Paul Wallbank | Paul Wallbank - Communications Professional

Lowered expectations – What is the future for Apple?

Where to next for Apple in an era of lowered expectations?

Last Friday I had a story in Business Spectator on the future of Apple in light of the company’s warning of a 20% fall in revenue next quarter.

The clear message from Apple’s executives was that the company is facing a terminal decline in iPod sales and the iPhone – it’s most profitable and highest selling product – is facing slower sales.

So the search is on to find something that will replicate the iPhone’s success, with the biggest candidate being the iWatch.

The problem with that is the entire wearable technology market is only forecast to be $6bn which is a seventh of Apple’s $42 billion profit last year, so the iWatch can never replace falling iPhone sales.

It may well be for Apple that the period of massive profits and growth is drawing to an end, it doesn’t mean the company is dying – for a start they has nearly $200bn in cash reserves and a healthy $150 billion in sales each year.

Short of Tim Cook unveiling something similar to the iPhone, the future for Apple is probably going to be a bit modest than past few years of huge growth, that’s not a bad thing.

Rather than being the end of Apple, it’s more a revision to the role the company has held for most of it’s existence – a high profit, niche business that sells on quality and brand rather than fighting in the commodity markets.

Winning the three-legged race

Merging two trouble companies rarely resolves the underlying problems

Does tying together two lame men give you an Olympic sprinter?

It’s quite common in the business world to see two second rate companies merging in the hope that their combined market share will give them enough momentum to overcoming the market leader.

The tactic rarely works as the businesses running third, fourth or fifth in a market are usually doing so because they have ordinary products or indifferent management rather than any inherited size disadvantage.

Merging two second-rate companies usually results with a pair of competing silos of mediocrity where the former workforce and management of the original business squabble over power in the new entity.

Far from being more competitive, the merged company is even more distracted with internal politics and power plays.

The story that Australian department store Myer proposed a merger with its rival David Jones is a very good example of this as two poorly run companies whose managements that have abjectly failed to adapt to the modern times, try to paper over their chronic problems by merging.

Both companies have failed internet strategies – Myer’s website managed to collapse during the Christmas sales season and no-one could be bothered fixing it for over week.

Along with lousy internet strategies, both companies have underinvested in IT systems leaving their point of sales and logistics systems antiquated and incapable of meeting modern customers’ needs.

Probably the greatest mistake that Myer and David Jones’ management made though was a focus on cutting costs through reducing sales staff.

The resulting lousy and often pathetic service resulted in both brands being seriously tarnished and had the effect of driving high value customers away.

Further damaging the stores reputation was the tactic of offering perpetual sales which trained the customers that would still shop with them into waiting for goods to be marked down rather than paying full price.

Merging the two operations would have done little to resolve any of the long term management failings of the two businesses, although no doubt there would have been some fat advisors fees for some of the boards’ friends.

Nothing fixes poor management better than getting rid of the poor managers, merging two poorly run business like Myer and David Jones does nothing.

Retailers failing as their poor management struggles to deal with changing marketplaces is an international problem, as this story about US chain Sears illustrates. The Australian experience though is a classic case study of two poorly led organisations trying to pretend their failings can be fixed through mergers.

Resolving the problems of troubled companies like Sears, David Jones and Myer involves having good management and smart investment, merging with a similarly troubled organisation solves little except perhaps putting off the day of reckoning.

People are the key to doing business in Asia

Pacnet’s CEO sees people as key to the future of Asian business

The first Decoding the New Economy for 2014 is an interview with Carl Grivner, CEO of Asian data center and communication company Pacnet.

Pacnet is unique in having an extensive Asian network of fibre links and data centres as well as having head offices in both Singapore and Hong Kong.

Having two head offices in cities as different as Singapore and Hong Kong presents a number of challenges along with some advantages as Carl explains.

The company’s combination of data centres and data links gives Pacnet an opportunity to offer some unique services in software defined networks, which Grivner describes as “the Pacnet Enabled Network”, that allows customers to create their own virtual networks.

What differentiates Pacnet in Grivner’s view are the company’s people – an asset essential in diverse Asian markets.

“What differentiates us are the people that we have in those locations,” says Grivner. “when you do business in Asia; doing business in Singapore versus Sydney versus Hong Kong everything is a little bit different, or a lot different for that matter.

“The physical assets are the physical assets but the people that get know how to get things done in each of those markets is what makes us unique.”

Grivner also explores the differences between Singapore and Hong Kong’s business cultures along with the diversity of the Chinese economy.

Little Boxes, big data and modern management

The careers of folk singers Pete Seeger and Malvina Reynolds have some lessons for modern management.

Yesterday’s passing of folk singer Pete Seeger at age 94 is a chance to think about old age, the Twentieth Century and how we use technology might be restricting us from seeing the opportunities around us.

One of Seeger’s best known hits of the 1960s was Malvina Reynold’s song ‘Little Boxes’ that described middle class conformity in the middle of the Twentieth Century, which had a renaissance in recent years as different contemporary singers did a take of the song for the TV series ‘Weeds’ .

As the ‘Weeds’ opening credits imply, we are probably more conformist today than our grandparents were in the 1960s.

In business, that conformity is born out of modern management practices that insist employees be put into their own ‘little boxes’ – if you don’t tick the right boxes then the HR department can’t put you in the right box.

With big data and social media expanding, increasing computer algorithms are used to decide which box you will fit into. One of the boxes that managers and HR people love ticking is the age box.

Little Boxes’ writer Malvina Reynolds would never have fitted into one of the modern HR practioners’ little boxes as she only entered the folk music community in her late forties.

Despite being a late bloomers, Malvina wrote dozens of folk and protest songs through the 1960s and 70s – The Seekers’ Morningtown Ride was another of hits – before passing away at age 77 in 1977.

Were Malvina Reynolds born 60 years later, she would expect to live to at least Pete Seeger’s age and expect to switch careers several time during her working life.

Modern age expectancy means the modern workplace’s age discrimination and the box ticking of HR managers is unsustainable; there’s too much talent being wasted while individuals, business and governments can’t afford to fund a society where the average person spends the last thirty years of their life in retirement.

With technology there’s no reason why a forty year old air pilot can’t retrain to be an accountant or a sixty year old farmer get the skills to become a nurse, the very tools that are being used to keep workers in boxes are the ones that enable them to break out of those boxes.

Similarly modern technology allows an accountant, farmer or young kid in an obscure developing nation to create a new business or industry that puts the box ticking HR managers in downtown high rises out of work.

Just as today’s box ticking manager might be confronted by a threats they barely know exist, so too is the business that spends all its time looking at data that confirms its owners’ and executives’ prejudices.
Life, and data, doesn’t always neatly fit into little boxes.

Filing box image courtesy of ralev_com through sxc.hu

Revisiting the Lipstick effect

How real is the lipstick effect? The Irish experience says it’s complex.

During the recession much was made about the ‘lipstick effect’ – the idea some businesses and products would survive because they’re little luxuries that cash strapped consumers will spend on while scrimping and saving in other areas.

Some of those areas are ladies’ cosmetics (lipstick), chocolate, movies and coffee shops. All of them offering small pleasures for a few dollars.

It’s a theory I’ve always been sceptical of and an episode of the BBC’s World Of Business where Peter Day travels to Cork to see how Ireland’s second city is recovering from the great recession illustrates the reality is a lot more complex than the theory suggests.

“We really struggled to keep alive,” Claire Nash of Nash 19 restaurant says in her interview with Day on her business experience during the recession.

“My turnover just absolutely took a spiralling tumble and it wasn’t that the customer weren’t coming in – those that had lost their jobs weren’t coming in – but those that hadn’t lost their jobs were really hurting and they were very careful with their spend.

“So they started using us as a treat, which was a model I never wanted to enter into but we weathered the storm.”

It can be argued that Claire survived because of the lipstick effect – she kept enough customers to survive – but it was tough and had she taken out the loans offered to her during the boom it’s unlikely her restaurant would have survived.

The key point though is the lipstick effect turned out to be a very different, and much less lucrative business, for Claire and other businesses in Cork.

So assuming a business will remained unscathed because of the assumption the lipstick effect is a big risk, if that’s the plan then Sequoia Capital’s infamous Powerpoint of Doom comes to mind.

While the presentation was aimed at tech companies and investors, it’s a good overview of how the Global Financial Crisis happened and Slide 49 – Survival of the Quickest – is probably the best lesson for any business: Act fast to adapt.

The lipstick theory is a nice way to justify unsustainable business models, particularly those that rely on consumer spending, in the face of a recession but the assumption spending will remain the same as customers will seek little luxuries is deeply flawed.

A business that doesn’t respond quickly to changed circumstances and reduced spending is one that might not survive a downturn.

Peter Day’s Cork story is a good listen on how Ireland and Cork have weathered the global financial crisis, the main question from the piece is how much have the Irish and the rest of the world learned from the mistakes of the boom years at the start of the 21st Century.

Milestones of the personal computer industry

Steve Jobs marked most of the milestones of the PC industry’s rise and fall

“There have only been two milestone products in our industry to date,” Steve Jobs told the Boston Computing Club in 1984. “The first was Apple II in 1977 and the second was the IBM PC in 1981.”

Jobs at the time was announcing the third breakthrough – the Apple Mac – which turned 30 last week.

Looking back over the four decades of the PC industry, Jobs’ claim that the Apple Mac was the sector’s third milestone stands up to scrutiny, however the greatest milestone of all for the PC was the launch of Window 3.0 in 1990.

The rise of Windows

Windows 3.0 changed the business model of the industry, it established software vendors – particularly Microsoft – as being dominant over hardware manufacturers, that shift nearly killed Apple and eventually sent most PC builders to the wall.

Microsoft’s advantage over Apple, IBM, Atari and dozens of other systems, was that users weren’t locked into one vendor’s products. It was possible

The Windows 3.0 milestone was even more important in that it forced a shakeout in the software industry as well, many of the incumbent vendors – most notably WordPerfect – though the Windows Graphic User Interface (GUI) was a flash in the pan and that most office workers would prefer to use keyboard instructions rather than mouse clicks.

WordPerfect was horribly, horribly wrong in judging the market and by the time they released the Windows versions of their product Microsoft had captured key market share for Word and the bundled Office suite that dominates the business world today.

Going mobile

So things were good for Microsoft until the next milestone, which again was marked by Steve Jobs, the launch of the iPhone genuinely did change the smartphone industry and was the first inkling of mobile would eventually destabilise the PC sector.

It’s interesting comparing Jobs’ iconic 2007 iPhone which sets the standard for product launches with the somewhat rough at the edges 1984 Boston presentation although both show how Steve Jobs was a master salesperson and a passionate believer in his products.

The PC’s final milestone

Three years later Steve Jobs delivered the milestone product that marked the beginning of the end for the PC industry, the iPad finally delivered a mobile computing device that businesses and consumers wanted.

Apple’s iPad also marked a fundamental shift in the computer industry – no longer did the software companies control the market, power had shifted back to the manufacturers.

From that moment on the PC, and Microsoft’s Windows business, started a terminal decline.

The rise and fall of the personal computer is a great illustration of a transition technology. That Steve Jobs bookmarked the beginning and the end of the PC industry is an interesting note about a technology that changed the home and workplace.

When Marissa met Mark

An exchange between Marc Benioff of Salesforce and Yahoo! CEO Marissa Mayer at the World Economic Forum tells us much about modern business

Not unexpectedly, last week’s World Economic Forum featured some high profile panels. One particularly heavy hitting group was the New Digital Context session featuring some of the tech industry top CEOs.

Featuring Yahoo’s Marissa Mayer, Salesforce’s Marc Benioff, Cisco’s John Chambers, BT’s Gavin Patterson and AT&T’s Randall L. Stephenson the panel looked at the rate of disruption and change to global business.

A key point in the discussion is Benioff and Mayer disagreeing with the host, Forrester CEO George Colony, about the rate of change and how businesses should be managing disruption.

Mayer’s view was Yahoo!’s is evolving to changes markets while Benioff feels the rate of change is so great that most corporations’ fundamental business models being changed.

It’s an interesting point and something we’ll look at a bit closer tomorrow.

The evolution of the Internet of Things

Cooking Hacks shows how the internet of things evolved out of other technologies

One of the notable things about modern technology is that few of the developments are actually new, the Internet of Things is a good example of this.

Most of the tech we talk about is a collection of existing technologies that have been cobbled together — cloud computing, 3D printing and the Internet of things are all good examples of this.

Libelium’s Cooking Hacks community page has a good infographic on how the makers’ movement, crowd funding and miniaturization have driven the development of the Internet of Things, 3D printing and wearable technologies.

The diagram, shown at the bottom of the post, is a good illustration of how technologies are evolving and the businesses that are being spawned from the developments.

Cooking Hack’s infographic show why it’s an exciting time to be in business.

Microsoft edges towards the post PC era and the end of Windows

Life was good for Microsoft Windows until the iPad arrived, now it’s becoming irrelevant to the business.

Microsoft’s evolution to the post PC era has been a fascination of this blog for several years now as the company’s once flagship Windows becomes irrelevant in a world dominated by smartphones and tablet computers.

The launch of Windows 8 and the Surface tablet were the great hope for the company, but it appears the business model that built Microsoft into one of the world’s biggest companies is doomed. Microsoft is shifting to the post-PC era where Windows has little role.

Yesterday’s financial results emphasised the shift as the consumer licensing business fell 6% year against last years revenues while the company’s overall revenues rose 14% – the old consumer Windows business is dying.

This is illustrated in the company’s quarterly report, where the business units that delivered the growth were all in non-Windows areas.

SQL Server continued to gain market share with revenue growing double-digits
System Center showed continued strength with double-digit revenue growth
Commercial cloud services revenue more than doubled
Office 365 commercial seats and Azure customers both grew triple-digits.

Drilling down into the numbers the trend against Windows is even more stark, here’s a chart of the performance of the division over the last ten years.

Microsoft Windows division financial performance

As we see, life was good for Microsoft Windows until the iPad arrived.

Following Apple’s proof that tablet computers could deliver what business and home customers wanted from a portable device, Windows’ revenue stagnated and now income and margins are falling.

The devices and services strategy of outgoing CEO Steve Ballmer recognises is a reflection of how Windows is becoming irrelevant to the business.

It’s hard to see where Microsoft now goes with Windows, the product still remains a key part of the business with 22% of revenues – although that’s down from 27% last year – and its hard to see a buyer parting with the hundreds of billions the division would be worth as a stand alone business.

For Steve Ballmer’s successor as Microsoft CEO dealing with the Windows problem will be one of many big issues they’ll have to deal with, the future of the once iconic product though won’t define the future of the business.

Tech security in a tough world

Even the professionals are struggling to keep up with a rapidly changing IT world, which is why businesses should start taking computer security seriously.

Network giant Cisco Systems released its 2014 Annual Security Report last week which should make sobering reading for every business manager and owner.

If you’re looking at a career change, the survey even suggests a possible new job.

Over two million of Cisco’s customers were examined in the survey and every single company had evidence of their systems being compromised in some way, from staff visiting suspicious websites to full scale hacker break-ins.

Keeping up with change

The survey points out IT security risks are evolving quickly as business technology becomes more complex and it’s hard for even industry professionals to keep up with the pace of change.

“Even the most sophisticated and well funded security teams are struggling to keep on top of what’s happening,” Chief Security Officer of Cisco, John Stewart, told a media briefing yesterday.

That concern was reinforced by Stewart’s colleague Levi Gundert, technical lead at Cisco’s Threat Research Analysis and Communications (TRAC) group.

“It’s not about are you going to be compromised,” said Gundert. “the question is how long is it going to take you to detect and shorten the remediation window?”

If even the world’s biggest corporations are struggling what can smaller organisations do to control the risk?

Disable Java

The biggest computer security risk is Java software. Cisco found a shocking 91% of software exploits were related to the application, “2013 was the year of the Java exploit.

It was a bad year for Java.” Says Gundert. It should also be noted that the first successful malware targeting Apple Macs, the Flashback Trojan, was a Java exploit.

The best way to deal with this risk is keep Java off your systems, the problem with that advice is many business applications – and games if you have a home office or kids use your computer – need the software to run.

If you have to use Java packages, make sure you have the latest version running on your systems.

Keep your systems up to date

It’s not just Java that is a risk, Cisco identified Adobe PDFs and Microsoft Office vulnerabilities as being other threats.

It’s important that all systems – Mac, Windows or any other operating systems – are kept up to date with the latest patches.

Lock down office systems

Except when your computers are being updated, there’s no reason for office computers to be running in Administrator mode.

Day to day use should be done in restricted user profiles; on a Windows machine, workers should be logged on as standard users, while on Macs they should be managed users, the only time an Administrator needs to be logged on is when maintenance is being done.

Watch those mobiles

The IT security industry has been watching smartphones for a while and 2013 started seeing large scale malware appearing on mobile devices, although it’s still small scale compared to PCs.

Cisco’s survey found only 1.2 percent of web based malware coming from mobile devices with almost all the infections being on Android systems.

Most of these Android infections were game add-ons downloaded from unofficial Android app stores so the message is to stick to the official, trusted services for Android apps.

Website risks

Another risky area for businesses identified by Cisco identified are websites being compromised and hijacked.

The software on these needs to be updated to the latest versions just as office computers should be.

Often, disused websites and blogs aren’t updated, the ABC discovered last year that abandoned, neglected websites are a great way for hackers and malware distributors to launch attacks or spread problems.

So if you have older websites or blogs, shut them down and redirect the domains to operating addresses.

For those operational websites password security needs to be beefed up as Cisco found ‘brute force’ attacks – where automated systems try every conceivable password combinations – were up threefold in 2013.

Professional skills shortage

A big problem facing the IT industry is a worldwide skills shortage: “There are essential a million jobs across the globe that can be filled but we don’t have trained people to fill them,” says Cisco’s Stewart. “We’ve got a dearth of talent and skills.”

For smaller businesses that means it’s harder to find someone to fix problems when they happen, for both business managers and owners it’s smarter to reduce the likelihood of having a problem rather than scrambling to find an IT professional to help after the event.

The good news from Cisco’s survey is if you’re thinking of a career change, or you have a teenager moping around looking for a job, then IT security could be the answer.

For everyone else, as business and the world in general becomes more connected the security of the systems our world is coming to depend upon is something we have to take more seriously.

InfoSec’s looming labor shortage

A looming shortage of IT security experts is one example of new jobs being created.

For the last few days I’ve been reading Cisco’s 2014 annual security report and trying to decide exactly which parts are suitable for this site, Networked Globe and the various other outlets I write for.

One of concerns Cisco raises in their study is the labor problem facing the information security (InfoSec) community with a shortage of a million workers this year.

Even when budgets are generous, CISOs (Chief Information Security Officers) struggle to hire people with up-to-date security skills. It’s estimated that by 2014, the industry will still be short more than a million security professionals across the globe. Also in short supply are security professionals with data science skills—understanding and analyzing security data can help improve alignment with business objectives.

“There are essential a million jobs across the globe that can be filled but we don’t have trained people to fill them,” Cisco’s Chief Security Officer John Stewart told a media conference yesterday. “We’ve got a dearth of talent and skills.”

As governments tighten up laws on liability for data breaches and privacy lapses a lot of businesses will be fighting to find people with the right skills to fix their problems or help them manage various technology and security risks.

So if you have a teenager moping around the house wondering what to do for a job, or you’re looking for a career change, becoming an IT security expert might be the answer.

Just as we see many jobs disappear in the face of technological change, we see new ones appear. This is a good example.

Digital vagrancy

The term digital vagrant might be appropriate for the businesses and people left behind in a connected world.

One of the joys of writing on and analysing trends IT industry trends is the never ending source of buzzwords and phrases that vendors invent.

Today is a good day with a release from security software vendor AVG coining the term ‘Digital Vagrant’.

Underlying the idea of digital vagrancy is an abandoned underclass who, overwhelmed by technology, are ignored and neglected in a connected society. As the AVG media release describes;

Users who are left behind to wander around in an online world that largely ignores them are nothing more than the digital equivalent of vagrants – people who are left to cope in a world that has become too overwhelming.

‘Digital Vagrant’ joins other wonderful ‘digital’ labels; digital immigrant, digital native and digital sharecropper come to mind.

It’s tempting to think that digital vagrancy is what eventually happens to poor exploited digital sharecroppers – those who’ve donated their free labour to help the likes of Mia Freedman, Chris Anderson and Ariana Huffington to build their media empires.

Should that be the case, there’s going to be many digital vagrants.

On more serious note, AVG does have a point in that both individuals and businesses that scorn technology risk being left behind in society that’s becoming increasingly connected.

Society and business are going through a change similar to that of a century ago where the motor car, trucks and tractors radically changed industries and the economy.

Those farmers and businesspeople who stuck with horse drawn equipment slowly became irrelevant and went broke.

A similar process is happening now as a new wave of technology is changing business and society.

The question for all of us is do we want to be left behind in a connected society?

Beggar image courtesy of apujol through sxc.hu