Last week I was going over a rather impressive list of products that Microsoft brought to market last decade that failed and while Apple’s list is shorter the failure of its Xserve server product after a decade of trying is just as telling. In looking at the two companies; both have largely been unable, at least for the last 10 years, to do well in areas dominated by the other. Widening the net Sony has made a number of attempts at business products and failed, and IBM had made a number of attempts at consumer products starting with the PC Jr. and failed. Currently Cisco is failing with consumer products and RIM is hardly keeping Apple awake and even GE seems to be trying to get out of all consumer segments because they can’t compete.
I think there is a lesson in here someplace and that lesson has to do with how large companies staff and fund efforts which goes to the heart of why, at one time, companies like GE and RCA could be both consumer and corporate vendors and why today that isn’t working.
Live Body Problem
I was one of the analysts brought in early on Apple’s Xserve around a decade ago and after seeing its go-to-market I was perhaps a little too outspoken on why it wouldn’t be successful. Given this was the last time I had a meeting like that with the group, it is burned in my memory. It was approaching the market like it would with a consumer product with the idea that a good offering and some light focused marketing would assure its success. At the time, I disagreed and it looked as if the folks managing the server effort had no experience in bringing servers to market. They performed as expected and last year Apple pulled the plug on one of its rare failures.
On the Microsoft side, the Zune effort is the most memorable because the plan on paper was actually very good and they actually hired experts to execute it. The problem was the experts were music experts (out of record companies) not device experts and it was clear they didn’t understand devices. The first Zune was incredibly ugly in a market that cared about looks and the GM briefing me on the product was trying to argue brown was the new black. The product looked like a square turd. On top of that the key feature, the ability to share music, only worked if the folks sharing music both had to have Zunes which, given Zune hadn’t shipped yet, was extremely unlikely. I told him this wasn’t going to sell and I can still remember him looking at me like I was clueless and pointing out it takes Microsoft three times to get a product right. He was fired a few months later. But Zune, which had a number of video advantages over the iPod line, didn’t get video content until late and was starved out of the market by Microsoft over most of last decade.
In both cases it appears the companies put people in critical decision making positions that were clueless when it came to the markets the firm was targeting. Both firms dramatically under resourced the respective efforts and made avoidable mistakes because they didn’t put in place decision makers at critical levels who knew what was needed. Or, in a likely misplaced effort to save money, both firms wasted all they did spend.
This comes down to a tendency in large firms to not assess executives based on their knowledge and capabilities for a new job but on their seniority or status in the company. This tends to put inexperienced people in key areas and the result is failed projects. The mistakes made resulted from the initial staffing decisions and it was those executives that set their respective firms on the path to failure.
Apple Stores Microsoft Xbox
Counter examples at Apple and Microsoft are the Apple Stores (which almost failed initially) and Xbox gaming system both of which fell outside of their company’s comfort areas and were very successful. Apple brought it the leading experts to manage the creation of their stores and avoided the failure that Gateway had a few years earlier attempting the same thing without that expertise. The Xbox effort was largely staffed by gaming enthusiasts and it pretty much captured all of the gaming talent from Microsoft, unfortunately the collateral damage was gaming support from a vastly more profitable product, Windows, but Xbox remains the one success in a sea of consumer failures last decade due largely to the quality of the staffing and a greater willingness to fund at appropriate levels. Granted it was helped a great deal by Sony over building and pricing the PS3, a mistake Apple wouldn’t have made, but the example holds none the less.
Experience leads you to set better goals and to invest more wisely. If you don’t understand a market you are much more likely to underestimate what needs to be done in order to win in it. And if you have a high title you may be considered as and have the power of an expert but are anything but that. One final thought before we move on, Steve Ballmer clearly doesn’t get the consumer market any more than Steve Jobs gets IT (recall the Apple Lisa and NeXT failures were largely his) and, as a result, neither can likely adequately, staff, fund or correct related problems which is supported by history.
If Apple had approached servers the way it approached the Apple stores we’d likely see Apple as a major server player today and if Microsoft had approached the Zune with Consumer Electronics experts rather than music specialists, Zune likely would have been more successful as well. In the end, this all comes down to funding and staffing, set an adequate bar and meet or exceed it and you have an Apple store or Xbox, don’t and you have a Zune or Xserve and a hole where your money used to be. It seems like such an obvious lesson as we watch the Motorola Zoom, RIM Playbook and HP TouchPad, it will be clear which companies played hooky or slept through it.
Apple and Microsoft fail because they don’t staff or fund the related projects adequately because they don’t know what “adequate” is. If you have no idea what the goal is or how to get to it, you will most likely lose the race.
President and Principal Analyst, Enderle Group
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