010 § Leave a comment
I will start this post with a disclaimer that I have limited experience on this topic. It is an area I have been fascinated by, and have been reading up all the material I can find on it. I am just putting my collection of thoughts on the matter here. I expect this post to serve mostly as a springboard to exploring the topic in further detail.
My inspiration for this post is an excellent book I just finished reading titled The Design of Business: Why Design Thinking is the Next Competitive Advantage by Roger L.Martin. More on the author here. The author argues that the future great companies will be pioneered by a new way of business thinking he terms as Design Thinking. This is not to be confused with marketing and branding. As FastCompany describes it,”it is a proven and repeatable problem-solving protocol, that any business or profession can employ to achieve extraordinary results”. Such a method is a carefully chosen amalgam of innovative thinking and an analytics based approach to doing business. With this introduction, I can delve into the reason why there is an Apple on the blog post title, which is why most of you are here. If you want to skip the rest of the post in favor of learning more about design thinking, I would recommend that you start at the footsteps of the famed thinkers of IDEO. The HBR article by Tim Brown of IDEO is also a good starting point. Oh by the way, IDEO and Apple have a shared past that reflects why they are, who they are. More on that relationship and the growth of IDEO is captured in an excellent book by Tom Kelley, The Art of Innovation: Lessons in Creativity from IDEO, America’s Leading Design Firm.
If you view how products are rolled out by Apple under the design microscope provided ably by the aforementioned pillars, there is a lot of fascinating stuff to see and learn. At Apple, there is a sense of design thinking in much of what they show and sell to the world. There is a tremendous amount of onus on the human centric approach to designing their products. The iPod was not the most innovative product in the market. Nor was the iPhone. They are instead a very user friendly solution to a known problem. They represent a vision of wanting to change how the mobile device is perceived and used, but not so far as to alienate the audience. For much of that they have Jon to thank. But they also have Steve to thank for his unerring sense of audience perception and customer requirement. He is willing to go where the customer wants to but doesn’t know to.
There is occasionally a resistance at Apple to take user feedback into evolving the device or creating one to reach everyone (Eg: lack of 3G in the first generation iPhone, lack of camera in iPod Touch, lack of camera in first generation iPad and so on). Some are business considerations while others just don’t make any sense. But these are minor quibbles while looking at the big picture of how Apple has revolutionized design and how we perceive it. Admittedly, Apple is at an odd but very successful crossroads between technology and liberal arts.
It could also be argued that Apple has had its share of failures in what it thought was a great idea at the time (Ex: Apple TV, iPod Shuffle in some versions). What cannot be denied is that the design powerhouse shows us a way to think and execute on good ideas and make them great products. For Apple, it is not just the technology. It is so much more.
If you are really interested in learning more about this particular topic of how design thinking and Apple’s innovation go hand in hand, there is a paid HBR article here.
May 20, 2010 § 1 Comment
Somewhere in San Jose, there are big changes happening. One that is not being shouted out from rooftops but a major one, nevertheless. As the title of the post would have revealed, I am refering to the transformation of and at Cisco. For most of us, the perception of Cisco is a staid old router company that makes gazillions selling routers and switches to the world. While that is still very true, Cisco has made a very conscious and admirable approach to expanding its portfolio in very adventurous ways.
Looking at their acquisitions over the last few years, one can get an idea of how they are trying to spread their wings without fundamentally changing themselves. The first oddball acquisition really happened in 2003 when they picked up home networking gear pioneer LinkSys. At that time, people were surprised by Cisco’s move to the SME and home office business but it definitely made sense. Things were then relatively silent from their image makeover standpoint until 2005 when they acquired Scientific Atlanta, a profitable maker of set-top boxes. Until then, Cisco had primarily been a backend communication equipment vendor with the lone exception of LinkSys. With this, they were starting to expand further into consumer electronic devices. The rest of their 2005 acquisitions, minor yet important are listed here. In 2006, they acquired a bunch of complementary tools to start putting together an ec0-system for enterprise customers at the front end. They are listed here. Their next big acquisition came in 2007 when they picked up WebEx, a pioneer in web conferencing systems and business collaboration tools. This was a major move by Cisco, one that would be bolstered further by their Tandberg acquisition in 2009.
With WebEx and later with Tandberg, Cisco was placing itself more and more in the end point devices and services space- for enterprises big and small. This was a smart move to build a complete enterprise offering for its customers- many of whom had large Cisco accounts and affiliations. The icing on the cake happened in 2009 when Cisco is an extremely surprise move, acquired Pure Digital Technologies, the maker of the very popular Flip video systems. This was a straight consumer play that was extremely unlikely for a very large networking vendor. But by 2009, Cisco was no longer that Cisco 0f 1999. They were a “network” ecosystem player- one that made anything any everything that had an IP address and the ability to communicate via a wired or a wireless interface.
The launch of the Valet line of Linksys devices targeting the novice home network user and the acquisition of the Moto Development Group, a consumer electronics design firm confirms Cisco’s full on assault on home electronic and networking devices. The company is now intriguingly poised to be a force to reckon with across the full spectrum of networking gear- ranging from GigaBit core routers to consumer video capture devices, from corporate wireless systems to enterprise video conferencing software and hardware. This is not your dot-com Cisco. This is a very different beast and one that had a lofty vision.
Welcome to the Human Network!