Tag: innovation

Steve Ballmer’s big platform change

Microsoft contemplates big changes as the computer market evolves around portable tablets and smartphones.

All Things D today reports that Microsoft is considering a major restructure to reflect changed computing markets.

One of the big messages from The State Of The Internet report is we are seeing three simultaneous changes to the computer industry – the shift from personal computers to smartphones, tablet computers and wearable systems – and Microsoft is at the centre of these transformations.

One graph, first released by Aysmco and expanded in the Meeker presentation, illustrates how fundamental these shifts are to Microsoft’s business.

mary meeker computingmarketshare-640x480

Microsoft’s domination of the computer industry was almost total at the beginning of the century and remained so until the iPhone was released in 2007. Then suddenly things changed.

With the success of Android and the iPad, the market shifted dramatically against Microsoft and the WinTel market share is now back to 1985 levels when the Commodore 64 was a credible competitor.

The change that Microsoft faces shouldn’t be understated, although the company’s strengths with products like Office, Azure and Hotmail (or whatever this year’s name for their online mail product is) give the once untouchable incumbent some opportunities, particularly in the cloud.

At the end of Mary Meeker’s presentation at the D11 conference, Walt Mossberg asked her about Microsoft’s view that tablets and smartphones are just new computing platforms. Meeker dismisses that with the observation that the data is clear, the market has shifted to Apple and Google.

“Google and Apple are driving innovation,” says Meeker. “Microsoft is not.”

The numbers aren’t lying for Microsoft. That’s why Steve Ballmer has to move fast and think creatively about the company’s future.

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Does closed government hurt business and the economy?

Does a culture of government secrecy make it hard for innovators and entrepreneurs to flourish?

Earlier this week I interviewed Vivek Kundra, the former US Chief Information Officer and now Salesforce executive, on innovation, technology and government with some of the Australian business perspectives run as a story in Business Spectator.

Something that stood out for me from the interview were Vivek’s views on the effects of governments making both innovations and information freely available.

“Two policy decisions that transformed the future of civilisation – GPS opening and human genome project through the Bermuda Principles.”

While it’s probably too early to draw conclusions on how the opening of the human genome data will change business, it’s certainly true the Global Positioning System has allowed whole new industries to evolve and it’s an important lesson on making technology available to the masses.

The Global Positioning System was, like the internet, a US military technology developed during the Cold War with the Soviet Union.

After Korean Airlines flight 007 was shot down by Soviet fighters in 1983, President Reagan approved civilian use of the GPS – then named Navstar – to prevent similar tragedies.

Such a decision was controversial, this was military technology being given over to the general population which could be used by enemy forces as well as airlines and truck drivers.

No doubt if the GPS technology was developed in the UK or Australia, there would have been demands to monetize the service. It almost certainly would have been sold off to a merchant bank that would have charged for the service and stunted its adoption.

By making GPS freely available, the US gained a competitive advantage which maintains the nation’s technological and economic lead over the rest of the world.

This openness isn’t just an advantage for technology companies. While US governments are no means perfect, the relatively open nature of local, state and Federal administrations is an advantage for the United States economy and society. As Vivek says,

Making data available provides three concrete functions; it allows citizens to fight corruption, it allows you to build the next billion dollar companies and it transforms government functions by breaking down silos.

When the default position of government is to classify everything as secret or ‘commercial-in-confidence’, there’s little chance of an entrepreneurial culture growing in that society – instead you have a business culture that favours connected insiders who can trade off their privileged contacts within government.

A culture of closed government reflects the business culture of a society and the reluctance of both the private and public sectors to openly share knowledge is why countries like Britain and Australia will struggle to emulate the United States.

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Ending the motor industry’s 1950s delusions

Can governments kick their habit of supporting the motor industry and focus on 21st Century industry investments?

Today Ford announced the pending closure of its Australian manufacturing operations, bringing to an end ninety years of the company building automobiles down under.

Ford’s announcement is small on a global scale – the Broadmeadows factory built 40,000 cars out of a worldwide supply of sixty-three million – it does illustrate some major structural issues facing both the global automobile industry and the Australian economy.

An Automotive Depression

Over capacity has been the curse of the automobile industry for decades as governments have propped out producers around the world.

KPMG’s 2012 Global Automotive Survey forecast the global industry would be 20 to 30 percent over capacity in 2016.

This doesn’t seem to worry industry executives or their government supporters, as KPMG reported;

Alarmingly, most auto executives still seem to regard the risk of overcapacity and excess production as a necessary evil to remain competitive. As the rapid growth of recent years eventually slows down, manufacturers that fail to address overcapacity could face some tough decisions.

Ford’s Australian executives could at least be credited with facing some of those tough decisions.

Many governments though are still in denial as they continue to subsidise motor manufacturers in an effort to copy the industry model that worked for the US Midwest during the 1950s.

Indeed, the Australian government in 2008 committed 5.2 billion dollars to support their domestic industry through to the end of this decade. Ford’s announcement today coupled with General Motor’s cutbacks last year show that policy is in ruins.

At the Ford and government press conferences, journalists pressed the Prime Minister and the Ford Australia’s CEO about repaying some of the millions of corporate welfare doled out to the multinational over the last decade. Naturally little was to be said about that.

In a stark comparison to Ford Australia’s announcement, US electric car manufacturer Tesla Motors repaid a $465 million US government loan.

While no-one can say Tesla’s future is certain, at least US investors are putting their money on 21st Century technologies instead of propping up declining industries of the last century.

Australia’s predicament

The car industry is just one sector that faces global overcapacity – ship building, real estate and mining are just three with similar excess production.

For Australia, the mining industry is winding down investment as worldwide production capacity expands. At the same time, the blue sky projections of China’s resources demand are being challenged.

While the mining boom comes to an end, Australia now has to face the consequences of the nation’s economic decision to focus on resources and property speculation in the 1990s and early 2000s.

As the Thais and Indonesians found in 1997, and the Irish and Icelanders a decade later, economies based on unsustainable foundations seem to work fine until suddenly they don’t.

It may well be that Australia is about find out what happens when the economic tide suddenly changes.

One bright side is that the government has the best part of five billion dollars to invest in new industry – assuming Australia’s politicians can wean themselves off their 1950s view of the world economy.

Image of Ford Australia celebrating 50 years of Falcon Production courtesy of Ogilvy Communications.

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Disrupting the incumbents

Industry incumbents like Nokia and Microsoft are finding their market positions disrupted as Apple, Hauwei and Samsung reinvent the marketplaces.

One of the truisms of modern business is that no incumbent is safe, Microsoft, Nokia and Hauwei are good examples of just how businesses that five years ago dominated their industries are now struggling with changed marketplaces.

In the last two days there’s been a number of stories on how the smartphone and computer markets are changing.

According to the Wall Street Journal’s tech blog, PC manufacturers are hoping Microsoft’s changes to Windows 8 reinvigorates the computer market.

Those hopes are desperate and somewhat touching in the face of a structural shift in the marketplace. These big vendors can wait for the Big White Hope to arrive but really they have only themselves to blame for their constant mis-steps in the tablet and smartphone markets.

Now they are left behind as more nimble competitors like Apple, Samsung and the rising wave of Chinese manufacturers deliver the products consumers want.

All is not lost for Microsoft though as Chinese telecoms giant Hauwei launches a Windows Phone for the US markets which will be available through Walmart.

Hauwei’s launch in the United States is not good news though for another failing incumbent – Nokia.

Nokia’s relationship with Microsoft seems increasingly troubled and the Finnish company is struggling to retain leadership even in the emerging markets which until recently had been the only bright spot in the organisation’s global decline.

Yesterday in India, Nokia launched a $99 smartphone to shore up its failing market position on the subcontinent.

For the three months to March, Nokia had a 23 percent share of mobile phone sales in India, the world’s second-biggest cellular market by customers, Strategy Analytics estimates. Three years ago it controlled more than half the Indian market.

India isn’t the only market where Nokia is threatened – in February Hauwei launched their 4Afrika Windows Phone aimed at phone users in Egypt, Nigeria, Kenya, Ivory Coast, Angola, Morocco and South Africa.

The smartphone market is instructive on how many industries are changing, almost overnight the iPhone changed the cell phone sector and three years later Apple repeated the trick with the iPad, in both cases incumbents like Motorola, Nokia and Microsoft found themselves flat footed.

As barriers are falling with cheaper manufacturing, faster prototyping and more accessible design tools, many other industries are facing the same disruption.

The question for every incumbent should be where the next disruption is coming from.

In fact, we all need to ask that question as those disruptions are changing our own jobs and communities.

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Sunset on the laptop market

Does Toshiba’s release of their Kira laptop mark the beginning of the end for portable computing?

Yesterday Toshiba released their Kira laptop computer – a premium device aimed at the ‘aspirational’ market.

The Kira is a fine device with good specs, little weight and an ambitious $2,000 price point. It probably also marks the laptop computer’s decline.

As tablet computers and smartphones become most people’s preferred computer devices, the laptop computer is becoming a niche device and increasingly less relevant to most technology users. The Kira is fighting for the share of a marketplace that has moved on.

Losing the Aspirationals

Unfortunately for Toshiba, those aspirational customers are locked into their Apple iPads and Sumsung smartphones. Laptops are seen as work devices more valued for their portability and cost.

“We have to give our customers a reason to upgrade their computers,” said Mark Whittard, the Managing director of Toshiba Australia.

The problem is computer users have little reason to upgrade, as nice as the Kira is the price point is just too high for customers who’ve been groomed to expect sub – thousand dollar systems and there are few compelling reasons to buy such a device.

Caught in a pricing pincer

Price points are probably the biggest problem for computer manufacturers – one of the reasons for the tablet computer’s success is they delivered an easy to use, portable computer for half the price of a portable computer.

At the same time the rise of netbooks and the rush to dump unwanted Microsoft Vista and Windows 7 stock onto the market groomed customers to expect cheap computers – few computer buyers are interested in spending more than a thousand dollars on a device.

These factors have squeezed the margins of the major manufacturers like Dell, HP and Asus.

Those pressures are going to increase as volumes fall. For much of the 2000s, laptop computers were fast moving consumer goods – pricing and profits were based on moving large numbers of the devices.

As manufacturing volumes fall, those devices are going to lose their economies of scale which will put further pressures on vendors’ margins.

Laptops aren’t going away, they still have a role for power users ­– particularly for those, like this writer, who need a tactile keyboard and media editing capabilities.

However those feature rich devices with their nice keyboards are going to cost more as parts become more expensive.

For laptop vendors the challenge is to find the profitable market niches and exploit them. In some ways Toshiba probably has a better opportunity than most with its range of premium and gaming portable computers.

Those in the market hoping the happy days of big volumes and good profits will return to the laptop PC market are in for a painful future. It’s something retailers, resellers and vendors need to understand.

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Building tech cities

What does London’s attempt to build a tech city teach others that want to create a Silicon Valley in their own town?

With the apparent success of the Silicon Valley business model, every city seems to want to emulate it. One region that’s probably gone further than most is supporting their local tech sector is London with its Tech City program.

But is it succeeding? The Guardian did an audit on the Tech City project and came away with some findings that aren’t particularly different from other cities.

What I personally find interesting is how the Digital Sydney project which I was involved in setting up during 2009-10 shares the flaws The Guardian has identified in the London initiative.

Identifying tech

One key criticism The Guardian has is that too many businesses are identified as being in the technology sector;

of the 1,340 companies, 137 are tech companies, 700 are PR or design agencies and 482 are “miscellaneous” – which includes charities, pubs, cafes and fashion boutiques. The remaining 21 companies were either entered more than once or entries with no information or link to an external site. So just 10% of companies in Tech City actually do technology, 53% are PR or design agencies, and 37% are “miscellaneous”.

This was true of identifying Sydney’s ‘digital hub’ – the vast majority of business surveyed were not actually tech businesses but movie post production, graphic designers and publishers. The technology sector was only a small group and the bulk of employment and investment came from large multinational corporations like IBM and Google.

Now it is possible to argue that businesses like post-production, publishing and broadcast media are ‘tech’, but then almost every industry could be thought of as ‘tech’ if you cast the net wide enough.

The problem is counting those businesses as being tech just on the basis they are heavy users of IT skews the numbers and gives an inflated view of how big the sector really is.

A capital city focus

One of the biggest criticisms of the Tech City initiative is that it is too London centric and The Guardian makes a good case about this, looking at cities like Brighton, Cambridge, Newcastle and Manchester.

A similar criticism could quite rightly be made about Sydney’s project, which focuses on the inner city enclaves of Surry Hills and Ultimo while ignoring most of the city or any of the state’s regional centres.

When I started at the New South Wales government I was warned by one old hand that “to these jokers NSW stands for North Sydney to Woolloomooloo.”

And so it proved to be.

Focusing on London’s Silicon Roundabout or Sydney’s Surry Hills also smacks of a ‘people like us’ syndrome where the support goes to nice middle class white folk – just like the politicians, public servants and captains of industry who run these programs.

Overemphasising tech

Another problem, not mentioned in The Guardian story, is the over emphasis on technology startups.

Projects like Tech City and Digital Sydney focus on last decade’s opportunities which Silicon Valley dominated. Governments look at California’s success and think we need to copy that when what we’re seeing is actually the fruits of the previous wave of opportunity.

It may well be that we’re repeating the mistakes of the 1950s and 60s where countries around the world imitated Detroit hoping to replicate the US’ success with the motor industry.

The costs of that error are still a millstone around taxpayers’ necks two generations later.

To be fair to those setting up projects like Tech City or Digital Sydney, they are attempts to harness the energy in their own cities but it may just be that government programs aren’t the best ways to bring entrepreneurs and inventors together.

Hopefully though their efforts will succeed although it’s more likely the next Silicon Valley will be just as much the result of a series of coincidences as today’s is.

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3D printing comes of age

3D printing technologies are becoming available to home and business users.

It may well be that a technology has reached mainstream acceptance when the media starts writing scare stories and politicians demand that something must be done.

Should that be the case, then 3D printing has come of age with the story of the first gun being fabricated and demands that legislation be passed preventing people manufacturing their own firearms.

The story does raise a range of issues about community safety that 3D printing is going to present. When anybody can design and manufacture a piece of equipment, how can we be sure it is safe – or legal – to use?

We’re going to be facing these issues very soon as retail 3D printers have started appearing.

At $1299, the Cube 3D printer isn’t quite affordable for most households or offices but we can expect prices to fall as more devices come onto the market.

At the more advanced end of the 3D printing market, The University of Wollongong’s Centre for Electromaterials Science has opened a research unit at Melbourne’s St Vincent’s Hospital to create tissue material with biological 3D printers  with the scientists beginning animal trials to reproduce skin, cartilage, arteries and heart valves.

So at one end of the spectrum we have hackers making plastic guns that freak politicians and scaremongering journalists out, while at the other there are scientists pushing the barriers of medical science.

We live in interesting times – and 3D printing is making things even more exciting.

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