DO I LOOK LIKE TIGER WOODS?

Truthfully speaking, it’s become quite an embarrassing ‘accomplishment’ for me. Almost two years ago, I had taken up the self-acclaimed mantle of being a Tiger Woods lookalike, writing in an editorial how a group of Americans had increasingly pointed out the same to me. Over time, I had rampantly propagated the same vaingloriously. My timing couldn’t have been worse! They say Tiger Woods hasn’t been able to come out of his house for the past many days. I think I won’t be able to come out of my house for many weeks altogether! Be that as it may, the question now is, would the various brands that used Tiger as an ambassador benefit from continuing with him? But even before that, revisiting a question I touched many issues back, do celebrity endorsements really help companies perform better?

While the the latest Interbrand-BusinessWeek ‘Most Valuable Global Brands 2009’ list has Coca Cola (a company renowned for choosing regional celebrity ambassadors) as the most valuable brand in the world (valued at $68.7 billion), the fact is that seven of the top ten ‘most valuable brands’ on the list do not have even a single celebrity brand ambassador as of date. These include names like IBM (worth $60.2 billion), Microsoft ($56.6 billion), Google ($31.9 billion) and Intel ($30.6 billion). Are the times of celebrity branding getting over? Not quite. In fact, not at all!

In their December 2008 paper titled ‘The Economic Value of Athlete Endorsers’, Anita Elbersei (Professor at Harvard Business School) and Jeroen Verleunii (VU University Amsterdam, Amsterdam) prove how sports athletes have a definite positive influence on their clients’ stock performance. They write, “We find that a firm’s stock market valuation increases when it recruits an athlete endorser, and (also) each time one of its athlete endorsers achieves a major career milestone.” In a hallmark 2009 Wharton marketing paper titled ‘Advertising yourself’, Prof. Eric Bradlow of Wharton states that it is important “to reach out to people who are ‘influencers’. Everyone should have a list of 20 or 30 people who will act as their ambassadors…” Professors Robert Clark (HEC Montreal) and Ignatius Hortsmann (University of Toronto) give empirical evidence in their classic research ‘Celebrity Endorsements’ that proves that not only do “celebrities enhance product recall... They also enhance consumer perception of product value... Consumers value more highly a product endorsed by a celebrity than one without a celebrity endorsement.” The acclaimed duo of Amit Joshi and Dominique Hanssens, after a decade-long analysis of Apple, Compaq, Dell, HP and IBM, prove in their thesis ‘Advertising Spending and Marketing Capitalization’ that when celebrities endorsed these ‘tech’ brands, shareholders and investors ensured the firm’s future earnings potential rose. In the brilliant treatise, ‘The Economic Worth of Celebrity Endorsers’, Professor Kamakura (University of Pittsburg) and Professor Agrawal (California State University) put forward the concept that the average impact of celebrity endorsement announcements is definitively positive on stock returns. Researchers Miciak & Stanlin give a global synopsis, “Celebrity endorsements work so well that (now, globally) about 20% of all TV commercials feature a celebrity.” It is time that those companies which do not use brand ambassadors wake up to see the true benefit. Tiger or no Tiger, celebrity endorsements work fantastically well, and avoiding the same can only lead to many opportunities lost.

With all this in the background, after many days, I finally started again socialising. I forced myself out to meet people, realizing that thankfully nobody was reminding me of my earlier follies... until this Saturday, in a party, I noticed one foreigner on the other side of the room intently staring at me for a long time. Petrified – and trying to avoid his gaze – I noticed to my chagrin that he’d started walking towards me. With disappointment, I realised my cover was blown. The man walked up to me, smiled, and spoke, “Has anyone ever told you that you look very similar to... Barack Obama?”

The mobile data apocalypse, and what it means to you

The mobile industry is now completing a huge shift in its attitude toward mobile data. Until pretty recently, the prevailing attitude among mobile operators was that data was a disappointment. It had been hyped for a decade, and although there were some successes, it had never lived up to the huge growth expectations that were set at the start of the decade. Most operators viewed it as a nice incremental add-on rather than the driver of their businesses.

But in the last year or so, the attitude has shifted dramatically from "no one is using mobile data" to "oh my God, there's so much demand for mobile data that it'll destroy the network." A lot of this attitude shift was caused by the iPhone, which has indeed overloaded some mobile networks. But there's also a general uptick in data usage from various sources, and the rate of growth seems to be accelerating.

Extrapolating the trend, most telecom analyst firms are now producing mobile data traffic forecasts that look something like this:




The forecasts are driven by a couple of simple observations:

--Smartphones produce much more data traffic than traditional mobile phones. Cisco estimates that a single smartphone produces as much data traffic as 40 traditional feature phones. So converting 10 million people from feature phones to smartphones is like adding 390 million new feature phone users, in terms of impact on the data network. The more popular smartphones get, the busier the network becomes.

--A notebook PC generates far more traffic than a smartphone. According to Cicso, a single notebook computer generates the same data traffic as 450 feature phones. As notebook users convert to 3G-enabled netbooks and add 3G dongles to their computers, they dramatically increase the data traffic load on the network.

You can read Cisco's analysis here.

This becomes especially interesting when you look at the forecasts for growth of 3G-equipped netbooks and notebooks. Mobile operators in many countries have started subsidizing sales of those devices if you pay for a data service plan. It's an attractive deal for many people. Say your son or daughter is going off to college. Do you buy them a regular notebook computer and also pay for the DSL service to their apartment, or do you buy them a 3G data plan for about the same price as DSL and get the netbook for free?

The forecasting firm In-Stat recently predicted that by 2013, 30% of all notebook computers will be sold through mobile operators and bundled with 3G data plans (link). Notebook computer sales worldwide are about 150 million units a year, so that's 45 million new 3G notebooks a year -- or the data equivalent of adding 20 billion more feature phones to the network every year.

Jeepers.

These forecasts are producing a behind-the-scenes panic among mobile network operators. The consensus is that there's no way their networks can grow quickly enough to support all that data traffic. There are several reasons:

--They can't afford to build that much infrastructure.

--Even if they could afford the buildout, they won't have enough bandwidth available to carry all that data, even with 4G.

--Traffic-shaping techniques like tiered pricing and usage caps can't restrain usage growth enough to save them, because

--Fear of losing customers to a competitor will force them to continue to subsidize sales of 3G dongles and offer relatively generous caps in their data plans.

There are a number of projections that show the operators losing money on wireless data a few years from now, as costs continue to increase faster than revenue. The danger isn't so much that they will all go broke, but they're very afraid that they'll turn into zero-profit utilities.

Many operators now seem to be counting on WiFi as their ultimate savior. The theory is that if they can offload enough of the data traffic from their networks to WiFi base stations connected to wired networks, then maybe other measures like 4G, usage caps, and aggressive improvements to the network will let them squeak through.

It's an ironic situation. For a long time the mobile operators thought of themselves as the future lords of data communication. All devices would have 3G connections, the thinking went, and the fixed-line data carriers such as Comcast and BT would fade away just like the fixed-line voice companies are doing.

Instead, the new consensus is that we're moving to a world where the fixed-line vendors will be expected to carry most consumer data traffic for the foreseeable future. They'll provide your wireless connectivity at home and work, while the mobile network will fill in the gaps when you're on the move. The area of disagreement, of course, is who will get the majority of the access revenue. We'll let the fixed-line and mobile operators argue over that one; I want to talk about some of the other impacts of this weird new hybrid wireless world that we're heading into.

(I touched on some of this in my post on net neutrality a couple of weeks ago (link), but I want to go into more detail here.)


The brave new world of scarce mobile bandwidth

Built-in WiFi is now good. For a long time many mobile operators resisted selling smartphones with WiFi built in. They viewed WiFi networks as competitors for customer control, and wanted to prevent usage of them. Now that they see WiFi as their savior, the operators are suddenly encouraging its inclusion in phones. Don't be surprised if in the near future it becomes impossible to get a subsidized price for any smartphone that doesn't have WiFi built in.


Traffic shaping is a fact of life, and a likely source of irritation. Many mobile operators are starting to limit the performance of applications that consume the most data bandwidth (today that's mostly video and file sharing). It's already being done today, and in most cases the operators won't even tell you they're doing it, unless the government requires them to. Certain apps will just communicate more slowly, or fail altogether, when the network gets busy.

There are a couple of exceptions where operators have been more public about their traffic shaping activity. The 3 network in the UK recently announced restrictions (link). And O2 in the UK has given details on exactly which applications it restricts in its home wireless data service (link).

Current traffic shaping hasn't generated a firestorm of complaints from the average customer (as distinct from net neutrality advocates), in part because it is very hard for users to tell why a website runs slowly on a particular day. But as mobile traffic continues to increase, operators are going to find that it's cheaper to ratchet up the restrictions bit by bit rather than pay for more capacity. Eventually people will notice, and I worry that we'll end up in a situation in which the operators carefully balance out how much they can piss off their customers without creating an outright revolt. It's a lot like the way the US airline industry operates today, and it's a miserable experience for everyone involved.

What to do. There are better ways to shape traffic. I think operators should give customers more information on how much data they're using at any given time, so they can manage it themselves. Then let them make an informed decision about which apps they'll use their bandwidth on. It would be relatively simple to create an on-screen widget showing how much data is being transferred at any time, just like the signal strength and battery life indicators on today's phones.

It's also possible to create some APIs that would tell a website how much bandwidth is available to it, so the developer could adjust its features accordingly. This idea is being tossed around between web companies and operators, but I don't know how much is actually being done about it.

Combine those changes with usage-based pricing (my next point) and customers will shape their own traffic. Then there won't be any need for covert manipulation of the network.


Say hello to capped data plans. Completely unlimited wireless data plans are not sustainable long term; the economics of them just don't work. And in fact, virtually no data plans today are completely uncapped; there is almost always some fine print about the maximum amount of traffic allowed before surcharges kick in or the user is tossed off the network.

Some people are saying that the operators should go back to charging by the byte, and in some parts of the world (particularly Asia), there is a long history of per-byte pricing. But the experience in most of the world has been that per-byte pricing makes users so nervous about their expenses that they won't use data services at all.

(DoCoMo in Japan has an interesting hybrid approach (link) in which it charges per-packet until the user hits a maximum charge of about $70 per month. Additional usage beyond that cap is free. So that's capped pricing rather than capped usage. This reduces customer fear of accidentally running up a gigantic bill, but I wonder how DoCoMo prevents power users from flooding the network with traffic. Maybe there's a second, hidden cap on total usage.)

What to do. I think the right answer in most of the world is going to be flat-rate data plans in which there's a clearly-communicated cap, with tiered charges beyond that. The cap will need to be set at a level that moderate users won't ever reach, so they don't become gun-shy about data. To alleviate the fear of accidentally running up a huge bill, there will also need to be an on-device meter showing how much of the user's monthly data allocation has been used (just telling them to go look at a website is not enough; it should be on-screen). I'm told that on-screen meters like this are already being offered on netbooks by some European operators.

Today most operators are pretty up-front about communicating the data limits when a computer is connected to a mobile network. But many of them are still deceptive toward smartphone customers. AT&T's Smartphone Personal service, for example, promises the following for $35 a month:

Included Data: Unlimited; Additional data: $0 per MB

Sounds pretty straightforward. No asterisks, no fine print. But if you click on the terms of service (link), you'll find a long list of banned application types, followed by this general provision:

"AT&T reserves the right to (i) deny, disconnect, modify and/or terminate Service, without notice, to anyone...whose usage adversely impacts its wireless network or service levels or hinders access to its wireless network... and (ii) otherwise protect its wireless network from harm, compromised capacity or degradation in performance."

In other words, if the network is getting slow, they can do anything to your service, at any time, without notice.

There is also a hidden 5G per month maximum:

"If you are on a data plan that does not include a monthly MB/GB allowance and additional data usage rates, you agree that AT&T has the right to impose additional charges if you use more than 5 GB in a month."

This is not just an American problem. Orange in the UK calls its iPhone data service "unlimited," but there's a footnote saying that "unlimited" actually means 750 megabytes a month, a surprisingly low cap compared to AT&T's.

If we're ever going to collectively manage mobile network overload, we'll all need to be much more up-front about the way it operates and what a particular service plan will and won't do.


Is residential 3G really a good idea? Especially in Europe, it's common for operators to tell people that they should ditch their DSL or cable modem at home and replace it with a 3G modem. That works out well only when the network has excess capacity. As soon as the networks start to get congested, the operators will need to offload traffic to residential WiFi routers connected to DSL or cable. If those residential fixed lines have been removed, the operators can't offload.

What to do. I think this one is going to be self-limiting. Once 3G bandwidth gets scarce, the operators will realize that they can get a lot more revenue feeding data to smartphones than to PCs. The math works like this: With a given amount of bandwidth, you could support a single notebook computer and charge about $50 a month, or support 11 smartphones at $30 a month each. Hmm, $330 a month versus $50, seems like a pretty easy decision.

But there are two circumstances in which it would make sense for the operators to keep subsidizing PC sales:

1. If smartphone sales plateau. If this happens, eventually the network will catch up with demand and then there will be excess capacity for PCs; or

2. If operators can route most of the actual data traffic from PCs through WiFi connected to landlines. In this case they could sell you data plans knowing that you won't affect their networks much. That brings us to the next point...


Operators have a huge vested interest in unlocking WiFi access points. Most WiFi access points today are encrypted and inaccessible to other devices in the area. I think there's a strong financial incentive for mobile operators to work with fixed-line access companies to get those access points unlocked. The benefit for the wireless companies is clear -- the more WiFi points they can talk to, the fewer cell towers they need to build. But the benefits for the fixed-line operators are much less clear. Why should they help the mobile operators with their bandwidth crunch?

What to do. The ideal situation would be a revenue-sharing deal in which the operators share some money with the fixed-line companies to encourage them to open up access to their networks. In this scenario, your DSL or cable provider would give you a WiFi router that has been pre-configured to automatically and securely share excess bandwidth with mobile devices in the area. Your own traffic would get priority, but any extra capacity could be shared automatically. The benefit for you as a consumer would be a free router, and/or a lower DSL bill as the cable company passes along some of the revenue it gets from the mobile operators.

The effectiveness of this sort of approach is going to depend on the relative cost for an operator of subsidizing a set of WiFi base stations in an area, versus the cost of installing more wireless capacity. I wonder about weird scenarios like a DSL provider auctioning off excess WiFi capacity to wireless operators in a particularly congested area.


Femtocells for the rest of us. Another very logical step for the operators is to start pushing femtocells aggressively. (Femtocells are radios that work like a short-range cell tower, but are the size of a WiFi router. You connect one to your DSL or cable line, and it offloads traffic from the wireless network. Link)

What to do. Today femtocells are generally sold as signal boosters in areas with marginal wireless coverage. But in the future I think it may make sense for operators to give away femtocells, or at least subsidize them, for customers who live in areas where the data network is congested.


What it all means: Fixed-mobile convergence with a twist

If you step back from the details, the big picture is that we really need a single integrated data network that encompasses mobile and fixed connections, and switches between them seamlessly. People have been talking about this sort of thing for years (check out the Wikipedia article on fixed-mobile convergence here), but the focus has generally been on handing voice calls between WiFi and cellular. That's hard to do technologically (because you can't interrupt a voice conversation during the handover for more than a fraction of a second). Besides, it doesn't solve a significant customer problem -- the voice network isn't the thing that's overloaded.

The place where we could really, really use fixed-mobile convergence is in data. I'm worried, though, that the intense competition between the wireless and wired worlds will make it difficult and slow to achieve the coordination needed. This might be a useful place for government to put its attention. Not in terms of regulating the integrated network into existence (that would be the kiss of death), but to grease the skids for cooperation between the mobile and fixed-line worlds.


Just one more thing...

Everything above is based on the assumption that those Cisco and analyst forecasts are correct. But Cisco has a vested interest in hyping fear of the data apocalypse (Emergency! Buy more routers now!!), and my general rule about tech analysts is that every time they all agree on something you should bet against them.

There is a genuine crunch in mobile data capacity going on at the moment; you can read about network outages caused by the iPhone even today. And I can assure you that for every network failure you read about, there are dozens of other failures and near-failures that don't get reported. Many wireless data networks are very stressed.

And the situation will get worse.

But there's no such thing as infinite demand. At some point the growth of mobile data will slow down, and it's very important to try to estimate how and when that'll happen, so we as an industry do not overshoot too badly. The question isn't whether the growth forecasts are wrong, it's when they will be wrong.

I'll write about that next week...

The OS is always greener...

In a report from a developer meeting, Nokia officials said they're moving to Maemo Linux as the OS for their high-end smartphones. That resulted in an entertaining little obituary in the Register by Andrew Orlowski (link). But then later in the day Nokia clarified that "we remain firmly committed to Symbian as our smartphone platform of choice" (link). That in turn led to a lively online debate about what Nokia actually said, and the challenges that Finnish people face when speaking English (check the comments here).

It's just one more chapter in the long and exquisitely awkward saga of Nokia and Symbian. From the outside I can't tell exactly what's going on at Nokia, and it's possible that Nokia itself doesn't know. It's a very large company, and various groups there can have conflicting agendas.

But I can't believe that there would be all of these repeated reports, leaks, and artfully-worded partial denials unless Nokia were de-emphasizing Symbian in the long run. The most prominent theory, which I believe based on things I hear through back channels, is that Nokia does indeed intend to move to Maemo at the high end. And, as we all know, in computing whatever's at the high end eventually ends up in the mainstream.

I'm sure Nokia has valid technical reasons for moving to another OS. Nokia has said that there are some things it wants to do with its smartphones that Symbian OS can't support. But still the change worries me. Nokia's biggest problem in the smartphone market isn't the OS it uses, it's the user experience and services layer in its smartphones. Moving to a new OS does almost nothing to fix that. It does force a lot of engineers to work on writing a lot of low-level infrastructure code that won't create visible value for users. It also forces Nokia to maintain two separate code bases, which will chew up even more engineers.

All of that investment could have gone into crafting some great solutions, the things that are the only way to pull customers away from Apple and RIM. At a minimum, it's a terrible shame that Nokia spent so much time and money on an OS that couldn't take it into the future.

(By the way, this focus on the OS doesn't apply only to Nokia. I hear a lot of buzz from operators and handset companies who believe that if they just pick the right OS they'll automatically end up with great smartphones. Android is the latest white knight for most of them, but of course Nokia's not going to depend on a technology from Google.)

There's an old joke in the tech industry about rearranging deck chairs on the Titanic. I don't think that applies to Nokia because they haven't hit an iceberg by any means. But I do have a mental picture of a sweet old lady who spends all her time every day cleaning the bathroom while the food is spoiling in the refrigerator.

FABLES OF MYOPIA, AND OTHER BESPECTACLED TALES...

The time I spent in school will perhaps never be forgotten. I wasn’t referring to myself (who in heavens would claim he can’t remember his own time in school... alright, maybe a former US President), but to the teachers whose subjects I failed, to the administrator whose projector I destroyed, to the provost who rusticated me out of the hostel five times by the time I kicked myself out, and to the Principal who once chased me around the sports ground brandishing a pair of industrial scissors threatening to cut my slovenly two penny hair. All this was pretty fine with me... all, except one boy, whom I envied to perdition. While we both were equally good sports enthusiasts and used to get into all the school sports teams – basketball, cricket, swimming, football, tennis – he would always be made the captain, however hard I tried to prove my sporting skills to the nepotistic coaches.

The frustrating irritation in me knew no bounds – well, the captain used to be treated like an emperor; and obviously, he would get all the, umm, fan mail, if you know what I mean! Driven to the point of galling exasperation, one fine afternoon, I cornered him at the school grounds after sports practice and loudly threw the accusation that it was only because of his connections that he, and not me, became the captain. Not taking a moment, and like a true sophisticated cultured gentleman that all boys in my school were trained to be, he lunged at me screaming bilingual four, five and six-letter words and shouted, “That’s not true. You couldn’t become the captain because you didn’t clear the vision test. You couldn’t even read the first line on the alphabet board!” His answer hit my jaw like a ten tonne truck before his fist did. The pest was right about the test. I had short-sight, but refused to wear spectacles (like all the ‘boys in the hood’) and to accept that I even had myopia. Consequently, I always failed the vision test, while he’d always pass it. But then, given the emotion of the moment, I did start wondering: did such a fabled connection really exist? Did a leader necessarily need to have an excellent vision to succeed?

Well, I won’t even childishly attempt to draw the metaphor up in the real corporate world – as the answer is a resounding yes! Vision is the obsessive compulsion to continuously achieve beyond benchmarks, and is the essence, the soul, the character of great leadership. Without a sustained and sincere visionary approach, not only does the CEO doom himself, he also magnanimously devastates his company’s future irreparably, targeting objectives which will never allow the organisation to become a global leader. But the toughest part in the whole imbroglio is – does the CEO even have a ghost of an idea of how wonderfully visionary could a vision be? Do you?

This boy of 14 dropped out of school and joined his uncle’s store as a watch salesman (as his penury ridden father had passed away due to tuberculosis). He worked 16 hour days, and even learnt English from a tutor during the night, after work! Seven years later, when he was just 21, he borrowed capital from some friends and family members and opened a plastic flower manufacturing company. Nine years later, his firm became the largest supplier of plastic flowers in Asia. Half-a century later, his empire spans across industries like oil, electronics, telecommunications, retails, ports, power, electricity and even health and beauty. The name of his empire – the publicly traded Hutchison Whampoa group (which he acquired from HSBC in 1971) and Cheung Kong Industries (which he founded in 1950), which operates across 55 countries and employs 2,20,000 people. The name of this determined and born visionary – Li Kashing, the richest man in Hong Kong and the 16th richest on the 2009 Forbes billionaires list, his net worth valued at over $16.2 billion, with his empire worth much more – $120 billion in mcap. Can you match his vision?

Born out of wedlock in Kosciusko, Mississippi, to teenage parents who broke-up soon after, this lady’s mother was a housemaid, and her father, a coal miner. Raped by family members when young, imprisoned in detention centres, pregnant at 14 (with her child dying soon after birth), she’s my icon of how vision can motivate one to become the champion of circumstances and business. At 17, she won the Miss Black Tennessee beauty pageant and was noticed by the local black radio station, WVOL, which hired her as a part time radio jockey. That proved to be her baby step into the world of media. After that, she worked with Nashville’s WLAC-TV and Baltimore’s WJZ-TV. Today, her company Harpo Corp. produces The Oprah Winfrey Show, aired in 140 countries around the world, with 30 million viewers a week in US alone. Oprah is the only black woman billionaire in world history, her personal worth estimated by Forbes at $2.3 billion. Can you match her vision?

Born nearsighted, a dyslexic, a school dropout, a failure in the first two business ventures he started, this man started a magazine called Student to cater to young demographics. To cover postage charges, his mother donated four pounds. Working from his basement, Student debuted in January 1968 (The first feedback he received for the magazine was from the headmaster of his previous school, who wrote: “Congratulations! I predict that you will either go to prison or become a millionair”) Within 25 years of that letter, this visionary put into place a diversify ed group with more than 150 companies, spread across six continents; and much to prove his school headmaster wrong, became a billionaire! With businesses ranging from comics to airlines, from colas to mobile telephony, Richard Branson’s personal wealth now amounts to $2.5 billion, and his fame to something much beyond! Well, can you match his vision?

A few years back, the Stanford University paper (Vision, Key to Creating Shareholder Value) quoted Lord John Browne, then CEO of the oil behemoth BP, “You have to remember what your vision is, and you have to be disciplined about sticking to it in order to create shareholder value!” When Browne became BP’s CEO in 1995, the company’s annual revenues were $26.95 billion. In 2007 when he resigned, they were a spectacular $274.32 billlion – a stupendous rise of 917.88%! Browne’s successor, Anthony Hawyard, has kept the visionary approach as rampant – the revenues for 2008 were a mind blowing $367 billion! That is vision!

The brilliant management guru Jim Collins, using a 70 year long study as a basis, showed in his best selling book Built To Last how ‘visionary companies’ gave stock returns that were almost 700% more than ‘comparison (not so visionary) companies’. The findings of a huge research by the well known Ken Blanchard Group (covering 2000 odd worldwide respondents between 2003-2006) show how “failing to communicate the vision in a way that is meaningful,” is the biggest mistake that leaders make when working with others. Noted author Jim Heskett, in a Harvard Business School paper (‘How much of leadership...’), writes, “Companies growing value the most are the ones with leaders that have a clear vision, continually communicate that vision, and then get out of the way!” Are you such a leader?

Clearly, it’s not just about what vision you have, but about the vision you make your followers believe in, and work towards! In summary, fanatic vision is about targeting objectives fantastically beyond what your normal potential would ever allow – devastate and destroy all current pretensions, processes, procedures, and assumptions that stymie the power of imagination and passionately work towards the fantastical objective like a delusional zealot, believing completely in the fact that you will achieve the quixotic target, at the same time ensuring that all your followers believe as fanatically in this prophetic atom-smashing finality!!! That, my CEOs, is being a visionary!

Coming back to where I started, back in school, post the jaw breaking fight, I ended up over a few months actually becoming friends with the truant captain, given our common roguish antecedents. One day, we both decided to skip school and watch a movie in the nearby theatre. The moment the movie started, I was stunned to see him take out a pair of spectacles from inside his bag and wear them. I was totally dumbfounded! With my mouth agape, I garbled to him, “But you said you had perfect vision?!?” The devil of the town coolly looked at me, and spoke, “I never said that. I just said that you never were able to read out the alphabets on the eye test board... while I used to mug them all up!” Geez, where was it that I started this editorial?...

IN SEARCH OF EXCELLENCE: 6 LESSONS FROM THE WORLD’S BEST MANAGED COMPANIES

In the past few months, while I have been trying to make sense of the strategies of the world’s largest companies in my editorials, my analysis has many times flamboyantly and quite shamelessly used the Fortune 500 lists, without doubt the most well known international listing of the world’s best managed corporations. Over the course of various editorials, my research team has time and again brought out data and analysis, which has almost never ceased to surprise me, and many times even changed my preconceived notions of what constitutes the best course of strategic action for a company. In short, the findings of my team have represented some of the most contemporary understanding in the world of modern management and in the world of Fortune 500, the highest revenue earning firms internationally. And in this issue’s editorial, after analysing many of my past editorials, I bring to you the compendium of 6 unique strategic factors that drive a majority of these Fortune 500 corporations in their search of excellence:

LESSON #1: TO HELL WITH ‘FUN’!
Only 6% of Fortune 500 companies in 2009 made it to the list of Fortune Best Companies to Work For 2009 list. In other words, the entire list of Fortune’s Best Companies to Work For had no mention of 94% of the top Fortune 500 names! The highest placed amongst those in the Fortune 500 list was the 10th ranked Valero Energy, which was placed eighth-last on the Best Companies to Work For list. The #1 company on the Best Companies to Work For list (NetApp) was ranked #647 on the Fortune 1000 list! The #2 and #3 on the Best Companies to Work For List (Edward Jones & BCG respectively) did not even feature amongst the Fortune 1000 names!

Learning: The best performing corporations of the world (in terms of revenues, increasing shareholder value and earnings) make sure they’re not fun places to work; rather, excellently performing companies like Exxon and Berkshire ensure that employees are made to work killingly hard.

LESSON #2: ‘SERVICES’ IMPLY ‘SHAREHOLDER VALUE’!
Surprisingly, the top ranked Fortune names weren’t the ones who could be most proud about delivering the best of returns of their shareholders. So guess which company delivered the maximum returns to its shareholders amongst all 2009 Fortune 500 names? An unknown firm called Dollar Tree, now ranked #499 on the Fortune list, gave back to its shareholders 60.8% returns y-o-y. In fact, only six Fortune 500 names delivered annual returns superior to 20%. The other five names are: Family Dollar Stores (ranked 359), Nasch-Finch (ranked 492), World Fuel Services (ranked 147), Amgen (ranked 168) and Omnicare (ranked 392); all of which, except one (Amgen) are into the ‘Services industry’! Even when we look at the revenues earned per dollar of assets or per dollar of equity, the top five industries in both the categories belong to the services sector.

Learning: If you want to be counted amongst the most efficient and productive companies of the world (for your shareholders, investors, customers), the services sector is where you might want to be for the coming few years.

LESSON #3: NEVER TRUST A WOMAN!
Only 3% of 2009 Fortune 500 companies have women as their CEOs; and the irony is that this puny woman CEO figure is actually a 0.6% jump over the previous year. And if the Fortune 1000 names are considered, the count boils down to a lower 2.8%. The figure is similar to the Standard & Poor’s 500 list, which has just 14 names of companies that are headed by women CEOs (again, 2.8%).

Learning: The world’s biggest companies don’t trust a woman to be their CEO.

LESSON #4: THE ‘FORTUNE’ OF LOYALTY AND YOUTH
While the average tenure with a single Fortune company for a Fortune 500 CEO is a high 26 years, the same for an S&P 100 CEO is also a similar 23 years, disproving the hype and hoopla about job-hopping leaders. While 61% of S&P 100 CEOs have been working for the same company for 15 years or more, 30% have never worked anywhere else (Source: Hewitt Associates CEO Study)! The report by Booz Allen Hamilton titled ‘CEO Succession: Stability in the Storm’, after analyzing the world’s 2,500 most valued publicly listed companies, also proves how loyalty is still alive and kicking, with boards today even encouraging succession planning of ‘internal candidates’. The study notes how “among new CEOs, outsiders – those brought in from outside the company to take the helm – make up only about 24 percent of the incoming class.” The belief in youth is also quite strong. Another study by Hewitt Associates, titled ‘Board Index 2008’, notes that as boards get older, “the average age of the CEO has decreased” as compared to 10 years back. As per the C T Partners report titled ‘Does Age matter when you’re CEO?’, S&P 500 companies, which are run by the youngest CEOs, outperform those run by the oldest. Stocks of S&P 500 companies whose CEOs are 47 and younger have outperformed the S&P 500 Index by 6.2% since 2007, while those led by CEOs who were 72 and older underperformed the S&P 500 Index by 12%. Even when Forbes magazine measured the performance of the 10 youngest (average age 44) CEOs vs. the 10 oldest (average age 74) CEOs of large companies using a formula to measure CEO compensation packages relative to shareholder return, it found that “the younger CEOs as a group outperformed the higher-paid, older CEOs.”

Learning: If you have any ambition of becoming a CEO, be loyal, and never jump jobs (at least, not more than once)!

LESSON #5: CEO + CHAIRMAN = SUPERMAN!
Despite all the hogwash talk about corporate governance and splitting of the CEO and Chairman roles, the truth remains intact – one bird in the hand is better than two in the bush. While 64% of Fortune 500 CEOs play the dual role of a Chairman and CEO, the figure is just about the same with S&P 500 companies, where 61% of the companies have the same person serving as the CEO & Chairman (Source: Hewitt Associates Board Index Report). A case to point is Rex Tillerson, the man in charge of ExxonMobil, one of the world’s top three corporations. Rex has been serving as both the CEO and Chairman. Under him, Exxon has reported eight of the ten highest quarterly net profits for any company in the history of mankind. The top three highest being $14.83 billion (during Q3, 2008), $11.68 billion (Q2, 2008) & $11.66 billion (during Q4, 2007) – all three records when he was the ‘dual’ man on top!

Learning: More the people taking the decisions, more delayed a company’s response to competition. Clearly, the world’s leading firms combine the Chairman’s and CEO’s post.

LESSON #6: CORE FOCUS ON A SINGLE BOARD
Over the past decade, outside board service by CEOs has fallen by 65% as compared to 1998. On an average, CEOs now serve on only 0.7 other boards, down from 1.0 in 2003 and 2.0 in 1998, as the Board Index Report by Spencer Stuart concludes. Not just that, the average size of the Board of Directors is also shrinking, having fallen by 10% over the past decade. The trend towards smaller boards becomes more noticeable now: The number of boards in the S&P 500 with 12 or fewer directors has increased by 18% since 1998 and 8% since 2003. Surprisingly, today 80% of S&P 500 Boards have 12 or less than 12 directors.

Learning: Do not allow the top management to focus on anything other than your corporation!

Which mobile apps are making good money?

At a conference the other day, several industry executives were on a panel discussing mobile application stores. There were representatives from Yahoo, Qualcomm, Motorola, and an independent application store. Someone from the audience asked a simple question: "Other than entertainment apps, name three mobile applications that are monetizing well." (In other words, apps that have a good business model and are making good money.)

The interesting thing was that none of the panelists had a very satisfying answer. The Qualcomm person cited navigation apps and something called City ID, and had no third app. The app store guy cited search-funded apps (Opera) and apps that are extensions of PC applications (Skype). The Motorola person, who used to work at Palm, cited two cool old Palm OS developers (SplashData and WorldMate, the latter not even available for Motorola's Android phones). And the Yahoo guy talked about Yahoo-enabled websites.

None of them had the sort of answer that the room was looking for -- what categories of smartphone apps are making it, and what are their business models, so other developers will know what to emulate? I started to laugh at the panelists' obvious discomfort, but then I realized that if I'd been on the panel and had been asked the same question, I would have blown it too. I know of a lot of mobile app companies that aren't making steady money, because they send me e-mails asking for ideas, but I don't seem to hear from the raging successes. Also, because I try to focus on what needs to be fixed in the industry, I'm probably guilty of skewing my posts toward what's not working.

So I did some thinking and a bit of research, and here are my three nominations for categories of non-entertainment mobile apps that are making it, and why. Then I'll open it up to your comments -- I have a feeling you'll have much better answers than me.


1. Vertical-market business applications. This was a good category for PDAs ten years ago, and it's a good category for smartphones today. There are dozens of business verticals where information overload, or an excess of written forms, hinder productivity. Find a way to manage that information electronically, and your application quickly pays for itself in increased productivity.

One example is ePocrates, which gives doctors drug reference, dosing, and interaction information. ePocrates has a beautiful business model in which the drug companies pay to get access to the doctors who use it. That helps the company give away its base product. I have to believe there are other verticals where you could create apps that would act as a middleman between suppliers and users.

Another interesting example, which I ran into at a conference recently, is Corrigo. They do work-order management (stuff like managing a mobile workforce and dispatching them to work sites on the fly). I like Corrigo because it makes good use of mobile technology, and scales nicely to multiple vertical markets.

Note that neither Corrigo nor ePocrates is a purely mobile application -- they are business solutions that leverage mobile. That's very typical of the business mobile market. It's not about being mobile for its own sake, it's about solving a business problem and using mobile technology to help do it.

One other cool thing about these businesses is that you can ignore the whole app store hassle and market them directly to the companies. You control your customer relationships, and you can keep 100% of your revenue.

2. PC compatibility applications. Inevitably some people will need to do on a mobile device the same things that they do on a PC -- edit a document, for example, or query a database. There's a solid market for applications to let the user do that. The market isn't enormous (not everyone is crazy enough to edit a spreadsheet on a screen the size of a Post-It note), but the people who need to do that are usually willing to pay for the apps. Or to make their employers pay for the apps. Documents to Go was probably the most successful application on Palm OS, and based on the stats posted by Apple I think it is probably one of the most lucrative non-entertainment apps on iPhone.

Unfortunately, Docs to Go is also a very well-entrenched application, so good luck displacing it. Maybe you can find another category of PC app that needs a mobile counterpart.

3. Brand extenders. There seems to be a steady market for mobile apps that help a major brand interact with its loyal users. A few recent examples:

• -The Gucci app lets a customer get special offers, play with music, and find travel attractions endorsed by Gucci. The company calls it a "luxury lifestyle application."
• -There are four different Nike iPhone apps: a shoe designer, a women's training guide, a football (soccer) training guide, and an Italian soccer league tracking app.
• -The Target store search app lets you find stores, and search for items within the stores (it'll tell you which aisle to look in). (For those of you outside the US, Target is a large chain of discount department stores.)
• -Magic Coke Bottle is a Coke version of the Magic 8-Ball. It's one of three Coke-branded apps.

The iPhone is the most popular platform for these apps today, although I expect they'll spread to other smartphone platforms over time.

The business model for this one is simple -- you get hired by the brand (or its marketing agency), they pay you to develop the app, and then they give it away. The more popular smartphones become, the more companies feel obligated to create mobile apps, so this is a growing market for now. (Beware, though -- having an iPhone app is kind of a corporate status symbol right now, like creating a corporate podcast was a couple of years ago. Development activity could drop off when businesses find the next trendy tech fad.)

To create this sort of app, you need to be very skilled at visual design, and you need to be comfortable managing custom development projects. Some developers don't have this sort of project and client management skills, and you can get yourself into a lot of trouble if you sign a contract without understanding what'll really be required to execute on it.

Also, you don't get to change the world creating a shopping app for Brand X. But in the right situation this can be a good way to make money while you work on your own killer app on the side. And if you're not into changing the world, there are companies that have built solid ongoing businesses on custom mobile development.


Other possibilities

There are a few of other categories of apps that I think could be candidates for inclusion, but in my opinion the jury is still out on them. I'm interested in what you think:

Location. Right now there are several location and direction apps selling well for iPhone, but with Google making directions free on Android, I fear the third party apps are at risk. However, the direction-finding business is a lot trickier than you'd expect (I learned that as a beta-tester for the Dash navigation system, which sometimes tried to get me to make a right turn by telling me to make three consecutive left turns). So we need to wait and see how good Google's directions are. But in the meantime I don't feel comfortable pointing to this as a viable category in the long term. What do you think?

Travel apps. There was once a very nice business in city guides for PDAs, but I get the sense that like many other categories of mobile apps, this one is being sucked into the free app vortex. But I suspect that there may still be a paid market for specialized tools like translation programs, and software that helps executives manage trips. WorldMate is an interesting example -- the base product is free, but if you pay you get special services.

Upgradeware. Speaking of free base products, I think this is the most intriguing possibility in the whole mobile app business today. In the PC world, there are a lot of app companies that manage to build sustainable businesses by giving away a free base product and then charging you for the advanced version (this is how most of Europe gets its antivirus software today, for example). In mobile this model worked well on Palm, but was not available on iPhone because Apple's terms and conditions prohibited a free application from offering in-app conversion to a paid upgrade. Apple just changed those terms.

Rob at Hobbyist Software asked the other day what I thought about the change. I think it's very long overdue, and I'm intensely interested in hearing from developers who have moved to that model. How's it working out for you?


Okay, so that's my list. If you're scheduled to appear on a panel somewhere, you're welcome to quote from it as needed. But now I'd like to throw the discussion open to you. Please post a comment -- What do you think of my list? And what non-entertainment mobile app categories, and business models, are making good money today, and why?

A web guy and a telecom guy talk about net neutrality

It was a nondescript bar in the American Midwest, the sort of place where working men drop in at the end of the day to unwind before they head home. You wouldn't expect to find two senior business executives there, and as I sat in the empty bar at midday I wondered if maybe my contact had given me a bad lead. But then the door opened and a general manager from one of the leading web companies walked in, followed by a senior VP from one of the US's biggest mobile network operators. I hunched down in the shadows of a corner booth and typed notes quietly as they settled in at the bar.

Bartender: What'll you have?

Telecom executive: Michelob Light.

Web executive: I'll have a Sierra Nevada Kellerweis.

Bartender: Keller-what?

Web executive: Um, Michelob Light.

Telecom executive: Thanks for coming. Did you have any trouble finding the place?

Web executive: All I can say is thank God for GPS. I've never even been on the ground before between Denver and New York.

Telecom executive: I wanted to find someplace nondescript, so we wouldn't be seen together. The pressure from the FCC is bad enough already, without someone accusing us of colluding.

Web executive: No worries, my staff thinks I'm paragliding in Mexico this weekend. What's your cover story?

Telecom executive: Sailboat off Montauk.

Web executive: Sweet. So, you wanted to talk about this data capacity problem you have on your network...

Telecom executive: No, it's a data capacity problem we all have. Your websites are flooding our network with trivia. The world's wireless infrastructure is on the verge of collapse because your users have nothing better to do all day than watch videos of a drunk guy buying beer.

Web executive: Welcome to the Internet. The people rule. If you didn't want to play, you shouldn't have run the ads. Remember the promises you made? "Instantly download files. Browse the Web just like at home. Stream HD videos. Laugh at an online video or movie trailer while travelling in the family car."

Telecom executive: That was our marketing guys. They don't always talk to the capacity planners. Besides, who could have known that the marketing campaign would actually work?

Web executive: Don't look at me. I've never done a marketing campaign in my life. I think you should just blame it on A--

Telecom executive: You promised, no using the A-word.

Web executive: Sorry. But I still don't see why this is a problem. Just add some more towers and servers and stuff.

Telecom executive: It's not that simple. The network isn't designed to handle this sort of data, and especially not at these volumes. Right now our biggest problem is backhaul capacity -- the traffic coming from the cell towers to our central servers. But when we fix that, the cell towers themselves will get saturated. Fix the towers and the servers will fall over somewhere. It's like squeezing a balloon. We have to rebuild the whole network. It's incredibly expensive.

Web executive: So? That's what your users pay you for.

Telecom executive: But most of them are on fixed-rate data plans. So when we add capacity, we don't necessarily get additional revenue. It's all expense and no profit. At some point in the not-too-distant future, we'll end up losing money on mobile data.

Web executive: Bummer.

Telecom executive: More like mortal threat. Fortunately, we've figured out how to solve the problem. The top five percent of our users produce about 50% of the network's total traffic. So we're just going to cap their accounts and charge more when they go over.

Web executive: Woah! Hold on, those are our most important customers you're talking about. You can't just shut them down.

Telecom executive: The hell we can't. They're leeches using up the network capacity that everyone else needs.

Web executive: Consumers will never let you impose caps. You told them they had unlimited data plans, that's the expectation you set. You can't go back now and tell them that their plans are limited. They won't understand -- and they won't forgive you.

Telecom executive: First of all, the plans were never really unlimited in the first place. There's always been fine print.

Web executive: Which no one read.

Telecom executive: Off the record, you may have a point. On the record, the fact is that you can retrain users. Look, you grew up in California, right?

Web executive: What does that have to do with anything?

Telecom executive: Once upon a time, there weren't any water meters in California. Now most of the major cities have them, and they'll be required everywhere in a couple of years. Something that was once unlimited became limited, and people learned to conserve.

Web executive: The difference is, I can read my water meter. You make a ton of money when people exceed their minutes or message limits, and you don't warn them before they do it. If you play the same game with Internet traffic, it'll scare people away from using the mobile web -- or worse yet you'll invite in the government. Look what happened with roaming charges in Europe.

Telecom executive: Jeez, don't even think about that. Okay, so we'll need to add some sort of traffic meter so people will know how much data they're using when they load a page.

Web executive: Great, that'll discourage people from using Yahoo.

Telecom executive: Huh?

Web executive: Oops, did I say that out loud?

Telecom executive: Then there's the issue of dealing with websites and apps that misuse the network.

Web executive: Not this again.

Telecom executive: I'm not talking about completely blocking anything, just prioritizing the traffic a little. Surely you agree that 911 calls should get top priority on the network, right?

Web executive: Of course.

Telecom executive: And that voice calls should take priority over data?

Web executive: I don't know about that.

Telecom executive: Oh come on, what good is a telecom network if you can't make calls on it?

Web executive: (sighs) Yeah, okay.

Telecom executive: So then what's wrong with us prioritizing, say, e-mail delivery over video?

Web executive: Because when you start arbitrarily throttling traffic, I can't manage the user experience. My website will work great on Vodafone's network but not on yours, or my site will work fine on some days and not on others. How do you think the customers will feel about that?

Telecom executive: Not as angry as they will be if the entire network falls over. Listen, we're already installing the software to prioritize different sorts of data packets. We could be throttling traffic today and you wouldn't even know it.

Web executive: But people will eventually figure it out. They'll compare notes on which networks work best and they'll migrate to the ones that don't mess with their applications. Heck, we'll help them figure it out. And if that's not enough, there's always the regulatory option. The Republicans are out of office. They can't protect you on net neutrality any more.

Telecom executive: You think you're better at lobbying the government than we are? We've been doing it for 100 years, pal. Besides, we have a right to protect our network.

Web executive: You mean to protect your own services from competition!

Telecom executive: Parasite!

Web executive: Monopolist!

Telecom executive: That's it! It's go time!

They both stood. The telecom guy grabbed a beer bottle and broke it against the bar, while the web guy raised a bar stool over his head. Then the bartender pulled out a shotgun and pointed it at both of them.

Bartender: Enough! I'm sick of listening to you two. Telecom guy, you're crazy if you think people will put up with someone telling them what they can and can't do on the Internet. The Chinese government can't make that stick, and unlike them you have competitors.

Web executive: See? I told you!

Bartender: Shut up, web guy! You keep pretending that the wireless network is infinite when you know it isn't. If you really think user experience is important, you need to start taking the capabilities of the network into account when you design your apps.

Web executive: Hey, he started it.

Telecom executive: I did not!

Bartender: I don't care who started it! Telecom guy, you need to expose some APIs that will let a website know how much capacity is available at a particular moment, so they can adjust their products. And web guy, you need to participate in those standards and use them. Plus you both need to agree on ways to communicate to a user how much bandwidth they're using, so they can make their own decisions on which apps they want to use. That plus tiered pricing will solve your whole problem.

Telecom executive: Signaling capacity too. Don't forget signaling.

Bartender: That's exactly the sort of detail you shouldn't confuse users with. Work it out between yourselves and figure out a simple way to communicate it to users. Okay?

Web executive: I guess.

Telecom executive: Yeah, okay.

Bartender. Good. Now sit down and start over by talking about something you can cooperate on.

Telecom executive: All right. Hey, what's that guy doing in the corner? Is that a netbook?

Web executive: He's a blogger!

Bartender: There's no blogging allowed in here!

Telecom executive and web executive: Get him!

I ran. Fortunately, the bar had a back door. Even more fortunately, the web guy and the telecom guy got into an argument over who would go through the door first, and I was able to make my escape.

So I don't know how the conversation ended. But I do know that I wish that bartender was running the FCC.

STEVE BALLMER SAYS IT’S UTTER HOGWASH!

If looks could kill, the outrageous way my seven year old cellphone looks could have killed anybody a mile around with a ten mile collateral radiation damage. I have been supremely chided by friends, families (neighbours’ included), philosophers and tour guides about the villainously repellent profile my cellphone seems to have inherited after so many years of use, misuse, and abuse. I had been completely insulated from all these ‘change-to-a-modernphone- dear-junkie’ diatribes, till one evening, for the first time, my wife with quite a rancid look on her face accosted me the moment I entered the house, and steamed away, “It’s not anymore about you, but about how outsiders have started perceiving us all due to that schlock of a contraption. Why can’t you buy a new phone? Even the car cleaners have better handsets. Don’t you think buying new technology actually improves productivity?” The thundering sword of a question was pretty haunting in nature: Critically, how valuable do the world’s greatest organisations consider investments in new technology? How well do these investments improve profits, sales etc...?

When the famed Jim Collins wrote a few years back in his best seller, Good To Great, that “none of the Good-To-Great [world class] executives put technology as one of their top 5 drivers,” not many believed that that would be the way it would be in the future. A year back, when I researched the outstanding NYSE CEO Report 2008, it stunningly corroborated Jim’s findings by showing that only 5% of CEOs now thought that new technology would be “the most important internal factor affecting profitability...” 67% of CEOs believed that “the ROIs from technology investments have failed to meet expectations till date!” In fact, the factor considered most important by CEOs for revenue growth was ‘management team’, rather than technology. Now, when I study the most recent NYSE CEO Report 2010, it brilliantly states, “As was the case [previously], operational efficiency and management stand out as the internal factors expected to have more impact on profitability. CEOs have downgraded the importance of new technology and products...” 70% of CEOs now say they would not increase their investments in technology.

A lucid and provocative speaker on business and technology, Nicholas G. Carr, in his most celebrated and controversial HBR article titled, ‘IT Doesn’t Matter’, proves through extensive research how, “As Information Technology’s power and ubiquity have grown, its strategic importance has diminished. Technology’s potential for differentiating one company from the pack – its strategic potential – inexorably diminishes.” While experts and media houses from around the world called the work “A bombshell” (Forbes), “Provocative” (NYT), “Firestorm!” (BusinessWeek), “Accurate description of the technological world...” (CNN Money), “...and of today’s tech landscape” (WSJ), Steve Ballmer, CEO of tech-giant Microsoft, predictably called the article a “hogwash!”

A famed letter from John Seeley Brown (former Chief Scientist, Xerox) and John Hagel III to HBR had this epitaph of a warning, “Businesses have overestimated the strategic value of IT. They have significantly overspent on technology in the quest for business value. IT-driven initiatives rarely produce expected returns...” And for those companies believing in being at the forefront of innovating new technology, I present PwC’s most recent Annual Global CEO Survey 2009, which shows that ‘technological innovation’ does not feature even in the top five factors for CEOs as a “critical driver of long-term success” (The most important factor was “Access to, and retention of, key talent”). Even when it comes to ‘Immediate threats’ that are driving CEOs’ priorities, ‘technological disruptions’ are ranked at a lowly #13; second from last! ‘Terrorism’, ‘Climate Change’, ‘Inadequacy of natural resources’ and other such factors are ranked higher in importance by CEOs. From the IBM Global CEO Study 2006 to the peerless thesis titled Economic and Technical Drivers of Technology (March 2006) by Dr. P. Yin (HBS) and Dr. Timothy F. Bresnahan (Stanford), from the superlative Economist Intelligence Unit 2007 report to McKinsey’s classic 2007 report (The Next Frontiers in IT Strategy), study after study has now proven that investments in technology have not only left a humungous majority of CEOs completely unconvinced about their effectiveness but are also atrociously useless in many cases.

So what do you do when on one side you have all the research in the world screaming away to you to not invest in a new cellphone, and on the other side you have a pressure cooked wife shouting at you to invest thousands in the latest thingamajig?... You buy the cellphone! Period!!!

BEASTUS MAXIMUS OR DON JUAN DE MARCO?

No man ever gets a potbelly. No one! And born gymnasts like me, never in ten lifetimes. You might get a little plump here and there, but a potbelly? Bah! Thus it was, when – with much irritation after being hounded for over a month by my wife who libelously accused me of having procured a potbelly – I landed at the neighbourhood gym (which looked more like a fancy den for bully boys, one-third my age, trying to show off their hormone pumped muscles).

Trudging in contemptuously, while ogling at the plethora of mile-long machines lined up on both sides, I was straightaway introduced by my teenage nephew, who frequented the gym, to two brawny thickset six-footers, and asked to choose the trainer I would desire to be trained under. And why would I ‘desire’ one trainer over the other? Their differing training styles were put forward for my consumption. While one hooligan roughneck (Beastus Maximus is what I call him) was purported to be the toughest monster-trainer west of Cambodia, who could savagely whip your ten generations blood-dry till you got into shape, the other surprisingly had a gentler and suaver style of training, allowing you to lavishly train according to your ‘desires’ and needs, without pushing too hard.

Not surprisingly, Mr. Don Juan predictably was the more admired trainer with a bigger following. But that brought me to an interesting question. Despite the likability – or dislikability – index, who would be in reality more effective in getting people into shape – would it be bullboy barbarian who could machine wrench your guts out; or would it be the caring inveigler who’ll give you enough space to set up a farmhouse?

I decided to check out the metaphor in global corporations – have hard taskmasters been less successful universally than soft taskmasters? My research gave results to the contrary. The list of Fortune’s 2009 Best 100 Places To Work For (which contains names of 100 corporations which employees love the most globally) had only 5 names from the world’s top 100 and best performing corporations. That is, 95% of the world’s 100 largest companies – including Exxon- Mobil (the most profi table corporation in the world), Walmart, Chevron, Hewlett-Packard, GE, Berkshire Hathaway – are actually not the best places to work!! More shocking is the fact that the #1 company in the Best Places to Work ranking (a company called NetApp) did not even make it to the Fortune 500 list of the world’s largest corporations! The #2 and #3 do not even feature in the Fortune 1000 list!!!

For information, Fortune once noted that research shows that having or not having natural talent is “irrelevant to great success. The secret? Painful and demanding practice, and hard work...” Fortune also wrote about Warren Buffett, the world’s richest individual, that he was “not a born CEO or investor or chess grandmaster,” and that he achieved greatness “only through an enormous amount of hard work over many years. And not just any hard work, but of a particular type that’s demanding and painful.”

In other words, deep-rooted and long standing sustained sincerity works terrifically better than plain passion and myopic bursts of commitment.

Tiger Woods is a textbook example of what research proves. Because his father introduced him to golf at an extremely young age (when he was just 2 years old!) and encouraged him to “work hard,” Tiger had racked up at least 15 years of hard work by the time he became the youngest-ever winner of the US Amateur Championship, at the age of 18! Even today, after winning many world titles, he works as hard, devoting many hours a day to conditioning and practice, even remaking the same swing twice, because that is his formula to getting super better.

When Carly Fiorina left HP (of course, after halving HP’s shareholder value in her six year term), the tumultuous 2001 merger with Compaq appeared to be driving HP straight to the undertaker’s workshop. Enter Mark Hurd, who is described as a “peerless control freak and an unrepentant leftbrainer!” As Fortune confi rms, “Hurd quickly established himself as a stern taskmaster for accountability.” Ben Horowitz, who was CEO of Opsware, which HP bought in 2007 in a $1.7 billion deal, adds, “His weapon of choice is the voicemail... and he begins the barrage in the wee hours. If Hurd is down on someone’s work, he’ll complain openly, so everyone knows he’s displeased. It feels like the walls are closing in on you.” Hurd’s greatness comes from the fact that he’s unrelenting, unrepentant and ruthless in his employee destruction, reaching below various levels of employees to rebuke bad performers personally. HP today is the world’s largest IT corporation (Fortune #9) whose revenues of $118.36 billion surpass even that of IBM’s. Even in the face of recession (a time when desktop and laptop sales have been battered), HP’s stock price has jumped by an unbelievable 130% since 2008 to touch $46 as of date.

That brings us to a close associate of Mark Hurd, A. G. Lafley, who in July stepped down as the CEO of P&G, while retaining the seat of P&G’s Chairman. When Lafley took CEO charge on June 6, 2000, P&G was in a big mess. Over the next six months, matters worsened, with the stock losing 50% of its value and its Mcap falling by more than $50 billion. But Lafley did the unimaginable through his ‘Working It’ program, which ensured that every member of the P&G family was made to “actually go into shops to sell to consumers,” as the April 2008 book by Ram Charan and Lafley titled The Game Changer notes. This go-to-field program ensured that each and every employee was made to work hard and sweat it out for maximum productivity! By the time Lafley left office as the CEO, P&G’s Mcap had improved dramatically to $150.59 billion from the lowly $33.74 billion it touched in the first six months of his arrival – a rise of 346.28%! What about ‘unhappy’ employees? Lafley confesses, “The company has no right to be happy unless ‘the boss’ is happy.”

Mentioning Jack “Neutron Welch” as “a tough taskmaster” would be a cliche. But it’s still important to note that Jack was well renowned for his often most displeasing “handwritten notes on performance” to employees, throwing out even passionate people at will, if they didn’t have sustained sincere attitude towards work. When Jack retired, GE’s value had increased by an astonishing 2,729% to $410 billion!

In the 2009 Conference Board Review paper titled, Why Americans don’t trust CEOs, Jason Jennings, author of the best-seller Less Is More notes that “strong leaders should be: straighttalking, hard-charging, tough taskmasters...” Many say like AIG’s former boss Hank Greenberg, who built a $99 billion financial-services empire (before Martin Sullivan, his successor destroyed it) – BusinessWeek calls Hank “the impatient and prickly leader, who could yell at people even while cycling furiously on a stationary bike!”

For too long, we have been a nation purporting the myth that companies should protect employees, give them brilliant and amicable working environments. No more! It is time to call the ridiculous bluff and to realise that without being the worst taskmasters and slappingly demanding sustained sincerity from employees, we can never become world class and globally benchmarked!!!

But hey, all said and done, research could go to hell, what about my personal life – and the ever growing potbelly? I still had the Damocles’ predicament hanging on my head at the gym. Who could ensure my potbelly could be zapped away with sureshot guarantee? Was the ungodly taskmaster Beastus Maximus really a better choice as my trainer or was my hero going to be the genteel Don Juan de Marco? I was confused and undecided through the day, until dinner when I met my dad – who had sometime back rid himself of his potbelly almost unbelievably overnight. I asked him what choice would he have made in such a damning situation? “Kapalbhati,” came his lightening reply. Taken aback, I said, “Kapalbhati?!? What in crazy heavens is that?!” He coolly replied, “It’s a yogic breathing technique, kid.” I stammered back, “But how can a breathing technique help you to get rid of your potbelly overnight?” Dad smiled mystically, and said, “Suck the damned potbelly in boy, that’s what it teaches you!”

Is Apple too powerful?

The new iPod nano is a tour de force, the Swiss Army Knife of mobile entertainment. I'm sure there's some obscure gadget from Japan that packs more features per cubic millimeter, but I've never heard of it, and chances are neither have you. This one's a major consumer product, just in time for stimulating the economy this holiday season. Speaking as a technophile, I want one of the new nanos for the same reason I want a Dremel with 300 different bits: just because.

I'm also impressed by the new price point on the iPod Touch. Apple frequently overhypes its announcements, but the $199 price point in the US truly is a milestone that should lead to much higher sales. The improvements to iTunes and the App Store look promising as well, and I'm especially intrigued by Apple's effort to make paid apps more prominent. More on that in a future post.

But the thing that surprised me the most about Apple's announcement wasn't the features of the new products, or the absence of a tablet or an iPhone Lite. It was something Steve Jobs said when he talked about the video camera in the nano:

"We've seen video explode in the last few years," he said, showing a picture of a Flip video camera. "Here's one, a very popular one, four gigabytes of memory, $149, and this market has really exploded, and we want to get in on this."

Think about that for a minute. "There's a big new market, and we want in." Not, "we're creating something new" or "we can vastly improve this category." Just, "we want a cut."

It sounds like something Don Corleone would say. Or Steve Ballmer. But it's not what I expected from Apple.

Now, it's logical for Apple to put video cameras into iPods. A friend of mine worked at one of the companies producing cameras-on-a-chip, and he's passionate about the potential for building vision into every consumer product. It's not just an imaging issue; when the device can see the user, you can create all sorts of interesting gesture-based controls that don't require you to ever even touch the device. Instead of point and click, the interface is just...point.

So it's been inevitable that video cameras would eventually be built into things like the nano. For Pure Digital, the makers of the Flip, this ought to be a tough but normal competitive challenge. The first step is to make sure your camera works better than theirs (check). Next, since music players are becoming cameras, you might want to build a camera that can also play music.

But that's where the situation becomes abnormal. Because even though Pure Digital was recently purchased by Cisco, giving it almost limitless financial resources, it's more or less impossible for its products to become equivalent to the iPods as music players. Not because they can't play music, but because they aren't allowed to seamlessly sync with the iTunes music application.

The issue of access to iTunes has already been simmering in the background between Apple and Palm, with Palm engineering the Pre to access the full functionality of iTunes, Apple blocking that access, and Palm breaking back in. To date I've viewed it as kind of an amusing sideshow, and I didn't really care who won. I figured the folks at Palm had plenty of time in the past to build their own music management ecosystem, but they (including me) didn't bother, so there wasn't any particular moral reason why they should have access to Apple's system.


Apple the predator

The situation with Pure Digital is vastly different, in my opinion. Pure Digital pioneered the market for simple video cameras. It identified an opportunity no one else had seen, and built that market from scratch. In a declining economy, it created new jobs and new wealth, and made millions of consumers happy. It's incredibly difficult to get a new hardware startup funded in Silicon Valley, let alone make it successful. For the good of the economy, we ought to be encouraging more companies like Pure Digital to exist.

But there's no way for a small startup like that to also create a whole music ecosystem equivalent to iTunes. Yes, third party products can access iTunes music. But not as seamlessly as Apple's own products, and as we've seen over and over in the mobile market, small differences in usability can make a big difference in sales. So Apple gets a unique advantage in the video camera market not because it makes a better camera, but because it can connect its camera more easily to a proprietary music ecosystem.

In other words, iTunes is no longer just a tool for Apple to defend its iPod sales; it's now a tool to help Apple take over new markets.

In the legal system they call this sort of thing "tying," and it is sometimes illegal. For decades, Apple complained that Microsoft competed unfairly by tying its products together -- Office works best with Windows, Microsoft's file formats are often proprietary so you can't easily create a substitute for their apps, and so on. I was heavily involved in the Apple-Microsoft lawsuits when I worked at Apple in the 1990s, so I know how passionately we believed that Microsoft's tactics were not just unethical, but also harmful to computer users and the overall economy.

So it's very disappointing to see Apple using tactics it once bitterly denounced, and declaring that it's decided to take over a market because "we want to get in." If Apple can use iTunes as a weapon against Pure Digital and Palm, what's to stop it from rolling up every new category of mobile entertainment product? Where's the incentive for other companies to invest?

I saw first-hand the stifling effect that Microsoft and Intel's duopoly control had on personal computer innovation. PC hardware companies learned not to bother with new features, because Microsoft and Intel would insist that anything new they created be made available to every other cloner. And software investments were restrained by the belief that Microsoft would use its leverage to take over any new application category that was developed.


Good fences make good neighbors

There's a danger that Apple's behavior will have the same chilling effect in mobile electronics. So I believe Apple should allow any device to sync with iTunes content, the same as an iPod. But not because it's morally right or even because it's legally required, but because it's the best thing to do for Apple. Here's why:

The two biggest threats to a very successful company are complacency and consistency. Complacency is more common -- a company that's very successful starts to relax and loses the hunger and drive that made it a winner. I think we can safely assume that won't happen to Apple as long as Steve is around. But the second risk, consistency, is more insidious -- behavior that's appropriate and accepted for a spunky startup gets punished when a big company does it.

This is what tripped up Microsoft. The same aggressiveness that served it well against IBM got it a series of lawsuits and intense government scrutiny a decade later. Even though Microsoft eventually won those suits, its execs were distracted for years, and it was forced to dramatically change its behavior. It has never been the same company since. I think Microsoft would have been much better off had it proactively adjusted its own behavior just enough to pre-empt legal action.

That's where Apple is today. It has to realize that it's no longer the underdog. It's the dominant company in mobile entertainment, and the fastest-growing major firm in mobile phones. It's already under a lot of legal scrutiny for the way it manages the iPhone App Store. If it also leverages iTunes to take out small competitors, and especially if it's dumb enough to say things like "we want in," it will guarantee unfriendly attention from government regulators -- a group of people who actually have more power to hurt Apple than do most of its competitors.

The Obama administration in the US is making noises about enforcing competition law more vigorously, and look at how the EU is picking on details in the Oracle-Sun merger, allegedly to protect local companies (link). If they'll do all that to help SAP and Bull, what will they do to protect Nokia?

Apple, you don't need the special connection with iTunes to keep on winning. You've already proven that you're much better at systems design than almost any other company on Earth. The huge iPhone apps base is exclusive to you, and that won't change. By opening up iTunes, you take away an easy excuse for regulators to pick apart your business, a process that would be distracting, expensive, and could result in much more dramatic restrictions on your actions.

Ease up a little on the gas pedal, Steve. It's the best way to keep moving fast.

ALL CONSUMERS ARE FOOLS!

Well, almost all! It was three years and three months ago when I had covered this concept passing a conclusive judgement on the intellectual incompetence of consumers around the world. And the wonder is, while releasing this iconic issue of 4Ps B&M that contains the exclusive ICMR survey of India’s 100 Most Valuable Brands, I realised that even after so many years, nothing has changed globally, and therefore I decided to bring to you the same editorial once again in toto! All consumers surely still remain fools! Seriously believe that, and you’ve got the most astoundingly rocking and smashingly successful marketing campaign! But don’t blame me, blame Dr. Daniel Kahneman of Princeton University, who received the Nobel Prize in Economics in 2002-03, for emphatically proving the above mentioned statement... His ‘Prospect Theory’ suggests that rather than undertaking decisions just based on ‘logical reasoning’ (namely, choosing the better product over the worse), humans also include a critical factor known as ‘intuition’, which is the main reason for consumers behaving irrationally and many a time even foolishly while purchasing products and services. Some years ago, even Dr. John Nash (of Nash Equilibrium fame) won the Nobel Prize for theorising a similar concept.

Most interestingly, the ‘Prospect Theory’ has its mirror image in the competitive strategy theory propounded by Dr. Michael Porter, where he postulates that all the global theories of competitive strategies and tactical warfare can be summarised into one electrifying word, ‘positioning’, and consecutively, into another word that is mind-bogglingly changing paradigms of marketing battles in global industries and consumer spaces. And that word is ‘perception’. Porter aggressively argues that consumers do not make decisions based on which product is better, but based on which product is “perceived” as better. Amusingly, across industries, more often than not, the product which is actually worse off in quality is the one which sells more, and many times, despite being priced higher.

And it’s been the same for quite a few years. For example, in 2006, the cell phone manufacturer that had the number one rank in quality in India was Sony Ericsson (IDC survey 2006); while the company which sold the most cell phones was Nokia (with a jaw dropping 79% market share, compared to a pathetic 5% of Sony Ericsson; the figures are 64% for Nokia and 6% for Sony Ericsson in June 2009), in spite of lagging behind Sony Ericsson in quality, and in spite of a majority 60% of their sales being in the costlier priced segments. Similarly in automobiles, Toyota has been consistently ranked as number one in quality, year after year (JD Power Surveys) and in 2009 was ranked the third Most Admired Corporation globally by Fortune. But still, despite being ranked relatively way below Toyota in quality, despite not even featuring in Fortune’s Top 50 Most Admired Corporations list, despite being bankrupt, the company that has consistently been the world’s largest passenger car manufacturer for years is General Motors (August 2009 global market share: GM 18.9%, Toyota 17.5%). And if speed & technological excellence were the factors of quality, then while Ferrari has won six of the past nine years’ F-1 Grand Prix Championship, its parent Fiat’s market share globally is 3.6% only. The ‘Judgement of Paris’ wine tasting competition in 1976, covered by TIME magazine’s George Taber, which was held again in May 2006 in London, proved that California wines tasted better than French, and by miles. Guess which sells more? But obviously, the French.

The strategy these global leaders use is ‘perception’! Play on consumers’ irrationality, and one can easily change their perception about eating cancer causing burgers, drinking liver destroying alcohol, consuming pesticide infested cold drinks, munching on fungal infected and worm strewn chocolates, smoking life destroying cigarettes, doing dope etc. etc. etc.; the list is never ending and extends even to football. In the history of FIFA World Cup Finals since 1930, only three times has a team that had the best quality player (that is, the player who won the Golden Boot award for scoring the most goals) gone ahead to win the tournament! For the sake of it, guess who is the most successful footballer of all times scoring the most goals in the history of international football. Obviously, the “perceived” answer is Pele, right? Wrong! The man is Daei Ali of Iran (109 goals). With 77 goals, Pele is not even second in the list (Ferenc Puskas from Hungary is, with 84 goals)! So are all consumers fools? Like I mentioned, I know of at least two people who’ve got Nobel Prizes proving just that! And none of them is a consumer like you or me!

Four questions about the Microsoft-Nokia alliance

The Microsoft-Nokia alliance turned out to be a lot more interesting than the pre-announcement rumors made it out to be. Rather than just a bundling deal for mobile Office, the press release says they'll also be co-developing "a range of new user experiences" for Nokia phones, aimed at enterprises. Those will include mobile Office, enterprise IM and conferencing, access to portals built on SharePoint, and device management.

Of those items, the IM and conferencing ideas sound the most promising to me. Office, as I explained in my last post, is not much of a purchase-driver on mobile phones. And I think Microsoft would have needed to provide Nokia compatibility in its mobile portal and device management products anyway.

I understand the logic behind the alliance. Nokia has never been able to get much traction for its e-series business phones, and Microsoft hasn't been able to kick RIM out of enterprise. So if they get together, maybe they can make progress. But it's easy to make a sweeping corporate alliance announcement, and very hard to make it actually work, especially when the partners are as big and high-ego as Microsoft and Nokia. This alliance will live or die based on execution, and on a lot of details that we don't know about yet.

Here are four questions I'd love to see answered:


What specifically are those "new user experiences"?

If Nokia and Microsoft can come up with some truly useful functionality that RIM can't copy, they might be able to win share. But the emphasis in the press release on enterprise mobility worries me. The core users for RIM are communication-hungry professionals. If you want to eat away at RIM's base, you need to excite those communicator users, and I'm not sure if either company has the right ideas to do that. As Microsoft has already proven, pleasing IT managers won't drive a ton of mobile phone purchases.


Will Microsoft really follow through?

Microsoft has been hinting for the last decade that it was were willing to decouple mobile Office from the operating system, but they never had the courage to follow through. Now they have announced something that sounds pretty definitive, but the real test will be whether they put their best engineers on the Nokia products. If Microsoft assigns its C players to the alliance, or tries to make its Nokia products inferior to their Windows Mobile versions, the alliance won't go anywhere interesting.


What does this do to Microsoft's relationships with other handset companies?

Imagine for a moment that you are the CEO of Samsung. Actually, imagine that for several moments. You aren't exclusive with Microsoft, but you've done a lot of phones with Windows Mobile on them. Now all of a sudden Microsoft makes a deal with a company that you think of as the Antichrist.

How do you feel about that?

I can tell you that Samsung is not the most trusting and nurturing company to do business with even in the best of times. So I think you make two phone calls. The first is to Steve Ballmer, asking very pointedly if you can get the same software as Nokia, on the same terms, at the same time. If you don't like the answer to that question, your next call is to Google, regarding increasing your range of Android phones.

Maybe the reality is that Microsoft has given up on Windows Mobile and doesn't care what Samsung does. But that itself would be interesting news.

I would love to know how those phone calls went today.


What does RIM do about this?

It has been putting a lot of effort into Apple-competitive features like multimedia and a software store. Does it have enough bandwidth to also fight Nokia-Microsoft? What happens to its core business if Microsoft and Nokia do come up with some cool functions that RIM doesn't have? Are there any partners that could be a counterweight to Microsoft and Nokia? If I'm working at RIM, I start to think about alliances with companies like Oracle and SAP. And I wonder if Google is interested in doing some enterprise work together.

Nokia and Microsoft, sittin' in a tree...

Multiple sources are reporting that Nokia is hedging its bets on mobile phone software:

-- The New York Times says Microsoft and Nokia will announce Wednesday that Microsoft is porting Office to Nokia's Symbian S60 phones (link).
--TechCrunch, quoting the Financial Times in Germany, claims Nokia is planning to dump Symbian in favor of its Maemo Linux operating system (link).
--Om Malik says he asked Nokia about it, and the company denied plans to dump Symbian. But the company also said, "recognizing that the value we bring to the consumer is increasingly represented through software, there is logically not just one software environment that fits all consumer and market needs." In other words, we have an open marriage with Symbian (link).


In one sense, this is absolutely not news for Nokia. It has been playing the field for years, trying to prevent any single company from gaining control over mobile software (and thereby imposing a standard on Nokia). The change is that in the past, most of that energy was aimed against Microsoft.

Microsoft too seems to be bending its standards. With the exception of the Mac, Microsoft has been extremely reluctant to license Office for other operating systems. In the past, if Nokia wanted Office, it would have been expected to license Windows Mobile.

But now both companies feel threatened by Apple and Google, and all of a sudden that ugly person across the dance floor looks a lot cuter.


The real question that no one seems to be asking is whether most customers will care about any of this stuff. Most Nokia smartphone users are blissfully unaware that their phones have an operating system, let alone whether it's Symbian or Maemo. They just want the phone to work well.

And speaking as a former Palm guy who dealt with the mobile market for years, putting Microsoft Office on a smartphone is like putting wings on a giraffe -- it may get you some attention, but it's not very practical.

Don't get me wrong, I like and admire QuickOffice, which is probably the leading Office-equivalent app in the mobile space today. It's a cool product, but for most people the screens of smartphones are too small for serious spreadsheet and word processing activity. It works, but it's awkward and produces eyestrain. Most people who have a serious need for Office on the go will just carry a netbook.

So Nokia and Microsoft will both get some nice publicity, but the announcements mean very little to the average user. What both Microsoft and Nokia need to do is create compelling new mobile functionality that's better than the stuff being produced by Apple and RIM. Until they do that, all the strategic alliances in the world won't make a significant difference.

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Update: The announcement this morning was more subtle and perhaps far-reaching than what was reported yesterday. I think the strategic situation is still the same as what I described above, but there might be more value for users than I expected. More thoughts after I have a chance to digest the announcement.