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Archive for November, 2013

Canadian Journalists, BlackBerry Should Not Be Viewed Through a ‘National’ Lens

Tuesday, November 12th, 2013

The dire predicament of once-dominant smartphone pioneer BlackBerry (formerly Research in Motion) has led Canadian scribes and pundits down the usual path of lamenting this outcome as evidence of some deep flaw in “Canadian companies.”

Let’s be clear. No matter where your company is headquartered, especially when it comes to global technology standards, your ecosystem is harsh… because it is dominated by companies like Google, Apple, and Microsoft.

If that weren’t true, then Netscape would still be your browser, you’d be using Lotus for spreadsheets, and you’d still use Wordperfect (of Orem, Utah) to compose documents. And Webtrends or Omniture would still be the header on the web analytics documents you share around the office, or post on your “intranet” built by some old iron enterprise software maker. Heck, maybe you’re one of those weirdos who still does business with some of these ex-brands.

Look at the trends in high tech — and especially, in a digital interconnected world — more closely, and it’s evident that this sector has enormous pressures towards scale and standardization. It’s a “winner take all” scenario, in which apparent leaders like Google or Microsoft must poke their heads up and out of the narrow leads they’ve gained in their industry niches, and look at the forces that could cause them to be fenced in by an even larger monopolist.

 

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So, years ago, folks were “wondering” if Google would develop a browser or an OS. Of course, they did. Years ago, I was suggesting Google would feel stifled by large wireless carriers, owners of utilities/fiber/etc.; indeed, they’ve been busily bidding on spectrum, building out local high-speed Internet services, etc.

Google overpaid — yet somehow underpaid — for a never-convincing display advertising conglomerate called DoubleClick, to advance its lead in digital advertising as a whole. (Is that monopolistic behavior? Sure is!)

When it came to the drive towards mobile, Google bought Motorola, and asked questions later. It was for the patents, people, and a few other assets, but it wasn’t a “good” acquisition. Motorola’s devices aren’t keeping up and they aren’t selling well. No matter. Google keeps rolling.

(Google doesn’t control everything, of course. No one uses Blogger. Everyone uses WordPress at some point, for some publishing reason.)

And then there’s Android.

Globally, there are only two credible smartphone platforms: Android and iOS. Two. If Microsoft or Blackberry make a stunning resurgence, perhaps there will be a third player.

Look at Amazon. It’s back to its old “spurning profit” ways as Jeff Bezos continues to be hell-bent on solving new problems in logistics and scale  to revolutionize the consumer experience, writ large.  Few companies of any type — especially those with vocal shareholders — would have the stomach or patience for such grandiosity, insofar as it transcends any need for small-r republican happiness, profitability, and a peaceful existence.

There are a few takeaways in all of this. The first is quite simple. If a company has never made it an obsession to drive towards the kind of total global dominance that transcends their industry category, then it’s silly to act all surprised when they run up against gigantic forces that impede them from simply convincing their customers to use their perfectly nimble, serious, and beautifully-engineered products. Most engineering-focused companies aren’t good at engineering world domination. And it doesn’t happen by accident. It happens “on purpose.” Google acquiring YouTube, DoubleClick, and Motorola (and appropriating Android) is “on purpose.” Blackberry has never done much of anything like that, though it finally did make a good move in acquiring a solid mobile OS developer.

Companies in consumer-based, standards-driven high tech — even big companies — need to figure out whether they can dominate at an even higher level than their existing massive niche. If they can’t, they need strategy. Strategy often means the foresight to — yes — sell out well before the decline sets in. Skype sold early. Does that mean there is a problem with “Scandinavian” entrepreneurs?

For that matter, pick any given region in the United States outside of a couple of the top high-tech zones, and those entrepreneurs “sell out” as well. And even “pretty good” core digital players like Yahoo, and someday Facebook, try to maintain dominance through what seems like a futile whack-a-mole of buying up upstarts. Yahoo burned tons of cash acquiring Geocities, eGroups, Broadcast.com, Tumblr, etc. The attempt to become a monopoly by simply adding scale does not generally work unless the strategy takes things up a level to command the operating system, infrastructure, etc. Facebook will face the same problem, as recent analyses of the “irrelevance” of the Instagram acquisition attest.

Apple is a sympathetic outlier in all this. For much of its life, despite the appearance of a kind of visionary dominant thought process (iTunes, etc.), it has really worked primarily to engineer compelling products, rather than on chokehold strategies in the vein of Microsoft and Google. When Steve Jobs decried Google’s appropriation of Android, he really was coming from a place of expecting fair play in the ecosystem… despite rarely playing fair with his inferior competitors.

Apple subconsciously compels people because it doesn’t force them to choose between the ancient and timeless virtues of usefulness/convenience, and beauty. Many other successful companies (Microsoft, primarily, in this narrative) have shunned beauty and elegance entirely. Jobs recognized early that technology was a consumer product that needed an aesthetic. That wasn’t *so* revolutionary; his idea of beauty was often something like a Braun blender. But it has continued to insinuate itself into people’s daily lives, much of which are now spent peering at a screen.

Global business (in many industries) thrives on scale. Scale leads to longevity and, in an odd way, the kind of flexibility that comes from being a holding company; a portfolio approach to dominance. The largest market capitalization company in Canada is Royal Bank of Canada. The stocks of Bank of Montreal, TD, and Scotiabank are all on a steady run in part because of those companies’ diversified global holdings.

You can say the same for many other industries. Retail. Technology outsourcing. Supply chain management. Engineering and construction. Monopolies exert dominance of a certain type, leaving room for upstarts to do what they do best.

Perhaps Apple is the exception that proves the rule that you can rarely just focus solely on making your customers happy. For many years, as is well documented, Apple’s lunch was being eaten by Microsoft because Microsoft was device-agnostic and eager to distribute its software (Office as standard) to all buyers. Apple’s victory wasn’t inevitable. It’s an unlikely triumph of beauty and loyalty over mere standards, mere dominance.

Apple products, by global standards, are costly and elitist. This fact is lost on many Americans. Even in advanced nations, there are eye-opening stats about Internet usage that prove that not everyone is on board with the dominant discourse of the digital age. Over 30% of low-income people in advanced nations do not use the Internet at all. (Ironically, many will probably get an iPad as their first device.) Only two years ago, many ordinary working people internationally had never even seen an iPhone in person. I saw a country boy on a train in Italy berating a passenger for his “Chinese phone” (it was an iPhone). He didn’t get the point, nor care to. A lot of people in Europe drive Citroens, Fiats, and Renaults, too. Perfectly good national monopolies make telecommunications equipment, and will continue to do so. Digital folks in Europe care very little about the Twitter IPO, can’t see the point of looking into advertising on Twitter. Not everything looks as obvious when you pull away from the relentless Silicon Valley driven worldview.

In any case, the kind of victory Apple achieved is rare. It required them to pull back from the brink of bankruptcy, and luck into allowing Steve Jobs to return as CEO. Microsoft invested hundreds of millions of dollars in a foundering Apple at a crucial time. In comparison with that, investors injecting $1.5 billion into BlackBerry, to go along with their multiple-billion-dollar bank balance against no debt, looks pretty good.

BlackBerry (Nokia, HTC, Motorola…), Yahoo, and many others may fail trying. The flip side of that argument is that if you get to a certain size, and at least have a longshot chance to hang around long enough to develop a rabid global following, you can build beautiful and useful things that a large number of people continue to like. That kind of brand isn’t built through TV advertising or other ad-agency shenanigans, but it can amplify it if the fundamentals are in place. Apple’s advertising from 1984 is legendary. It was the upstart. Microsoft was “Big Brother.” The ad pulled no punches. It didn’t go through the motions of putting a glossy coat on something “nice.” It had something serious to say. And it took square aim at Goliath.

Following 1984, Apple’s fortunes crumbled. Its stock price dropped. Steve Jobs was forced to resign. It took many years for the company to rejoin the road back to glory and dominance in personal computing (etc.). In 1985, split-adjusted Apple shares traded below $2.00 for most of the year. Between 1981 and 1995, Apple’s stock appreciated 175%. Microsoft shares rose 6,000%.

Usually, an upstart like Apple doesn’t become Goliath. In this case, the company was essentially on life support for half of its first 20 years.

So doing better than pure life support is not so bad, actually. You can just get big enough to be remembered, and to fund schools, hospitals, and scientific research, as Canadian tech heroes Mike Lazaridis and Jeff Skoll have done.

As Malcolm Gladwell illustrates in David and Goliath, what makes a giant fearsome is also its undoing: it may not be nimble when conditions change. It can’t take potshots at the big guys and run away… since it is the big guy. There are advantages to being small. There will be many more upstarts and many more happy customers outside of the obvious areas that monopolies control. But if most of you prefer to use that “Chinese (Apple) phone” rather than the “Canadian” one, at least think twice before adopting the cheap and cheerful (Android) standard. I’ve made up my own mind. If forced from my BlackBerry, I’ll not use Android.

If the Canadian business reporter could improve one part of her game, it would be to stop setting unrealistic expectations for companies (losing to Google/Apple/Microsoft is something pretty much everyone does!), and get out there and focus on all those fast-growing Davids. And for Canadian companies, poke your head up and try to get noticed for your “David status”. There are probably thousands of upstarts who haven’t thought about applying to appear in the Profit Hot 50 or even the Profit 500.

 


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