Reading News on an iPad is Astonishly Bad UX

Hi, my name is Bob Warfield, and I am a news junkey.  I subscribe to about 200 blogs in my feed reader.  I alternate between my Gmail, Google Reader, and Google News when I have a spare moment of leisure, looking for something new and exciting to discover.  I do this almost entirely on my iPad because it’s nice to get away from my home office desk where I spend most of my time working on my bootstrap company, CNCCookbook.  More and more, I am considering reducing the frequency of my access to Google News and primarily limiting it to my desktop.  The reason?  The User Experience reading news there is astonishingly bad.  Mind you, it’s only a little bit better on the desktop, but I find that accessing it with Chrome instead of the iPad’s built-in browser smooths the journey just ever so slightly, and it needs a Hell of a lot of smoothing.

Welcome to Smoothspan Blog, fasten your seat belts, and keep arms and legs inside the car at all times, because it’s been awhile, and it’s time for a good rant.

Before I go much further, let me give some absolution to Apple and the iPad, though the browser on the device surely could stand to be better.  Some part of what I am about to report is potentially browser related, but I do understand the iPad browser is more like an innocent bystander than the slavering maniac who is dishing out the BS causing my pain (sorry, a little of my inner monologue keeps slipping out when I’m angry).  I will also give partial absolution to Google and their News reader.  Again, it can only be partial, because just as Apple could build a more robust browser (you’ll see what’s needed shortly), Google could treat their news sources like they treat everyone else.  There’ve been SEO-related Google Search releases that heavily penalize sites that are too spammy, for example, but you don’t have to spend long accessing the literary giants like the New York Times via the Google News to see that those who are supposedly well above the commonplace web are offering a UX that has more in common with the worst days of America Online (AOL for you young ‘uns) than it does with their high falutin’ words.

With that aside, it’s time for me to explain what my problem is, and the good news it that it is simple.  When I open the Google News page, here is the sort of thing that happens to me more often than not:

I click an article only to discover I can’t really read it without subscribing due to the pay wall

For example, the Wall Street Journal has been doing this to me.  I’ll wind up on a page with a big giant Pay Wall notice and there is maybe one sentence of actual story text.  Of course Google got to index the whole story and placed it in their News Feed according to the full text, not the one sentence.  This is in violent contradiction to their normal webmaster guidelines where making the experience for Google differ from that of average viewers is strictly Verboten.  It is also in contradiction to their recent changes that heavily penalize pages that show much advertising above the fold.  Advertising?  Fold?  Hah!  On the WSJ stories I’ve been seeing there is nothing but advertising above the fold.  I don’t care who they are or what kind of national treasure their journalists may be, this is spam, served up steaming hot by Google and the WSJ.  Oddly, while this happened to me three times this morning on the iPad, there was no sign of it on my desktop.  I’m sure there’s some cookie or other thing counting off my accesses, and since I mostly read on the iPad, it gets dinged first.

BTW, NY Times, just because you let me see 10 or however many articles before your Pay Wall popup, I’m not any happier.  How about this:

Unlimited articles if accessed via Google News, and however many your Pay Wall allows if I go there via search, a referral link, or directly?

I click on an article and I’m immediately greeted by an offer to download their iPad app

Oh goody.  That’s just what I want.  Guess what guys?  You are needlessly and annoyingly delaying me on the journey to my reward.  I am reading from a feed that has God knows how many different news publications.  What are the chances I want to download an app for each and every one?  This is the Internet in the 2000′s.  There may be some people who want to sit at the breakfast table and read your waste of wood pulp cover to cover.  Leave them to doing that on the wood pulp and leave me out of it.  At least get the hint when I say, “No” the first time and quit asking.

I click on an article and it freezes and reloads multiple times.  Ultimately, it may just crash.

This happens constantly and is the robustness issue I hold Apple partially accountable for.  Apparently, in order to enact their diabolical Pay Wall, Advertising, and Privacy Subversion schemes, the newspapers have to run such wretchedly abusive Javascript, that the browser just can’t handle it smoothly.  I don’t see this in Chrome on my desktop, but it is constant on the mobile devices.  Something comes up.  You start reading.  You might even get one little scroll in.  Then the screen repaints and you’ve lost your place.  Or it freezes and you can’t scroll further until the diabolical machinations have completed.  This may go on through two, three, or even four cycles before it finally settles down.  On any of the cycles, there is a finite chance that the browser evaporates completely due to a crash and you’re left staring at the desktop.  Now you have a question to face, because that newspaper has just asked you in true Clint Eastwood fashion, “Do you feel lucky, punk?”  If you do, you’ll reload.  If not, you’ll demurely return to Google News and look for some other story to read.  After all, you were probably not worthy of the high quality journalism and you mercifully just missed seeing that damned pay wall or an offer to download an iPad app.

Here’s a news flash, if you’ll pardon the pun:  you newspaper guys should fire your IT departments that write this stuff and pick up a nice copy of WordPress.  I never see these problems reading the 200 blogs I subscribe to.  Never.

And gosh, you might save enough to invoke the Pay Wall less often.

I click on an article and it is video.  Worse, it is video that can’t be played on an iPad.

Yes, Steve Jobs can still reach out from the grave with his hatred of Flash and stop us in our tracks on his sacred iDevices.  Excellent.

I don’t tend to like video at all on my iPad.  Playback is often painful, buggy, or nonexistent.  Yet, there’s no way for me to tell in advance that I am headed into a video-only story and that worse, it won’t even play on my iPad.  Sorry Google, I gotta blame this one on you, and yes Apple, you too.  Silly buggers, why did you think this was a good thing?

After I get done reading an article and go back to Google News, it insists on repainting

Hey, love the real time spirit.  But if you spend half your time waiting for repaints either in the news story or Google News, a lot will change and you’ll never even see it.  You Google guys are supposed to be algorithm experts, how about a little algorithm here?  How about if the story isn’t that big a deal, if it is just a rehash of something you already showed, you don’t refresh that more than every 10 minutes or so?  Gimme a chance to get to the bottom of the page once anyway.  If some amazing thing happens, and I’m trusting your algorithm mightily to understand and be reasonable about the definition of “amazing”, then feel free.  But don’t just do it every time anything at all has changed on the front page.

Okay, how do we fix this crappy User Experience?

I could go on for quite a while in that vein.  The UX here really is pathetically bad.  I spend literally hours on the net and never experience anything like it until I get started reading News stories.  That ain’t right.

One approach is for Google to penalize the egregious and Apple to fix their darned browser so it doesn’t crash so much (I have to laugh about the claim Flash accounts for most crashes on Apple devices, pretty sure it is this browser which crashes more than anything I run on my iPad, Flash/AIR apps included).  That’d be nice, but Apple being Apple (“we don’t need no steenking Google Maps and we’ll ship whatever we please whenever we please”) and Google being Google (“honestly, we don’t mean to be Evil, we just are”), that might not happen.

How about just putting some Social voting into Google News?  This way Google can point to real facts from users if the NY Times wonders why it is getting less traffic?  Or, they can point to real facts when Bob Warfield is on a rant and tell him to sit down, users clearly don’t agree.  I believe a lot of good comes of group curation.  Unfortunately, I am just not sure Google cares a lot.  It’s pretty hard to tell what they do care about these days.  Google News might just be something they do so as not to leave an exposed flank and they don’t need to do it particularly well before moving on.

Or, how about counters?  Imagine if each story told what % of the time it was crashing your browser, what % of the time you’d have to go through some full page ad for mobile app or other, the average time it would take to load (another thing Google penalizes everyone but the newspapers for), and, well, you get the idea.  Heads would roll.  Things would get better.

I do find myself wondering about Yahoo.  I used to read their news before I became a Google Guy.  Unfortunately, they’re the people who will constantly log me out of my stock quotes to force me to type in my password expressly so they can sell a full page ad on their login page.  Do I think they will offer a better UX?  Nah, probably not.

(End of Rant)

Wishing you all Happy Holidays and be sure to check out the Geminids meteor storm tonight.  It is happening at a quasi-reasonable hour even.  FWIW, I hit many of the worst problems described above trying to find the details on the Geminids and that’s what drove me to the keyboard.  Sorry for the interruption, and please return to your normally scheduled activities as I will mine.

Steve Ballmer and Marissa Mayer Face the Same Problems at Microsoft and Yahoo

I know this will come as a shock to many Microsofties who will hate seeing their company compared to Yahoo, but I firmly believe that Steve Ballmer and Marissa Mayer face exactly the same problems at their respective companies.  The only differences are matters of scale and position on the lifecycle to extinction.  Both are CEO’s of once great and now fading empires.  Both organizations have gone a long time without showing much sign of recovery.  In Microsoft’s case, the stock has been flat since Bill Gates handed over the reigns.  The world has started referring to Steve Ballmer’s tenure as Microsoft’s Lost Decade.

I came to this conclusion just as I was about to write about the new Office Microsoft is showing around and what I think the most important work for Ballmer to accomplish in the next 12 months would be.  As the thoughts for the article were percolating, a fresh round of articles about Marissa Mayer taking the Yahoo CEO post began circulating and I thought, “Well, I’d better write about what she needs to do too.”  That’s when I realized they’re both facing the same problems and need essentially to do the same things to fix their respective companies.  Because we’re talking about two large entities that are each worthy of a post of their own, and trying to bring the threads together, this will be something of a magnum opus post.  Appologies in advance for being verbose.

Let’s set the stage with a little review of what’s being written.  I’ll start with Mayer and then go on to Ballmer.  In both cases, the usual suspects did the usual Echo Chamber number on the news.  We got an initial round of, “Golly, we’re surprised at how cool this news is after we’d written off <insert either Microsoft or Yahoo here>”  This was followed almost immediately by the round of grumblers and link baiters who write about how Mayer is the wrong thing for Yahoo being a product person instead of a media person and Office is too little too late.  Both are bullshit-tunnel-vision-link-baited and shallow article types (other than that guys, you did great analyzing these events).  Hey, let’s face it, journalists and what passes for journalists these days write about the news, they don’t make it, and they often don’t even understand it.  They don’t care.  They’re running the modern equivalent of Pavlov’s dogs where if you stick the right stuff in a headline with the right edgy attitude you get traffic, rinse and repeat until it becomes mechanical.  Yada, yada.

So, for Marissa Mayer we got:

Analysts react to Marissa Mayer in the WSJ:

“What we are a bit worried about is that by selecting Ms. Mayer, Yahoo is
explicitly pursuing an aggressive and bold growth strategy, whereas we believe a
value strategy might be more appropriate,”

Uh huh.  Analysts used to mean something to the stock market but they never really got tech with a very few exceptions–Rick Sherlund, Mary Meeker, and Chuck Philipps.  Absent an Oracle-style rollup Godfather for failed Internet media companies, Yahoo has little choice but to bet on a bold growth strategy.  There’s a reason most analysts aren’t running companies.

Ever popular Mathew Ingram on GigaOm tells us Marissa may not be a good fit:

In his post is a lot of gobbledigook from various folks that boils down to Mayer not being a media maven while Yahoo is a media company.  Shouldn’t it really have a media CEO?  I’m gonna call bullshit on that one too.  Where are these media companies?  The idea that media companies would rule died quite a while ago.  We have seen News Corp fail, AOL fail, the Music Industry fail, and Yahoo fail.  We are watching Books fail at the hands of technologists as we speak.  How much more fail do we need from the media world thinking they know how to run this stuff.  OTOH, despite some recent stumbles, we have seen Reed Hastings take what looks to me like a media company called Netflix and totally kick ass.  Reed’s prior post was founding and running Pure Atria software, which produced extremely nerdy technical tools for software developers.  Steve Jobs is another example who captained a launch of Apple into the music business.  Here is an important newsflash to those who think hardcore software product people can’t hack media or marketing:

In an online digital world, media and marketing are products.  The whole freaking User Experience is a product that spans all of these things.

If you don’t understand that, you are going to wake up like a lot of other once great companies and wonder how the software wunderkind ate your lunch.  This is why Marc Andreesen keeps proclaiming that software is eating the world.  Companies that don’t have people like Marissa Mayer can’t play that game.  Media Guys, Sales Guys, and Marketing Guys are never going to play that game.

‘Nuf said on that theme for the moment other than to add for Steve Ballmer, your biggest problem may be precisely that you don’t have what Marissa Mayer brings to the table as a product person.  You’re a snack cake salesman when you needed to be a fighter pilot.

Kara Swisher has 10 Totally Fluff Questions for Marissa Mayer

Oh boy.  Talk about linkbait.  Lists are always link bait and this one is no different.  It covers such critical advice as making sure not to be too geeky and not to think it’s cool to wear a lot purple.  Yes Kara, I imagine you were saying of Marissa, “What. A. Geek.”  And guess what, she runs things.  Jealous?

The less snarky questions focused on:

-  How do you cut enough people to carve out space to work in?

-  Which products do you cut?

-  How will you manage the board and partners?

Kara, you need to go have a conversation with Mark Hurd.  That’s his kind of discussion.  It did not do wonders for HP.  It propped him up nicely, but it has left the world’s largest computer company wondering WTF to do next.  The reason is simple.  These are short term answers.  You can’t cut technology companies to greatness.  You have to actually build something.  Product people are long term people.  They build things.  They understand that you don’t slash and burn out one side of your mouth and then succeed in hiring tons of awesome new talent.  Rather, you come up with a strategy that the talent can actually respect and you build a culture that the talent can thrive in.  Geez, what’s next?  Shall we ask Marissa if she plans to implement Microsoft-style stack ranking during her first 30 days?

The funniest was ReadWriteWeb telling us Yahoo needs a visionary not another product person and then letting Forrester Analyst Shar VanBoskirk define what a visionary is thusly:

“What I think Yahoo needs is a visionary – an aggressive executive who can make some pretty solid decisions about the business Yahoo needs to be in,” VanBoskirk said. “I’m not sure Yahoo needs another product person.”

Sounds like a visionary is a damn bean counter to me.  Let me get very very crystal clear:  a real product person will make solid decisions about the business Yahoo needs to be in.  Seems like Forrester and Gartner Analysts are the only ones whose crystal balls are more cloudy than Wall Street Analysts.

I won’t bore too much with the happy posts about Mayer because they typically boiled down to, “Yahoo is so screwed up we had no idea they could attract someone as talented as Marissa Mayer.”  Cool beans.

I think Fred Wilson had the best happy post I read:

Fred Wilson proclaimed that Yahoo is no longer dead to him.

Funny quote, but a little heavy on the Mario Puzo, no?  While your avatar-caricature looks a bit like a dark haired Marlon Brando, I’m not sure I fancy you the Godfather.  But, I know you have the sense of humor to take this in the sense it was meant.  And yes, I agree with you Fred, Yahoo is making some decent decisions here.

For Ballmer and the new Office release, it was much the same, although the kudos were a little more forthcoming with substance.  Let’s be real, Windows 8 and Office 2013 are the best work Microsoft has done in a long long time.  They deserve some kudos.  And, like the Mayer articles, we got first some good stuff followed by the snarky stuff.

Here are some of the articles that caught my eye:

Ballmer talks about why the Lost Decade is a myth:

Okay Steve, dream on.  It’s no myth.  What had been an awesome shareholder value machine has stalled on your watch almost to the day Gates stepped out.  Yet, Ballmer at least talks like he understands what needs to be done in this passage:

It’s not been a lost decade for me! I mean, look, ultimately progress is measured sort of through the eyes of our users.  More than our investors or our P&L or anything else, it’s through the eyes of our users.  We have 1.3 billion people using PCs today.  There was a time in the ’90s when we were sure there would never be 100 million PCs sold a year. Now there will be 375 million sold this year alone.  So, is it a lost decade?

The stock market has always had its own meter.  Sometimes it’s ahead of itself, sometimes it’s behind itself. A broken watch is right twice a day.  Ultimately all Microsoft can do is focus in on doing exciting products…

Okay, Steve, we agree.  Microsoft needs to deliver exciting products.  Now here is the part you REALLY need to understand:  it has failed to do so under your tenure.  There have been few exciting products from Microsoft for a LONG time.  The Lost Decade is not only a failure to deliver shareholder value, it is a failure to deliver exciting products.  When you have delivered them, they’ve been accidents and not in your core businesses.  Time to change that or get someone who can.  Incidentally, this is absolutely true for Yahoo as well.  They quit being exciting when they quit delivering exciting news.  On the Internet, everything is a product.  If your “product” is not exciting, you lose.

The high level summary of why Ballmer and Mayer face the same problems at Microsoft and Yahoo boils down to both failing to deliver exciting product often enough to matter in recent years.  Microsoft has had slightly better network effects to slow their decline (helps when you control an OS!), but the eventual outcome will be the same as it has been for Yahoo.

GigaOm wonders if Microsoft can recover its superpowers

Great continuation on the failure to deliver exciting products theme.  Consider these quotes:

To put it in the simplest terms, Apple makes products that people are crazy about and will stand in line all night to buy. When was the last time you saw a Microsoft product that inspired that kind of devotion?

…

Microsoft’s tried-and-true model of chipping away at a product category over the years until it got it right (usually around release 3)  isn’t applicable in the web era of continuous updates.

Of course, there is always someone around who will opine that the lack of quality product is simply a lack of focus.  For this article, Harvey Lubin says:

They have started to compete on too many fronts, against too many competitors.They want to beat Apple at computer hardware, and mobile services. They want to beat Google at Web search.They want to beat IBM at servers. They want to beat Sony & Nintendo at gaming. By trying to do everything, they end up doing none of them very well.

If it were truly a lack of focus, there would be some exciting products and a bunch of also rans.  That’s not really the case.  What we have is a lack of culture or talent that is capable of producing the exciting products.

Ars Technica gave us the Mac Fanboy perspective which is “Why did you bother, you can never be as great as Apple.“

Well of course they did pretty much eat the Mac’s lunch for many years, so it actually is worth bothering and for the first time in years Microsoft shows signs they actually might still be able to bother.  Chill dude.

On a more positive note, Larry Dignan notes that Microsoft has a Killer Product Cycle Underway

He’s right, this is a killer product cycle for Microsoft.  Their problem has been that killer cycles happen too seldom.

What’s Next for Microsoft and Yahoo?

As I’ve argued, Microsoft and Yahoo are in the same place.  We may argue about the matter of degree, but both are once-great empires that have disappointed customers and shareholders for a long time.  They are each reaching inflection points where it will be increasingly hard to recover if they don’t take prompt action.  But what should that action be?

First, let’s take a moment to recognize each company gets one more get out of jail free card.  Microsoft gets it because the Windows/Office release cycle is the best they’ve had in years.  Yahoo gets it because nobody expected the likes of Marissa Mayer would take their CEO job.  In other words, we have a temporary willing suspension of disbelief.  The key will be to act in a way that extends that into lasting momentum.  To do that both companies need to produce exciting products at a rate that establishes and builds momentum.  That’s what vibrant tech growth companies do, and it is what has been lacking from these two for way too long.

Marissa Mayer and Steve Ballmer face the same problem:

How do they reignite a steady stream of exciting product launches to rebuild their company’s momentum?

If they each accomplish nothing else in the next 12 to 18 months, there are two key things that they both must do to set the stage for that kind of momentum:

Microsoft and Yahoo Must Both Achieve Agility

Ballmer and Mayer must make their organizations demonstrably agile.  The days of 3 year product cycles for Microsoft are long since over.  Ballmer needs to put a stake in the ground that we will see updates for all the key products with betas out in 12 months and shipping in 18 months from now.  Mayer should do the same for Yahoo. Then they must deliver those results against that schedule, and they must sharpen the pencils still further until they can do 12 month product cycles.  Once having gotten that religion, they must never let more time than that pass without impactful releases of all their key offerings.  The world simply changes too quickly these days, and cycles any longer than that leave companies struggling to stay relevant as they miss one key trend after the next.  As any student of OODA Fighter Pilot tactics will tell you, once you get inside the other guy’s decision loop and make him respond to you, your victory is only a matter of time.

That doesn’t mean shipping mediocre products just to say you shipped something.  Microsoft, that doesn’t mean you’ll get your standard high dollar upgrade fees every 12 months either.  It means you will make it happen, “it” being shipment of a release that really moves the ball forward.  Every 12 months.  Without fail.

If you can establish that kind of momentum, that kind of agility, many benefits will accrue.  You will start to control the agenda as others respond to your initiatives instead of vice versa.  You will attract and retain good talent as they see the opportunity to do something that matters in the near term.  Momentum is key for tech companies.  If a shark stops swimming, it dies.

Microsoft and Yahoo Must Both Articulate and Demonstrate a Product Vision Worth Getting Excited About

Establishing agility is almost a mechanical process.  Yes, it will require enormous cultural upheavals and force of will.  But it is not like trying to schedule that Einsteinean flash of insight that is sometimes called for.  Unfortunately, the second of the two key things you must do is closer to requiring Einstein.  Establishing an agile cycle will help, and you probably have enough stuff on the drawing boards to get through the first cycle with flying colors.  But to go further, to have it all make sense and not just be a rambling features-gone-amuck kind of release cycle, you must have Vision.

This has historically been tragically missing from both companies.  At best, Microsoft has had a Vision to commoditize other people’s ideas, and lately it has fallen far short on that.  Yahoo’s Vision seems to have been to grab up one shiny plaything after the next and claim to be a great media company amassing playthings in a meaningful way.  Not much of a Vision (I use the capital “V” advisedly).

Marissa Mayer may be a Visionary capable of producing that capital “V” Vision, but Steve Ballmer most assuredly is not.  Steve, you’re going to have to get someone in there who is.  Possibly more than one someone’s.  You’re going to have to empower them and you’re going to have to stay the Hell out of their way.  Like Clint Eastwood told us, “A man has to know his limitations.”  This will be extremely hard for Microsoft, which has confused a Product Management Culture with having Vision.  Product Managers mostly only have lower case “v” vision because they listen to customers too much.  They let customers define how the problems will be solved instead of sticking to describing what problems they have.  Despite what MBA school teaches, checking off every request some customer made never results in Vision.  It’s better than nothing, but not much better.  Steve Jobs was never even interested in what problems customers have and went out of his way to make sure they had little input into how the problems he deigned to solve would be solved.  Marissa, if you are not a Visionary, and very very few CEO’s and other successful people (let alone Product Managers) are ever self aware enough to know when they are not Visionaries, you have the same problem as Steve.  You’re simply better equipped as a product person to understand how to help realize the Visions of others.  But if you aren’t the Visionary, you will need to get some in there quickly.

Visionaries are rare indeed, for they are the ones with crystal balls that actually work.  They see clearly how insanely great things could be, and what it will take to get there.  They are unfettered by considerations of how things are today and often whether things will even seem possible.  They ignore Wall Street, pundits, analysts, and customers alike.  Losing their Visionary or even more commonly failing to ever have a Vision that can withstand the test of time is the most common reason Tech companies die.  Visions can be accidental.  Accidental Visions turn out to be proxies for the real Vision.  Minicomputers are a great example.  They were closer to being commodities than Mainframes, but they fell well short of commoditizing computing power the way PC’s did.  By and large their luminaries never figured that out, or if they did, they were unable to do much about it.  Proxies are dangerous, because they work for a time.  Companies worship these false prophets for way too long when the proxies cease to track the real prize closely enough.

Large companies can only find real Visionaries by looking for people who have been right more than once, and never right because they rode somebody else’s wave.  Having found one of these rare unicorns, Visionaries are often completely at odds with the skillset needed to survive in large organizations.  They are not politically savvy (or don’t care).  They do not do well in meetings.  They do not crave gigantic staffs to manage.  They will not suck up at the expense of doing something they know is wrong, or even a little bit less right.  They are prickly and uncompromising.  Yet, you must not only find them, you must prop them up and make them successful despite all the antibodies the entrenched burocracies at Microsoft and Yahoo will generate to try to expel them.  It’s not going to be fun, but the alternative is a continuing slide into irrelevance at the hands of the Visionaries in other companies.  That’s even less fun and you’ve had a taste of what that’s all about.

Are you still hungry enough to do what it takes?  Do you want to win?

Good.  Because now you know what you need to do.  Let’s get on with it–time is short.

Tim Cook’s US Manufacturing Reality Distortion Field

Tim Cook visiting Foxconn

People say Steve Jobs had a “reality distortion field“.  His powerful charisma and messages were said to have the ability to make people believe in what he wanted them to regardless of the facts.  Now Tim Cook is trying to deploy his own reality distortion field of sorts, and it’s working so far.

A number of articles have been written around the question of why Apple doesn’t do more manufacturing in the US.  After all, its super high tech products are produced in huge volumes that create thousands of jobs and our country could use those jobs, especially in the manufacturing sector.  The iPhone production line at Foxconn’s Zhengzhou Technology Park employs 120,000 people, so a lot of jobs indeed are at stake.

Great stories abound of Apple going to extreme lengths to create the world’s most potent supply chain, to the point where it has become a powerful competitive weapon.

For example, in 1998, Apple bought out all available air freight for Christmas 1998 to ensure that the company’s new translucent blue iMacs would be available.  This was done at a cost of $50 million, and the move handicapped rivals like Compaq that got to the party late, wanted to book space, and found it had already been sold to Apple.  When Apple wanted to make the little green light appear next to the webcam on a MacBook, it bought hundreds of $250,000 laser machines to drill the tiny holes in the metal.  I marvel today at the light that appears on my own Macbook when the lid is closed and it is sleeping.  The holes are literally invisible they’re so small.  It’s as if the light shines right through the metal, which in a sense, it does.

With the ability to invest so much, why aren’t more Apple products made in the good old U, S, of A?  Why isn’t Apple creating more jobs here?

Rather than just admit they do it overseas because American workers are unwilling to sleep thousands in dorms while working around the clock 12 hour shifts, so therefore it is cheaper for Apple, Cook has a more savvy response.  He blames it on a shortage of skilled workers:

All the remaining American tool-and-die makers–a key profession in preparing to make high volume products–could hardly fill the auditorium in Rancho Palos Verdes where the event was held, Cook said. In China, those skilled in that trade would fill several cities, he added.

And that is Cook’s reality distortion field hard at work.  I’ll give you some counter arguments.

First, if there really is such a critical shortage of these skills, why are so many out of work?  How is it that the US Aerospace and Defense industries manage to produce so many of the world’s highest performance and highest tech products from stealth fighters to nuclear submarines to missiles to drones?  The products produced by this industry are coveted by every country on the planet.  Are we really to believe that we can produce stealth fighters and nuke subs but we don’t have the skills to make iPhones?  That beggars belief.

Second, if there are so few machinists available, why are so many participating in online communites and sites ranging from professional sites like Practical Machinist to amateur sites like CNCZone to hybrids like my own CNCCookbook?  I get over 1 million visitors a year to my little site.  Sure, some are from overseas, but very few are from China.  Most, in fact, are from the US.

Third, how is there such a strong Maker movement in the US and so many domestically created products on Kickstarter if this is all dead and dying in the US?

The answer is simple–Cook is talking balooney.  It ain’t true.  This is not about skilled tool and die markers, this is about having 8000 workers who are willing to roll out of bed, take a cup of tea and a biscuit, and jump onto a 12 hour shift to adapt to a last minute design change Apple mandates.  It’s about dealing with a country whose factories and workers are subsidized to the hilt by the Chinese government and by the substandard conditions these workers toil under.  It’s about having the Chinese government invest capital so Apple doesn’t have to.

In fact, Cook’s message about a lack of skills is really just parroting what Steve Jobs told President Obama:

It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

Then again, perhaps Jobs was parroting Tim Cook, who is the man credited with moving Apple manufacturing from domestic highly automated factories overseas.

Lately, the New York times and others have cried, “Foul!” over worker’s conditions in China, but I have not seen anyone calling “Bull!” on Job’s and now Cook’s claims that the skills simply don’t exist in this country.  There’s a lot more reality distortion and dust-raising-skuffling going on too.  No end of blog posts about why Apple should take this on  when other companies like HP, GE, or IBM heven’t.  Or whether it is Apple’s responsibility or whether it is fair to ask Apple to play on a field made uneven by competition.  There is hand wringing over how much good is done for workers in China who might otherwise be much worse off and whether it is fair to ignore their plight versus domestic workers or jobs created for retail clerks in Apple’s stores.

That’s more Balooney and hand waving–Apple is now investing in improving worker’s conditions and its margins are so large it can afford to do far more before any competitor has much of an advantage.  Why can’t it invest in recreating manufacturing that works in this country?  Imagine what an amazing and productive paradigm shift that would be?  Wouldn’t that truly be a “product” that Tim Cook, master of operations and supply chains, could be proud of in the same sense that Jobs could be proud of his fantastic innovations around personal computers, phones, and digital music?

I’ll leave the subject with one last counter-argument to this tale of how woefully inadequate US manufacturing is to the task.  Take a look at Germany.  By all accounts it should be far less competitive than the US in manufacturing.  Taxes are worse.  Regulations are worse.  Wages are higher.  Yet, Germany’s manufacturing economy thrives.  For more insights on why, see my blog post over on CNCCookbook.

Nobody there will sit still for the argument that there just aren’t enough skilled Germans to do the work.  We shouldn’t sit still for that argument either.  We’ve penalized countries in the past for dumping products here to decimate competition.  How should we deal with dumping cheap wage workers for the same purpose?

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.