Quick Takes: Logitech's Misstep, Nokia's New Names and Fonts

Short thoughts on recent tech news...


Logitech strays from the path

I haven't written much about Logitech here, but they've long been one of my favorite tech companies because they have a history of breaking all the rules of Silicon Valley:

--The Valley says you can't make money in commodity hardware, but Logitech makes good profits from the most commoditized bits of the computer industry.

--The Valley says you especially can't make money in low-end consumer hardware, but that's where Logitech thrives.

--The Valley says that if you want to make money in hardware, you need to be based in a low-cost part of the world like China.  But Logitech is Swiss-owned and headquartered in Silicon Valley, two of the highest-cost places to do business in the world.

Logitech succeeded by picking well-established markets like keyboards and webcams where its skills in design, user experience, and added-value features let it charge a bit more than the commodity players.  As the folks at Logitech will tell you, "we're chefs, not farmers."  In other words, we don't create new markets, we come to existing markets and do an especially nice job of rearranging the ingredients.

But Logitech's financial performance hasn't been great for the last two years, and the company's most recent quarter was a loss.  The disappointing earnings report stood out to me because Logitech put much of the blame on its Google TV product, which apparently had apocalyptic negative sales last quarter (more returns from retailers than shipments) (link).  Apparently somebody at Google convinced Logitech to do some farming, and the company is paying dearly for it. 

I'm usually an advocate of companies taking risks and pioneering new markets, and I think that's something Logitech has the skills to do if it's careful.  But in this case, it chose a terrible target: the uncertainties of a new market, but with a user experience constrained by Google's software.  So Logitech took on the risks of farming without the ability to fully apply its own strengths.  Logitech was more or less a passenger on Google's boat.

The lesson, obviously: Be very careful when you step away from your proven strategy.  Oh, and never trust Google to develop a new market for you.


Good luck naming your phones, Nokia (again)

Nokia announced that it has changed the naming system for its phones, going back from letters to numbers (link).  The last time Nokia changed its naming, five years ago, I wrote a piece saying why technology naming schemes eventually break down after about six years.  This morning I thought about updating the post, but actually I think it's still valid as-is, except that naming schemes now apparently last only five years.  Here's a link to the article, so you can judge the rest of it for yourself (link).


Font games

Speaking of Nokia, there are few things more embarrassing for a company than announcing to the world that you have chosen a new font for your corporate communication.  Making font and logo changes is often interpreted as rearranging deck chairs on the Titanic -- "we can't fix our fundamental problems but by God at least we'll fix the font!"  That's unfair, of course; Apple changed its logo in the middle of its rebirth, ditching the six colors, and it turned out just fine.  So I didn't blame Nokia when it announced on March 25 that it was moving to a new font (link).

But I'm surprised that more than four months later, Nokia's old font is still splattered all over its web pages.  You can find the new one in some spots, but a lot of website navigation, headlines, and even new product announcements are in the old font.  Here are some examples (click on the images for a larger view):

Nokia Conversations (official company blog), August 2, 2011.  Note the use of the old font to announce the company's newest product.  That means the use of the old font isn't limited to legacy bits of the website that haven't been converted yet.

Nokia Press website, August 2, 2011.  New and old logos together on the same page.  That's got to annoy the corporate branding folks.

Nokia UK home page, August 2, 2011.  New font used for the headline, but the old font is used elsewhere.

Nokia US home page, August 2, 2011.  Old font almost everywhere.  Well, you kind of expect Nokia's US site to be behind the times.

Nokia Finland home page, August 2, 2011.  The greatest use of the new font -- except when they mention Ovi.  Freudian slip?


I feel childish and petty for picking on Nokia about a little detail like this.  Fonts stand out to me because I used to run a font company, but I know most people don't even notice them.  Nokia has much bigger problems to solve. 

However, four months is more than enough time to switch over to a new font, especially in newly-created headlines.  Since the criticisms about Nokia's smartphones often center on inattention to detail and slow execution, you'd think they would want to execute crisply wherever they can.  In its March announcement, Nokia wrote that the new font is important because "the letters flow into each other somewhat, creating the impression of forward movement." Since the old font lingers, does that create the impression that Nokia's not moving forward?

Quick Takes: The RIM Tragedy, Lame Market Research, Ebooks Closer to Tipping, Flip vs. Cisco, Google as Microsoft, Nokia and the Word "Primary"

Short thoughts on recent tech news...


RIM as Greek tragedy

I wrote last fall that I was worried about RIM's financial stability (link), but I never expected the company to start inflicting damage on itself.  RIM has always come across as a calm, dependable company.  Maybe not as flashy as some other firms, but reliable and smart.  But as we approached the PlayBook launch, the company has started to look like its own worst enemy.

It's clear that the PlayBook was designed initially as a companion device for people who have BlackBerry phones, and only those people.  That's an interesting choice -- not one I would have made, but I can see RIM's logic.  But apparently RIM decided late in the game that it needed to market the tablet to a broader range of customers.  It started talking up the features those users would need, without making clear that the features would not be included in the device at launch.  Many of the things the company has been touting -- such as Android app compatibility and the ability to check e-mail messages independently of a BlackBerry -- were not available when the device shipped.  RIM has been marketing vaporware.  That guarantees disappointed reviews that focus on what the device doesn't do, rather than what it does.  Check out Walt Mossberg's write-up (link).

While this has been going on, RIM co-CEO Mike Lazaridis has been compounding the problem by creating a personal reputation as a loose cannon.  His latest escapade was ending a TV interview with BBC when they asked about security issues.  The use of the word "security" was mildly provocative, but if you've ever dealt with the British press, you know they specialize in goading people to get an interesting reaction.  The more senior your title, the more they'll poke at you, to see if you can take the heat.

The way this game works, there are several techniques you can use to deal with an aggressive question.  You can laugh at it, you can calmly point out the flaw in the question, you can answer it earnestly and patiently, and you can even pretend not to understand it (I did that once on a UK TV show and it drove the interviewer crazy because he didn't have time to rephrase the question).  But the one thing you can't do is stop the interview.  If you do that, the BBC will post a clip of you online that makes you look like a gimlet-eyed prima donna (link).

The fact that Lazaridis did this means either he's losing personal control under pressure, or not being properly briefed by his press people, or both.  Whatever the cause, it is unprofessional, and it's making RIM's challenges harder.

If you want to understand the damage being done, you can read the forward-looking obituary of RIM that Slate just ran (link).  Or check out this column by Rob Pegoraro of the Washington Post (link). Rob's a very fair-minded, professional journalist who isn't given to hyperbole.  But he called Lazaridis' actions "profoundly foolish from any sane marketing perspective...Seriously, does RIM not realize whom it’s competing with? The company is all but begging to get crushed by Apple."

I haven't written off RIM by any means.  They have a huge customer base, a great brand, and a long history of overcoming skepticism from people like me.  I hope they can do it again.  But at a minimum, RIM's management needs to recognize that they do not have the marketing skills needed to play in the world of increased smartphone competition.  They need professional help, immediately.  And I worry that the marketing problems are actually symptoms of much deeper disorder within the company.


The lamest market research study of the year

It's still early in the year, but I think someone's going to have to work pretty hard to do a lamer market research study than Harris Interactive's EquiTrends survey of mobile phone brands in the US.  Harris says the survey indicated that Motorola has the most "brand equity" of mobile phone brands in the US, followed by HTC, Sony Ericsson, Nokia, and Apple.  Harris also provided a nice chart of the results (link):



There are a couple of problems here.  The first is that the reportedly best-selling mobile phone brand in the US, Samsung, was not included in the results (link).  Oops.

The second problem is that Harris doesn't directly measure brand equity (which is a pretty fuzzy concept anyway).  What it measures is "Familiarity, Quality, and Purchase Consideration."  Those three ratings were combined into an overall brand equity score.

So this is a made-up rating created through a mathematical formula that Harris hasn't shared with the public, as far as I can tell.  But Harris assures us that it's meaningful: "Those companies with high brand equity are able to avoid switching behaviors of those brands that lack brand equity."  (link).  So, according to Harris's research, people in the US should be switching from other phone brands to Motorola.

But in the real world, the exact opposite has been happening.  Motorola has been losing share.  The number three rated brand, Sony Ericsson, has barely any distribution in the US, so it doesn't have much share to lose.  The number four brand, Nokia, has lost most of its US share.

Harris argues that Apple's mediocre score is driven by the sophistication of the iPhone:  "There is still a large audience of consumers that aren’t interested in a smartphone running their life, and Apple doesn’t have a product to meet that need."  I think that's correct, but HTC also sells only smartphones, and it was ranked number two.

And oh by the way, what's the margin of error in Harris's survey?  I can't find it disclosed anywhere, but my guess is that it's several points plus or minus, in which case everyone except Motorola is in a statistical tie.  That wouldn't have made for a cool looking marketing chart, though.

It's been distressing to see websites pick up the Harris story and repeat it without questioning the results.  PC Magazine swallowed it whole (link), as did MocoNews (link).  A lot of other sites reprinted the Harris press release verbatim.  Even if you didn't dig into the flaws, the study ought to fail the basic sniff test of credibility -- does anyone really believe that HTC has a stronger brand in the US than Apple?

When I worked at Apple and Palm, we hated synthetic brand rating studies like this one (and the JD Power ratings, which are similar) because the results depend more on the secret formula used by the polling company than on the actual behavior of customers.  The polling companies construct these special methodologies because they can then sell long reports to the companies surveyed explaining the results, and also charge the winners for the right to quote the results in their marketing.  Check out the fine print at the bottom of the Harris press release: "The EquiTrend® study results disclosed in this release may not be used for advertising, marketing or promotional purposes without the prior written consent of Harris Interactive."  I don't know for sure that Harris charges to quote the survey, but that's the usual procedure.

The lesson for all of us is that you should never accept any market research study without looking into its background, even if it comes from a famous research company.


Ebooks: Here comes the tipping point

The continued strong sales of iPad, Kindle, and Nook in the US are bringing us steadily closer to the tipping point where it will pay an author to bypass paper publishing and sell direct to ebooks.  The latest evidence is from the Association of American Publishers, which reported that ebooks made up 27% of all book revenue in the US in January-February 2011 (link).  AAP correctly pointed out that the ebooks share was raised temporarily by people buying ebooks to read on all of the e-readers they got for Christmas.  The share will go down later in the year.

Still, at any share over about 20%, it will be more economical for an established author to self-publish through ebooks (where they can retain 70% of sales revenue) rather than working through a paper publisher (where they get at most 15% of revenue).  When we hit that point on a sustained basis, I expect that a lot of authors will move to electronic publishing quickly.

It looks like we'll hit that point sometime this year or next.


Flip aftershocks

Silicon Valley has the attention span of a toddler in a candy store, but it was interesting to see how people around here lingered on the story of Flip's demise several days after the announcement.  There were dark suggestions of ulterior motives at Cisco -- that they had bought the company to strip it of its intellectual property (link) or that they shut it down a viable company only so they could look decisive to Wall Street (link).  And that was just the stuff in the press.  I've heard even more pointed speculation from people working in Silicon Valley.

My guess is the real story is a lot more complicated and nuanced, but at this point it doesn't matter.  Killing Flip may have helped Cisco with Wall Street analysts, but the sequence of buying Flip and then shutting it down has seriously damaged the company's image in Silicon Valley as a leader and a partner.  Silicon Valley is a very forgiving place.  You can make huge strategic mistakes, and waste billions of dollars, and still you'll be forgiven as long as you did it in sincere pursuit of a reasonable business idea.  But Cisco's senior management is now viewed as either overconfident to the point of stupidity, or as the deliberate torture-murderer of a beloved consumer brand.  I've rarely seen this level of hostility toward a management team, and I don't think they will be forgiven anytime soon, if ever.

Does that have any practical impact on Cisco's business?  Not immediately; business is business.  But it will probably be a little harder for Cisco to make alliances and hire ambitious people in the future.


Google 2011 = Microsoft 2000?

It's spooky how Google is sometimes starting to remind me of Microsoft circa 2000.

The latest incident was a quote from a Google executive saying that the company wants iPhone to grow because Google makes a lot of money from it (link).  Microsoft used to say the same sort of thing about Apple, claiming that it made more when a Mac was sold rather than a Windows PC (link).  (The idea was that many Microsoft apps were bundled with Windows at low cost, whereas Mac customers bought Microsoft apps at retail.)
   
In both cases, the statements may be technically true, but what they really point out is that the company has deep internal conflicts between its various business units.  Yes, part of Microsoft wanted to make Macintosh successful, but another part of Microsoft wanted to kill Macintosh.  Microsoft as a whole wanted to do both at the same time, which created internal confusion.  Add in antitrust lawsuits by governments and Wall Street pressure for quarterly growth, and Microsoft quickly became distracted, inwardly focused, and slow-moving.

Parts of Google, I'm sure, think iPhone is great and want it to grow.  But I guarantee that the Android team is trying to kill iPhone (and Nokia, and HP/Palm).  Google has its own set of government distractions, plus a big old lawsuit from Oracle, plus legal action by Microsoft and Apple against Android licensees. 

There are huge differences between Google and Microsoft, of course.  Google is not under the same sort of Wall Street pressure that was applied to Microsoft, and Google's founders have not lost interest in running the company. 

But it's disturbing to see how quickly some of Microsoft's symptoms are showing up at Google.


Hey Nokia, how do you define "primary"?

Microsoft and Nokia said they have finalized the contract for their alliance.  There were a couple of interesting tidbits in the announcement:

--Both companies said they completed the negotiations sooner than they expected.  Usually that sort of statement is hype, but for an agreement of this size, it actually was a pretty fast turnaround.

--They went out of their way to say that Nokia will be paying royalties for Windows Phone similar to what other companies pay.  That's important legally and for regulators, so companies like Samsung can't complain that Microsoft is giving discriminatory pricing.  At the same time, the announcement also made it clear that Microsoft will be passing a ton of money to Nokia for various services and IP, which Nokia wanted on the record to help with its investors.  I think the net effect will be that Nokia gets a free Windows Phone license for a long time.  That will not please Samsung, HTC, and the other Windows Phone licensees, because it puts them as a price disadvantage.

--The companies are apparently cross-licensing a lot of patents.  I wonder if this will help Nokia with its IP warfare against Apple.

--In an interview with AllThingsD (link), Microsoft and Google Nokia said Windows Phone was Nokia's "primary smartphone operating system." That leaves open the door for Nokia to play with other smartphone operating systems, and it leaves completely unanswered the question of tablets.  I'm sure the Symbian/Meego fans will be all over that as a ray of hope for their platforms, but to me it just leaves some prudent wiggle room for Nokia in the future.  I'd love to know how the agreement defines the words "smartphone" and "primary" -- or if it even has definitions for them.

(Note: Edited on April 22 to fix an embarrassing typo.)

Quick Takes: Nokia's culture, RIM's interface, and living in the paradigm of engineers

This post is an experiment.  I sometimes run across information that I think is worth sharing, but that doesn't fit into my usual publishing tools.  Generally it'll be something too complicated to tweet, but too simple for one of my usual long blog posts.  I've decided to try compiling those tidbits into an occasional post, which I call "Quick Takes."

Please let me know if you find this useful.

This time I want to talk about the aftermath of the Nokia-Microsoft deal, Android on BlackBerry, wireless insecurity, and WikiLeaks as a model for the future of human society.


More aftershocks from the Nokia-Microsoft deal

In the flood of commentary about Nokia's deal with Microsoft, I ran across three items with interesting perspectives on the deal.  They helped me understand how much work Nokia still needs to do.  If you're interested in the deal, or just in organizational change, I think they're worth checking out...

The engineering-driven culture.  Adam Greenfield, a former Nokia employee, discussed Nokia's culture and explained how it produces wonderful mobile phone devices but poor user experiences (link).  The key sentence:

The value-engineering mindset that’s so crucial to profitability as a commodity trader is fatal as a purveyor of experiences.

When I've written in the past that Nokia needs to learn how to do real product management, this is what I was trying to say.

This is how it feels to have an alliance dumped on you.  Meanwhile, if you want to get a sense of how corporate alliances get built, check out Engadget's interview with Aaron Woodman of Microsoft (link).  Aaron is a Microsoft spokesman and a key player in the Windows Phone team, so you might expect him to know chapter and verse about the plans for the alliance with Nokia.  But he doesn't, and you can feel his discomfort as Engadget tries to pin him down on some details:

Q:  There will be no preferential treatment given to Nokia in terms of the level of customization that they can apply to their devices. Is that correct, or no?
A: So it's an interesting question -- you say, like, preferential treatment, so say more about that. Is that like oh, they can modify...

The reality is that a big corporate alliance is created from the top down.  Senior management negotiates the broad outlines, and then announces the deal (because it's material to both companies and has to be announced to prevent insider trading).  Then the mid-level employees have to painstakingly work out what the agreement actually means.  I believe that's happening as you read this, and that process will probably continue for some months.  Meanwhile, Aaron can't answer most of Engadget's questions because the answers don't yet exist.  I give him a lot of credit for not trying to make up something to make himself sound better.

Anyway, if you see some vagueness from Microsoft and Nokia in the next few months, don't be alarmed.  It's how these things are done.

When is an installed base not an installed base?  I've been delighted to watch the rise of Horace Dediu, a former Nokia employee who has built himself a huge online following through very cogent analysis of Apple, and now the overall mobile market.  Although I usually find myself agreeing with everything he says, I thought he was a bit off base in some recent commentary about Nokia (link).

Dediu plotted the installed base of every mobile platform, and pointed out that Symbian has a far larger installed base than any other mobile platform.  He said Nokia has decided to throw away that installed base:

The disposal of such a large installed base must count among the largest divestitures in technology history and, when coupled with the adoption of the least-tested alternative as a replacement, elevates platform risk-taking to a new level. It may seem bold, but there is a fine line between courage and recklessness.

If all of those Symbian users understood that Symbian was their OS, had purchased applications for it, and felt that Symbian added value to their devices, then Nokia would indeed be taking a huge risk.  But virtually the only people who were even aware of Symbian were the people reading and writing blogs about the mobile industry.

Try this -- go look at a typical Nokia Symbian phone.  What is the brand you see on it?  Start the software, launch some apps.  Do you see the word "Symbian" displayed prominently?

Have you ever seen an ad for Symbian?  A billboard perhaps, or a big glossy ad on the back cover of the Economist?

Maybe a teensy little text ad inside the Economist?  Anything?

Indeed not.  Because Nokia didn't want the name Symbian to be prominent.  Heck, it didn't even let Symbian create its own user interface, let alone advertise its brand.  Nokia made Symbian into anonymous plumbing, because Nokia wanted Nokia to be the brand that users bought.  And considering how things worked out, that was something the company did right.

When I was at Palm and we surveyed mobile phone users, we asked Symbian users what OS was on their phones.  Most of them had no idea.  Among the minority who said they knew what their OS was, more of them thought it was Windows than knew it was Symbian.

Let me say that again, more Symbian users thought they were using Windows than knew they were using Symbian.  I guarantee that hasn't changed in the years since we did our surveys.

So, if Nokia executes its marketing properly, it should be able to flip most Symbian users to Windows Phone easily.  Just grin, tell them it's the cool new Nokia smartphone, and move on.  In that vein, the riskiest thing Nokia has done in the past couple of weeks is play up its deal with Microsoft.  It would have been better to play it down, so Nokia customers wouldn't get a message of disruption.

But I doubt most of them are listening anyway.

If there's anything reckless in the Nokia-Microsoft deal, it's the huge number of things that both companies need to execute very well in order to make it work.  But I think there's nothing reckless about the basic idea of ditching Symbian.


Android apps on BlackBerry?

There have been persistent rumors that RIM is trying to get software that will let its PlayBook tablet run Android apps (link).  Now there's some evidence that they may be looking to do the same on BlackBerry phones as well (link).  This seems like a reasonable thing to do, but I'm astounded that they're only working on it now.  The time to plan the app platform for your tablet is when you're creating the software for it, about a year before it ships.  It's not the sort of thing you dink around with a couple of months before shipment.  And you especially don't tell the public about it right before the hardware launches -- all that does is undercut any chance you had of getting native app development on your platform.


Wireless isn't secure (duh)

This isn't news if you've been paying attention.  For years the security companies have been telling us that wireless networks (especially wifi) can easily be snooped.  I'm not sure why the wireless insecurity story has never gotten much traction outside the beltway.  Maybe we weren't using enough web apps to care, or maybe no one listens to the security companies because they're presumed to be alarmists who just want to charge you $49.95 a year for something that'll make your computer run slow.

Anyway, it seems to me that the story is now popping up all over the place.  In December the Wall Street Journal ran a series on the information collected by mobile apps (link), this week The New York Times ran a story on the third party tools available to hack wifi hotspots (link), and a professor at Rice University posted on the types of data his class could sniff from his Android phone (link).  A surprising find -- two apps unrelated to location services were broadcasting his GPS location.

Why is this significant?  The mobile operators plan to offload traffic to wifi to reduce network congestion.  If those networks turn out to be insecure, the operators might be blamed for security breaches that result.  Or if more wifi networks are restricted due to security fears, the operators might find it harder to do that offloading in the first place.  Bottom line -- it is risky to depend on someone else's infrastructure as part of your core product.


WikiLeaks: Human society as designed by an open source engineer

O'Reilly ran a fascinating review of Inside WikiLeaks, a new book describing how WikiLeaks operates (link).  It reminded me of some thoughts I had after I heard a talk by Ward Cunningham, one of the creators of the wiki (link).

Most of the social structures in the world today were designed by two groups of people, religious leaders and lawyers.  The religious leaders gave us governments based on moral codes and hierarchies; the lawyers gave us governments based on laws, property, and checks and balances.  In both cases, the people creating the system built into it their own worldviews, their own assumptions about human nature.  The assumptions were so fundamental that I think they didn't even realize they were using them; they just baked them into the system.

Wikipedia, WikiLeaks, and movements like them are profoundly new because they attempt to structure society around the social assumptions of a third group of people: engineers.  And not just any engineers, but open source engineers.  That culture believes in the rationality of human beings and the existence of absolute truth.  It assumes that if the same information were available to everyone we'd be able to settle all disputes through logical discourse.  And it is intensely hostile to authority structures, because by definition they're assumed to get in the way of free discussion.

WikiLeaks is an attempt by that culture to restructure society.  I know that sounds crazy, but here's a quote from the book:

In the world we dreamed of, there would be no more bosses or hierarchies, and no one could achieve power by withholding from the others the knowledge needed to act as an equal player.

If you want to see this idea taken to its logical extreme, check out the short story "The Ungoverned" by science fiction author Vernor Vinge (it's online here).  I'm not saying that's the world we're headed for, but I think we'd all be foolish to assume that WikiLeaks will be the last attempt at open source social engineering.

I think it's actually just the beginning.

Impact of the Nokia-Microsoft Alliance: Welcome to the Five-Platform World

Like a big collective cow, the blogosphere is continuing to chew on the Nokia-Microsoft announcement.  It seems to be one of those rare events that forces people to stop, step back, and reconsider their assumptions.

I think it's impossible to say today what impact the Nokia-Microsoft alliance will have, because we don't know how well Nokia will execute.  If Nokia executes poorly, there won't be any change at all -- both Microsoft and Nokia will continue to gradually decline in mobile.  If Nokia executes well, I think the impact could be pretty big.  Not asteroid-killing-dinosaurs big, but a very large meteorite, with effects felt worldwide.

For the purposes of this note, I'm going to assume that both Nokia and Microsoft will execute well.  That's a risky assumption -- they would not have formed this alliance if they had been executing well in the past.  But for today we'll give them both the benefit of the doubt.


How many platforms can we stand?

Ignore the hype from Nokia about the "third platform."  The reality is that we're on track to end up with four or five significant smartphone platforms in the US and Europe: Apple, Android, RIM, Windows Phone, and HP/Palm if their new products are excellent.  Japan as usual will be very different, and I don't think all five players will be equally active worldwide.

You might ask if the market can accommodate five platforms.  There's a school of thought that says the smartphone market is destined to go the way of the PC market -- eventually almost everyone will coalesce on a single platform that has the most applications and licensees.  If that's how smartphones are destined to work, nobody seems to have told the customers.  Platforms with small numbers of apps (RIM in particular) have continued to sell well.  Also, back when I was at Palm and we had far more apps than any other mobile device, it didn't let us destroy Pocket PC, or RIM, or Symbian.

I think apps do matter in smartphones, but so far they appear to matter less than they do in PCs.  Without any apps, a PC is useless, whereas most smartphones ship with a lot of functions built in: voice telephony, texting, e-mail, browser, camera, etc.  Third party apps are more gravy than steak, at least for now.

So maybe the magic number is two platforms.  In marketing, many experts believe customers can hold only two major brands in their heads for any market: a leader and a challenger.  Think Coke and Pepsi, Hertz and Avis, Airbus and Boeing.  On the other hand, there are plenty of markets which have dozens of competitors.  Automobiles, for instance.  You can have huge numbers of successful brands there because the market is heavily segmented -- Rolls Royce doesn't compete with Mini Cooper.

I believe the number of smartphone vendors and platforms is going to depend on the actions of the smartphone companies themselves.  If they treat smartphones like a single consolidated market, a shakeout is probably inevitable.  If they segment the market, creating brands and devices that serve different groups of customers differently, I think there's room for all the platforms to survive.

Unfortunately, at this point most of the smartphone companies are focusing only on slavishly copying Apple.  Even RIM, a company with differentiated communicator products, is trying desperately to turn them into iPhone clones.  That's a great strategy to ensure commoditization and market dominance by Apple.

Since we're giving Nokia the benefit of the doubt today, let's assume they create differentiated products that help to segment the market.  I think that would stimulate other handset companies to do the same thing, leading to a relatively stable multiplatform world.

Here's what that means to the rest of the industry...


For the Android licensees, there will be intense competition for shelf space

In a five platform world, I think it'll be hard for all of the Android licensees to survive.  Picture your typical Verisprint store a couple of years from now (Vodorange if you're in Europe).  It probably carries three iPhone devices, because Apple has diversified its line.  There are a couple of RIM devices with keyboards.  We're assuming Nokia and Microsoft are successful, so there are a couple of Nokia smartphones on display.  Since we're giving the benefit of the doubt, we'll also assume HP has paid big comarketing dollars to get two of its devices shelved.  That's nine smartphones.  How much space is left for Android models?  I figure maybe two or three devices, split between Samsung, HTC, Motorola, SonyEricsson, LG, etc.  Life gets very uncomfortable for a couple of those companies.

Or maybe they get lucky and a RIM or HP gets knocked out of the picture.  That would leave space for more Android vendors.  But the Android licensees can't control that -- they're counting on Google to drive one or two of the other handset platforms out of business.  Is Google prepared to fight that sort of alley knife-fight against an HP or RIM, companies that might otherwise be Google partners? 

Android was a fun product for Google when all it meant was bleeding Microsoft.  But it eventually made Apple into an enemy, and now Nokia.  HP is next, and RIM will come after unless it licenses Android.  Is that the lifestyle Google wants?  I doubt it.

By the way, I think the Android shelf space problem is one of the reasons why Nokia went with Microsoft rather than Google.  Nokia has more control over its fate as a Windows Phone vendor, and it knows Microsoft is willing to do anything to win.


What happens to the other Windows Phone licensees? 

It's really hard for me to picture them sticking with the platform in more than a token fashion.  They avoided Symbian because it was a stacked deck in Nokia's favor; I think Windows Phone now looks the same.  The only way they'd invest more is if Nokia's WinPhone products started to take off strongly in a couple of years, and they were afraid of being left out.  I presume that's what Microsoft is counting on (it's how they dealt with IBM in PCs).


Can HP really be the fifth platform? 

HP is by far the weakest of the five mobile platforms.  Although it has a great legacy, it has neglected its developers tragically and its products are late.  The recent HP event shows it still has a legacy of goodwill in Silicon Valley, and you can't count out the world's largest PC company.  But HP's success depends on great execution.  If its products are timely and deliver on their promises, I think it has a good shot.  I am especially impressed by the things HP wants to do to link its products together (another on the long list of things Microsoft fumbled years ago).

But can HP execute?  It's been steering a zigzag course in PCs.  For several years it invested heavily in differentiation, and hired a lot of former Apple staffers.  But in the last year it laid off many of those people, killed its advertising campaign, and focused on Acer-style price competition.  Now suddenly HP is talking like it wants to go back to being a differentiated premium vendor.  That sort of inconsistency will be deadly when competing directly with the other smartphone platforms.

I can't figure out if the HP guys are Jedi knights or middle-aged paunchy men playing with plastic swords.  Based on history, I'm about 60-40 in favor of the plastic swords.


For the mobile operators, all of this produces immense happiness

Sometimes it's better to be lucky than good, and the Nokia-Microsoft deal is a huge stroke of luck for the operators.  They have always wanted the handset vendors to be barefoot and pregnant, too weak and divided to fight with them for control over phone customers.  A five-platform world is immensely attractive to them because the platforms can be played off against one another.  If RIM gets too uppity, you can just tip the product mix toward HP, or vice-versa.

The downside of this for the operators is that five platforms are a lot more work to support.  So they'll have conflicting temptations -- carrying more platforms gives them more leverage, but adds to their costs.  I think the biggest operators will choose the leverage; Verizon proved that it's not healthy to be cut off from a successful platform, and you can never tell which one is going to be successful next. 


For app developers, there will be more pain

The prospect of a five platform market is a nightmare for developers.  It's already hard to support two platforms (Apple and Android); the idea of supporting five is a logistical nightmare.  Most developers will focus on one or two, but that limits their potential revenue because the available market is smaller.

This situation favors large established developers that can afford to do ports to all the platforms.  Unfortunately, large software companies are usually the slowest to innovate, so I fear the net result of a five-platform world is likely to be less innovation in mobile apps.

There will probably be intense interest in cross-platform development environments that let a developer write once and deploy anywhere.  The platform companies will resist, and probably governments will eventually get dragged into the debate as they are asked to define what constitutes restraint of trade in an online app marketplace.

The one silver lining might be if the platform vendors start to compete for developers by giving them benefits -- for example, by loosening restrictions in their app stores, and taking a smaller cut of revenue.  I hope that will happen, but it's not enough to make up for the fractured development platform.


What it means to Nokia: A chance to survive

Although Europe is really a collection of nations rather than a single place, there are a few things that seem to tug on heartstrings across many European countries.  The Eurovision song contest is one, Airbus is another, and Nokia is a third.  It represents European style and marketing prowess, and it proves that people in Europe can lead a high-tech industry.  So the deal with Microsoft represents far more than a business deal; it feels like a betrayal of a European jewel at the hands of a rapacious American company.

It's important to understand what the alternative was for Nokia.  If the company had continued at current course and speed, the decline in gross margins would have put it close to breakeven this year, and it would have started losing money in 2012.  Things were already so bad that restoring 10% operating profit this year would require laying off about a third of the company.  Obviously the cuts won't be that severe because Elop is aiming at a multiyear recovery, but the numbers show how close Nokia was to a death spiral in which spending cuts and revenue declines start reinforcing each other.

Nokia was like a plane rapidly losing altitude.  If you don't pull back on the yoke in time, there's nothing you can do to avoid hitting the ground.  The company was very close to that point.

I believe Nokia's directors knew this when they hired Stephen Elop, and his charter was to restructure the company radically before the problems became unsolvable.  In that sort of situation, you don't ask what products you ought to save.  You figure out how much money you can spend, you make a prioritized list of everything you do, and you start cutting from the bottom of the list until your activities fit into the budget.

I think when Elop and the board did that exercise, all of Nokia's OS business was below the line.  They just couldn't afford it.

Although stepping back from OS is emotionally devastating to many Nokia employees and fans, I don't think it's necessarily bad for the company.  Operating systems are like plumbing; they don't actually add much value to the building, but if they're built wrong they can destroy it.  Symbian advocates talked persuasively about its superior power management and ability to run on low-cost hardware, but as far as I can tell that was never reflected in higher margins for Nokia smartphones.  Most Symbian users didn't even know the OS was there, and if they had they would not have paid extra for it.  Symbian was enormously complex and difficult to work with, and it cost Nokia a fortune.  According to Nokia's annual reports, it paid about $800 million when it bought Symbian, and it reportedly employed at least 2,500 Symbian engineers (link).  Those engineers probably cost about $500m a year, or about $5 per Symbian phone sold.

Nokia went into the OS business because it was afraid of depending on someone else's plumbing.  Now it's betting that Microsoft is weakened enough that it'll actually cooperate with Nokia.  Microsoft will reportedly end up paying Nokia more than a billion dollars to adopt Windows Phone (link), and Nokia can reassign the Symbian engineers to tasks that will actually differentiate Nokia's products.  The deal with Microsoft could end up being not a surrender for Nokia, but a liberation.

But as I've said before, it all depends on execution.  For the folks inside Nokia, things will feel worse before they feel better.  The layoffs are still to come, and until then it will be hard for employees to focus on their jobs.  Even after the layoffs are done, it will be a lot of months before Nokia can ship new devices designed to take advantage of Windows Phone.  Until then, Nokia is unlikely to reverse its gradual loss of share in smartphones. 

When I first held a Nokia n97, I was lost in admiration at how beautifully the hardware was put together.  Everything from the shape of the case to the motion of the sliding hinge screamed elegance.  Then I tried the software and I wanted to toss it out a window.  Nokia's smartphone task is now very simple: produce some great devices like the n97, marry them cleanly with Windows Phone, and partner with Microsoft to get them distributed as broadly as possible.

If Nokia targets those products at real customer needs, and differentiates them from the iPhone rather than just trying to top it, it has a good chance of creating the multi-platform future it's talking about.

It's not as much fun as conquering the entire tech industry, but it's a lot better than going broke.  And it's probably the only choice Nokia had.

Nokia: An Excess of Cleverness

I'm looking forward eagerly to Nokia's strategy announcement this week.  Although Nokia is not highly esteemed in the US, most of the rest of the world recognizes it as an enormously important company: a brilliant manufacturer, a symbol of status and affluence in the developing world, and a source of great pride to its many fans in Europe and elsewhere.  If Nokia could combine its strengths with better execution in software and smartphones, it could be a formidable force in the computing industry as a whole, not just in mobile.

In anticipation of the new strategy, I wanted to share a few thoughts on why Nokia has struggled with the intersection of phones and computing, and what it might do to fix the problems. 

A couple of disclosures first:
--Several years ago I did a consulting project for Nokia.  I've also met with them, I have had a lot of briefings from them, and I know several people who work there.  No inside information from any of those sources has gone into this note.
--Before someone posts a comment saying so, yes my views are colored by the place I live, Silicon Valley.  Your paradigm may vary.

As is often the case for big successful companies, I think Nokia's strengths are also its weaknesses:


Strength 1: Nokia focuses very well...which can lead to denial of reality 

Nokia has a very intense, delivery-focused culture that has enabled it to pursue strategies with awesome focus and determination.  Over the years, the company has transformed itself from a paper mill to a rubber boots company to a video monitor company, etc, etc.  I can think of very few modern firms that are capable of that sort of huge transformation.

But I think that same determination has also sometimes enabled Nokia to live in denial of reality.  As an outsider who has dealt with Nokia a lot over the years, the company often comes across to me as the opposite of a learning organization.  Rather than getting inquiry and questions, when you discuss an issue with Nokia you tend to find that there is already an official Nokia answer to it: self-assured, hermetically sealed, and often sounding slightly condescending.

When Nokia was on a roll and executing beautifully, that self-assurance was entirely justified.  As somebody once said, "it's not arrogance if you can do it."  But as the company faltered, I think its belief in its own specialness and power led it to resist making changes that would have happened at most other companies several years ago.  This deepened Nokia's problems.

A quick look at the company's financials tells the story.  In 2006, Nokia was on a roll.  Its revenue was growing nicely, and it had operating profits of about 12% before taxes.  But starting in 2007, Nokia hit a wall.  Its revenue flattened and then fell.  Despite the revenue problem, Nokia held its R&D, marketing, and administrative spending almost steady in Euro terms, increasing them as a percent of revenue.  It's as if Nokia believed four years of revenue stagnation were just a temporary glitch to be endured rather than a fundamental problem that had to be fixed.

(Note: Fiscal years, all figures in $millions.  The numbers above and below were restated from euros to dollars.  I also excluded miscellaneous revenue and expenses, and one-time charges, because they distort the trends.)

To give you an idea of the impact of Nokia's slowdown, here are a couple of comparisons to Apple.


First, revenue...


Yes, Apple is now a bigger company than Nokia in terms of revenue.  That alone is pretty astonishing to me, and I'm sure it irritates the folks at Nokia, since they routinely bristle at this sort of comparison (link).


Here are expenses (R&D, marketing, and administration) as a percent of revenue.  Lower is better.


Apple has done a nice job of holding its expense growth below its revenue growth.


And here's the payoff:  Operating income


Financially, Apple has just plain run away from Nokia.


When Stephen Elop was announced as CEO of Nokia, people made a lot of hay about his background as a Canadian.  I think that was the wrong bit to focus on.  To me, the most important element of Elop's background was the ten years he spent in Silicon Valley.  I wondered what a Silicon Valley guy would think when coming into a company and seeing financials like these.  I believe the reaction would be horror: "Why didn't you people panic back in 2008?"  The accepted wisdom here is that you just don't let expenses stay high through four years of declining revenue.  That lets the problems fester.  Nokia is now a bit like a patient who has delayed routine medical treatment for so long that he ends up in the emergency room needing surgery.

Elop's now-famous memo on Nokia's problems speaks volumes about the company's culture (link).  Assuming the memo is real (I am taking the word of the press on this), Elop likens Nokia's situation to jumping from a burning oil derrick into the North Sea -- where, as anyone in the Nordic countries would know, you can die of hypothermia in minutes. 

What does it say about the employees' resistance to change that the CEO feels he has to be this alarming? 


Strength 2: Nokia manufactures wonderfully...which produces sterile, inartistic smartphones

Nokia is one of the most efficient manufacturing companies on the planet.  Very few western companies have ever withstood an all-out assault by China Inc, but Nokia, a company from high-cost Finland, has also been for years the world's lowest-cost major producer of phones.  Elop's memo says that cost leadership is now under threat, but still it's an unbelievable accomplishment that ought to be studied in every business school worldwide. 

But the same manufacturing-driven culture that turns out great, cheap feature phones by the dozen breaks down when asked to craft an intricate smartphone in which overall system integration is the most important feature.  Nokia designs phones using a manufacturing-like process in which different groups create features in parallel.  So (to make up an example) one group might do the user interface, another the mail app, and another the browser.  That's very efficient for creating lots of phones quickly, but it means it's very difficult to integrate all of the pieces together closely so they produce a great user experience.  The best smartphones, like the iPhone, are designed holistically, with all of the pieces coordinated together.  A product manager controls the process and can enforce compliance with the product vision.  This process is much slower and less efficient than Nokia's, but when you're creating a product with a lot of software, it ensures that everything works together well.

Apple can get away with this less efficient process because it produces one phone at a time.  Nokia has 89 different phone models available currently in Europe (link).


Strength 3: Nokia makes fantastic plans...over and over and over again

Nokia has for decades been able to hire the brightest people from a very bright country, Finland.  After meeting a lot of Nokia employees, I can tell you that it probably has one of the smartest workforces anywhere.  But all that intelligence has produced an analytical culture that breeds complicated plans elaborately fleshed out by committees.  Its history in the last decade is a series of wickedly clever, logical strategies that were so complex and took so long to develop and implement that they were often obsolete before they came to fruition.  It sometimes seems as if Nokia has been crippled by an excess of cleverness.

I'm reminded of a short story by science fiction legend Arthur C. Clarke, Superiority.  In it he described a society that lost a war by continually focusing on the new weapons that were about to come out of the labs, rather than mass-producing the ones that it already knew how to build.

To make matters more difficult, Nokia defined almost every major company in computing and telecommunications as its enemy.  At one time or another it has decided that it needed to dominate or defeat Microsoft, Apple, RIM, Google, the entire handset industry, the network equipment suppliers, and of course the mobile operators.  Even the US government tries to fight only two wars at once; Nokia has been fighting at least five.

There are so many examples of Nokia's busted plans that I don't know where to start.  The Symbian adventure, in all of its permutations, is an obvious one.  Nokia has gone through a number of different organizational structures, each of which was supposed to optimize it to compete in the new world of computing and internet.  But the one that sticks out at the moment is Nokia's venture in tablet computing.

Don't get me wrong, I do know the differences between an iPad and an n900.  They are dramatically different devices that reflect profoundly different design philosophies.  But both were designed for a similar high-level goal -- to make computing and web access mobile.  Nokia shipped its product first, more than three years ago.  Apple shipped last year.  Apple is selling seven million units a quarter, while n900 sales are what, a few hundred thousand?  Nice, but not a new industry.  I know Nokia has learned a lot, and has built a lot of infrastructure, but at some point you have to generate revenue rather than just having a great learning experience.


What do you do, Mr. Elop?

I think the biggest challenge facing Stephen Elop is that he needs to preserve the strengths of Nokia even as he undoes their effects.  Expenses have to come down, but at the same time he needs to invest in innovation.  The company must keep its manufacturing strength, even as it adopts a design philosophy that undercuts manufacturing efficiency.  People at Nokia have to be free to innovate independently, but when left to itself the Nokia culture tends to seek consensus and compromise.

I suspect that given all these changes, even motivating the Nokia workforce may become a challenge.  The Nokia people I've talked to love the company and desperately want it to get better.  But nobody could live through the last few years without getting a bit burned out.  Now the CEO says your home is on fire and you need to jump into freezing water.  Would that memo motivate you to work harder, or would it motivate you to work on your resume?  I was discussing the memo with several of my old friends from Apple today, and one of them joked that the message to employees was, "Everybody come to the communication meeting Friday!  Oh, and you might want to pack up your personal belongings and bring them, just in case."  On Friday, Nokia's people will need to see a carrot -- an attractive, plausible vision for the future of the company -- rather than just a stick.

I'll be watching carefully for that vision.  We're hearing rumors that Nokia is planning to shift away from its current operating systems and build on top of Windows Phone 7.  I doubt that's the full story.  For one thing, Nokia can't completely cut off its current software and switch to something else; there would have to be a long transition.  Besides, in the Nokia earnings call last month, Elop dropped some hints about his plans.  He talked about maintaining two platforms, one aimed at the mass market and another at the high end.  He said Nokia's biggest challenge is at the high end, so that's where I would expect a change is most likely.  Elop also went out of his way to praise the QT software layer, so I would be very surprised if it's killed.  If Windows Phone is in Nokia's future, I think we'd see it at the high end, paired with QT.  So we'd get a hybrid OS with Microsoft's plumbing and Nokia APIs. 
   
That would be a bold move, but it's also extremely complicated.  I remember when Palm tried to build its future on Windows Mobile, and gave up in disgust a couple of years later when Microsoft licensed Palm's innovations to other phone companies.  How would Nokia restrain Microsoft from doing the same thing again?  Elop worked at Microsoft, so I'm sure he has some ideas. 
   
Overall, it sounds like a high risk strategy, almost wickedly clever.  Exciting stuff.  And yet I keep remembering how Nokia's other wickedly clever strategies have worked out.

Note:  I've added more commentary on the Nokia announcement here.

Is Symbian dead? And if so, who killed it?

"We should declare victory and go home."
--Apocryphal quote attributed to George David Aiken

I hesitate to write anything about Symbian, because it's a great way to get branded a parochial American, or an Apple fanboi, or a "member of the US-protectionistic mobs braying for blood," to paraphrase a comment from a tech discussion forum in the UK this month.

But there's been a huge cloud of smoke and very little light in the recent online discussions of the changes at Symbian. Is Symbian dead? Is it stronger than ever? What's really going on? I wanted to see if I could make sense of the announcements. Besides, there are some important lessons from the Symbian experience, and I'd like to call those out.

Here's my take on what's happened: The business entity called Symbian was originally designed to prevent Microsoft from controlling the mobile OS standard, without having Symbian itself seize control over the mobile phone companies that funded it. In that task it succeeded. However, as a company run by a consortium, Symbian's governance was politicized and inefficient. This left Symbian woefully unequipped to compete with Apple and Google. A different approach was needed, and Nokia's new management has finally come to terms with that. As a result, Symbian as an organization is now defunct, and Symbian as an OS is becoming background infrastructure that has little relevance to the mobile platform wars.


To explain why I reached that conclusion, I have to start with a quick refresher on Symbian's history, for readers who haven't been following it closely...

There are two things named Symbian: Symbian the company and Symbian the OS. Some of the confusion this month was caused by people mixing up the two things. Symbian OS began as EPOC, the operating system used in Psion's handheld devices. EPOC was spun out of Psion in 1998 as a separate company called Symbian, co-owned by Psion and most of the leading mobile phone companies of the day, led by Nokia. The idea was that all of them would use the renamed Symbian OS in their smartphones, enabling them to put up a unified front against Microsoft, which they feared would rule the smartphone market.

Over time Nokia came to be the dominant manufacturer of Symbian OS phones outside of Japan, largely (in my opinion) because the Symbian phones made by other mobile phone companies didn't sell well. Eventually the other mobile phone companies no longer wanted to pay for a joint venture that was mostly just supplying software to Nokia. Linux was gaining momentum as a free, open source mobile OS, so the Symbian partners, led by Nokia, decided in 2008 to convert Symbian OS into an open source project. Nokia hired most of the Symbian engineers, and gave away their code through the foundation.

Symbian the company was replaced by the Symbian Foundation, a nonprofit tasked with managing the open source process and encouraging other companies to sign up to use the software. The idea was that Nokia, the other Symbian licensees, and a growing hoard of academics and developers would work on various parts of the OS, contributing back their modified code to the shared base. The move to open source kept some level of engagement from several other mobile phone companies, most notably Samsung and SonyEricsson.

But both companies continued to have poor sales for their Symbian phones, and this fall they announced that they had no further plans to use the OS. That left DoCoMo in Japan as the only other major user of Symbian. Nokia was stuck with an open source foundation that mostly just supplied its own software back to it. That wasn't going to be viable. So earlier this month, Nokia and Symbian announced three significant changes:

--The Symbian Foundation is being dramatically scaled back to "a legal entity responsible for licensing software and other intellectual property, such as the Symbian trademark." (link). In other words, it's just a shell. Symbian is now truly Nokia's OS. Nokia will plan, develop, and manage the Symbian code base, and distribute it directly to anyone who still wants it (presumably DoCoMo). You can read a biting commentary on the changes here.

--At the same time, Nokia reaffirmed an announcement it made in October that it is focusing all of its application development support on the Qt software layer that it purchased several years ago (link). Qt will now apparently be Nokia's one and only application layer, deployed on both Symbian and the upcoming MeeGo OS being codeveloped with Intel (link).

--The EU is putting 11 million Euros into a new organization, called Symbeose (which stands for "Symbian – the Embedded Operating System for Europe"), which will help fund the development of advanced Symbian OS features, including asymmetric multiprocessing, dev tools, memory management, image processing, video acceleration, speech to text, mobile payment, multimedia formats, and embedded systems beyond mobile. There are two semi-conflicting explanations of what Symbeose is all about. Some people say it's aimed at turning Symbian into an embedded OS that can run in all sorts of devices (why Europe needs that instead of Linux is unclear to me, but you can hear some discussion of the wrongheaded North American mobile paradigm here). Others say the intent is to resurrect Symbian OS as a smartphone OS used by companies other than Nokia. In a presentation, Symbian Foundation said the investment is intended to "combat mobile device and service homogeneity exemplified by Android and iOS" (link). Apparently taxpayer support is needed because Nokia isn't willing to pay for some infrastructure needed by other phone companies (link). A Symbian Foundation employee explained: "I would say that the main focus of the developments will be advancing existing, as well as building new tools and services relevant for smartphone manufacturing at the beginning of the manufacturing process. We want to make it easier for any manufacturer to take the Symbian codebase and develop new smartphones" (link).


What it means

Symbian isn't dead. It's just irrelevant. After the announcement, Nokia professed its strong support for Symbian OS (link). Nokia has no choice but to support the OS because it's built into the whole middle to top end of the Nokia product line. Given all of the legacy Nokia code written in Symbian OS, the Symbian-based phones still in development, and all of the Nokia development teams who are used to working in Symbian, it would probably take years to flush all of the Symbian code out of Nokia's products even if it wanted to. Symbian at Nokia is kind of like Cobol at IBM -- you're going to go on tasting that particular meal for a long time to come.

But the decision to focus on Qt for applications means that Symbian OS is effectively no longer an app development platform. It's embedded software; the background plumbing that powers Nokia's smartphones (and maybe other embedded systems, if the EU has its way). There's nothing wrong with that, but it makes Symbian irrelevant to most of the folks who talk about mobile technologies online. We don't spend much time online debating which OS kernel a device should use, and that's now the world Symbian lives in. The real competition for developer and smartphone user loyalty in most of the world is now Qt vs. iOS, Android, and RIM. Plus that Windows thing.


What it means for Nokia: Hope. Nokia's app recruitment efforts have been hamstrung for years by what I think was an incoherent software platform story. What should developers write their software on? Symbian native, S60, Silverlight, Qt, Adobe Air, Java...at one time or another Nokia romanced just about every mobile platform on the market. Nokia said that was a strength, but actually it was a sign of indecision and internal conflict. Developers crave predictability; they want to know that the platform they choose today will still be supported five years from now. By flitting from platform to platform like a butterfly, Nokia sent the unintentional signal that developing for it was dangerous.

Many developers did support Nokia anyway, especially in places where the Nokia brand and market share were so dominant that the decision was a no-brainer. But I think their loyalty did a disservice to Nokia in some ways, because it blinded the company to the shortcomings in its developer proposition. When Nokia had trouble recruiting developers in places like Silicon Valley, it seemed to think they were just biased against it. Time and again, I attended Nokia developer events in California where Nokia concentrated on telling people how big its installed base was, and showing off its latest hero device (N97, anyone?). I can see Nokia's logic -- after all, developers in Europe seemed happy. But the reality was that developers in Europe had given it the benefit of the doubt, despite its poor overall proposition.

So the decision to focus on Qt (pronounced "cute," get used to it) is a positive one, in my opinion. This is one of those cases where making any decision is better than the status quo. Qt isn't perfect, but if all of Nokia aligns behind it, any problems in it can be ironed out.

Unfortunately for Nokia, this is just the beginning of the changes it needs to make, rather than the end. Nokia's Qt development tools still reportedly need work (link). And app developers don't just need a coherent technical story, they also need a coherent business story. How do they make money? Although Nokia sells a huge number of Symbian-based smartphones, most of their users seem blissfully unaware that they can add applications. That's why Nokia has a much smaller base of applications than iPhone, even though its customer base is far larger.

To attract more developers, Nokia will need to do a lot of marketing, both in advertising and on the device, to make sure Qt users know they can get apps, and are stimulated to try them out. Nokia has the resources to do this, but once again it'll need consistent and well coordinated execution to make it happen, something that the company has failed to deliver in the past. (For example, spamming people with SMS messages telling them to try other features is probably not the right approach (link).)

To give you an idea of how much ground Nokia needs to make up, Apple iOS has 60 million users and 225,000 applications, a ratio of about 3.75 applications per thousand users. Android is close behind, with 3.5 apps per thousand users. In contrast, Symbian has 390 million users and 7,000 native apps, a ratio of about .02 apps per thousand users. (link). Yes, I know, there are additional Nokia apps written in Java, but that kind of proves the point that Symbian is plumbing rather than a platform.

All of these changes need to be carried out against a backdrop of cost cutting, as Nokia brings its expenses in line with its revenues. One of these days when I get the time I'll write more about Nokia's overall situation, but for now suffice it to say that Nokia is working off the after-effects of several years of growing expenses while revenue was stagnant. Nokia's circumstances aren't quite as bad as the California state budget (if you are in Europe, think Greece), but it's ugly enough to distract from all of the other things the company needs to fix.


What it means for developers: Wait. First, the bad news: The switch to Qt means that current Symbian OS developers who aren't already using Qt will need to rewrite their applications. This is the latest in a series of rewrites that Nokia and Symbian have forced on developers over the years. If they had more developers it probably would be causing a big ruckus right now. The fact that you don't hear a lot of screaming speaks volumes.

The good news is that Nokia may be getting its act together for developers at last. But if I were working on a mobile application today...wait a minute, I am working on a mobile application today. So here's what I'm doing about Nokia: I'm waiting. If Nokia creates a great business proposition for developers and sticks to it, our team would be delighted to support Qt aggressively. Who wouldn't want to sell to a base of 400 million users? But given Nokia's history of whipsawing its developers, we won't take anything for granted. In particular, we want to see if Qt is actually the exclusive development platform for MeeGo, rather than just a secondary option. You've got to show us the consistency, Nokia.


Oh, and ignore Symbeose. I don't know exactly how the Symbeose initiative got started, but to me it looks like the Symbian Foundation lobbied for it for a long time, prior to the recent changes in the Foundation. For the old Foundation, Symbeose made sense, because it was a clever way for a nonprofit to get some OS development done in areas that Nokia didn't care about. But with the Foundation mostly gone, Nokia has no incentive to turn Symbian into a general embedded OS, and in fact it says MeeGo is its OS for use in non-phones. In that situation, I can't picture a lot of other companies committing to build Symbian OS into their products.


Lessons from the Symbian Foundation's demise

I'm seeing a lot of interesting rationalization online about Symbian's fate. For example, Tim Ocock, a former Symbian employee, wrote a fantastic post (link) in which he argues that Symbian was very successful as an OS for phones with PDA features, but was never designed for running browsers and lots of applications. That's a pretty shocking statement, considering how many times I heard Symbian advocates boast about the sophistication of their modern, general purpose OS compared to clunky old PDA-centric Palm OS. Remember, this is a company that until very recently was bragging about its superior implementation of symmetric multiprocessing (link), hardly something you need for a PDA.

But I think Tim is dead-on in most of his analysis. He did a great job of detailing the technical and attitudinal flaws within Symbian itself, so I won't bother repeating them here. Instead, I want to talk about the flaws in Symbian's governance.

Did Symbian fail? The companies that founded Symbian had two goals in mind: to prevent Microsoft from dominating the market for smartphone software, and to prevent Symbian itself from becoming a power that could dictate to the phone companies that funded it. As a result, Symbian's governance structure was designed with a complex system of checks and balances that wouldn't apply to a normal company. To make major decisions, Symbian had to negotiate a consensus among its owners the mobile phone companies, who understood little about the management of a mobile platform and were suspicious of each other and of Symbian itself.

This bureaucratic, highly politicized oversight process repeatedly forced Symbian into blind alleys, and prevented it from doing things that a "normal" OS company would take for granted. When Symbian was founded, there was talk of an eventual IPO. The prospect of an IPO is an important recruitment tool -- it lets you use stock to hire ambitious engineers and managers. But the idea was eventually shot down by the owners; it would have made Symbian too independent.

Crippled by design. Once the threat from Microsoft receded, the owners' second goal for Symbian -- preventing it from competing with them -- seemed to dominate their treatment of Symbian. I'm not saying there was some central evil plan to hamstring Symbian; there wasn't. But everything the company planned to do had to be approved by the handset companies, and on a case by case basis they vetoed the things that sounded threatening to them. Over time, this forced Symbian away from initiatives and features that would cause users and developers to be loyal to the OS rather than the handset.

So Symbian didn't create an app store, and Symbian's developer relations were very confused because Nokia wanted to do a lot of that itself. But the most egregious example was user interface, which Symbian worked on from time to time, but was eventually forced out of by its owners. When I was at Palm, the Symbian project I feared most was "Quartz," the effort to create an icon-driven touchscreen UI for Symbian. Quartz looked very nice, and if it had survived Symbian would have had a dandy iPhone competitor on the market before the iPhone launched. But politics between Symbian's owners forced it completely out of the UI business, and Quartz was spun out into a separate company called UIQ, which went bankrupt in 2009.

You can get more details on the whole sad Quartz saga here.


Quartz circa 2001

An OS without a single consistent user interface is a nightmare for software developers, because they can't write apps that run across the installed base of devices.

Eventually, in the face of all the restrictions, the most ambitious, nonconformist people at Symbian -- the ones who drive innovation in any organization -- seemed to drift away in frustration or were forced out when they irritated the owners. Symbian itself retreated into focusing on technological esoterica like symmetric multiprocessing -- things that didn't really differentiate the platform to users, but that the licensees wouldn't object to.

From one perspective I guess you can say Symbian was a complete success, because it fulfilled the two negatives that its founders wanted: Microsoft didn't dominate mobile software, and Symbian itself didn't exercise any control over its founders.

However, the cumulative effect of the handset companies pursuing their short-term interest was that Symbian was utterly unready to respond when Apple and Google entered the market. I don't think either Nokia or Symbian really understood how the game had changed. Apple designs phones as integrated systems, with the software and hardware tightly coordinated. Nokia could never achieve that level of coordination with an operating system managed through standards committees.

And as for Android, Nokia apparently thought that open sourcing Symbian would create a level playing field with Google's free OS. But I think the structure of the Symbian Foundation made that impossible.

The fatal flaw of the Symbian Foundation. Although Android is a free product, it's supported by a for-profit corporation that has massive resources. The attraction of Android to phone companies isn't just its price, but its safety -- Google stands behind it with marketing and technical support.

In contrast, Symbian Foundation was designed as a rigorously noncommercial institution banned from any business activity. People at the Foundation told me Nokia was adamant about enforcing the ban on commercial activity because it was afraid the tax authorities might rule that the foundation wasn't a nonprofit, endangering the tax credit that Nokia got for donating its Symbian code base.

Most open source companies give away their software in order to make money from some other mechanism -- consulting, or support, or a for-fee version of the same code. Symbian Foundation was banned from making money on any of these activities, meaning it could never become financially self-supporting.

Forget about marketing support; Symbian couldn't even offer enhanced technical support to licensees who were begging to pay for it. That was especially crippling because Symbian OS is notoriously complex and difficult to program (link).

Consider this quote from Tim Ocock's article:

"The difficulty of writing good Symbian code was hugely beneficial to Symbian as a business in the early days. For many years, 80% of Symbian's revenues were earned through consulting for licensees....Symbian’s licensees...each had their own proprietary telephony chipsets that needed to be integrated and their own customisations to the platform in mind....Despite talk of Symbian enabling differentiation, the reality was licensees' budgets were squandered on hardware porting and making the core platform fit for purpose."

Picture yourself as a manager at a handset company, choosing an OS for your smartphone. The Symbian option has no advertising support, requires customization, is hard to program, has few third party consultants to support it, and the company licensing it won't help you do the programming. Meanwhile, Google Android is more modern, is based on Java and Linux so it's easy to find programmers, has lots of support, and has user-friendly features like an app store. Which one seems the safer bet?

How could the Symbian Foundation ever succeed in that situation?

Although people advocating for a "European" mobile OS often complain that Android had unfair financial advantages, the fact is that Symbian was ripe for the picking, a situation that was almost entirely self-inflicted.

The lesson for other tech companies: Open source is not magic pixie dust that you can sprinkle on a struggling product to turn it into a winner. Open source is a tactic, not a business strategy. It has to be paired with a business plan that says how you'll make money and drive innovation.


This is the end, my friend, of our elaborate plans

Like an army refighting the last war, Symbian was designed to defeat Windows Mobile, but never came to terms with its new adversaries Apple and Google. There's no shame in that for most of the folks who worked at Symbian; they did the best they could to navigate the politics of Nokia and all the other Symbian licensees. But radical change was necessary. I hope Nokia's Qt strategy will be successful. And I'm sure that Symbian code will continue to serve for years as the underlying technology for millions of Nokia smartphones. But except in the dreams of a few EU officials, Symbian OS is now just legacy plumbing.

It's time to move on.

iPad: The (attempted) Windows killer

(Well, you've got to admit, that's not something you'll be reading on most other weblogs today.)

Ten hours after the Apple iPad announcement, my overall reaction is that the product wasn't necessarily better or worse than I expected, but it was definitely different.

I expected an upsized extension to the iPod Touch, with a focus on watching videos, browsing, and playing games. The device can certainly do all of that, but Apple spent a huge amount of time demonstrating features I didn't expect -- e-mail management, productivity applications, and typing with the on-screen keyboard.

I know many of you think those are just checkoff items, and you may be right. We're all trying to read Apple's strategic intentions from a single product announcement, and that's hard to do. But here's how I view it: I believe Apple is serious when it spends five minutes demonstrating a feature, and I believe they actually said what they meant to say during the announcement. Specifically:

--Apple's identity is as a mobile device company.
--Netbooks suck and Apple can do something better.
--It's amazingly comfortable and easy to type on a touch screen.

(I'm not sure I agree with the last one, by the way, but we're talking about what Apple believes, and Steve sold the onscreen keyboard thing hard.)

If they really believe all of those things, then the iPad starts to look like Apple's idea of the next logical stage in the evolution of personal computing. It takes everything Apple learned from iPod and iPhone and applies that to a redesign of the low-end personal computer. It's Apple's vision of the netpad done right -- not a PC accessory, but a lightweight portable device that can replace the PC for many basic usages. The idea wouldn't be to kill the PC outright, but to nudge it toward the workstation space, in the process gradually eating away at the market share of Windows.

Yes, I believe killing Windows is still very high on Steve's personal to-do list. Always.

If you start from that assumption, a lot of the other things Apple said today make more sense. Why did they spend a year rewriting iWork for the tablet? Because you need an office suite in order to displace a PC (you don't need it for a media tablet). Why price that suite at just ten bucks a module? Because that profoundly screws up the pricing for Office on netbooks (the only way Microsoft can match that pricing is to destroy the value of its cash cow).

Why didn't we get a more comprehensive media store? I was expecting an entertainment tablet, and so I thought there would be a much more aggressive push for third party media developers. Apple did create the iBooks store, but they don't seem to be reaching out to individual authors the way I expected. And other media (video and animation) remains in iTunes rather than getting its own purchasing experience. To me, the iPad feels more like a netbook replacement that also does books, rather than a media tablet that also does spreadsheets.


Will it work?

If Apple's plan really is to displace netbooks, it faces some interesting challenges. One of the greatest appeals of a netbook is that it is a fully functional Windows notebook computer (cramped and awkward, but fully functional). Computer users have historically been very resistant to compromising on some core features. Will they accept a netbook that doesn't have a physical keyboard or a hard drive, and that can't run Flash and Java? And as Chris Dunphy (link) asked me today, will Apple give iPad applications more freedom to multitask than they have on the iPhone?

I don't know. And so I really don't know how the product will sell.

It doesn't help that the marketing for the iPad feels muddled. Apple's website tonight reads, "Our most advanced technology in a magical and revolutionary device at an unbelievable price." Ugh, it's a big bag of features. As I asked in my pre-launch post yesterday, who is it for and what problem does it solve? The question hasn't been answered crisply.

At least Apple got the base price of the product right. It's still above what I think most consumers will pay for a tablet, but Apple's within the realm of believability, and over time I hope the price will come down further. If it does, and if Apple markets it strongly, the product may be able to find its own market.


Meanwhile, I'm sure the iPad will have an important impact on some other companies. Namely...

Nokia: Step your game up. Several years ago, Nokia said it was re-creating itself as a computer company. Now Apple says it has re-created itself as a mobile company. Not just a mobile company, but supposedly the world's biggest mobile device company as measured by revenue. Whether that statistic is actually meaningful or something Apple manipulated through clever accounting, it must have driven the Nokia management team nuts -- which was undoubtedly Apple's intent.

Now Nokia has to decide whether it wants to compete with Apple in yet another product category, at a time when it already seems a bit overwhelmed. It's a very tough decision. (And please don't tell me the N900 is an iPad competitor. It's too small.)

Is Kindle in trouble? Not yet. The Amazon Kindle vs. iPad competition is going to be very interesting. My first reflex was to say that Kindle is in trouble -- iPad is a much more capable device, and the convergence advocates will tell you that a general-purpose tablet will eat a single-purpose e-reader. But Kindle is half the price of the iPad, even less when you factor in the cost of 3G for the iPad plus a service plan. Plus its screen, although only black and white, produces less eyestrain than a backlit LCD display. I don't think Kindle takes a big hit in the near term. In the long term, I am worried about Amazon's ability to compete with general-purpose tablets, but maybe Amazon's goal is to own the bookstore rather than the book reader. In that case, they should make sure the Kindle app works really well on the iPad.

The one thing I'm sure Amazon should not do is attempt to compete with Apple in the general-purpose tablet business. That's like challenging the Australian national rugby team to a drinking match.

The mobile operators: Pay attention to your pricing plans. I think this will be one of the most interesting floats in the iPad parade. Apple is now making its second attempt to bypass the subsidy model used by the operators. If Apple had been willing to bundle a two-year wireless contract with the iPad, it probably could have gotten the device subsidized down to about $299 or $350. But the downside would have been a $60 or higher monthly service plan, with soft caps on the amount of video someone could browse. It will be interesting to see how customers react to Apple's choice, especially when other companies sell subsidized net tablets for very low initial prices. In the phone market, Apple had to give in and accept the subsidy. We'll see if history repeats itself.

It will also be interesting to see how AT&T makes out with the revenue from iPad subscribers. At first glance, $30 a month for unlimited data sounds like a bad deal for AT&T. But keep in mind that data plans usually include several hundred dollars for the subsidy; the operator supposedly doesn't even turn a profit until sometime in the second year. With these plans, AT&T makes money from day one. So it may be able to make a better profit than you'd expect. Still, it seems a bit odd for a company with a network as congested as AT&T's to be adding a device designed to stream high-quality video from the web.

PC application developers: Pain. If the iPad really is Apple's vision of the future of personal computing, it's an ugly world for today's PC application developers. By pricing the pieces of iWork at $9.99 each, Apple has effectively created a price ceiling for major productivity applications. How many PC app companies can make money at that price per unit? And remember, that's the ceiling. It's time to start rethinking your business model...


No matter how well the iPad sells, it's a very interesting experiment worthy of the Apple brand, and I'm sure it'll drive a legion of imitators from Asia. I wish we had a few more hardware companies like Apple who were willing to mix up the market like this; innovation would move a lot faster.