It could have been worse. A lot worse.
Many of the companies rumored to be looking at Palm would have bought it mostly for the patents or the brand, and tossed aside everything else. But I think there's a good chance that HP bought the company to keep running it. HP has a long history of activity in the mobile devices market, but hasn't had a lot of knockout success there lately, other than in notebook computers. Palm makes it a player again, or at least potentially a player.
The press release makes it sound like HP was especially interested in the software side of Palm rather than the hardware. WebOS was mentioned six times (compared to one mention of Pre), and Todd Bradley, EVP of the Personal Systems group at HP, was quoted in the press release as saying, "Palm's innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices."
Sure sounds to me like they're planning to deploy the OS across different classes of devices. And tablets were reportedly mentioned specifically in the press conference after the deal was announced.
So overall, I think Palm users and developers should feel good about the deal. Obviously, everything will depend on execution. But at least the company's not being immediately dismantled, which could easily have happened.
Here are some other thoughts on the deal:
Upside for Palm device sales. With HP's huge sales infrastructure, the Pre can move quickly into a lot of interesting places Palm couldn't easily reach -- especially corporate sales, more international markets, and more operator deals.
Ominous news for Microsoft. Between the gains for Android and the Apple-driven trend toward mobile companies owning their own platforms, the market space for Microsoft's mobile software continues to shrink. But more important than that, HP is the number one Windows vendor, and it now owns its own operating system. That's not an immediate crisis for Microsoft, but it should keep someone there awake at night.
Can the old dog HP learn new tricks? Historically, HP has been pretty close to inept in two areas that Palm knows how to run: Managing a consumer developer community, and creating a great user experience by combining hardware and software. If HP is wise, it will keep the Palm teams intact and let them gradually spread those skills to the rest of the company. On the other hand, if HP tries to "help" the Palm folks execute, it will almost certainly drown them in process and bureaucracy.
What is HP's goal in personal systems? The thing that surprises me most about the Palm purchase is that the rumor mill in Silicon Valley said HP was moving away from differentiation in PCs. The company has laid off many of the Apple refugees who had come in to help run the PC business, and the quirky advertising seems to have faded into the background. Supposedly, HP was much more interested in emulating Acer than Apple in PCs. But the Palm deal positions HP as a much more direct competitor to Apple.
Maybe HP sees mobile as a different marketplace, where investment and innovation can pay off better.
PS: I won't even get into the irony of former Palm CEO Todd Bradley now controlling the company again. Let's just say Silicon Valley is a very small place.
Rabu, 28 April 2010
Rabu, 21 April 2010
SHOW US YOUR FACES, DEAR CEOs!
CEOs come in many flavours. While some are plain vanilla, others are charismatic. While some fail, others redefine success. And while some hide, others believe in the fact that “seeing is believing”. Which one are you?
Undercurrents of controversies have always chaperoned the question: Should a CEO’s face represent the company and vice-versa? The answer is, yes – for good or for worse! That black and white photograph of Henry Ford, standing next to the ancient Model-T will always represent what Ford Motors was during its glorious heydays. Bill Gates will always be the representative of the might of Microsoft, all across the world, despite his giving away all his executive powers. Carly Fiorina will remain in the memories of thousands, for having been the loud public CEO, who created the much criticised HP-Compaq giant (the world’s largest IT company today). And whose face do you recall when you think of Dell Computers?
Much has been written and discussed about the Fed’s unceremonious firing of Rick Wagoner (the-then CEO & Chairman of General Motor Co.) in March last year, after he came under heavy criticism for allowing GM to bloat beyond logical dimensions, thereby paving way for $82 billion in losses since he took over as its CEO in June 2000. The Harvard Alumnus scrapped the EV1 electric- car program and diverted resources away from hybrids (his biggest mistakes as he confesses), but had built enough credibility to carry all shame on his strong shoulders. And to give what’s due to him, he became the symbol of the imperial auto manufacturing American nation called GM, so much so, that the Fed practically had to ask him to step down in lieu of further aid to GM. Wagoner represented brawns; the man who had worked for 32 years at GM, ever since he earned an MBA degree, represented GM. [For the critics, under Wagoner, GM had more cars that exceeded 30 miles-per-gallon than any other automaker in the world!]
To many, Akio Toyoda, the President of Toyota Motor Co., represents nothing but a meteoroid. Toyota surpassed GM in 2009, to become the world’s largest producer of automobiles for just a year before it got off to the worst possible start to 2010. To many more, he still cuts that sorry figure who apologised before the US Congress for his act of recalling 8 million vehicles this year, while taking home a $16.4 million slap. To most, the only picture that comes to mind when you imagine what Toyota is, is its three ellipsical logo. Toyoda was a character unknown to the world; no doubt, even when he testified how the company was committing to recalls in all good faith, he failed. You don’t believe a CEO whom you’ve never seen before – neither as a customer, nor as a Senator!
“If you get your face and your name out there enough, people will start to recognise you,” says this flamboyant CEO of over 200 branded companies. Over the years, he has launched costumes to amuse his business partners, customers and the media. He has thrown himself off tall buildings, hung off bridges and taken deep sea dives – all to grab attention. He had the gall to drive a tank into Times Square and fire at the Coke signboard to launch the challenge against the big cola maker. His bet – Virgin Cola. The CEO – Richard Branson, who’s flamboyant smile represents his group of over 200 companies – the Virgin Group. “A young girl once came up to me and told me I could be famous because I looked just like Richard Branson,” says he. That’s the power of being a CEO brand.
Larry Ellison, the highest paid CEO of 2009 is the poster boy of Oracle. Not easy to become a recognised face amongst the masses, especially when your company has a B2B business structure, but Ellison, born out of wedlock to a 19-year-old Jewish mother, had managed his public image quite well, despite having been married four times! He started Oracle in 1977 (the same year when Wagoner joined GM), investing $1,400 of his own money. Today, it is worth $131 billion on the bourses, and Ellison is the sixth richest man in the world. Ellison has suffered a series of personal mishaps, but has managed to cover it up well, for the sake of his corporation, which has grown in leaps by the years. Today, he is known for his extravagant lifestyle, his $200 million real estate, his fleet of exotic cars and his personal aircrafts. What he is known for most widely is for being the poster CEO of Oracle.
Jeffrey Immelt is another name that has earned a huge critique following –for converting GE into more of an Automated Teller Machine that a manufacturing giant (close to 50% of GE’s 2009 revenues came from GE Capital Services). The slowdown hit it hard, washing away close to $100 billion of its Mcap. It wasn’t an easy task to become the GE ambassador to the world, but Immelt, minus all his shareholder wealth destroying acts, has done his bit to play it to the galleries. Some blame him, some praise him, but everyone knows him.
Larry Ellison’s good friend Steve Jobs is no different. From being the brand ambassador at the launch of every iconic Apple product to fi ring employees at will, his fame has grown over time, at manifold the rate at which he has lost pounds. If it’s not Steve, it’s not Apple!
The list of CEOs who have led from the front, both in the boardrooms and outside in the open isn’t short. From Warren Edward Buffett (of Berkshire Hathaway) to Rupert Murdoch (of News Corporation), from Larry Page and Sergey Brin (who are known for their product Google, unlike the founders of Orkut, LinkedIn and Twitter) to Mark Zuckerber (the 24 year-lad founder and CEO of Facebook and the youngest selfmade billionaire in the world), from Indra Nooyi (“The Iron Woman” who is not just the most powerful woman in the world on many lists, but also one who has transformed PepsiCo’s portfolio, and publicly so, leading the aggressive expansion of PepsiCo into nations like Brazil, Russia, India and China; not many would recall who CocaCola’s CEO is!), the list is long.
Think about it, American CEOs, you’ll know a dime a dozen. But if I were to ask you to name a few Japanese CEOs, apart from Akio Morita (and perhaps Toyoda too), you would know none. Is that the reason why for the past many years, Japan is suffering from a debilitating recession? I don’t have the answer to that, but what I can surely say is that Japan lacks CEOs not only at the corporate level, but even at the country level (for example, the US has Obama) who would be able to jumpstart the economic growth by individually becoming the face of change. Clearly, the term ‘leading from the front’ was not made for no reason. on. 4Ps
Undercurrents of controversies have always chaperoned the question: Should a CEO’s face represent the company and vice-versa? The answer is, yes – for good or for worse! That black and white photograph of Henry Ford, standing next to the ancient Model-T will always represent what Ford Motors was during its glorious heydays. Bill Gates will always be the representative of the might of Microsoft, all across the world, despite his giving away all his executive powers. Carly Fiorina will remain in the memories of thousands, for having been the loud public CEO, who created the much criticised HP-Compaq giant (the world’s largest IT company today). And whose face do you recall when you think of Dell Computers?
Much has been written and discussed about the Fed’s unceremonious firing of Rick Wagoner (the-then CEO & Chairman of General Motor Co.) in March last year, after he came under heavy criticism for allowing GM to bloat beyond logical dimensions, thereby paving way for $82 billion in losses since he took over as its CEO in June 2000. The Harvard Alumnus scrapped the EV1 electric- car program and diverted resources away from hybrids (his biggest mistakes as he confesses), but had built enough credibility to carry all shame on his strong shoulders. And to give what’s due to him, he became the symbol of the imperial auto manufacturing American nation called GM, so much so, that the Fed practically had to ask him to step down in lieu of further aid to GM. Wagoner represented brawns; the man who had worked for 32 years at GM, ever since he earned an MBA degree, represented GM. [For the critics, under Wagoner, GM had more cars that exceeded 30 miles-per-gallon than any other automaker in the world!]
To many, Akio Toyoda, the President of Toyota Motor Co., represents nothing but a meteoroid. Toyota surpassed GM in 2009, to become the world’s largest producer of automobiles for just a year before it got off to the worst possible start to 2010. To many more, he still cuts that sorry figure who apologised before the US Congress for his act of recalling 8 million vehicles this year, while taking home a $16.4 million slap. To most, the only picture that comes to mind when you imagine what Toyota is, is its three ellipsical logo. Toyoda was a character unknown to the world; no doubt, even when he testified how the company was committing to recalls in all good faith, he failed. You don’t believe a CEO whom you’ve never seen before – neither as a customer, nor as a Senator!
“If you get your face and your name out there enough, people will start to recognise you,” says this flamboyant CEO of over 200 branded companies. Over the years, he has launched costumes to amuse his business partners, customers and the media. He has thrown himself off tall buildings, hung off bridges and taken deep sea dives – all to grab attention. He had the gall to drive a tank into Times Square and fire at the Coke signboard to launch the challenge against the big cola maker. His bet – Virgin Cola. The CEO – Richard Branson, who’s flamboyant smile represents his group of over 200 companies – the Virgin Group. “A young girl once came up to me and told me I could be famous because I looked just like Richard Branson,” says he. That’s the power of being a CEO brand.
Larry Ellison, the highest paid CEO of 2009 is the poster boy of Oracle. Not easy to become a recognised face amongst the masses, especially when your company has a B2B business structure, but Ellison, born out of wedlock to a 19-year-old Jewish mother, had managed his public image quite well, despite having been married four times! He started Oracle in 1977 (the same year when Wagoner joined GM), investing $1,400 of his own money. Today, it is worth $131 billion on the bourses, and Ellison is the sixth richest man in the world. Ellison has suffered a series of personal mishaps, but has managed to cover it up well, for the sake of his corporation, which has grown in leaps by the years. Today, he is known for his extravagant lifestyle, his $200 million real estate, his fleet of exotic cars and his personal aircrafts. What he is known for most widely is for being the poster CEO of Oracle.
Jeffrey Immelt is another name that has earned a huge critique following –for converting GE into more of an Automated Teller Machine that a manufacturing giant (close to 50% of GE’s 2009 revenues came from GE Capital Services). The slowdown hit it hard, washing away close to $100 billion of its Mcap. It wasn’t an easy task to become the GE ambassador to the world, but Immelt, minus all his shareholder wealth destroying acts, has done his bit to play it to the galleries. Some blame him, some praise him, but everyone knows him.
Larry Ellison’s good friend Steve Jobs is no different. From being the brand ambassador at the launch of every iconic Apple product to fi ring employees at will, his fame has grown over time, at manifold the rate at which he has lost pounds. If it’s not Steve, it’s not Apple!
The list of CEOs who have led from the front, both in the boardrooms and outside in the open isn’t short. From Warren Edward Buffett (of Berkshire Hathaway) to Rupert Murdoch (of News Corporation), from Larry Page and Sergey Brin (who are known for their product Google, unlike the founders of Orkut, LinkedIn and Twitter) to Mark Zuckerber (the 24 year-lad founder and CEO of Facebook and the youngest selfmade billionaire in the world), from Indra Nooyi (“The Iron Woman” who is not just the most powerful woman in the world on many lists, but also one who has transformed PepsiCo’s portfolio, and publicly so, leading the aggressive expansion of PepsiCo into nations like Brazil, Russia, India and China; not many would recall who CocaCola’s CEO is!), the list is long.
Think about it, American CEOs, you’ll know a dime a dozen. But if I were to ask you to name a few Japanese CEOs, apart from Akio Morita (and perhaps Toyoda too), you would know none. Is that the reason why for the past many years, Japan is suffering from a debilitating recession? I don’t have the answer to that, but what I can surely say is that Japan lacks CEOs not only at the corporate level, but even at the country level (for example, the US has Obama) who would be able to jumpstart the economic growth by individually becoming the face of change. Clearly, the term ‘leading from the front’ was not made for no reason. on. 4Ps
Minggu, 18 April 2010
Lessons From the Fall of Palm
What went wrong?
Palm is now apparently prepping itself for a remainder sale, or new sugar daddy, or some other sort of deal that will change its current trajectory. I wish them well, and I hope they can remain independent and go on to accomplish great things in the future. But whatever happens, it's clear that the current incarnation of Palm has failed. Almost everyone I talk to in Silicon Valley is already speaking of the company in the past tense.
Most of the comments I've seen online blame the company's failure on the high marketing costs associated with selling hardware:
--Ed Snyder, an analyst with Charter Equity Research, told the New York Times: “They poured all their resources into developing a killer product. But they didn’t have the resources left to go to market.” (link)
--Engadget called Palm "a company that has more talent, history, and bright ideas than it has cash and customers." (link)
--Charlie Wolf of Needham & Company told Bloomberg: "It can't get scale. It doesn't have the resources to market the Palm OS and the Pre in a way that would break through the noise." (link)
--Even Palm CEO Jon Rubinstein blamed the problem on marketing challenges: "Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today....However, driving broad consumer adoption of Palm products is taking longer than we anticipated." (link)
The quotes reflect the tech industry's stereotypical view of hardware businesses: They require huge marketing budgets, making them incredibly high-risk, high-cost investments. That's why you see thousands of software startups in Silicon Valley and only a handful of hardware ones.
I think that's nuts. Hardware companies like Pure Digital (maker of the Flip camera) succeeded with virtually no marketing budget. Why? Because they made appealing products that filled a particular customer need. If you do that, hardware is easy to market virally. I think the lesson from Palm's failure isn't "making hardware is dangerous," it's "lack of focus in a small hardware company is dangerous."
I don't want to turn this post into an anti-Palm diatribe. As I said, I hope they survive, and I have enormous respect for the people who work there. But in the spirit of helping everyone learn from Palm's situation, here are the five lessons I think we should all take away from Palm's struggles:
1. Understand what problem you're solving. I asked this question when the Pre was first announced, and I'll ask it again now: What compelling problem does the Pre solve for what customer? (link) It's easy to answer that for successful devices:
--BlackBerry = great e-mail on the go for mobile professionals
--iPhone = the best entertainment and browsing on the go (later extended to include apps)
--Flip = the easiest way to capture video and share it online
What's the short pitch for Pre? Go check the Palm website. As of April 18, it featured three different positionings right on the front page: "Social networking at its best," "Advanced 3D games," and "Work smarter, stay connected." So it's a business / social networking / gaming tool. For all of those millions of people who want to do serious business, 3D games, and Facebook posts all at once.
This isn't a recent problem. At the time of the Pre announcement, Palm advocates described it as a device for people who want better e-mail than the iPhone and better entertainment than the BlackBerry. The implication was that there's a big center to the smartphone market that's frustrated by the lack of a keyboard on an iPhone and the lack of a music player on BlackBerry. Re-read Jon Rubinstein's quote above: "webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today." The assumption there is that millions of customers are looking to buy a "smartphone experience," as opposed to a tool that solves a particular problem.
If that unsatisfied center existed, Pre would have sold like hotcakes.
2. Take care of your friends. When Elevation Partners took control of Palm, the company wasn't just a famous brand. It also had a fairly large base of loyal customers and developers who had stuck with the Treo through a lot of angst and adversity. The new Palm did very little to keep those people loyal. The developers weren't given any way to bridge their existing applications to the new OS. Faced with starting over on webOS or starting over on the much larger iPhone base, guess what they chose. And Palm, which once prided itself on simplicity, made the Treo to Pre migration process into the sort of marathon experience that we used to tease Microsoft about. Here are some of the instructions from Palm's own website (link):
You can find some more discussion here.
This in itself wasn't a disaster. Any company has to set priorities, and Palm just didn't make the links to its legacy customers and developers a priority. But it meant Palm couldn't draw on a pool of friends to help it get sales off to a quick start. That put even more pressure on Pre to be a knockout hit from day one.
3. Move faster and slower. After the Elevation deal, Palm went through a very strange management transition. Jon Rubinstein was installed as Chairman and head of product development, Ed Colligan remained as CEO (so he was Jon's employee and boss at the same time), and Jeff Hawkins was supposed to remain as product guru. Palm said at the time that Jon would be the execution person and Jeff the visionary. "The combination of those two guys is one of the most dynamic... combinations on the planet," Palm said. Yeah, right. The real process was a creeping reorganization in which Rubinstein replaced the old Palm executive team in stages. I think Palm would have been better off with a single quick transition in which the new team was put in place all at once and given time to coalesce.
But if Palm moved too slowly on organizational change, it probably moved too quickly on product shipment. The Pre shipped without a finished development environment, frustrating the developers who were most motivated to create interesting software on it. And it had an OS that hadn't been tuned properly for performance, so even its most enthusiastic users had to apologize for its lack of responsiveness. Although there was a lot of pressure on Palm at the time to ship, in retrospect the company would have been far, far better off if it had waited a few more months and shipped a product that delivered a great user and developer experience.
4. What you do, do well. The old Palm's "zen" design principles said: "Find a problem, find the simplest solution, punt the rest." It was an appliance design philosophy translated into computing. The new Palm tried to boil the ocean. Its ambition to create a smartphone platform superior to iPhone forced it to compete on a very broad range of fronts, everything from OS to SDK to app store to hardware. Inevitably, Palm wasn't able to execute equally well in all areas, and some of the Pre's features were compromised due to lack of resources. Apple can get away with a flawed version one product because it has the financial resources to go back and fix its mistakes. Which brings me to the fifth lesson...
5. You're not Apple. Trying to beat Apple head-on is a rich man's game, the computing equivalent of fighting a land war in Asia. There are effective ways to compete with Apple on a budget, but they all involve avoiding or neutralizing its strengths, and targeting segments or tactics that Apple can't or won't pursue. Instead, Palm attacked head on. I'm picturing that Warner Brothers cartoon where Black Knight Yosemite Sam charges at full speed into the wall of a castle and bounces off flat as a pancake (link).
What it means for the rest of us
You'll notice that I didn't say anything about Palm's bizarre ads featuring a Borg hive queen (here and here). That's because they were a symptom, not a cause. When your product is right, the message will be simple and you won't need creepy ads to stand out. Often you won't need ads at all.
The mistakes highlighted by Palm are common in the tech industry. Here's what I think we should do about them:
--I know there are device companies out there right now where the employees are whispering to each other, "we've committed to shipping on a certain date, but the product won't really be ready." You know who you are. Don't let your company pull a Pre; speak up. If nothing else works, print this post and send it to your boss. The Board of Directors might fire you if you delay the launch, but they definitely will fire you if the product fails.
--I frequently talk with companies that are creating bundles of technologies rather than coherent solutions to problems (anybody want to buy a Verizon Droid? link). Ask yourself, who is my customer, and am I solving a problem that they care about deeply?
--I know investors who say, "I'll never touch hardware, it's too risky." Understand that you're missing opportunities where you could invest with a higher return, because valuations aren't being bid up by competing investors. The fault, dear investor, is not in our product category, but in our execution.
That's my take. What do you think? Where did Palm go wrong (if at all), and what do you think the lessons are for other companies?
Palm is now apparently prepping itself for a remainder sale, or new sugar daddy, or some other sort of deal that will change its current trajectory. I wish them well, and I hope they can remain independent and go on to accomplish great things in the future. But whatever happens, it's clear that the current incarnation of Palm has failed. Almost everyone I talk to in Silicon Valley is already speaking of the company in the past tense.
Most of the comments I've seen online blame the company's failure on the high marketing costs associated with selling hardware:
--Ed Snyder, an analyst with Charter Equity Research, told the New York Times: “They poured all their resources into developing a killer product. But they didn’t have the resources left to go to market.” (link)
--Engadget called Palm "a company that has more talent, history, and bright ideas than it has cash and customers." (link)
--Charlie Wolf of Needham & Company told Bloomberg: "It can't get scale. It doesn't have the resources to market the Palm OS and the Pre in a way that would break through the noise." (link)
--Even Palm CEO Jon Rubinstein blamed the problem on marketing challenges: "Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today....However, driving broad consumer adoption of Palm products is taking longer than we anticipated." (link)
The quotes reflect the tech industry's stereotypical view of hardware businesses: They require huge marketing budgets, making them incredibly high-risk, high-cost investments. That's why you see thousands of software startups in Silicon Valley and only a handful of hardware ones.
I think that's nuts. Hardware companies like Pure Digital (maker of the Flip camera) succeeded with virtually no marketing budget. Why? Because they made appealing products that filled a particular customer need. If you do that, hardware is easy to market virally. I think the lesson from Palm's failure isn't "making hardware is dangerous," it's "lack of focus in a small hardware company is dangerous."
I don't want to turn this post into an anti-Palm diatribe. As I said, I hope they survive, and I have enormous respect for the people who work there. But in the spirit of helping everyone learn from Palm's situation, here are the five lessons I think we should all take away from Palm's struggles:
1. Understand what problem you're solving. I asked this question when the Pre was first announced, and I'll ask it again now: What compelling problem does the Pre solve for what customer? (link) It's easy to answer that for successful devices:
--BlackBerry = great e-mail on the go for mobile professionals
--iPhone = the best entertainment and browsing on the go (later extended to include apps)
--Flip = the easiest way to capture video and share it online
What's the short pitch for Pre? Go check the Palm website. As of April 18, it featured three different positionings right on the front page: "Social networking at its best," "Advanced 3D games," and "Work smarter, stay connected." So it's a business / social networking / gaming tool. For all of those millions of people who want to do serious business, 3D games, and Facebook posts all at once.
This isn't a recent problem. At the time of the Pre announcement, Palm advocates described it as a device for people who want better e-mail than the iPhone and better entertainment than the BlackBerry. The implication was that there's a big center to the smartphone market that's frustrated by the lack of a keyboard on an iPhone and the lack of a music player on BlackBerry. Re-read Jon Rubinstein's quote above: "webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today." The assumption there is that millions of customers are looking to buy a "smartphone experience," as opposed to a tool that solves a particular problem.
If that unsatisfied center existed, Pre would have sold like hotcakes.
2. Take care of your friends. When Elevation Partners took control of Palm, the company wasn't just a famous brand. It also had a fairly large base of loyal customers and developers who had stuck with the Treo through a lot of angst and adversity. The new Palm did very little to keep those people loyal. The developers weren't given any way to bridge their existing applications to the new OS. Faced with starting over on webOS or starting over on the much larger iPhone base, guess what they chose. And Palm, which once prided itself on simplicity, made the Treo to Pre migration process into the sort of marathon experience that we used to tease Microsoft about. Here are some of the instructions from Palm's own website (link):
Decide where you want to move your Calendar/Contacts
The Data Transfer Assistant moves your info out of the desktop organizer and onto your phone. From there, your phone sends the data to the web account of your choice.
Your choices: Google, Microsoft Exchange, or Yahoo!.
Need help deciding where your info should go?
Skip this step if you already have an online account where you want to move the info from your old desktop organizer.
Create an account for one of these web services:
1. Go to Google.com: Create a Google account and set up a new account.
2. If you've never used Google Calendar, you'll need to sign in at least one time before proceeding. Go to google.com/calendar, and follow the login & activation steps until you see your calendar.
Microsoft Exchange for corporate users
Ask your IT Helpdesk for these four pieces of information.
* Incoming mail server name
* Domain name (if it's different from your incoming mail server name)
* Exchange username
* Exchange password
Yahoo! Calendar & Contacts
Contacts are transferred from Yahoo.com to the phone, but not from phone to Yahoo!
1. Go to Yahoo.com: Sign up for Yahoo! and create a new account.
Or back up your info to your online Palm profile
Ready to go - you already created an account when you set up your phone.
Set up the account on your phone
After creating an online account, add it to your phone. This ensures that your info moves correctly to the account.
1. On your phone, open Contacts.
2. Open the application menu and tap Preferences & Accounts.
3. Tap Add An Account and select the account you created above.
4. Enter the username and password for that account.
Sync your old device one last time
Skip this step if you do not have a previous Palm device.
To make sure you have the most up-to-date version of your info in Palm Desktop or standalone Outlook, synchronize your previous Palm device and your computer one last time.
Export your info using the Data Transfer Assistant
For fastest results, turn on Wi-Fi (if available) and plug in the charger before proceeding.
Download the tool: Data_Transfer_Assistant_1e.exe
After the download is complete, double-click Data_Transfer_Assistant_1e.exe in the location on your computer where you downloaded it.
Follow the onscreen instructions.
Note: When you connect the phone to your computer, some applications may launch automatically, moving the Data Transfer Assistant to the background. To return the Data Transfer Assistant to the foreground, click the Data Transfer Assistant icon on your computer's taskbar....
You can find some more discussion here.
This in itself wasn't a disaster. Any company has to set priorities, and Palm just didn't make the links to its legacy customers and developers a priority. But it meant Palm couldn't draw on a pool of friends to help it get sales off to a quick start. That put even more pressure on Pre to be a knockout hit from day one.
3. Move faster and slower. After the Elevation deal, Palm went through a very strange management transition. Jon Rubinstein was installed as Chairman and head of product development, Ed Colligan remained as CEO (so he was Jon's employee and boss at the same time), and Jeff Hawkins was supposed to remain as product guru. Palm said at the time that Jon would be the execution person and Jeff the visionary. "The combination of those two guys is one of the most dynamic... combinations on the planet," Palm said. Yeah, right. The real process was a creeping reorganization in which Rubinstein replaced the old Palm executive team in stages. I think Palm would have been better off with a single quick transition in which the new team was put in place all at once and given time to coalesce.
But if Palm moved too slowly on organizational change, it probably moved too quickly on product shipment. The Pre shipped without a finished development environment, frustrating the developers who were most motivated to create interesting software on it. And it had an OS that hadn't been tuned properly for performance, so even its most enthusiastic users had to apologize for its lack of responsiveness. Although there was a lot of pressure on Palm at the time to ship, in retrospect the company would have been far, far better off if it had waited a few more months and shipped a product that delivered a great user and developer experience.
4. What you do, do well. The old Palm's "zen" design principles said: "Find a problem, find the simplest solution, punt the rest." It was an appliance design philosophy translated into computing. The new Palm tried to boil the ocean. Its ambition to create a smartphone platform superior to iPhone forced it to compete on a very broad range of fronts, everything from OS to SDK to app store to hardware. Inevitably, Palm wasn't able to execute equally well in all areas, and some of the Pre's features were compromised due to lack of resources. Apple can get away with a flawed version one product because it has the financial resources to go back and fix its mistakes. Which brings me to the fifth lesson...
5. You're not Apple. Trying to beat Apple head-on is a rich man's game, the computing equivalent of fighting a land war in Asia. There are effective ways to compete with Apple on a budget, but they all involve avoiding or neutralizing its strengths, and targeting segments or tactics that Apple can't or won't pursue. Instead, Palm attacked head on. I'm picturing that Warner Brothers cartoon where Black Knight Yosemite Sam charges at full speed into the wall of a castle and bounces off flat as a pancake (link).
What it means for the rest of us
You'll notice that I didn't say anything about Palm's bizarre ads featuring a Borg hive queen (here and here). That's because they were a symptom, not a cause. When your product is right, the message will be simple and you won't need creepy ads to stand out. Often you won't need ads at all.
The mistakes highlighted by Palm are common in the tech industry. Here's what I think we should do about them:
--I know there are device companies out there right now where the employees are whispering to each other, "we've committed to shipping on a certain date, but the product won't really be ready." You know who you are. Don't let your company pull a Pre; speak up. If nothing else works, print this post and send it to your boss. The Board of Directors might fire you if you delay the launch, but they definitely will fire you if the product fails.
--I frequently talk with companies that are creating bundles of technologies rather than coherent solutions to problems (anybody want to buy a Verizon Droid? link). Ask yourself, who is my customer, and am I solving a problem that they care about deeply?
--I know investors who say, "I'll never touch hardware, it's too risky." Understand that you're missing opportunities where you could invest with a higher return, because valuations aren't being bid up by competing investors. The fault, dear investor, is not in our product category, but in our execution.
That's my take. What do you think? Where did Palm go wrong (if at all), and what do you think the lessons are for other companies?
Rabu, 07 April 2010
FIRST LOSER’S ADVANTAGE
EVERYBODY TOLD US WHY HAVING THE FIRST MOVERS’ ADVANTAGE WAS MOST CRITICAL FOR SUCCESS. THEY WERE ALL WRONG!
The global business acumen is populated with a multitude of mildewed and hollow adages that fail to equip companies with knowledge to reap extraordinary benefits; First Movers’ Advantage is one such hogwash. Over decades, there have been entrepreneurs who have been washed away by this cliché, that once promised them a blue ocean. And most often than not, they ended up wasting truckloads of dollars in inventing the next unimaginable business bet, and building the platform for the late coming slumber-jacks, who eventually walked away with all the goods – the revenues, the profits, and in most cases, even the innovator’s future!
Henry Ford, who himself was a first mover (having pioneered the automobile), had once proclaimed, “I believe that the best strategy for the first per son is to be second!” He was right. Today, Ford Motor Company, his brainchild has not only slipped from being the world leader in automobiles, which it was some decades back (Toyota, GM & Volkswagen with respective market shares of 13.7%, 12.2% & 9.5% are the top three as per the December 2009 World Motor Vehicle Production OICA Survey), but has also become the champion of automobile recalls, globally! If you thought that the $16.4 million fine imposed on the late-mover Toyota Motor Co. by the US government, following its monstrous recall of 8 million vehicles since January 2010 was a fair punishment, how much would you recommend for the first mover Ford, which in 2008 recalled 14.1 million vehicles, after recalling 8 million in 1996?
What’s common between Vivola, Erwise, Midas and Mosaic? All four, individually claimed that they created the browser market. Their hard work translated into a business idea for late-mover Bill Gates. As of February 2010, Microsoft’s Internet Explorer commanded a 65% control over the global browser market (data by Janco Associates Inc.).
Being the first to stake a claim on a new territory doesn’t ensure sustainability. Sadly, it doesn’t even guarantee advantages as was originally believed. Take the case of the lesser known Prodigy Communications. It was an early bird in the business of online connections, which it entered in 1984, along with huge brand names to guarantee it success: there was IBM leading technology for its operations, Sears Roebuck heading its online retail and CBS was roped in for news coverage and selling of ad-space. Twelve years later, it was sold to a private investor group for just $250 million. Similar was the case with the Graphical User Interface, which was developed by the Xerox Corporation at their Palo Alto Research Center (PARC) in the 1970s. Steve Jobs, co-founder of Apple Computers, visited PARC in 1979 and was impressed by the Xerox Alto, the first computer with a graphical user interface feature. He offered Xerox a chance to invest $1 million in Apple pre-IPO stock, in lieu of two visits to PARC with his engineers. Today, none remember that the Xerox Alto was the first computer with a GUI; for the world, it is the Apple Lisa, which simply “copied” the technology which Jobs saw at Xerox. It’s interesting how one man can prove the case for the late movers so well. Steve Jobs didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed right! His iPod, iMac, iPhone have become bestsellers.
There are many examples of how the first mover lot has been one which has been long forgotten. Names like King Kullen Grocery Inc. (which pioneered supermarkets in America in 1884), Minnetonka (which produced the world’s first liquid soap), Ampex (maker of the first VCRs, which lived for just two decades), Chux (from J&J, which was the first disposable diaper brand), Micro Instrumentation & Telemetry Systems (which pioneered personal computing with the Altair), Visicalc (the first desktop spreadsheet program), Atari (which brought to market the first video game), Dumont (which led the way in selling television sets), and many more, have been relegated to the dust-laden history books. And to talk about the new age champions, they are all those which learnt from the mistakes of the early birds.
Walmart was not the pioneer of retail. Excel was not the first spreadsheet to hit desktops. Commercial aircraft were not the brainchild of Boeing or Airbus. Neither did Disney start a theme-based park, nor was Starbucks the first to sell gourmet coffee. It’s true: they were not the first, they had learnt well and did better!
The criticism is supported well by research too. Researchers DavidMontgomery (Stanford University) and Marvin Lieberman (University of California), in their paper titled ‘First Mover Advantages...’ stated that the ability “to ‘free ride’ on first-mover investments and resolution of technological and market uncertainty” comes as an advantage to second movers.
“Pioneers often miss the best opportunities, which are obscured by technological and market uncertainties. In effect, early entrants may acquire the ‘wrong’ resources, which prove to be of limited value as the market evolves,” added the duo. And to talk about numbers, the fi nal nail is hammered in by Richard B. McKenzie of the University of California, who proved through an extensive study how failure rates across traditional industries for pioneers, was a 71%, with their lot controlling just a pathetic average market share of 6%.
A research by professors Markus Christen (INSEAD) and William Boulding (Duke University) also testifies thus, “We found that pioneers in consumer goods had an ROI of 3.78% lower than later entrants. And the ROI of first movers was 4.24% lower than followers in the industrial goods sector. Bottomline: Pioneers were substantially less profitable than followers over the long run…
Once upon a time, long long ago in Bethlehem, the wise men said that competition was like a 100 meter race – the first off the blocks is the one who has the biggest chance of winning the race. What they unfortunately forgot was that competition was more like a 40 kilometer marathon, where it matters more how well would you last the whole distance and learn from the mistakes of those ahead of you. Imagine driving a car at 120 miles an hour on a completely pitch dark highway in the middle of the night. Now, wouldn’t you give a king’s ransom to have another car ahead of you tasting the bumps and ditches first?
The global business acumen is populated with a multitude of mildewed and hollow adages that fail to equip companies with knowledge to reap extraordinary benefits; First Movers’ Advantage is one such hogwash. Over decades, there have been entrepreneurs who have been washed away by this cliché, that once promised them a blue ocean. And most often than not, they ended up wasting truckloads of dollars in inventing the next unimaginable business bet, and building the platform for the late coming slumber-jacks, who eventually walked away with all the goods – the revenues, the profits, and in most cases, even the innovator’s future!
Henry Ford, who himself was a first mover (having pioneered the automobile), had once proclaimed, “I believe that the best strategy for the first per son is to be second!” He was right. Today, Ford Motor Company, his brainchild has not only slipped from being the world leader in automobiles, which it was some decades back (Toyota, GM & Volkswagen with respective market shares of 13.7%, 12.2% & 9.5% are the top three as per the December 2009 World Motor Vehicle Production OICA Survey), but has also become the champion of automobile recalls, globally! If you thought that the $16.4 million fine imposed on the late-mover Toyota Motor Co. by the US government, following its monstrous recall of 8 million vehicles since January 2010 was a fair punishment, how much would you recommend for the first mover Ford, which in 2008 recalled 14.1 million vehicles, after recalling 8 million in 1996?
What’s common between Vivola, Erwise, Midas and Mosaic? All four, individually claimed that they created the browser market. Their hard work translated into a business idea for late-mover Bill Gates. As of February 2010, Microsoft’s Internet Explorer commanded a 65% control over the global browser market (data by Janco Associates Inc.).
Being the first to stake a claim on a new territory doesn’t ensure sustainability. Sadly, it doesn’t even guarantee advantages as was originally believed. Take the case of the lesser known Prodigy Communications. It was an early bird in the business of online connections, which it entered in 1984, along with huge brand names to guarantee it success: there was IBM leading technology for its operations, Sears Roebuck heading its online retail and CBS was roped in for news coverage and selling of ad-space. Twelve years later, it was sold to a private investor group for just $250 million. Similar was the case with the Graphical User Interface, which was developed by the Xerox Corporation at their Palo Alto Research Center (PARC) in the 1970s. Steve Jobs, co-founder of Apple Computers, visited PARC in 1979 and was impressed by the Xerox Alto, the first computer with a graphical user interface feature. He offered Xerox a chance to invest $1 million in Apple pre-IPO stock, in lieu of two visits to PARC with his engineers. Today, none remember that the Xerox Alto was the first computer with a GUI; for the world, it is the Apple Lisa, which simply “copied” the technology which Jobs saw at Xerox. It’s interesting how one man can prove the case for the late movers so well. Steve Jobs didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed right! His iPod, iMac, iPhone have become bestsellers.
There are many examples of how the first mover lot has been one which has been long forgotten. Names like King Kullen Grocery Inc. (which pioneered supermarkets in America in 1884), Minnetonka (which produced the world’s first liquid soap), Ampex (maker of the first VCRs, which lived for just two decades), Chux (from J&J, which was the first disposable diaper brand), Micro Instrumentation & Telemetry Systems (which pioneered personal computing with the Altair), Visicalc (the first desktop spreadsheet program), Atari (which brought to market the first video game), Dumont (which led the way in selling television sets), and many more, have been relegated to the dust-laden history books. And to talk about the new age champions, they are all those which learnt from the mistakes of the early birds.
Walmart was not the pioneer of retail. Excel was not the first spreadsheet to hit desktops. Commercial aircraft were not the brainchild of Boeing or Airbus. Neither did Disney start a theme-based park, nor was Starbucks the first to sell gourmet coffee. It’s true: they were not the first, they had learnt well and did better!
The criticism is supported well by research too. Researchers DavidMontgomery (Stanford University) and Marvin Lieberman (University of California), in their paper titled ‘First Mover Advantages...’ stated that the ability “to ‘free ride’ on first-mover investments and resolution of technological and market uncertainty” comes as an advantage to second movers.
“Pioneers often miss the best opportunities, which are obscured by technological and market uncertainties. In effect, early entrants may acquire the ‘wrong’ resources, which prove to be of limited value as the market evolves,” added the duo. And to talk about numbers, the fi nal nail is hammered in by Richard B. McKenzie of the University of California, who proved through an extensive study how failure rates across traditional industries for pioneers, was a 71%, with their lot controlling just a pathetic average market share of 6%.
A research by professors Markus Christen (INSEAD) and William Boulding (Duke University) also testifies thus, “We found that pioneers in consumer goods had an ROI of 3.78% lower than later entrants. And the ROI of first movers was 4.24% lower than followers in the industrial goods sector. Bottomline: Pioneers were substantially less profitable than followers over the long run…
Once upon a time, long long ago in Bethlehem, the wise men said that competition was like a 100 meter race – the first off the blocks is the one who has the biggest chance of winning the race. What they unfortunately forgot was that competition was more like a 40 kilometer marathon, where it matters more how well would you last the whole distance and learn from the mistakes of those ahead of you. Imagine driving a car at 120 miles an hour on a completely pitch dark highway in the middle of the night. Now, wouldn’t you give a king’s ransom to have another car ahead of you tasting the bumps and ditches first?
Why focus ?
Confucius says: “Man who chases two rabbits catches neither!”
“I’d rather be strong somewhere than weak everywhere”.
When managers know they have only one battle to fight it concentrates their minds wonderfully.
Companies that broaden their line, for whatever reason, are vulnerable to narrowly focused competition that takes advantage of division.
Nobody loses business just because they have a broad focus. To lose business you have to run up against a competitor with a narrow focus.
What’s needed for success is focus, which sometimes can be achieved with a full line of products, but with sacrifices' made in other areas. Distribution could be one such area. Dell Computer deselected retail distribution and direct sales force with success.
Some managers equate size with power. Is a large company more powerful than a small one? Not necessarily. A highly focused company is more powerful than a less focused company.
What provide an organization with its power is its degree of focus and its share of market. Size is only important if it contributes to an increase in market share.
Power gives a company the ability to “control” an industry, taking it in a direction that will only increase the company’s power and domination.
Wouldn’t it be easier to increase the share of a business you know than to get a share of a business you don’t know?
A focus is not forever.
At any point in time, a company has 3 kinds of products. (1) yesterdays products, which are candidates for disposal; (2) today’s products, which are producing the bulk of the company’s profits; and (3) tomorrow’s products, which are the company’s future.
Nothing stays still long enough for a company to be perfectly focused.
Sooner or later even the most powerful focus becomes obsolete. That’s when a company must refocus itself.
Focus, the future of your company depends on it.
Abstracts from: “Focus, The future of your company depends on it”, by Al Ries
If you are a BtB-unit manager and you are interested in some practical DIY-tools on strategic focus maybe you will enjouy visiting my blog: Strategy On-line
Regards
Peter
Kamis, 01 April 2010
A dissenting view on the Yahoo - New York Times merger
The reactions to the New York Times - Yahoo merger announcement this morning were predictably brutal. "The best corporate merger since AOL-TimeWarner," TechCrunch wrote. On the radio this morning, one of the commentators talked about "the blind leading the crippled," and joked that they should both merge with General Motors so we could "get all the deadwood together in one place." The impromptu picketing of Yahoo headquarters by angry Flickr users probably didn't help.
I have a different take on the deal, though. After years of failed "new media" ventures based more on hope than synergy, I think this one might actually make business sense. Here's why:
No more paid content fantasies. The Times had been headed down the road toward making its content paid-only for anyone reading more than a few articles a month. In my opinion, this was a huge roll of the dice that could have destroyed the company's long-term prospects. The Times online edition is the most popular newspaper site in the US, and has been very gradually closing the gap with CNN, the US online news leader. Moving to a paid model would have cut the Times audience very substantially, leaving some other news operation to seize the number one position. As we know from other areas of the web, there are very strong network effects online. Once the Times surrendered the online traffic lead, I think its role as the newspaper of record in the US would have gradually been lost.
No more Yahoo search fantasies. Yahoo has had a terrible time deciding what sort of company it wants to be. For a long time it was supposed to be a "new media" company, which apparently meant it had the business practices of a film studio without the cool movie premieres. Many people in Silicon Valley still think of Yahoo as the failed Google wannabe, which is kind of like criticizing Sweden for failing to be Germany.
Unfortunately, Yahoo has been feeding that comparison lately with radio ads touting the benefits of Yahoo search. One was a scenario about a woman who was able to use search to find where a movie was playing, but not the actual showing times of the movies. Let's do a reality check, gang. Have you ever looked up a movie online? Do you know how hard it is to confirm where a movie is playing without also finding the showtimes? The effect of the ad is to position Yahoo as the search engine for stupid people.
And besides, it put the focus back on search, where Yahoo is destined to be an also-ran forever. The company shouldn't drop that business (it generates a lot of cash), but it's not the future engine of Yahoo's growth.
So, what is Yahoo's future? I think its biggest strength, what we used to call in business school its "core competence," is its ability to pair brand ads with content. Yahoo is world class in its ability to work with major brand advertisers to match their online ads with words and pictures that attract the people they want to target. It's not as sexy a business as search advertising (because the revenues and growth rates are not as good), but it's a real business and Yahoo does it better than anyone else I know of.
Yahoo's challenge, in my opinion, has been that not all of its content is top quality, so some of its sites are not as attractive to advertisers as they should be. In places where Yahoo has great content, such as Yahoo Finance, the engine seems to work very nicely. In other areas, Yahoo's content is very me-too, and so are the results.
The synergy. The New York Times' challenge is that it has great content but can't make the online audience large enough to pay for its huge editorial staff (the Times currently reaches 1.25 percent of global Internet users each day, according to Alexa). Yahoo's challenge is that it has huge reach (27% daily reach of global Internet users) but inconsistent quality. Pair the Times' outstanding content with Yahoo's reach and advertising expertise, and maybe you could make the world's most powerful online publisher.
Anyway, that's what the merger's going to test.
Next steps: Clear the decks. To make the merger work, both companies are going to need to focus on what they do best, which means paring away the other businesses they've added in the past as diversification experiments. In the NYT's case, that means letting go of a lot of other media properties the company has picked up over the years. There's going to be just one national news leader, not three, and it doesn't make sense to keep on paying full editorial staffs at several different places, many of them duplicating each others' work.
And at Yahoo, that means stepping back from being an internet conglomerate. Search is important as an on-ramp to quickly get eyeballs to the content of the new Yahoo, but it's not the long-term goal in itself. A friend at Yahoo told me the other day that a third of the company would probably quit if Yahoo decided to focus on publishing. My thought: that might be better than gradually bleeding the best and the brightest throughout the company as they lose faith in Yahoo's overall direction.
A human resources executive at Apple once listened to employees complaining about a reorganization, and then said, "when the caravan starts moving, the dogs all bark." It was a heartless comment, but he had a point. In that spirit, the picketing by Flickr users is probably a sign of healthy change.
Or it would be if any of this post were true. But it's April 1, and I'm indulging in a little bit of tech industry fantasy. In this case, though, I'd call it a dream.
Memories of past April Firsts:
The tech industry bailout (link)
iPhones worn as body piercings (link)
Spitr: Twitter meets telepathy (link)
Sprint and Google, a match made in Kansas (link)
I have a different take on the deal, though. After years of failed "new media" ventures based more on hope than synergy, I think this one might actually make business sense. Here's why:
No more paid content fantasies. The Times had been headed down the road toward making its content paid-only for anyone reading more than a few articles a month. In my opinion, this was a huge roll of the dice that could have destroyed the company's long-term prospects. The Times online edition is the most popular newspaper site in the US, and has been very gradually closing the gap with CNN, the US online news leader. Moving to a paid model would have cut the Times audience very substantially, leaving some other news operation to seize the number one position. As we know from other areas of the web, there are very strong network effects online. Once the Times surrendered the online traffic lead, I think its role as the newspaper of record in the US would have gradually been lost.
No more Yahoo search fantasies. Yahoo has had a terrible time deciding what sort of company it wants to be. For a long time it was supposed to be a "new media" company, which apparently meant it had the business practices of a film studio without the cool movie premieres. Many people in Silicon Valley still think of Yahoo as the failed Google wannabe, which is kind of like criticizing Sweden for failing to be Germany.
Unfortunately, Yahoo has been feeding that comparison lately with radio ads touting the benefits of Yahoo search. One was a scenario about a woman who was able to use search to find where a movie was playing, but not the actual showing times of the movies. Let's do a reality check, gang. Have you ever looked up a movie online? Do you know how hard it is to confirm where a movie is playing without also finding the showtimes? The effect of the ad is to position Yahoo as the search engine for stupid people.
And besides, it put the focus back on search, where Yahoo is destined to be an also-ran forever. The company shouldn't drop that business (it generates a lot of cash), but it's not the future engine of Yahoo's growth.
So, what is Yahoo's future? I think its biggest strength, what we used to call in business school its "core competence," is its ability to pair brand ads with content. Yahoo is world class in its ability to work with major brand advertisers to match their online ads with words and pictures that attract the people they want to target. It's not as sexy a business as search advertising (because the revenues and growth rates are not as good), but it's a real business and Yahoo does it better than anyone else I know of.
Yahoo's challenge, in my opinion, has been that not all of its content is top quality, so some of its sites are not as attractive to advertisers as they should be. In places where Yahoo has great content, such as Yahoo Finance, the engine seems to work very nicely. In other areas, Yahoo's content is very me-too, and so are the results.
The synergy. The New York Times' challenge is that it has great content but can't make the online audience large enough to pay for its huge editorial staff (the Times currently reaches 1.25 percent of global Internet users each day, according to Alexa). Yahoo's challenge is that it has huge reach (27% daily reach of global Internet users) but inconsistent quality. Pair the Times' outstanding content with Yahoo's reach and advertising expertise, and maybe you could make the world's most powerful online publisher.
Anyway, that's what the merger's going to test.
Next steps: Clear the decks. To make the merger work, both companies are going to need to focus on what they do best, which means paring away the other businesses they've added in the past as diversification experiments. In the NYT's case, that means letting go of a lot of other media properties the company has picked up over the years. There's going to be just one national news leader, not three, and it doesn't make sense to keep on paying full editorial staffs at several different places, many of them duplicating each others' work.
And at Yahoo, that means stepping back from being an internet conglomerate. Search is important as an on-ramp to quickly get eyeballs to the content of the new Yahoo, but it's not the long-term goal in itself. A friend at Yahoo told me the other day that a third of the company would probably quit if Yahoo decided to focus on publishing. My thought: that might be better than gradually bleeding the best and the brightest throughout the company as they lose faith in Yahoo's overall direction.
A human resources executive at Apple once listened to employees complaining about a reorganization, and then said, "when the caravan starts moving, the dogs all bark." It was a heartless comment, but he had a point. In that spirit, the picketing by Flickr users is probably a sign of healthy change.
Or it would be if any of this post were true. But it's April 1, and I'm indulging in a little bit of tech industry fantasy. In this case, though, I'd call it a dream.
Memories of past April Firsts:
The tech industry bailout (link)
iPhones worn as body piercings (link)
Spitr: Twitter meets telepathy (link)
Sprint and Google, a match made in Kansas (link)
Selasa, 16 Maret 2010
The future of publishing: Why ebooks failed in 2000, and what that means for 2010
This post is adapted from a speech I gave at the O'Reilly Tools of Change publishing industry conference in February.
It's a great time for ebooks. There are at least six ebook reader devices on the market or in preparation. A major business magazine predicts that up to seven million of these devices will be sold next year. A major consulting firm says ebook sales will account for ten percent of the publishing market in five years. And an executive at the leading computing firm predicts that 90 percent of all publishing will switch to electronic form in just 20 years.
But the year isn't 2010 -- it's 2000, and the ebook market is about to go into hibernation for a decade. What went wrong, and what can the failure tell us about the prospects for ebooks in 2010?
I had a front row seat for the last generation of ebooks: In 1999 I was at Softbook (one of the early ebook reader companies), and later I interacted with the folks at Peanut Press (an ebook publisher) after they were bought by Palm. My short summary of the lessons I learned: Although some of the barriers that stopped ebooks in 2000 have been reduced, most of them are still in place. So I think the market isn't likely to grow as quickly as many optimists are predicting. However, the economics of traditional publishing are very vulnerable to a paradigm change. That change is likely to happen later than most people expect, but once it happens it'll probably move very quickly indeed. So stay out of the avalanche zone.
Here are the details on why, and how to avoid the avalanche when it does happen.
Why ebooks failed in 2000
I know I'm going to get some comments reminding me that ebooks didn't ever completely fail. They've been around for a long time, and some people read books on their computers every day. Granted. But the market for ebooks and ebook reader devices utterly failed to take off the way that most observers expected in 2000. It's important to understand why, or we may be at risk of repeating history.
I think the failure of ebooks ten years ago was due to five problems:
1. Not enough ebooks. The core customers for an ebook reader are reading enthusiasts, meaning they like to read a lot of books. If you ask them how many books they'd like to have available for their reader, they'll look at you funny and say, "All of them, of course. What's the point in paying for an ebook reader device that doesn't let you any book you want to read?"
In 2000, we had a huge problem with ebook availability. They were expensive to convert to ebook format (hundreds of dollars per title), and publishers were reluctant to make that sort of investment. I don't have any statistics on the number of ebooks available back then, but I remember that it was an ongoing, major problem for the company.
Today, the situation is better but not ideal. Looking at the New York Times bestseller list for February 28, all but one of the top 10 books in hardcover fiction and nonfiction were available in ebook format. However, there is still a problem with the timing of availability. Barnes & Noble had 15 books on its "Coming Soon" list for March 10, but only six of them were to be released as ebooks at the same time as they came out in print. That's a poor ratio, and would be a significant annoyance to an ebook user.
Looking at older books, availability seems to be hit or miss. Many more books are available in ebook format today than in 2000, but there are weird gaps. For example, many of the most popular works of Robert Heinlein (one of the leading science fiction authors of all time) are not currently available in the Kindle store, but are available for Barnes & Noble's Nook device. For Isaac Asimov (another all-time great), only a small subset of his work is available electronically from either Amazon or Barnes & Noble.
This sort of confusion frustrates many ebook users.
2. Ebooks were too expensive. Many book buyers feel they get extra value when they buy a hardcover book. It's more substantial than a paperback, and has a nice slipcover. The pages don't turn yellow, and the printing is generally very clear. If they like the book, they can put it on a bookcase somewhere to show their friends how tasteful they are. An ebook has none of these benefits. To many users, it feels more like a paperback -- disposable, intangible, slightly cheap. But in 2000, many ebooks were priced the same as hardcover books.
Combine high book pricing with limited availability, and most people didn't feel ebook readers were a reasonable value. The market stalled right there.
The problem with ebook vs. hardcover pricing is that publishers bundle two sorts of value when they create a hardcover book: The physical product is more impressive, and you get earlier availability of the book, often a year or more before the paperback version comes out. Unfortunately, book buyers think most of the extra value they're paying for from a hardcover is the physical book. Meanwhile, publishers (and authors) often think the main value of a hardcover is early availability. Many authors and publishers don't want to say this to the public, but hardcover books are a tax on the most enthusiastic fans of an author.
E-publishing breaks that cozy little arrangement, by separating the early availability value from the better production value. Publishers couldn't figure out what to do about that in 2000. So they often did the conservative thing, pricing ebooks the same as hardcovers. To ebook customers, that felt like exploitation, if not outright fraud.
It still feels that way today.
The situation now is somewhat improved, in that ebook prices are often somewhat lower than hardcover prices. But it has not been resolved. For example, Amazon lists Payback Time by Phil Town as a hot new release. Its list price is $26.99 and the ebook price is $13.36, so that looks like a huge discount. But the hardcover version is already being discounted to $14.57. So the ebook price is about the same as the hardcover's street price. That's not acceptable to a lot of ebook customers.
Until very recently, Amazon had been subsidizing down the price of most ebooks to $9.99 in an effort to deal with conflicts just like this, but that arrangement broke down when challenged by Macmillan. The result was a very nasty public spat in which Amazon briefly pulled all Macmillan books (paper and electronic) from its online store. That drove many book authors into a frenzy, with most of them siding with Macmillan (examples here and here and here).
What is it about the tech industry and authors? Both Amazon and Google have shown a unique ability to make authors bond with publishers, people they otherwise tend to view as parasitic scum.
The relationship between Amazon and Macmillan is very complicated, and I don't want to get into the details of their contracts here. There's ample evidence for labeling either one of them a villain and/or idiot if you want to. But my point is that ebook pricing remains screwed up today. Maybe not as uniformly screwed up as it was in 2000, but it's still a mess.
3. The hardware form factor was wrong. When ebook readers failed to sell well, ebook producers tried to focus on other electronic devices -- PCs, PDAs, and smartphones.
The trouble is that for most people, the ergonomics and psychology of reading are wrong on computers and smartphones. A laptop is the wrong size and weight to create an immersive reading experience, and the backlit displays on most laptops create eyestrain compared to reading ink on paper.
PDAs and smartphones are too small for immersive reading for most people, and besides people are usually in a different mindset when they use a pocket device. They use it briefly, in short spurts throughout the day, when they are bored or need to find a bit of information. It's like the information equivalent of snacking. A reference book might be useful in this context, and holy books like the Bible sell well in electronic form because some people take comfort in reading a bit of them every day. But for most people, a pocket device isn't something that you'd curl up with for a couple of hours, the way you would with a book.
This is an area where we're obviously making a lot of progress. Amazon and Sony have both been willing to subsidize their tablet devices for years while the ebook market develops, and Apple and other big computer companies are now entering the tablet market, not to mention a host of smaller startups.
Just remember that most electronics companies are sheep. If tablets don't sell well, they will exit the market as quickly as they entered it.
4. Periodicals weren't ready. Although we call these devices "ebook readers," if you look at user attitudes and usage patterns, in many ways they are a better fit for reading periodicals (newspapers and magazines) than they are for books. Most printed magazines and newspapers are viewed as disposable, so many people don't object to paying the same price for an e-version as they do for the printed version. And most periodicals can be read in short bursts, which fits the usage pattern for mobile devices.
Even better, an e-magazine can get to the reader faster than a printed version, because it doesn't have to be printed and mailed.
When I was at Softbook, there was a lot of user interest in getting magazines on our devices. Unfortunately, very few were available, and the effort to get them converted started too late to save the company.
Today, there are electronic versions of a number of publications targeted at the ebook readers. But a couple of additional problems have surfaced. One is that often the e-versions are inferior to the printed versions. On the Kindle store, 64% of the reviews for the e-version of The Economist magazine are a single star (the lowest possible rating). Here are some sample comments:
Time Magazine, 46% of reviews are one star:
Wall Street Journal, 50% of reviews are one star:
In fairness, some other publications are better-reviewed. The Kindle version of the International Herald Tribune has an average rating of four stars, as does the New England Journal of Medicine. But overall, there are a lot of teething problems as the publishers figure out how to produce their e-versions and how to price them. This is likely to hinder customer adoption until the problems get sorted out.
5. Poor marketing. In my opinion, the right way to create a technology product is to identify a group of customers who have a major problem, and to solve that problem decisively. It's not clear that ebooks, especially as they are constituted today, do that. Paper books simply aren't broken, from the perspective of most users. S. David Mash had a good quote on this (link):
A lot of the investment in ebook devices today seems to be driven more by strategy than by user needs. E-books are believed to be an important future business opportunity, and companies are maneuvering to be in position when that opportunity takes off.
The problem is, unless they solve a user problem, and communicate it to the users, the market won't take off in the first place. This tripped up the ebook companies in 2000, and I think it is still true today. Check out Amazon's pitch for why you should buy Kindle:
Can you spot the problem? It's a list of features, not a list of benefits. Now let's look at Sony:
They're doing a tiny bit better, in that they do list a user benefit. Unfortunately, how many people do you know who want to carry 350 books at one time? I call this situation "phantom value," and it's something that happens a lot to tech companies. They've made a product without really thinking through the value proposition. When it comes time to market it, they pick one feature of the product and try through brute force to persuade customers that they should care about it. Usually the only people they convince are themselves.
This same thing happened when the music industry was first trying to defend itself from MP3 players. There was a huge fuss over the superior audio quality of CDs, and a lot of people in the music industry put a lot of effort into talking up the quality aspect of CDs. The only problem was that the average music listener couldn't hear the difference and didn't care about it.
What it means for ebooks in 2010
Although ebooks are doing much better than they were in 2000, there are still very significant structural barriers to the broad adoption of ebooks. We're in a chicken and egg situation where the content isn't fully ready for use because there aren't enough device users to force investment, but people won't buy more devices until the content gets better. As long as Amazon and Sony continue to subsidize the market, I think it will continue to grow moderately. And I think the iPad and related tablet products may help. But overall, the prospects for near-term explosive growth don't look good.
What happens next, and what can we do about it?
First, let's talk about a couple of opportunities. Paper books published today are not broken, but there are a couple of notable places where the publishing industry as it works today really is breaking down, and ebooks could help.
Save the short story. The first problem is the market for short stories. I wrote about this several years ago at length (link), so I won't repeat the whole situation here. But a quick summary is that the magazines that used to produce a lucrative market for short stories have mostly gone out of business or moved on to other sorts of content. As a result, authors have relatively little incentive to write short fiction these days.
Speaking as someone who grew up reading and appreciating short fiction, this is a loss for readers and an opportunity for e-reader devices. Short fiction is a great fit for e-readers because it can be consumed in small bites, and if authors could sell directly to their readers, the revenue could eventually be good enough that people would go back to writing short fiction. Plus it would give e-reader devices a real benefit -- content that you can't get anywhere else.
What's missing is the marketplace to make that happen. We need the equivalent of an iTunes store for short stories, tied to a mass market tablet device.
Free the backlist. At the O'Reilly conference I heard a fascinating statistic from Brewster Kahle of the Internet Archive: 70% of all the books ever written in English are out of print but still under copyright. In other words, you can't legally make copies of them, but there's not enough demand for them that the publishers can afford to reprint them. They are orphans.
These aren't just obscure books. In science fiction, my favorite category, award-winning books from the 1950s and 1960s are frequently out of print, and forget about finding less-known books even from major authors. The best you can do is a used book search, which if you're lucky will get you a smelly and dog-eared paperback in the mail. And those are the famous authors! Books from many others are unavailable in any form.
In my opinion, this is appalling. And it's also an opportunity.
Kahle is working on a project to let universities lend out electronic copies of the books in their stacks, which include many of these orphan books. As I understand it, the idea is that the library owns the right to lend out one copy of the book. If a central server keeps track of that single electronic copy, it's possible to legally read e-versions of orphaned books. It sounds like an incredibly cumbersome approach -- and it is. But it's better than nothing, and once again it's producing content for e-readers that can't be obtained any other way.
The project is called BookServer, and 1,000 more books are being digitized every day (link). It's the most hopeful thing I've heard about the future of libraries in years.
Rethink the periodical
The Internet is flooded with videos of prototype electronic magazines that publishers have been working on. Most of them look pretty similar -- there's an electronic image that looks just like a printed magazine page. The user moves from page to page by swiping a finger back and forth on the device's screen. You can zoom in to look at a graphic more closely, and zoom out to a thumbnail view that shows several pages side by side. The pages include both ads and stories, just like the magazine. In some prototypes, static pictures are replaced by videos and animations. Most of the demo is made up of page swiping and zooming, and you're left thinking, "hey, that looks just like a print magazine on the screen."
I am reminded of this:
It's called the Horsey Horseless Carriage. Time Magazine wrote about it in 2007 (link). It was supposedly an early automobile design in which a horse's head (thankfully a carved wooden one rather than stuffed) was mounted on the front of an automobile. The idea was apparently to make the car look more like a horse-drawn carriage, so the real horses would not be frightened by it. Just as striking as the horse's head is the rest of the car's design. From the wheels to the body design to the weird tiller the driver uses to steer, it is a basically a horse-drawn carriage that has a motor affixed to it.
We laugh now because we know the carriage needed a total rethink to translate it into a car -- everything from the wheels to the controls to the seat designs had to change radically. And yet when it's our turn to create something new, we create electronic magazines that look just like printed magazines.
It's a failure of the imagination, in my opinion. Most of the design of a magazine was driven by the economics of printing and mailing a paper publication. Why are the ads and text arranged the way they are? Because in a paper magazine, you can force people to skim past the ads while they look for the articles. Why is a magazine that particular size? Because that's what the post office will deliver, it fits easily in mailboxes, and it's a paper size we're used to handling. Why does it come out once a month or once a week? Because you have to bundle up a critical mass of content and ads before it makes financial sense to mail it. And on and on and on.
None of those assumptions apply to an electronic publication. They are all rules that we've absorbed from the print world, so deeply that we don't even think to question them. Some of those assumptions may still make sense in the electronic world, but many of them won't. One area where I feel strongly that our assumptions are faulty is advertising.
People reading paper magazines are used to fumbling past ads while they read. It's a standard part of the experience. But people using an electronic device have been conditioned by the web to expect to click and jump directly to the content they want. Making them flip through simulated electronic pages full of ads simply won't work. That means the ads in an electronic publication probably can't be as numerous as they are in a print publication. What's worse, the ads that pay the most money -- the inside front cover and the back cover -- don't even necessarily exist in an electronic publication.
I think some magazines believe they can force the current ad experience on users. Some of them even have persuaded themselves that readers see the ads as part of the value of the magazine (see my discussion of phantom value, above). But publications need to understand that they'll be competing with a new crop of publishers who grew up online and are not hamstrung by the same thinking.
The best example of this new thinking is Yahoo. It's very trendy to dismiss Yahoo these days because it's not Google, but in reality the company is a very different beast. Google is all about search and direct-response advertising associated with it. Yahoo is basically an electronic publisher supported by "display" ads -- brand-building ads created by large national advertisers, targeted at the specific demographic groups Yahoo delivers.
Yahoo today runs a hugely successful electronic newspaper. It has a news section:
A finance section:
And a sports section:
All of them are totally supported by ads, with no subscription fee.
If you're a magazine or newspaper publisher, you may think that e-publishing finally gives you a path out of the free-web-content trap. But ask yourself what happens when companies like Yahoo realize they too can create electronic publications for ebook readers. Will they charge for subscriptions, or will they create completely ad-supported publications? What does that do to your business model?
I think the periodical has to be rethought much more thoroughly than it has been to date. At its core, the thing that makes a magazine or newspaper valuable to readers is its editorial staff -- a group of writers, editors, and artists who work in synergy to produce a unified product. Rather than asking how to make a magazine electronic, we need to ask what must be built around an editorial staff to make it viable in the electronic world. I don't know what the result will be, but I'm pretty sure it won't look like a print magazine scanned and transferred to a screen.
Publishers: Rethink your value
Although publishers today are focusing on what ebooks do to their distribution channels, the real threat to them, in my opinion, is the likelihood that in the future authors will publish their books directly to the public, bypassing the entire publishing value chain. To understand this challenge, it's necessary to look at the current value chain for books...
An author typically gets about 12% of the list price of a book. The rest of the revenue is consumed by the distribution channel -- the publisher's overhead, the cost of printing and shipping books, the expenses of the bookseller, etc. This is not to say that publishers and booksellers are getting rich. Typically a small number of bestselling books generate the revenue that covers the losses a publisher takes on everything else it publishes. Something similar happens to bookstores. The reality is that the whole publishing value chain is grossly inefficient -- it absorbs a lot of cash, and almost no one gets rich from it.
This distribution chain was stable only when it was the sole way to get a book to a customer. It's already under attack by Amazon, which avoids the overhead of a physical bookstore; and by discount retailers who skim off the best-selling books, absorbing the revenue that formerly supported local bookstores. But that's only a prelude to what's coming.
Because authors get such a small percentage of the sales price of a book today, any system that let them capture more of the revenue from a book sale will be very attractive to them, even if it sells a lot fewer books.
The chart below illustrates my point. For simplicity, I've assumed a best-selling author who gets 15% of the book's revenue, a bit more than usual. The author's new book is going to sell 100 printed copies through the traditional retail channel at $20 each. That means the total revenue for the book will be $2,000, of which the author gets $300.
But if the author sells the book direct to the public as an ebook, he or she will be able to keep 70% to 80% of the revenue (because that's what the online content stores are typically returning). If the store's cut is 25%, the author will make $300 after he or she sells only 20 books.
The red and blue bars show the author's revenue as ebook readers reach various levels of penetration in the book-buying population. The chart's kind of complex, but its main message is that once e-readers are in the hands of about 20% of the book-buying public, an author has a financial incentive to sell direct rather than selling through a publisher.
Fortunately for publishers, e-readers are far below 20% penetration today. They're probably at about 2%. So the business is stable for the moment. In fact, it's probably a little more stable than a lot of publishers believe. We're likely to have a latency period of at least several years while the e-reader installed base gradually grows. During this time nothing terribly dramatic will happen to publishers, and they may think they have the situation under control. But then we'll reach a tipping point, and suddenly established authors will have a financial incentive to go direct rather than bothering with paper publication of their books. Once that happens, all book buyers will have a very strong incentive to get e-readers -- some books by bestselling authors simply won't be available in paper form, or will be available first electronically. This will drive more rapid sales of e-readers, which will give authors even more incentive to bypass the publishers.
Once the dam cracks, the water will move very quickly.
Some notes on this scenario:
--I simplified the pricing story by assuming that ebooks are priced the same as hardcovers. They aren't, so the tipping point is probably a bit higher than 20%.
--On the other hand, Macmillan's move to raise the price of ebooks actually brings the tipping point closer. Every time ebook prices go up, that creates more incentive for an author to go electronic.
--The authors most likely to switch to electronic publication are the established names who don't need a publisher's help in marketing. Those authors are also often the most profitable for a publisher. That means the impact of the switch may be even greater than what I laid out here.
--Products like the iPad bring the tipping point closer, because they are tablets that do other things than just reading books. This bypasses the chicken and egg situation that killed e-readers in 2000. Every time Apple convinces someone to buy an iPad to do browsing or watch videos, that's another potential book-buyer who's ready for ebooks.
--The competition between Apple and Amazon will also probably bring the tipping point closer, because it holds down the cut charged by the online ebook stores. In January, anticipating the iPad announcement, Amazon cut its charge on self-published ebooks to 30%, matching Apple's terms on the iPhone app store (link).
Six critical questions for book publishers
Are publishers doomed? Not necessarily. I think we're going to end up with a range of situations in which some authors sell direct on their own, some use selected services to help them self-publish, and some partner with publishers for services similar to the things they do today. But the publishers will be dealing with new competitors and new economics, and they'll need to rethink who their customers are, and what unique value they can add from the perspective of those people. The time to do that thinking is now, before e-readers reach the tipping point. Here are the questions to ask:
1. Who is my customer, the author or the book-buyer? Most publishers today would say "both," and might add the bookstore to that list as well. But that reflects the print publishing channel structure. In the electronic world, those audiences do not have to be bundled together. There may be some publishers who partner primarily with authors, and are more or less invisible to readers. There may be other publishers that play a very prominent role in the eyes of readers (examples below). The point is to understand which type of publisher you are, and adjust your business accordingly.
2. How much value do my editing services add from the reader's point of view? I've seen quotes from publishers saying that ebook consumers will want to pay more for ebooks that are properly edited. If you believe this, I invite you to re-read the discussion of CDs vs. MP3s above. If a book is poorly edited, people will just blame the author. That means editing is actually a service for authors, not readers. Which brings us to the next question...
3. How much value do my editing services add from the author's point of view? Many authors acknowledge that their editors add tremendous value to their books; others hate their editors. But the key question is, could they hire a freelancer to do the same thing? Question for a publisher: What if some of the people you just laid off form an editing cooperative and then contact your authors with a cut-rate offer?
4. How much demand generation do we really do? This is a place where the perspectives of authors and publishers often differ. Publishers tell me that they do a lot to create demand for books. Authors typically say the publishers just shovel books onto the market and wait to see which ones sell themselves. If the publisher doesn't generate demand, then an author might as well self-publish electronically as soon as it pays more money.
5. Which brand are the readers buying? This varies tremendously from publisher to publisher. In fiction, the author's name is generally the brand that readers respond to. No reader cares who published Steven King's latest book; they just buy Steven King. But in other fields, especially nonfiction, it's more common for a publisher to control the brand. Think of the For Dummies franchise, or Sunset's How-to books, or the role that O'Reilly plays in technical books. I think e-publishing may make those brands even more powerful. A traditional publisher can help a paper book sell well by working behind the scenes to get bookstores to promote it -- put it on the table out front, place it on an endcap, and so on. Most of that promotional opportunity doesn't exist in an online store. Instead, your product is just tossed out there in a sea of other products, and it has to succeed or fail on its own. In that world, a recognized brand naturally floats to the top. That's why the Madden football game on iPhone costs $7 while many other iPhone games sell for 99 cents.
6. What sort of book am I selling? Writer/publisher Craig Mod wrote a splendid essay discussing the difference between books that have form and books that do not have form (link). Books that have form get some value from the physical book itself -- maybe it's the arrangement of text and images that creates a certain impression, or maybe it's the need for something physical (think of a coffee table book or a gift book). Those books are not going to be cannibalized easily by electronic publishing.
On the other hand, formless books (those that don't get any special value from the physical form of the book) are ripe for the picking. Think paperbacks and general-consumption fiction and nonfiction.
I'll leave you with Craig's hopeful picture of what this all means for the future of books:
When we're confronted by all the downsides of change, it's important to remember that change also brings progress. If publishing gets a lot more efficient, we should see greater diversity of new sorts of publications, as well as the rebirth of a lot of old books and stories that we can't get to today. That's a future to look forward to -- as long as you can figure out how to keep your job during the transition.
It's a great time for ebooks. There are at least six ebook reader devices on the market or in preparation. A major business magazine predicts that up to seven million of these devices will be sold next year. A major consulting firm says ebook sales will account for ten percent of the publishing market in five years. And an executive at the leading computing firm predicts that 90 percent of all publishing will switch to electronic form in just 20 years.
But the year isn't 2010 -- it's 2000, and the ebook market is about to go into hibernation for a decade. What went wrong, and what can the failure tell us about the prospects for ebooks in 2010?
I had a front row seat for the last generation of ebooks: In 1999 I was at Softbook (one of the early ebook reader companies), and later I interacted with the folks at Peanut Press (an ebook publisher) after they were bought by Palm. My short summary of the lessons I learned: Although some of the barriers that stopped ebooks in 2000 have been reduced, most of them are still in place. So I think the market isn't likely to grow as quickly as many optimists are predicting. However, the economics of traditional publishing are very vulnerable to a paradigm change. That change is likely to happen later than most people expect, but once it happens it'll probably move very quickly indeed. So stay out of the avalanche zone.
Here are the details on why, and how to avoid the avalanche when it does happen.
Why ebooks failed in 2000
I know I'm going to get some comments reminding me that ebooks didn't ever completely fail. They've been around for a long time, and some people read books on their computers every day. Granted. But the market for ebooks and ebook reader devices utterly failed to take off the way that most observers expected in 2000. It's important to understand why, or we may be at risk of repeating history.
I think the failure of ebooks ten years ago was due to five problems:
1. Not enough ebooks. The core customers for an ebook reader are reading enthusiasts, meaning they like to read a lot of books. If you ask them how many books they'd like to have available for their reader, they'll look at you funny and say, "All of them, of course. What's the point in paying for an ebook reader device that doesn't let you any book you want to read?"
In 2000, we had a huge problem with ebook availability. They were expensive to convert to ebook format (hundreds of dollars per title), and publishers were reluctant to make that sort of investment. I don't have any statistics on the number of ebooks available back then, but I remember that it was an ongoing, major problem for the company.
Today, the situation is better but not ideal. Looking at the New York Times bestseller list for February 28, all but one of the top 10 books in hardcover fiction and nonfiction were available in ebook format. However, there is still a problem with the timing of availability. Barnes & Noble had 15 books on its "Coming Soon" list for March 10, but only six of them were to be released as ebooks at the same time as they came out in print. That's a poor ratio, and would be a significant annoyance to an ebook user.
Looking at older books, availability seems to be hit or miss. Many more books are available in ebook format today than in 2000, but there are weird gaps. For example, many of the most popular works of Robert Heinlein (one of the leading science fiction authors of all time) are not currently available in the Kindle store, but are available for Barnes & Noble's Nook device. For Isaac Asimov (another all-time great), only a small subset of his work is available electronically from either Amazon or Barnes & Noble.
This sort of confusion frustrates many ebook users.
2. Ebooks were too expensive. Many book buyers feel they get extra value when they buy a hardcover book. It's more substantial than a paperback, and has a nice slipcover. The pages don't turn yellow, and the printing is generally very clear. If they like the book, they can put it on a bookcase somewhere to show their friends how tasteful they are. An ebook has none of these benefits. To many users, it feels more like a paperback -- disposable, intangible, slightly cheap. But in 2000, many ebooks were priced the same as hardcover books.
Combine high book pricing with limited availability, and most people didn't feel ebook readers were a reasonable value. The market stalled right there.
The problem with ebook vs. hardcover pricing is that publishers bundle two sorts of value when they create a hardcover book: The physical product is more impressive, and you get earlier availability of the book, often a year or more before the paperback version comes out. Unfortunately, book buyers think most of the extra value they're paying for from a hardcover is the physical book. Meanwhile, publishers (and authors) often think the main value of a hardcover is early availability. Many authors and publishers don't want to say this to the public, but hardcover books are a tax on the most enthusiastic fans of an author.
E-publishing breaks that cozy little arrangement, by separating the early availability value from the better production value. Publishers couldn't figure out what to do about that in 2000. So they often did the conservative thing, pricing ebooks the same as hardcovers. To ebook customers, that felt like exploitation, if not outright fraud.
It still feels that way today.
The situation now is somewhat improved, in that ebook prices are often somewhat lower than hardcover prices. But it has not been resolved. For example, Amazon lists Payback Time by Phil Town as a hot new release. Its list price is $26.99 and the ebook price is $13.36, so that looks like a huge discount. But the hardcover version is already being discounted to $14.57. So the ebook price is about the same as the hardcover's street price. That's not acceptable to a lot of ebook customers.
Until very recently, Amazon had been subsidizing down the price of most ebooks to $9.99 in an effort to deal with conflicts just like this, but that arrangement broke down when challenged by Macmillan. The result was a very nasty public spat in which Amazon briefly pulled all Macmillan books (paper and electronic) from its online store. That drove many book authors into a frenzy, with most of them siding with Macmillan (examples here and here and here).
Hey, you want to know how to piss off an author? It’s easy: Keep people from buying their books. You want to know how to really piss them off? Keep people from buying their books for reasons that have nothing to do with them. And you know how to make them absolutely incandescent with rage? Keep people from buying their books for reasons that have nothing to do with them, and keep it a surprise until it happens. Which, as it happens, is exactly what Amazon did. As a result: Angry, angry authors. Oh so very angry.
Amazon apparently forgot that when it moved against Macmillan, it also moved against Macmillan’s authors. Macmillan may be a faceless, soulless baby-consuming corporate entity with no feelings or emotions, but authors have both of those, and are also twitchy neurotic messes who obsess about their sales, a fact which Amazon should be well aware of because we check our Amazon numbers four hundred times a day, and a one-star Amazon review causes us to crush up six Zoloft and snort them into our nasal cavities, because waiting for the pills to digest would just take too long.
These are the people Amazon pissed off. Which was not a smart thing, because as we all know, the salient feature of writers is that they write. And they did, about this, all weekend long. And not just Macmillan’s authors, but other authors as well, who reasonably feared that their corporate parent might be the next victim of Amazon’s foot-stompery.
--Science fiction writer John Scalzi
Hey, Amazon. When cutting off publishers, don’t start with the one that has the most science fiction writers. We will blog you dead!
--Science fiction author Scott Westerfield
What is it about the tech industry and authors? Both Amazon and Google have shown a unique ability to make authors bond with publishers, people they otherwise tend to view as parasitic scum.
The relationship between Amazon and Macmillan is very complicated, and I don't want to get into the details of their contracts here. There's ample evidence for labeling either one of them a villain and/or idiot if you want to. But my point is that ebook pricing remains screwed up today. Maybe not as uniformly screwed up as it was in 2000, but it's still a mess.
3. The hardware form factor was wrong. When ebook readers failed to sell well, ebook producers tried to focus on other electronic devices -- PCs, PDAs, and smartphones.
The trouble is that for most people, the ergonomics and psychology of reading are wrong on computers and smartphones. A laptop is the wrong size and weight to create an immersive reading experience, and the backlit displays on most laptops create eyestrain compared to reading ink on paper.
PDAs and smartphones are too small for immersive reading for most people, and besides people are usually in a different mindset when they use a pocket device. They use it briefly, in short spurts throughout the day, when they are bored or need to find a bit of information. It's like the information equivalent of snacking. A reference book might be useful in this context, and holy books like the Bible sell well in electronic form because some people take comfort in reading a bit of them every day. But for most people, a pocket device isn't something that you'd curl up with for a couple of hours, the way you would with a book.
This is an area where we're obviously making a lot of progress. Amazon and Sony have both been willing to subsidize their tablet devices for years while the ebook market develops, and Apple and other big computer companies are now entering the tablet market, not to mention a host of smaller startups.
Just remember that most electronics companies are sheep. If tablets don't sell well, they will exit the market as quickly as they entered it.
4. Periodicals weren't ready. Although we call these devices "ebook readers," if you look at user attitudes and usage patterns, in many ways they are a better fit for reading periodicals (newspapers and magazines) than they are for books. Most printed magazines and newspapers are viewed as disposable, so many people don't object to paying the same price for an e-version as they do for the printed version. And most periodicals can be read in short bursts, which fits the usage pattern for mobile devices.
Even better, an e-magazine can get to the reader faster than a printed version, because it doesn't have to be printed and mailed.
When I was at Softbook, there was a lot of user interest in getting magazines on our devices. Unfortunately, very few were available, and the effort to get them converted started too late to save the company.
Today, there are electronic versions of a number of publications targeted at the ebook readers. But a couple of additional problems have surfaced. One is that often the e-versions are inferior to the printed versions. On the Kindle store, 64% of the reviews for the e-version of The Economist magazine are a single star (the lowest possible rating). Here are some sample comments:
"I was very happy and interested in the Economist on Kindle despite the cost until I learned that the subscriber content on the Economist web site is not included....For the cost involved the Kindle subscription should at least equal the print subscription benefits."
"Why does it take a week to make the Kindle version available. I find it very convenient to read and search but do not want to be a week behind in reading."
"I only receive part of the magazine. Overseas users don't get images -- including the cover image and graphs/charts."
"Many of the charts and graphs are so small the legend is unreadable which in turn renders the displays meaningless."
Time Magazine, 46% of reviews are one star:
"This is a rather embarrassing electronic version of Time Magazine. There are NO pictures, no charts, no illustrations. Instead whenever you run into an article that has these in any decent amount, they've inserted an entry telling you to go get a PDF or print version....It looks and feels like some cheap RSS reader collected this rather than being an electronic version of the magazine."
"I'd like to read some parts of Time but not others, so I very much miss having a convenient table of contents. As it is, we have to (slowly) leaf thru all articles to find out what's of interest."
Wall Street Journal, 50% of reviews are one star:
"The pricing makes absolutely no sense: $99/year for the WSJ print edition with the Online Web edition included. $119.88/year ($9.99/month) for the Kindle edition.... That makes no sense because I could buy the Web edition and read it through the Kindle Browser for no additional charge."
"I also subscribe to the print and wsj.com which shows how the Kindle edition is very limited in his layout and pizzaz....Compared to the NYTimes Reader or even the wsj.com it is a sad commentary on their apparent lack of effort. There should be a more detailed table of contents instead of just very general catagories of articles. To find a specific article is sort of a blind proposition...being forced to go through the all article until you find what you're looking for."
In fairness, some other publications are better-reviewed. The Kindle version of the International Herald Tribune has an average rating of four stars, as does the New England Journal of Medicine. But overall, there are a lot of teething problems as the publishers figure out how to produce their e-versions and how to price them. This is likely to hinder customer adoption until the problems get sorted out.
5. Poor marketing. In my opinion, the right way to create a technology product is to identify a group of customers who have a major problem, and to solve that problem decisively. It's not clear that ebooks, especially as they are constituted today, do that. Paper books simply aren't broken, from the perspective of most users. S. David Mash had a good quote on this (link):
The reading device for the paperback is widely available for free (sunlight). This device can be used for other tasks as well.
A lot of the investment in ebook devices today seems to be driven more by strategy than by user needs. E-books are believed to be an important future business opportunity, and companies are maneuvering to be in position when that opportunity takes off.
The problem is, unless they solve a user problem, and communicate it to the users, the market won't take off in the first place. This tripped up the ebook companies in 2000, and I think it is still true today. Check out Amazon's pitch for why you should buy Kindle:
Can you spot the problem? It's a list of features, not a list of benefits. Now let's look at Sony:
They're doing a tiny bit better, in that they do list a user benefit. Unfortunately, how many people do you know who want to carry 350 books at one time? I call this situation "phantom value," and it's something that happens a lot to tech companies. They've made a product without really thinking through the value proposition. When it comes time to market it, they pick one feature of the product and try through brute force to persuade customers that they should care about it. Usually the only people they convince are themselves.
This same thing happened when the music industry was first trying to defend itself from MP3 players. There was a huge fuss over the superior audio quality of CDs, and a lot of people in the music industry put a lot of effort into talking up the quality aspect of CDs. The only problem was that the average music listener couldn't hear the difference and didn't care about it.
What it means for ebooks in 2010
Although ebooks are doing much better than they were in 2000, there are still very significant structural barriers to the broad adoption of ebooks. We're in a chicken and egg situation where the content isn't fully ready for use because there aren't enough device users to force investment, but people won't buy more devices until the content gets better. As long as Amazon and Sony continue to subsidize the market, I think it will continue to grow moderately. And I think the iPad and related tablet products may help. But overall, the prospects for near-term explosive growth don't look good.
What happens next, and what can we do about it?
First, let's talk about a couple of opportunities. Paper books published today are not broken, but there are a couple of notable places where the publishing industry as it works today really is breaking down, and ebooks could help.
Save the short story. The first problem is the market for short stories. I wrote about this several years ago at length (link), so I won't repeat the whole situation here. But a quick summary is that the magazines that used to produce a lucrative market for short stories have mostly gone out of business or moved on to other sorts of content. As a result, authors have relatively little incentive to write short fiction these days.
Speaking as someone who grew up reading and appreciating short fiction, this is a loss for readers and an opportunity for e-reader devices. Short fiction is a great fit for e-readers because it can be consumed in small bites, and if authors could sell directly to their readers, the revenue could eventually be good enough that people would go back to writing short fiction. Plus it would give e-reader devices a real benefit -- content that you can't get anywhere else.
What's missing is the marketplace to make that happen. We need the equivalent of an iTunes store for short stories, tied to a mass market tablet device.
Free the backlist. At the O'Reilly conference I heard a fascinating statistic from Brewster Kahle of the Internet Archive: 70% of all the books ever written in English are out of print but still under copyright. In other words, you can't legally make copies of them, but there's not enough demand for them that the publishers can afford to reprint them. They are orphans.
These aren't just obscure books. In science fiction, my favorite category, award-winning books from the 1950s and 1960s are frequently out of print, and forget about finding less-known books even from major authors. The best you can do is a used book search, which if you're lucky will get you a smelly and dog-eared paperback in the mail. And those are the famous authors! Books from many others are unavailable in any form.
In my opinion, this is appalling. And it's also an opportunity.
Kahle is working on a project to let universities lend out electronic copies of the books in their stacks, which include many of these orphan books. As I understand it, the idea is that the library owns the right to lend out one copy of the book. If a central server keeps track of that single electronic copy, it's possible to legally read e-versions of orphaned books. It sounds like an incredibly cumbersome approach -- and it is. But it's better than nothing, and once again it's producing content for e-readers that can't be obtained any other way.
The project is called BookServer, and 1,000 more books are being digitized every day (link). It's the most hopeful thing I've heard about the future of libraries in years.
Rethink the periodical
The Internet is flooded with videos of prototype electronic magazines that publishers have been working on. Most of them look pretty similar -- there's an electronic image that looks just like a printed magazine page. The user moves from page to page by swiping a finger back and forth on the device's screen. You can zoom in to look at a graphic more closely, and zoom out to a thumbnail view that shows several pages side by side. The pages include both ads and stories, just like the magazine. In some prototypes, static pictures are replaced by videos and animations. Most of the demo is made up of page swiping and zooming, and you're left thinking, "hey, that looks just like a print magazine on the screen."
I am reminded of this:
It's called the Horsey Horseless Carriage. Time Magazine wrote about it in 2007 (link). It was supposedly an early automobile design in which a horse's head (thankfully a carved wooden one rather than stuffed) was mounted on the front of an automobile. The idea was apparently to make the car look more like a horse-drawn carriage, so the real horses would not be frightened by it. Just as striking as the horse's head is the rest of the car's design. From the wheels to the body design to the weird tiller the driver uses to steer, it is a basically a horse-drawn carriage that has a motor affixed to it.
We laugh now because we know the carriage needed a total rethink to translate it into a car -- everything from the wheels to the controls to the seat designs had to change radically. And yet when it's our turn to create something new, we create electronic magazines that look just like printed magazines.
It's a failure of the imagination, in my opinion. Most of the design of a magazine was driven by the economics of printing and mailing a paper publication. Why are the ads and text arranged the way they are? Because in a paper magazine, you can force people to skim past the ads while they look for the articles. Why is a magazine that particular size? Because that's what the post office will deliver, it fits easily in mailboxes, and it's a paper size we're used to handling. Why does it come out once a month or once a week? Because you have to bundle up a critical mass of content and ads before it makes financial sense to mail it. And on and on and on.
None of those assumptions apply to an electronic publication. They are all rules that we've absorbed from the print world, so deeply that we don't even think to question them. Some of those assumptions may still make sense in the electronic world, but many of them won't. One area where I feel strongly that our assumptions are faulty is advertising.
People reading paper magazines are used to fumbling past ads while they read. It's a standard part of the experience. But people using an electronic device have been conditioned by the web to expect to click and jump directly to the content they want. Making them flip through simulated electronic pages full of ads simply won't work. That means the ads in an electronic publication probably can't be as numerous as they are in a print publication. What's worse, the ads that pay the most money -- the inside front cover and the back cover -- don't even necessarily exist in an electronic publication.
I think some magazines believe they can force the current ad experience on users. Some of them even have persuaded themselves that readers see the ads as part of the value of the magazine (see my discussion of phantom value, above). But publications need to understand that they'll be competing with a new crop of publishers who grew up online and are not hamstrung by the same thinking.
The best example of this new thinking is Yahoo. It's very trendy to dismiss Yahoo these days because it's not Google, but in reality the company is a very different beast. Google is all about search and direct-response advertising associated with it. Yahoo is basically an electronic publisher supported by "display" ads -- brand-building ads created by large national advertisers, targeted at the specific demographic groups Yahoo delivers.
Yahoo today runs a hugely successful electronic newspaper. It has a news section:
A finance section:
And a sports section:
All of them are totally supported by ads, with no subscription fee.
If you're a magazine or newspaper publisher, you may think that e-publishing finally gives you a path out of the free-web-content trap. But ask yourself what happens when companies like Yahoo realize they too can create electronic publications for ebook readers. Will they charge for subscriptions, or will they create completely ad-supported publications? What does that do to your business model?
I think the periodical has to be rethought much more thoroughly than it has been to date. At its core, the thing that makes a magazine or newspaper valuable to readers is its editorial staff -- a group of writers, editors, and artists who work in synergy to produce a unified product. Rather than asking how to make a magazine electronic, we need to ask what must be built around an editorial staff to make it viable in the electronic world. I don't know what the result will be, but I'm pretty sure it won't look like a print magazine scanned and transferred to a screen.
Publishers: Rethink your value
Although publishers today are focusing on what ebooks do to their distribution channels, the real threat to them, in my opinion, is the likelihood that in the future authors will publish their books directly to the public, bypassing the entire publishing value chain. To understand this challenge, it's necessary to look at the current value chain for books...
An author typically gets about 12% of the list price of a book. The rest of the revenue is consumed by the distribution channel -- the publisher's overhead, the cost of printing and shipping books, the expenses of the bookseller, etc. This is not to say that publishers and booksellers are getting rich. Typically a small number of bestselling books generate the revenue that covers the losses a publisher takes on everything else it publishes. Something similar happens to bookstores. The reality is that the whole publishing value chain is grossly inefficient -- it absorbs a lot of cash, and almost no one gets rich from it.
This distribution chain was stable only when it was the sole way to get a book to a customer. It's already under attack by Amazon, which avoids the overhead of a physical bookstore; and by discount retailers who skim off the best-selling books, absorbing the revenue that formerly supported local bookstores. But that's only a prelude to what's coming.
Because authors get such a small percentage of the sales price of a book today, any system that let them capture more of the revenue from a book sale will be very attractive to them, even if it sells a lot fewer books.
The chart below illustrates my point. For simplicity, I've assumed a best-selling author who gets 15% of the book's revenue, a bit more than usual. The author's new book is going to sell 100 printed copies through the traditional retail channel at $20 each. That means the total revenue for the book will be $2,000, of which the author gets $300.
But if the author sells the book direct to the public as an ebook, he or she will be able to keep 70% to 80% of the revenue (because that's what the online content stores are typically returning). If the store's cut is 25%, the author will make $300 after he or she sells only 20 books.
The red and blue bars show the author's revenue as ebook readers reach various levels of penetration in the book-buying population. The chart's kind of complex, but its main message is that once e-readers are in the hands of about 20% of the book-buying public, an author has a financial incentive to sell direct rather than selling through a publisher.
Fortunately for publishers, e-readers are far below 20% penetration today. They're probably at about 2%. So the business is stable for the moment. In fact, it's probably a little more stable than a lot of publishers believe. We're likely to have a latency period of at least several years while the e-reader installed base gradually grows. During this time nothing terribly dramatic will happen to publishers, and they may think they have the situation under control. But then we'll reach a tipping point, and suddenly established authors will have a financial incentive to go direct rather than bothering with paper publication of their books. Once that happens, all book buyers will have a very strong incentive to get e-readers -- some books by bestselling authors simply won't be available in paper form, or will be available first electronically. This will drive more rapid sales of e-readers, which will give authors even more incentive to bypass the publishers.
Once the dam cracks, the water will move very quickly.
Some notes on this scenario:
--I simplified the pricing story by assuming that ebooks are priced the same as hardcovers. They aren't, so the tipping point is probably a bit higher than 20%.
--On the other hand, Macmillan's move to raise the price of ebooks actually brings the tipping point closer. Every time ebook prices go up, that creates more incentive for an author to go electronic.
--The authors most likely to switch to electronic publication are the established names who don't need a publisher's help in marketing. Those authors are also often the most profitable for a publisher. That means the impact of the switch may be even greater than what I laid out here.
--Products like the iPad bring the tipping point closer, because they are tablets that do other things than just reading books. This bypasses the chicken and egg situation that killed e-readers in 2000. Every time Apple convinces someone to buy an iPad to do browsing or watch videos, that's another potential book-buyer who's ready for ebooks.
--The competition between Apple and Amazon will also probably bring the tipping point closer, because it holds down the cut charged by the online ebook stores. In January, anticipating the iPad announcement, Amazon cut its charge on self-published ebooks to 30%, matching Apple's terms on the iPhone app store (link).
Six critical questions for book publishers
Are publishers doomed? Not necessarily. I think we're going to end up with a range of situations in which some authors sell direct on their own, some use selected services to help them self-publish, and some partner with publishers for services similar to the things they do today. But the publishers will be dealing with new competitors and new economics, and they'll need to rethink who their customers are, and what unique value they can add from the perspective of those people. The time to do that thinking is now, before e-readers reach the tipping point. Here are the questions to ask:
1. Who is my customer, the author or the book-buyer? Most publishers today would say "both," and might add the bookstore to that list as well. But that reflects the print publishing channel structure. In the electronic world, those audiences do not have to be bundled together. There may be some publishers who partner primarily with authors, and are more or less invisible to readers. There may be other publishers that play a very prominent role in the eyes of readers (examples below). The point is to understand which type of publisher you are, and adjust your business accordingly.
2. How much value do my editing services add from the reader's point of view? I've seen quotes from publishers saying that ebook consumers will want to pay more for ebooks that are properly edited. If you believe this, I invite you to re-read the discussion of CDs vs. MP3s above. If a book is poorly edited, people will just blame the author. That means editing is actually a service for authors, not readers. Which brings us to the next question...
3. How much value do my editing services add from the author's point of view? Many authors acknowledge that their editors add tremendous value to their books; others hate their editors. But the key question is, could they hire a freelancer to do the same thing? Question for a publisher: What if some of the people you just laid off form an editing cooperative and then contact your authors with a cut-rate offer?
4. How much demand generation do we really do? This is a place where the perspectives of authors and publishers often differ. Publishers tell me that they do a lot to create demand for books. Authors typically say the publishers just shovel books onto the market and wait to see which ones sell themselves. If the publisher doesn't generate demand, then an author might as well self-publish electronically as soon as it pays more money.
5. Which brand are the readers buying? This varies tremendously from publisher to publisher. In fiction, the author's name is generally the brand that readers respond to. No reader cares who published Steven King's latest book; they just buy Steven King. But in other fields, especially nonfiction, it's more common for a publisher to control the brand. Think of the For Dummies franchise, or Sunset's How-to books, or the role that O'Reilly plays in technical books. I think e-publishing may make those brands even more powerful. A traditional publisher can help a paper book sell well by working behind the scenes to get bookstores to promote it -- put it on the table out front, place it on an endcap, and so on. Most of that promotional opportunity doesn't exist in an online store. Instead, your product is just tossed out there in a sea of other products, and it has to succeed or fail on its own. In that world, a recognized brand naturally floats to the top. That's why the Madden football game on iPhone costs $7 while many other iPhone games sell for 99 cents.
6. What sort of book am I selling? Writer/publisher Craig Mod wrote a splendid essay discussing the difference between books that have form and books that do not have form (link). Books that have form get some value from the physical book itself -- maybe it's the arrangement of text and images that creates a certain impression, or maybe it's the need for something physical (think of a coffee table book or a gift book). Those books are not going to be cannibalized easily by electronic publishing.
On the other hand, formless books (those that don't get any special value from the physical form of the book) are ripe for the picking. Think paperbacks and general-consumption fiction and nonfiction.
I'll leave you with Craig's hopeful picture of what this all means for the future of books:
You already know the potential gains: edgier, riskier books in digital form, born from a lower barrier-to-entry to publish. New modes of storytelling. Less environmental impact. A rise in importance of editors. And, yes — paradoxically — a marked increase in the quality of things that do get printed.
When we're confronted by all the downsides of change, it's important to remember that change also brings progress. If publishing gets a lot more efficient, we should see greater diversity of new sorts of publications, as well as the rebirth of a lot of old books and stories that we can't get to today. That's a future to look forward to -- as long as you can figure out how to keep your job during the transition.
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