Google Brilliance, Fake Steve Jobs Truth, and the Death of Blu-Ray

Wednesday Nov 28th 2007 by Rob Enderle
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A veteran tech industry observer looks at 2007, and notes that some careful thought might have saved some dumb mistakes.

As we wrap up 2007 there have been some potentially wide ranging events, and what should be some lasting lessons. For the next several weeks I’ll explore these two or three at a time, and for this week I’d like to pick some of the biggest.

Google is trending to be a company with power that eclipses Microsoft, IBM and AT&T combined and, partially anticipating a Microsoft Evil Empire-like set of problems, they have taken on Big Oil with their aggressive alternative energy strategy. This movement could have global implications for them and for us.

A lot of us lust after fame and fortune and would like to imagine what it would be like to be rich and popular like Steve Jobs or Larry Ellison. The recent parody Options: The Secret Life of Steve Jobs gives you a view into the lives of some of these folks, giving you a sense of what that kind of power can do to a person’s personality and life. Virtually no real friends, marriages that are more fluff than reality, and a near constant and overwhelming paranoia significantly offset the advantages that this wealth and power grant.

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Finally, one of the big battles this year was the one between Blu-Ray and HD-DVD. Over the Black Friday weekend, the total number of HD-DVD players purchased so far reached 750,000 players. There are a number of lessons on why Blu-Ray has become the albatross around Sony’s neck and I’d like to close this week making sure you don’t make similar mistakes.

Google: Learning from Microsoft’s Mistakes

One of the things that someone like me who has been in the market a long time finds very frustrating is the repetition of mistakes. It gets incredibly dull to provide the same advice over and over again to address problems that should have been easily avoided the 2nd, 3rd, 4th or 5th time. Yet that is what seems to happen. Companies don’t look at their predecessors or peers very closely and so constantly repeat the same mistakes over, and over, and over again. They lose billions while saving thousands by scrimping on a good analyst team that would help them make informed decisions.

Google may turn out to be the exception for at least one big problem: image. Whether it was Standard Oil, AT&T, IBM, or Microsoft, when a company gets large it both gets an image problem and grows a tendency to misuse its power, exacerbating this problem. With all of the companies, short of Microsoft (which really still doesn’t seem to even comprehend they have a problem) this repeating issue has cost them billions to correct in image recovery.

Google is the first I’ve observed to get ahead of the curve and move to address their image issues before they become too pronounced. By selecting alternative energy as their philanthropic platform they touch everyone on an issue that is both topical and of increasing concern. In addition it’s politically powerful, making it advantageous to side with Google and disadvantageous to move against them.

The risk is going to war with the Oil Cartels and these guys don’t have much of a sense of humor. Still, Google has been defined by big bets that have paid off for them successfully and this may very well do that.

The lesson here is that image is important. How you are perceived can drive you in, or out, of a market and moving on image problems early and aggressively can have massive monetary and competitive benefits. I’m just pleased that Google has apparently learned from one of Microsoft’s mistakes and doesn’t feel the need to repeat it. I also really like the idea of someone standing up and doing something material about our addiction to Oil. So their action certainly resonates with me.

Fake Steve Jobs – Real Silicon Valley

One of the most interesting books I’ve read in a long time is Dan Lyons’ Fake Steve Jobs book. Many of us in the valley were followers of the Fake Steve Jobs blog and a number of us, including me, were thought to be the author. I’m not that good. In the Blog, Dan captured the spirit of Steve Jobs and by reading the Blog it was almost like you were reading Steve Jobs’ mind. Others have tried this, but the only one that has consistently been believable, funny, and thought provoking is The Secret Diary of Steve Jobs.

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The book is a masterpiece of insight. Dan has taken many of the reported behaviors of a lot of executives in technology and woven them into a parody of Steve Jobs, Apple, the Silicon Valley, and the Technology market in general. If, in reading this book, you doubt what he is talking about is possible you clearly don’t follow technology closely. For instance there was a tech CEO a few years ago who used to like to hire Pizza Delivery boys and chase them with his restored Sherman Tank (which eventually crashed against a very large tree), he also used to dress up as a nun and go bar hopping in some of the seedier parts of the city. And this is only one of the untold stories in technology.

Good parody is both humorous and gives you an enlightened perspective into events, and people that you otherwise wouldn’t have. This book, to my eye, is good parody. If you’ve ever wondered what it would be like to have more money then you could ever think of spending this is a good way to see how the other half lives, and why the grass can be anything but green on the other side of the fence.

I’ve known a lot of very wealthy people in my career as an analyst, and have seen some die early before experiencing some of the best parts of life or really enjoying their wealth. I’ve observed massive pettiness and downright childish meanness in their behaviors, and realized that far too many think of themselves very poorly and live in constant fear. Granted you don’t have to end up this way but far too often fast wealth results in really nasty behavior and, after reading this book, you’ll look at a lot of these wealthy self-absorbed CEOs differently.

If the cost of wealth is the destruction of your life and those close to you, the lesson buried in this book is that that this cost is too high. As is working closely with people like this, something that many more of us should constantly remember.

How Blu-Ray Committed Suicide or the Tech Version of the Naked Emperor

On paper Blu-Ray was a failure on day one. Unfortunately the details of this paper weren’t apparent to those of us following technology until after the offering had launched. Blu-Ray is the cause of low attach rates between HD TVs and HD movie players. It has dropped Sony from uncatchable first place in console gaming to a distant 3rd, and it has almost assured that when the market does move to HD media it won’t benefit Japan or optical drive manufacturers but someone else.

Had the industry supporters of this – particularly the now fired head of Sony’s Playstation Group – known this they would have run, literally, screaming from this technology.

The three warning signs were that there was already strong backing for a competing technology (HD-DVD) that would reach market first. The cost of Blu-Ray was 2x or more over HD-DVD for the players, and the average movie watcher didn’t care about video games, or cute special features, they simply wanted to watch the movie while supporters were focused on special features as a differentiator. In short, the big advantage that Blu-Ray had, the buyers didn’t care about and were unlikely to.

This is the Emperor Has No Clothes problem that seems to plague companies of all sizes. Someone who should have raised their hands and said, Hey, maybe we should spend our billions on something that could actually result in comparable revenue like maybe fixing the digital delivery of HD content problem, or the mobility problem (putting movies on portable players), or even expending the gaming segment which is what Nintendo did with a fraction of the cash.

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But no, some powerful executive at Sony (and if there was any one company that should have known better it’s Sony, which remakes this same mistake several times every decade) pushed through an initiative that trashed their strongest asset, the Play Station. Now Sony is stuck. The effort is a hole that takes critical resources and they can’t even walk away from it without doing even more damage to critical parts of the company.

To be clear, all Sony has accomplished with a massive waste of resources is assuring that HD optical penetration in the market is about 1/20th of potential. And the collateral damage to Sony will go down in the history books. It’s the business equivalent of the Iraq war.

The lesson here really is that folks need to do their homework, and I mean builders not buyers (though it can apply to both), and think about the big picture before making big bets. We started out with Google being repetitively very smart as a young company and ended with Sony being repetitively stupid, suggesting that age does not always make for good decisions, analysis does. Google appears to be doing good analysis with respect to most things (though there are exceptions even there) and Sony is the walking example of what not to do.

Remember to Think

In this piece we talked about Google learning from Microsoft’s mistakes and Sony not even learning from their own. We also pointed to the Options book by Dan Lyons as a great way to learn about some of the movers and shakers in technology and suggest that reading this book would be vastly more fun and less painful than experiencing some of this stuff first hand.

While I too have made some incredibly stupid mistakes in my life, I try very hard not to make the same mistake twice, and to learn from others because I feel no compelling need to experience pain (though there have been times I’ve wondered about this last point).

As we move towards the end of 2007 take a moment to reflect and evaluate the paths you are on. Even the best make avoidable mistakes by not thinking enough.

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