What Would Steve Do? Ruminations on the Jobs Formula

The follow on wave to the initial reaction to Steve Jobs departure has begun, and it’s interesting.  It’s all about understanding the “Steve Jobs Formula”.  I confess I do enjoy reading these articles as do I enjoy reading about the “Warren Buffet Formula.”  There are entire books about the latter.  The one thing that is strangely missing is cracking open the Forbes list of the 400 Richest Americans and finding a passage for some new billionaire that says, “Well, I just followed the Warren Buffet Formula and it was easy.”  Perhaps that’s Nature’s way of telling us that these brilliant leaders can’t be deconstructed and reduced to some “formula”.  Nevertheless, we’re driven to understand what they did and why.  In this article, I want to critique or amplify on some of what the pundits are saying about the Jobs “Formula”.

The Folly of Assuming Commoditization is the Only Game in Town

Those who worship at the altar of commoditization see it as inevitable for any market.  Someone will introduce an innovation and the commoditization race begins.  Whoever manages to make the innovation “good enough but much cheaper”, wins.  They will own the Lion’s Share of the market and the profits.  There is little question that commoditization happens, perhaps inevitably, to some markets just as described.  But to assume it is inevitable for every market, and that building better mousetraps is misguided, is a mistake.  Clearly Apple has shown the way in a number of markets for a case where the best product really can win.  Importantly, it may not win in terms of numbers or market share, but it can win in terms of share of profits.  Many have taken to commenting that Apple doesn’t really care about market share, it cares about products.

Apple didn’t invent this notion that commoditization need not be inevitable, by the way.  Mark Segal has a good write-up on this where he views commoditization as the conventional wisdom and Apple as the innovator, but it isn’t.  I’ve been hearing about it since Business School.  Michael Porter says there are three stable competitive strategies:  build the best, be the low cost provider, or be the niche player.  The Commoditists assume that being the low cost provider is the only position that counts.  Long before Porter, Henry Ford was a commoditizer.  He was sending his people to junkyards everywhere to examine which parts of junked Ford automobiles were still usable.  Anything usable was obviously overbuilt and could be cheapened to give Ford a cost advantage.  Apparently Mercedes Benz didn’t get the memo on how to operate that way, and today they seem much stronger than Ford for it.

More recently we have strategies involving Blue Oceans and such the further refute the commoditization destiny.  When I look at the life of a Commoditizer, I can’t think of anything less interesting than spending your every hour not caring about what is good, but rather driving out every extra fraction of a cent of cost.  For most markets (not sure about paper clips and the like, they may be pure commodities, but don’t forget how Starbucks turned the ubiquitous cup of coffee into a product worthy of Apple), there will always be an opportunity for the very best.  It’s a question of whether you can build the best, convince people it is the best, and perhaps most importantly, imbue a sense of style and connect with lives in a way that makes enough people insist on having the best.

If you’re capable of all that, let the Commoditizers do their thing, and you go do your thing.

Confusing “Minimum” With “MinimumViable” Where Steve Jobs and Entrepreneurs are Concerned

Sean Ammirati in RWWeb writes that there are four parts of the Jobs formula that Entrepreneurs must avoid:

1.  Avoid being secretive

2.  Avoid a perfect release 1.0–release early and release often

3.  Avoid starting a community–swarm an existing community

4.  Avoid being closed–create an API Day 1

This analysis is motivated by a lot of the current writing and thinking about how startups should operate, but it belies a misunderstanding of what “Minimum Viable” means and what Jobs uses as his strategy.  It is a mistake to think if we simply release early and often enough, we will succeed.  It’s very popular for entrepreneurs to assume an air of (often false) humility, tug their forelocks, aw shucks about how little the know and how smart the wisdom of crowds, and leave it up to the almighty customer to tell them what to do.  They learned this behavior, no doubt, from Wall Street, but they lack the portfolio effect to help them actually succeed with it, although they do sometimes have the other benefit Wall Street enjoys–the use of Other People’s Money to test out these ideas.

Look, if we take even a fundamentally very good core product and slather on a thick and chaotic layer of customer-mandated and product management defined features, that leads to Crap Product.  We know that.  We’ve seen it too many times.  It’s the reason Microsoft is failing today.  But just because a nice clean sheet product that said “No” to all sorts of things and shipped really quickly can beat such a Death-By-Feature-Overload Behemoth does not make that the only strategy that wins or even the best strategy to win.  Winning in a competitive market is all about giving people something they desperately want (whether because they need it or simply want it) while forcing the competition to completely upend what they’re doing to respond, and ultimately forcing them to be too late and too little in their response.  Satisfying that equation with just enough is the essence of a “Minimum Viable” Product strategy.  Shipping something that isn’t good enough to ignite need and is easily copied and side tracked by the competition is minimal, but not viable.

With that in mind, let’s revisit those 4 tenets of what an Entrepreneur should avoid and make 4 tenets of what an Entrepreneur should do:

1.  Be secretive what you’re building but not who you are.   You have a chance to attract a following without telling them quite yet exactly what you’re building.  It’s enough to strike up a common interest, perhaps around the kinds of problems you hope to solve.

2.  Make sure your release 1.0 can ignite customer delight and is not easily ripped off by your competition.

3.  In terms of swarming communities versus building communities, if your business intends to use a network effect as a barrier to entry, it has to be your network effect.  Before you swarm someone else’s network, make sure you have the ability to lock whomever you attract into your network.  Otherwise you are just building features on someone else’s platform and you’re likely to wind up like those many startups that built Twitter front ends only to have Twitter say, “Thanks for all the ideas, folks.  We’ll take it from here.”

4.  Make sure you are in control.  It isn’t about being Open or Closed, it’s about control.  You must be in control of your ability to delight your customers and keep the competitors struggling to respond.

Vertical versus Horizontal Integration, Open versus Closed, these are all just symptoms of the underlying strategic goal Jobs had to ensure he had the control he needed to get where he was going without having the fruits of his labor stolen.

Incidentally, if you really want to understand the part about, “forcing the competition to completely upend what they’re doing to respond, and ultimately forcing them to be too late and too little in their response”, that’s the true essence of competitive strategy.  The best way of thinking about it on those terms comes from fighter pilot John Boyd’s writings about his “OODA” (Observer Orient Decide Act) strategies.  They’re every bit as applicable to modern business strategy as jet fighter dogfighting if only because there’s even more room for nuance and deception.

On Caring About the Customer

There are a lot of ways to care about the customer.  The salesperson cares that the customer signs the contract.  The product manager cares that the customer’s feature is implemented.  The Marketer cares that the customer says nice things about the company and its products, and that they read the marketing materials and hopefully one day become sales leads.  The CFO wants the customer to pay on time, to avoid egregious terms and conditions in the contracts, and to stay happy enough they don’t ask for a refund.  The CEO cares that the customer is satisfied.

These are professional, but not very deep relationships one could have with their customers.  They don’t begin to tap into anything resembling “Delighting” or “Enchanting” the customer.

Jobs, by contrast, has never really seemed to fall into any of these camps.  His relationship with customers has always seemed to me to be most similar to the relationship of a parent to their children.  They want what’s best for the children.  They delight in seeing their children happy.  They’ll do what it takes to help their children.  And they’re prepared to make some tough decisions if it leaves their children in a better place.

But parents don’t spend much time asking the children how they can be better parents.  Families don’t have 360 degree reviews mandated by HR.  They don’t conduct focus groups to see what the kids think about the latest parental policies and ideas.  They know what’s right, and they love parenting more than life itself.

This should not be so surprising.  It’s the behavior of anyone seeking to truly delight their customers and to delight themselves in their art, for to truly delight the customer, you must give them something they don’t have and probably didn’t even realize could exist.

They can’t tell you how to delight them in a survey.  They can only tell you how to stop pissing them off.  There’s a profound difference in the two.

Film makers understand all this.  Steve Spielberg didn’t run around asking people whether they thought a movie about children harboring a so-ugly-he’s-cute alien would be a success.  Hemingway spent a lot of time out and about drinking in humanity in all sorts of colorful places, but he didn’t ask people to help him write his books.

“Writing, at its best, is a lonely life.”

The CEO’s Biggest Product Launch is His Company’s Culture

By now you will have heard the news:  Steve Jobs has resigned as CEO of Apple, Tim Cook will take over, and Jobs will carry on as Chairman of the Board.

Inevitably, the discussion about what this means for Apple going forward is underway.  It’s clear that Jobs has been the creative leader of Apple, the man that made the iPhone and iPad, not to mention the Mac.  He’s the man that started the Tsunami of a sea change we see underway today.  The “notebook effect” that has PC makers from HP on down wondering what it means, whether they should even be in the business, and what the way is to move forward if they do, is due to Jobs.  He is the man who made Apple the enormously valuable juggernaut it is through product, business models, strategies, brand, style, and moxie.  There can be no question a guy like that will be missed, even if he is still available to consult.  You can’t lead through consultation.  A consultant can’t be the dynamo that tirelessly injects the energy into the organization that it thrives on.

In answer to the question, “What does this mean for Apple’s future?”, there can be only one reply:

Apple is not about to test its succession plan, Tim Cook, or any other single executive.

Apple is about to test whether its Culture has the right stuff to carry on without Steve Jobs’ hand on the tiller.

That’s a tall order.  I don’t know if Jobs has successfully created a culture that can do it, or not.  But I do know that for any CEO, their biggest and most important “product” is not anything recognizable like the Mac, iPhone, or iPad.  Rather, it is the Culture they have put into place.  In the end, no one person can do it all, and the greater the success, the less likely it is all because of one man, however visionary and brilliant he may be.  I have a sneaking suspicion that someone as extraordinary as Steve Jobs hasn’t missed that point.  He can’t have helped but surround himself with people who understand.  Apple can’t have started so many successful revolutions without a revolutionary culture.

I’d like to leave you with a selection of quotes from the Wall Street Journal that I think make the point that Steve Jobs has created a Culture that can endure.

*********

“We think the Mac will sell zillions, but we didn’t build the Mac for anybody else. We built it for ourselves. We were the group of people who were going to judge whether it was great or not. We weren’t going to go out and do market research. We just wanted to build the best thing we could build.

When you’re a carpenter making a beautiful chest of drawers, you’re not going to use a piece of plywood on the back, even though it faces the wall and nobody will ever see it. You’ll know it’s there, so you’re going to use a beautiful piece of wood on the back. For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through.” [Playboy, Feb. 1, 1985]

***

“I don’t think I’ve ever worked so hard on something, but working on Macintosh was the neatest experience of my life. Almost everyone who worked on it will say that. None of us wanted to release it at the end. It was as though we knew that once it was out of our hands, it wouldn’t be ours anymore. When we finally presented it at the shareholders’ meeting, everyone in the auditorium gave it a five-minute ovation. What was incredible to me was that I could see the Mac team in the first few rows. It was as though none of us could believe we’d actually finished it. Everyone started crying.” [Playboy, Feb. 1, 1985]

***

Q: There’s a lot of symbolism to your return. Is that going to be enough to reinvigorate the company with a sense of magic?

“You’re missing it. This is not a one-man show. What’s reinvigorating this company is two things: One, there’s a lot of really talented people in this company who listened to the world tell them they were losers for a couple of years, and some of them were on the verge of starting to believe it themselves. But they’re not losers. What they didn’t have was a good set of coaches, a good plan. A good senior management team. But they have that now.” [BusinessWeek, May 25, 1998]

***

“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.” [Fortune, Nov. 9, 1998]

***

“The system is that there is no system. That doesn’t mean we don’t have process. Apple is a very disciplined company, and we have great processes. But that’s not what it’s about. Process makes you more efficient.

“But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we’ve been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea.

“And it comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important. [BusinessWeek, Oct. 12, 2004]

***

“The most compelling reason for most people to buy a computer for the home will be to link it to a nationwide communications network. We’re just in the beginning stages of what will be a truly remarkable breakthrough for most people––as remarkable as the telephone.” [Playboy, Feb. 1, 1985]

***

“I’m an optimist in the sense that I believe humans are noble and honorable, and some of them are really smart. I have a very optimistic view of individuals. As individuals, people are inherently good. I have a somewhat more pessimistic view of people in groups. And I remain extremely concerned when I see what’s happening in our country, which is in many ways the luckiest place in the world. We don’t seem to be excited about making our country a better place for our kids.” [Wired, February 1996]

***

“Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.” [Stanford commencement speech, June 2005]

***

“I’ll always stay connected with Apple. I hope that throughout my life I’ll sort of have the thread of my life and the thread of Apple weave in and out of each other, like a tapestry. There may be a few years when I’m not there, but I’ll always come back. [Playboy, Feb. 1, 1985]

What to Do When Your Cloud is Down

This post is on  behalf of the Enterprise CIO Forum and HP.  

As I write this, Amazon is having a major East Coast outage that has affected Heroku, Foursquare, Quora, Reddit and others.  Heroku’s status page is just the sound of a lost sheep bleating repeatedly for its mother in heavy fog.  What’s a poor sheep to do about this problem anyway?  After all, isn’t a Cloud-based service dead once it’s Cloud is dead?

Rather than wringing our hands and shaking our heads about “That Darned Cloud, I knew this would happen”, let’s talk about it a bit, because there are some things that can and should be done.  Enterprises wanting to adopt the Cloud will want to have thought through these issues and not just avoided them by avoiding the Cloud.  In the end, they’re issues every IT group faces with their own infrastructure and there are strategies that can be used to minimize the damage.

I remember a conversation with a customer when I was a young Vice President of R&D at Borland, then a half a billion dollar a year software company (I miss it).  This particular customer was waxing eloquent about our Quattro Pro spreadsheet, but they just had one problem they wanted us to solve: they wanted Quattro Pro not to lose any data if the user was editing and there was a power outage.

I was flabbergasted.  ”It’s a darned computer, it dies when you shut off the power!” I sputtered in only slightly more professional terms.  Of course I was wrong and hadn’t really thought the problem through.  With suitable checkpoints and logging, this is actually a fairly straightforward problem to solve and most of the software I use today deals with it just fine, thank you very much.

So it is with the Cloud.  Your first reaction may be, “We’re a Cloud Service, of course we go down if our Cloud goes down!”  But, it isn’t that black and white.  I like John Dodge’s thought that the Cloud should be treated just like rubber, sugar, and steel.  When Goodyear first started buying rubber from others, when Ford bought steel, and when Hershey’s bought sugar, do you think they didn’t take steps to ensure their suppliers wouldn’t control them?  Or take Apple.  Reports are that Japan’s recent tragedies aren’t impacting them much at all and that they’re absolutely sticking with their Japanese suppliers.  This has to come down to Apple and their suppliers having had a plan in place that was robust enough to weather even a disaster of these proportions.

What can be done?

First, this particular Amazon outage is apparently a regional outage, limited to the Virginia datacenter.   A look at Amazon’s status as I write this shows the West Coast infrastructure is doing okay:

Most SaaS companies have to get huge before they can afford multiple physical data centers if they own the data centers.  But if you’re using a Cloud that offers multiple physical locations, you have the ability to have the extra security of multiple physical data centers very cheaply.  The trick is, you have to make use of it, but it’s just software.   A service like Heroku could’ve decided to spread the applications it’s hosting evenly over the two regions or gone even further afield to offshore regions.

This is one of the dark sides of multitenancy, and an unnecessary one at that.  Architects should be designing not for one single super apartment for all tenants, but for a relatively few apartments, and the operational flexibility to make it easy via dashboard to automatically allocate their tenants to whatever apartments they like, and then change their minds and seamlessly migrate them to new accommodations as needed.  This is a powerful tool that ultimately will make it easier to scale the software too, assuming its usage is decomposable to minimize communication between the apartments.  Some apps (Twitter!) are not so easily decomposed.

This then, is a pretty basic question to ask of your infrastructure provider: “How easy do you make it for me to access multiple physical data centers with attendant failover and backups?”  In this case, Amazon offers the capability, but Heroku took it back away for those who added it in their stack.  I suspect they’ll address this issue pretty shortly, but it would’ve been a good question to explore earlier, no?  Meanwhile, what about the other vendors you may be using that build on top of Amazon.  Do they make it easy to spread things around and not get taken out if one Amazon region goes down?  If not, why not?

Here’s the answer you’d like to hear:

We take full advantage of Amazon’s multiple regions.  We’ll make it easy if one goes down for your app to be up and running on the other within an SLA of X.

Note that they may charge you extra for that service and it may therefore be optional, but at least you’ve made an informed choice.  Certainly all the necessary underpinnings are available from Amazon to support it.  Note that there are some operational niceties I won’t get into too deeply here, but I do want to mention in passing that it is also possible to offer a continuum of answers to the above question that have to do with the SLA.  For example, at my last startup, we were in the Cloud as a Customer Service app and decided we wanted to be able to bring back the service in another region if the one we were in totally failed within 20 minutes and with no more than 5 minutes of data loss.  That pretty much dictated how we needed to use S3 (which is slow, but automatically ships your data to multiple physical data centers), EBS, and EC2 to deliver those SLA’s.  Smart users and PaaS vendors will look into packaging several options because you should be backed up to S3 regardless, so what you’re basically arguing about and paying extra for is how “warm” the alternate site is and how much has to be spun up from scratch via S3.

Another observation about this outage:  it is largely focused on EBS latency, though there is also talk of difficulty connecting to some EC2 instances.  This is the second time in recent history we’ve heard of some major EBS issues.  We read that Reddit had gone down over EBS latency issues less than a month ago.  Clearly anyone using EBS needs to be thinking about failure as a likely possibility.  In fact, the ReadWriteWeb article I linked to implies Reddit had been seeing EBS problems for quite some time.  One wonders if Heroku has too.

What will you do if you’re using EBS and it fails?  Reddits says they’re rearchitecting to avoid EBS.  That’s certainly one approach, but there may be others.  Amazon provides considerable flexibility in the combination of local disk, EBS, and S3 to fashion alternatives.  The trick is in making your infrastructure sufficiently metadata driven, and having thought throught the scenarios and tried them, sufficiently well-tested, that you can adapt in real-time when problems develop.  In this respect, I have seem Netflix admonish that the only way to test is to keep taking down aspects of your production infrastructure and making sure the system adapts properly.  That’s likely another good question to ask your PaaS and Cloud vendors–”Do you take down production infrastructure to test your failover?”  Of course you’d like to see that and not just take their word for it too.

I haven’t even touched on the possibilities of utilizing multiple Cloud vendors to ensure further redundancy and failover options.  It would be fascinating to see a PaaS service like S3 that is redundant across multiple data centers and multiple cloud vendors.  That seems like a real winner for building the kind of services that will be resilient to these kinds of outages.  It’s early days yet for the Cloud, even though some days it seems like Amazon has won.  There’s plenty of opportunity for innovators to create new solutions that avoid the problems we see today.  Even the experts like Heroku aren’t utilizing the Cloud as well as they should be.

Now is your chance!

This post is on  behalf of the Enterprise CIO Forum and HP.

Related Articles

James Cohen has some good thoughts on how to work around Amazon outages.

I tweeted: “The beauty of Cloud: We can blame Amazon instead of our IT when we’re down. Except we really can’t: http://tinyurl.com/3hjhzr5“

Excellent discussion here about how Netflix has a ton of assets on AWS and was unaffected.  In their words, they run on 3 regions and architected so that losing 1 would leave them running.  As Netflix says, “It’s cheaper than the cost of being down.”  Amen.  I’m seeing some anonymous posts whining about the exact definition of zones versus regions, what’s a poor EU service to do, etc., etc..  Study Netflix.  They’re up.  These other services are down.  Oh, and forget the anonymous comments.  Give your name like a real person and don’t be a lightweight.

Lots of comments here and there also that multi-cloud redundancy is hard.  Aside from the fact that this particular incident today didn’t require multiple clouds, consider that it is fantastically easier to go multi-cloud than it is to build multiple physical data centers.  Salesforce.com was almost a billion dollar a year company before they built a second data center.  Speaking of which, I bet they want to chat with the folks at Heroku now that they own them.

Clay Loveless gets failover in the Cloud.  JustinB, not so much.  Too ready to take Amazon’s word about their features.  Makes me wonder if folks early to AWS who saw it buggy and got used to dealing with that are better able to deal with problems like today’s?  When you run a service, it’s your problem, even when your Cloud vendor fails.  Gotta figure it out.

Lydia Leong (Gartner) and I don’t always agree, but she’s spot on with her analysis of the Amazon “failure” and what customers should have been doing about it.

EngineYard apparently was set to offer multiple AWS regions in Beta, and accelerated it to mitigate AWS problems for their customers.  Read their Twitter log on it.  Would love to hear from some of their customers that tried it how well it worked.

Black Hat Social Marketing (aka Maybe Scoble Was a Little Bit Right About Authenticity)

I have to admit: when Scoble blew up over the idea that the Facebook comments adopted by Techcrunch might reduce authenticity, I was convinced he was wrong.  The premise is a simple one: the Facebook commenting system forces you to leave comments under your real name.  The theory is that a lot of people will be afraid to say what they really think for fear of angering Techcrunch, which can make or break startups with their bully pulpit posts.

But then I happened to notice a weird thing in Eric Schonfeld’s Techcrunch article lambasting Adobe’s Wallaby for being weak.  It was the usual sort of Apple Fan Boy post you see so often on Techcrunch and a few other places.  He hated Wallaby, a Flash to HTML 5 translator, because it has limitations on which Flash features it can translate and there are bugs that can crash the browser.  Never mind that said limitations might be limitations of HTML 5′s current maturity not to mention the crashing of the browsers when fed HTML directly conflicts with Steve Jobs assertion that it was Flash doing the crashing.  I didn’t really expect much, but being a Flex developer and a great fan of the platform, I was out reading the articles on Wallaby and this was the only negative one I saw in my Google Reader.

So how did Scoble get to be a little bit right?  Well, of course you have to read the comments on Techcrunch.  They’re the real value on Techcrunch as I see it.  The posts are sort of like the Hockey Game and the comments are the Fights.  You’re there for the Fights, not the Hockey Game, silly!

One of the posters, Steven Sacks (hey, we get to know his real name), points out:

Ever since TechCrunch switched to Facebook comments, all their anti-Flash posts have a slew of comments supporting Flash. Prior to this, all the anti-Flash post comments were predominantly anti-Flash. Good to see all those anonymous posters don’t have the guts to post under their real names AND can’t write negative comments under numerous names.

Sure enough, there were a ton of comments, all but one were pro-Flash and very negative on Techcrunch as I write this.

That’s fascinating.  OTOH, I look at Scoble’s argument, and it seems obvious that if you can’t be anonymous and you want to say something negative, you might hesitate.  But here were folks not afraid to use their real names when trashing the mighty Techcrunch, and they were nearly all pro-Flash.  Where had all the Apple Fan Boyz in the commenting audience gone?

So far, I only have two working hypotheses:

First, maybe the Apple guys just didn’t get there yet.  Only problem with that is that the Techcrunch post went out several days ago, so they had time to mobilize.  That hypothesis is looking sketchy.

Second, maybe Techcrunch was being gamed.  What if a whole bunch of those anonymous Fan Boyz were actually just a very small number of people who disappeared once the veil of anonymity was no longer available?  Wouldn’t it be fascinating to know who they were?  Employees of an Adobe competitor even?

It’s fascinating to consider the impact on perception if you can scare up a virtual cyber mob any time you want to say anything you want and nobody is the wiser.  Maybe we’re seeing some evidence that just as there is Black Hat SEO, there can be Black Hat Social Too.

I actually don’t think Facebook is the cure for bad comments, but the dynamics we see here are fascinating.

Related Articles

4Chan founder says anonymity is authenticity.  I’ve decided the authenticity is a function of what’s being discussed.  Yes, there are topics where anonymity begets authenticity.  But as we’ve seen above, there can also be topics where anonymity begets manipulation.

Scoble does a good job explaining how anonymity hurts.

Virtualization Made Mac What it is Today

Sam Diaz is writing about Apple’s latest Draconian App Store subscription policies and how they’re not a bad thing.  Forrester CEO George Colony says Apple is headed for a repeat of their defeat at the hands of Windows with these policies:

We know what happened — the world has had to use a lowest-common denominator PC operating system for decades, with excursions into wonderful places like Vista. This time around, Apple’s hostile position could result in a 2014 App Internet market that looks something like this: 80% Android, 10% Apple, 10% Other.

Colony’s concern is that this is the formative time for app consumption and app markets.  It’s too early to exert a monopolist’s egregious tax on those markets.  People aren’t locked in enough yet.

Diaz has a counter-argument:

Here’s the thing: Colony says that like it’s a bad thing. Say what you will about Apple’s share of the PC market – but the fact is that Apple’s lineup of Mac computers are far superior to anything that’s running Windows. And increasingly, quarter after quarter, the company notes that its share is growing and that about half of the Mac purchases in a single quarter have been by consumers who switched from Windows.

My problem with Sam’s argument is that none of that shift started happening until Virtualization meant you could have your Mac cake and eat some Windows software too.  It isn’t really clear they’re leaving the door open to do that with their App Store policies.  This isn’t about not only having Apple wonderfulness PLUS everything else in the world when Apple doesn’t happen to have the right answer.  It’s about ONLY having the Apple wonderfulness and being glad of it, dammit.

It’s going to be interesting to see what happens come the June 30 deadline for compliance with the new policies.  We will no doubt get hints along the way.  As an iPad user who set aside his Kindle but still constantly reads using the iPad’s Kindle app, I’m keenly interested.

During his last go-round with book publishers and Amazon, Steve Jobs largely managed to get book prices on Kindle raised.  That may turn out to be the result here too.  Kindle charges a “publishing expense” fee back to the book publishers.  So far it covers the wireless costs for Kindle’s built-in Sprint modem.  Perhaps Amazon will decide to roll the iPad 30% into that fee, making books sold there dramatically less profitable for publishers.  There would be a certain poetic justice in that.  The publishers leaned on Jobs to break one walled garden only to see another spring up immediately in its place.  What are they going to do about this one?

 

 

 

 

 

Microsoft’s Extraordinary Quarter, Valuations, and “Who Owns the Cash?”

As usual, there is another fascinating discussion underway among the Enterprise Irregulars.  And again, as so often happens, there are related discussions.  In this case we have a discussion about whether there are any companies who’ve reached $100M in revenue with 100 employees, and one about Microsoft’s recent quarter, its cash position, relative valuations versus companies like Apple, and the idea that Microsoft’s cash belongs to shareholders.  It’s fascinating to watch these threads come together serendipitously, and then extract further meaning from the gestalt. 

Shareholder Gordon Gecko

Let’s start with the $100M/100 employee thought.  Are there any such companies?  Perhaps, but they are certainly private and they are likely insanely profitable.  The profitability piece means there would be a tendency to spend the profits to reduce risk (and what won’t be said, make everyone’s life easier) and explore new growth possibilities.
 
I think it is very likely doable to build such a company, just that few are motivated to do it and would perceive such a model as very high risk.  I also think some of the technologies you need to do it may not have existed until recently.  The alternative to technology is an unfair market advantage as evidenced by gross levels of profitability.  Let’s talk about each.
 
Go through the laundry list of $100M businesses, and ask yourself what are the characteristics that drive headcount that have to be minimized:
 
-  Leveraged marketing and sales–no feet on the street.  So it’s marketing driven, whatever it is, and it’s either sold online or through a dealer channel that doesn’t rake too much off so you can transfer cost to the channel.  But supporting the channel can drive up heads, so you almost would need something they have no choice but to carry.  That leads to an idea that is both an unfairly strong brand and is also something of a monopoly.  Not sure what qualifies today, but back in the day DOS would have been a great example.  More on that in a second.
 
-  Customer Service:  Amazing how many heads this drives.  You need a product that either requires very little service or a Customer Service methodology that produces very little cost (Social CRM can reduce your costs to 1/3 of what they were, been there, done that). 
 
-  Product:  Platforms and on-prem drive spurious headcount.  At Callidus, we estimated we could get by with 40% fewer heads if we only had to support the current release on 1 platform and we would have no loss of innovation.  I will go further.  The optimal number of developers is a maximum of 10.  Any more than that and your team loses efficiency due to communication loss.  Give me 10, and I can build almost any single product you can imagine in 12-18 months or less.  Been there, done that.  Quattro Pro kept up with 10 developers against Lotus and MSFT teams of 100 or more.  However, they do have to be the RIGHT 10 developers.  I could write a long post on that, but will spare you here.  To get more than 10 working efficiently, you need a loosely coupled application suite, where each module has its own 10 and the communication requirements between them are modest.
 
-  Manufacturing and Fulfillment:  Clearly (well, maybe not, I guess I can imagine some cases, sort of) it will be hard to get there with physical goods.  You can outsource it all.  Could a Dell back in the day do $100M with 100 and all the right outsourcing?  Maybe, but we are speaking of software here.
 
The Internet and technologies like Social CRM make some of this possible.  The alternate model, which is a product with ridiculous margins and brand ubiquity to drive unbridled demand, has also existed.  Back in my Borland days, we used to envy MSFT having a $250-300K ratio of revenue per employee.  We knew that the profitability was very uneven and that the monopoly DOS franchise financed a lot of it.  I have no doubt that DOS could’ve been cut out and scaled to a $1M per employee business.  This is probably true of some Google businesses too.  But, these companies never do that.  They finance the future and they reduce risk by spending the profits today.

Now, one of my esteemed colleagues mentioned that it would be a terrible investment decision for a company with such margins not to embark on a plan of ambitious investment.  That is certainly the conventional wisdom, but the track record says otherwise.  The majority of M&A transactions started out with just such a thesis and wound up net destroying shareholder value.  I would venture to say this is probably also the case for large companies trying to start new businesses.  It is rare that they can get them up to the levels of performance of the core franchise, and hence they are dilutive.  This was certainly true for Oracle and its apps business relative to the DB business, for example.

It will be interesting to see whether today’s technologies and Internet allow some of the bootstrap players who’ve already gotten quite large to get there.  Their motivations as “lifestyle” companies (and I don’t say that like it’s a bad thing), might lead them not to care about this “invest to grow” imperative.  I’m speaking of companies like a SmugMug or a 37Signals.  I suspect their revenue/employee metrics are pretty close already even if the absolute revenue numbers are not.  You don’t have to read many interviews with the SmugMuggers to realize they’re in love with photography and their customers and are unlikely to move too far afield of that.

Now we see pretty clearly the link between the $100M/100 and the Microsoft quarter.  Both are examples of what I will call “unfair profitability.”  These are profits born not just of good ideas and good execution, but of some sort of lock-in effect that inhibits competition over long enough horizons to build such franchises even though the profits are so huge that competitors should be homing on it like heat seeking missiles.  Coincidentally (can there be so many discussion coincidences, or is there more at work in the Universe than we know?), there is a fabulous article by Jim Stogdill on this very issue of unfair profits called Points of Control = Rents.  Worth a read for a good discussion of who has unfair profits in our world today and how did they get them. 

We’re on the downslope now folks, so bear with me. 

Next up for discussion is the statement that the disparity in PE multiples between AAPL and MSFT is crazy given the margins of the two companies and the quarter MSFT just had.  My response is that the disparity in multiples is not crazy at all.  Take your Yahoo stock charts and overlay 5 year performance of MSFT and AAPL:

AAPL vs MSFT Share Price

There should be no doubt in your mind why AAPL gets a higher valuation.  In fact, the contrast is so stark you may wonder why AAPL doesn’t have an even bigger premium.

Inevitably, Warren Buffet’s name was invoked as was the question of whether one could invest in MSFT for the long haul.  In essence, was MSFT so undervalued as to be an ideal Buffet Tech Stock?  But if you’re familiar with Buffet’s investment thesis, MSFT is not really a Buffet business.  Value is not the only part of the Buffet/Graham equation.  Value is the insurance in case the rest of your thesis fails and there has to be has to be a rest of the thesis.  In particular, for Buffet, there has to be reason to believe earnings growth can go on forever at a rate that amounts to an interesting rate of return.  Industries with disruptive tendencies are not good bets because that growth is not reliable in the long haul.  Hence Buffet will declare self-deprecatingly that he won’t invest in tech because he doesn’t understand it.  What he means is he can’t predict when then disruptions will happen, and they happen often enough he can’t hold for a sufficiently long horizon to be interested.

Lastly, we get to the idea that companies have a responsibility to distribute excess cash because the cash belongs to shareholders.  The idea that the cash belongs to shareholders is also an interesting one.  It’s become something of a cliche, in the Gorden Gecko at Teldar Paper Shareholder meeting-esque sort of sense. 

 

If shareholders really owned the cash or even the company, they could call up and have the cash sent over.  Companies can trade below their cash value, and it isn’t even all that uncommon for them to do so.  If shareholders owned the cash, they would call up and have it sent over from one of those companies.  If you had a company that had delivered the kind of equity returns that Balmer’s Microsoft has (flat for so long that it has been called a “Value Trap” by one of our EI’s), I suspect you would also like to have a lot more cash sent over.  But you don’t own the company or the cash, so you don’t control the cash, despite it feeling good to claim otherwise.  What you own is a piece of paper that grants you certain shareholder rights.  That’s a steed of a different hue.  There are lots of people in the “That cash belongs to us” food chain that are much closer to being able to pick up the phone and have the cash sent over than the poor common shareholder.

 

Ask any VC what terms have to be in the deal for the preferred to be able to pick up the phone and have the cash sent over.  Entrepreneurs should make no mistake, it is possible for those guys to own the company and the cash.  In fact it is very likely for that to happen.  I have even personally seen a case where a firm picked up the phone, had the round they’d just put in sent back, and closed the doors.

 

Ask your banker what terms have to be in their note such that when those provisions are not met, they don’t even have to pick up the phone.  They can sweep the cash.  It was a big concern among startups that this was going to happen a lot very recently.

 

These people and many others are closer to “owning the cash” than common shareholders.

 

Common shareholders are not powerless, just almost powerless so that it takes ridiculous numbers of them working together to have a voice.  And even then, what can they really do?  They can jawbone about it.  They can sell their shares.  They can launch proxy fights, which the company will respond to with all sorts of machinery that is efficient at blocking hostile takeovers.  They can launch shareholder suits about failures of fiduciary responsibility.  Yada, yada.  There has to be an awful lot at stake to get enough of them mobilized to go through any of these processes with much chance of success.  Having too much cash on hand is not something that will rise to that occasion.  It’s not enough to mobilize the troops.  If nothing else, the processes are lengthy, the cash is liquid, and quarters are fragile.  If you want to get an envelope full of cash out of a car whose ownership is being contested, you don’t set fire to car to increase your chances.  There has to be some malfeasance, some sense that management is doing something really grossly unfair to the common and well outside their fiduciary responsibility.  We’ve all seen enough shenanigans to know that “grossly unfair” is a very high bar indeed.

 

In the end of the day, companies that can establish unfair points of control allow them to create artificial scarcity and milk the consumer.  Network effects are the most popular Lock-In 2.0 for the Web World, though they existed in the form of available apps and hardware platforms back in the DOS days, the CP/M days before that, and all throughout the mini and mainframe eras.  Today’s buying marketplace is only slightly more canny in their ability to see the garden wall being built and get upset with the gardener about it.  If they see it in time, they try to steer clear.  Open Source has become powerful for exactly that reason.  I love the Red Hat quote, “We love to turn a billion dollar business into a couple of hundred million dollar business.”

 

The prior software generation also had an “implementation rent.”  If you just spent $100M to get SAP live, even if the whole experience was terrible, and the end result only just tolerable, it will be a long long time before you consider undertaking anything remotely like that again.  Most careers won’t survive it.  I vividly remember asking a telco senior exec one time how she thought about the ROI of billing systems.  She laughed and told me there was no ROI.  Nobody thinks about that ROI.  They only think about whether their career can survive the process of replacing a billing system should they be unlucky enough that it comes up on their watch.  SaaS companies road into some of these situations with the idea they would be so much easier to install they would defeat the “implementation rent.”  Some of them are encountering the penalty for that largesse in the form of unreasonably high churn.  If it was easy to put it in, it is easy to take it out as well.

 

So if you are an investor, don’t predicate your success on ownership of the cash.  Rather, choose companies that have unfair points of control that allow them to be unfairly profitable in markets that are growing faster than the S&P 500.  Make sure those unfair points of control and that market growth can continue unimpeded for as far as the eye can see.  Beware disruption.  Does AAPL warrant a higher multiple than MSFT?

 

Yes, despite the current extraordinary MSFT quarter, it seems the market favors Steve  Jobs’ ability to create these unfair points of control in fast growing long tenure markets over the apparent failure of Microsoft to add any new ones and the evidence their old points of control and markets are at risk.

Android is so Open, it got Flash Back on the iPhone

How ironic.  On the same day that MG Seigler was penning one of his characteristically snarky posts (snark is one of the ways Techcrunch pursues its Follower Economy) about how Android isn’t really open, Apple announces the return of Flash to the iWorld.

Adobe’s stock price is cooking this morning as a result (I wonder if 10% of Adobe’s revenue is even traceable to Mobile Flash? Maybe), and I have to admit, being the Adobe Flex fanboy that I am, I’m chortling over my morning cafe mocha too!

A couple of things to talk about on this news.

First, why do I award credit for this to Android?  Peeps, come on–Steve Jobs didn’t just wake up from his hissy fit about Flash (thanks for that link, Larry!) and decide, “Oh darn, I was wrong.”  No, no, no, not happening.  Something grabbed Steve Jobs by the throat and shook him right out of his reality distortion field.  That something was competition.  Not only has Android been selling extremely well, but the Bastiches have even been using Apple’s, “Hey, we’re not the Man, we’re Cool“, marketing tactics.  Dude, what’s next, Android thinking differently (I can’t see Google having the populist moxie to get that grammar wrong the way Apple did, all those PhD nerds just couldn’t handle it).

Competition is what forced this change, MG Seigler.  Android’s “We’re more open than open can be” pitch was working.  In fact, this Apple announcement sweeps away most of what one would’ve argued were barriers to openness.  It isn’t just Flash that benefits.  Besides which, a heck of a lot of people love their iDevices (3 out of 4 of our whole family have iPhones and we share an iPad) but want Flash access.  Forget movies, they can change.  I can’t even see the stock graphs on Yahoo because they’re Flash.

Gordon Gecko was wrong when he said, “Greed is good.”  It pains me as a person often described as being slightly to the right of Attila the Hun to reach that realization.  What Gordon should have said was this:

Competition, for lack of a better word, is good. Competition is right, Competition works. Competition clarifies, cuts through, and captures the essence of the evolutionary spirit. Competition, in all of its forms; Competition for life, for money, for love, knowledge has marked the upward surge of mankind.

And here, it has let Flash back into the iWorld.  Good job, Android!

Second, I want to take a few lines to talk about why I think Flash is so important.  Much has been made of how the LAMP stack has transformed web development.  Companies can now create products without requiring millions of dollars in R&D expense.  But the LAMP stack primarily benefit the back-end, in other words the server-side.  What about the client?  What is the equivalent of a LAMP stack for client development?  Unless you’re a tremendous fan of 3270 green screen UI, and I know some are even in this day and age, you need the equivalent of the LAMP stack to efficiently product great clients.  Here is the secret:  Flash is the LAMP stack of UI development!  Yes, there are some Flash wannabes out there, specifically Silverlight.  So what?  Microsoft would love for .NET to be the LAMP alternative too.  Flash is it for these simple reasons:

-  It is ubiquitious.  Aside from the iWorld, and that changes today, the vast majority of the world has already installed Flash and it runs in their browsers.  That’s 99.3% penetration in mature markets.  Essentially, everyone has it.

-  It is a write once run anywhere tool that really works.  You write your Flash code and all 99.3% of users can run it without you needing to give it another thought. 

-  AJAX and Javascript, the alternative, is riddled with browser dependencies.  Any dev team that has tried to get even simple rich UI like a Wiki-style rich text editor to work understands this.  It’s a huge overhead to keep up with all of these browser dependencies, and a constantly moving target.  With Flash, Adobe does that work for you so you can get on with building your app.

-  Flash has amazing graphical power and Job’s protestations to the contrary is actually quite fast.  People are writing 3D games in it, for example.

-  Flash can transcend the browser to create apps via AIR, and as we’ve discovered in the mobile world, apps are where it’s at.  Google used to offer Gears for this purpose, but pulled the plug on it.  Silverlight?  Hey, competition is good, bring it.  But they aren’t really there yet.

This all adds up to something that’s very important to the ongoing evolution of User Experience across all devices.  Simply put, Flash deserves to keep going and to be available on all those devices.  Thank you, Steve Jobs, for relenting, even if it took a gun to your head.  Adobe: now is not the time to rest on your Laurels.  There are some issues here and there in the House of Flash that you still need to attend to.

What Apple TV Should Have Been

I read with interest Don MacAskill’s post about the disappointment in Apple TV over at SmugMug.  He listed a bunch of limitations that boiled down to their being no open apps capability.  It’s all closed:

-  The only photo share is Flickr.  No Facebook or SmugMug photos and videos.

-  You get ABC and Fox for TV, over and out.  BTW, Amazon already has those too, big deal.

He goes on, the post is worth a read.  And, as he starts out, they’re all Apple Fan Boys over there.

I couldn’t resist leaving the following comment paraphrasing Google:

It’s almost like Apple TV has a draconian future, where one man, one company, and one carrier controls its future.

Oh wait, my bad.  That’s the iPhone and iPad.  Not Apple TV.

Carry on!

BW

Seriously silly business.  The control just keeps ratcheting up to more and more unnecessary levels.

Android: The Long Term Bet

Fascinating news from a recent Appcelerator survey of 2700 mobile developers:

- The long term bet among these developers is Android

- Apple is a short term bet, mostly because it’s a hot platform now.

- The reason is open-ness and cross-platform portability

The really interesting thing is that a lot of Apple’s problems are self-inflicted.  They could be a lot more open and trustworthy, but they’re not acting like Switzerland. 

It isn’t too late for them to change, but it looks like they have a lot of trust to rebuild.  Is Jobs capable of listening?

Adobe, this is good news for you too.  Your Flash/Flex platform offers the best cross-platform compatibility out there, except that it doesn’t run on Apple’s platforms.  Follow my 7-step plan and prevail as Android comes into its own.

Adobe: 7 Things You Should Do With Flash/Flex

Dear Adobe:

Apple has started the anti-Flash/Flex snowball rolling, and it is getting steadily bigger.  It’s a perfect storm, because they’ve got the platforms that are perfectly suited to Flash, their platforms are wildly popular, and your faithful audience desperately wants to be there.  But that’s not all.  They didn’t just prohibit Flash, they have called a lot of attention to a credible competitor: HTML5.  I know, I know.  It will be a long time before HTML5 is everything Flash is today.  It’s not even close right now, and a lot of people have conflated media delivery with Rich User Experience in ways that unfairly diminish your platform.  Get over it.  Economic pressures (aka naked greed and envy to be on these precious Apple platforms) have created a hill of growing height, and the water that is developer mindshare is rapidly flowing down that hill and away from Flash.

What can you do?

Lame ads won’t help.  Complaining about it won’t help.  Technology and innovation can help.  If you move quickly, and you have some things in your camp that buy you time (Android), you can still salvage the situation.

Here is what it takes:

1.  Absolute Single Minded Focus on Performance and Stability

People have concluded your platform is buggy and slow.  It doesn’t matter if you agree or not, the customer is always right.  When you hear McAskill at Smugmug and Adler at Scribd railing about your stuff, it’s time to move from denial to acceptance.  Their voices and those of many others are too loud and being spread too efficiently to pretend it isn’t so.  It’s past time to deal with it, in fact.  You need to embrace this problem, own it, and deliver the solution as quickly as possible.  The solutions can take many forms.  My recommendations are part of this post, and this point is more about declaring a focus both publicly and internally and owning the problem.  You don’t have to say, “We agree, our platform is slow and buggy.”  You do have to say:

“We have a great platform and our customers have told us to make it dramatically faster and more stable.  That’s our #1 priority, and here’s how we plan to do it…”

2.  Stability:  Quality + Security.  Get a Czar.

I’ll define Stability as consisting of equal parts Quality and Security.  Your customers are finding too many bugs.  There are too many public security issues.  This is happening at a time when you can ill afford it.  Get a Czar nominated and equipped to deal with this area.  Apportion your development cycles between performance and stability, give the stability cycles to the Czar and just do it.  The Czar needs to rapidly do the following:

- Identify the most egregious problems you have missed that are troubling your customers.  Look outwardly not inwardly to find them.  Fix that first tranche rapidly.

- Upgrade your automated testing so regressions are under control.

- Put in place a culture of quality that ensures that every single release is better than the last one.

- Investigate whether some of the quality issues don’t stem from education issues.  If customers are approaching it wrong, or don’t know how things work, they may be seeing behavior that is exactly what’s expected, but that looks to them like a bug.  Do not let this be an excuse for thinking you don’t have real bugs too.

- Be transparent about the plans and the results.

Get this stuff fixed and make sure it stays fixed.  This is not a, “Let’s fix the top 100/1000/or whatever bugs,” thing.  It’s a cultural change accompanied by results.

3.  Build a High Performance Native Compiler

Yes, I know, it is wonderful that Flash programs work everywhere.  But you are dealing with Performance perception and a company that says they will only let Native tools in the tent.  Figure out how to kill both birds with one stone.  Every platform does not need a native compiler.  But, if Facebook can afford to build a PHP compiler for performance sake, you definitely can afford to do this.  If you don’t have any serious compiler gurus, get some on board.  While you’re at it, build an optimizer for your interpreted stuff too.  You need a two-pronged attack:

-  Better bytecodes with the usual optimizations that matter closer to the language–operator strength reduction and all that.

-  Killer native compiler that will run circles around your bytecode stuff when it needs to.

If you do it right, it should be possible to pick and choose which classes are native and which are bytecode within the same Flash app.  You will also need to provide infrastructure that makes it easy to serve up the right native version to whatever platform is being used by the consumer.  Don’t make your developers figure that out.  BTW, you need to get this into Beta in less than 12 months.  You don’t have much time.

There is an old saying, “If you want people to make a new decision, you must give them new information.”  This pair of developments is the new information for performance haters.

4.  Revisit the Asynchrony of Flash and Embrace Multicore

This may just be baked too deeply into the programming model, but it sucks.  Sometimes programs want to be able to block until something happens, and when they can’t they wind up wasting their time and you mobile device’s battery life to no good end.  This asynchronous stuff is a throwback to not having a real multi-thread model for Flash, and in the Multicore Era, that’s a liability.  Sure, current mobile platforms don’t have many cores.  It doesn’t matter.  #3 is really only a stopgap.  In the Multicore Era, if you want to completely crush the competition on performance, do it with more cores.  When I was at Oracle, it was all about building benchmarks that could use more cores than SQL Server.  Once you use more cores than the other guys, you become almost exponentially faster.

And while you’re at it, you will deliver a model that is much friendlier to developers.  Being able to deal with multiple threads and blocking should be the basis for Flex 5.

5.  Embrace the GPU and Knock ‘Em Dead With 3D

Last point.  For most machines, the graphics processor is the most powerful CPU in the machine.  That’s a big surprise to many, but hey, it’s true.  That sucker has got vector processing going on just like the old Cray supercomputers.  There are companies building supercomputers out of them, for Heaven’s Sake.  Our freakin’ Air Force uses the GPU’s in Sony Playstations to build supercomputers fer cryin’ out loud.  I know it is a pain to go native on the GPU.  Sometimes the OS doesn’t help you very much.  But you have to find a way to get your developer’s hands on those beautiful MIPS.  This is especially true since Flash is all about the visuals.  While you’re at it, build a killer 3D subsystem for Flash so peeps can create virtual reality, 3D modelers, CAD/CAM, killer FPS games, and a whole of others things you haven’t even thought of.  With #’s 3, 4, and 5, nobody will be able to touch you on the performance front.

6.  Bring Back the Flock with a Cross Compiler

In many ways, Apple’s insistance on anything but Flash is like an old-fashioned shelf space war straight out of the pages of Ye Olde Shrink Wrapped Software.  If I build my app in not-Flash, it is a pain for me to go back to Flash no matter how much I like it.  It is worse if my not-Flash is on a super hot platform, because I kind of want to just keep writing not-Flash on that platform once I get hooked. 

Here is the thing: if HTML5 is really as limiting as Flash devotees claim, it should be trivial to translate the limited functionality of HTML5 to Flash.  While you are at it, please undertake the slightly less trivial task of moving Objective-C to Flash.  Sound hard?  It is a little, but not any harder than all the other stuff you need to do.  Besides, I’ll bet you can do this one as a joint project with Google.  Why?  Easy:

Take any award-winning iPlatform app.  Feed source into your new cross compiler.  Push a button.  Get back an award-winning Android app written in Flash.  BTW, you can have it on your desktop or anywhere else too. 

Now what iPlatform developer could resist that if it all works great?  Don’t think of it as aiding the enemy by giving developers an opportunity to start from HTML5 with less downside.  The developers that will use this are already lost to you, and you need to bring back your flock.

7.  Keep Your HTML5 Powder Dry

By now Adobe, I expect you’re really feeling pretty unhappy with this post.  The stuff I am telling you needs to be done is not easy, and it won’t be cheap.  At the same time, you know in your heart that this is what it really takes to win this war.  It’s about to get worse.  HTML5 is coming.  All of those other steps will only allow you to maintain your lead for longer. 

You need to recreate everything that is great for your platform on HTML5.  But, you need to keep it in the backroom until the timing is right.  Don’t dribble it out.  Do big quantum leap releases.  Your first one should not be an also-ran.  It should establish Adobe as the premiere resource for HTML5 developers.

It’s just that simple

As I’ve said, this is a hard road.  But, if you don’t follow it, if you don’t dig down deep and go to war now in a meaningful way, you won’t catch up later.  You’ve got a great platform.  If you want to keep it, you know what to do.