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Firing Well

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by Jean-Louis Gassée

Ending a work relationship needn’t be complicated or traumatic. It can be done in a sane and respectful way if a clean framework is set up at hiring time.

In an August, 2012 Monday Note titled The HR-Less Performance Review, I described a sane, humane way for an employer to conduct the dreaded Performance Review. The script is simple:

Your performance meets or exceeds requirements. You get to keep your job.
Your salary increase is x%.
When you’re ready, allow me to offer a few observations and suggestions that could help improve your performance and our relationship: <Polite challenges and proposed cures, here>.
That said, because you’re doing fine as things are, feel free to ignore my remarks.

Now, do you have any questions, complaints, or observations of your own?

And remember, You’re Doing Fine…

Thank you. End of review.

That’s the template. Of course, there is a second type of review, or, more accurately, there isn’t one. If the individual’s performance fails to meet requirements, the message should be succinct and clear: We need to part company. There’s no need to drag the victim through a painful and pointless Performance Improvement Process. (I will briefly address the in-between pass/fail configuration below.)

The termination of a work relationship can be just as clean and respectful as a positive review… and Firing Well starts with a sane and honest hiring process.

I’m not referring to the painstaking process that matches skills, credentials, and experience to the prospective position. As long as it doesn’t lapse into a Death by Interview ordeal, or flirt with bizarre, “mind-bending” questions, the job interview lets both parties read each other and come to a mutual agreement.

Once hired, there is the honeymoon. After that, the real relationship starts, and with it, occasionally, the realization that there are non-technical obstacles that were hard to foresee during the interview courtship.

To ease the pain of the breakup, my standard interview routine includes a segment on Why and How I’ll Fire You.

This is how it goes.

You will definitely be fired for Attitude or Judgement failures — and note the plural. A single incident can be a great opportunity to reboot the relationship; I’ve experienced several such instances where a healthy confrontation cleared things up for the better and for good.  

Business life is tournament play, we have to be competitive. If the organization’s size and composition allows, we will “bench” you, offer a supporting role, especially if you have shown good judgment and a helpful disposition. 

But repeated lapses of judgment or a habitually disruptive attitude can’t be tolerated, and we will have to part company. In plain English, I will fire you.

I’ll pause here to note how helpful this is as an interview test. The ideal candidate will shrug: “But of course, no need to stay with a bad situation.” Some will show discomfort — which can then be explored and dispelled with a friendly but frank explanation. As for the rare individual who’s dumbfounded or distraught by the notion of possibly being fired…thanks, we’ll get back to you.

Then I proceed to explain How I’ll Fire You. This is the part that clears up unwarranted doubt and fear.

If the dreaded day comes, I assume you’ll already understand that things aren’t working. No perp walk across the floor to my office, I’ll walk into yours, close the door, ask permission to sit down, and state my business. I’ve made a decision: You have to leave the company. 

I’ll tell you that the decision was made after thoughtful deliberation, and it won’t be reconsidered. I won’t suffer you the indignity of Why, I’ll only want to discuss the How, what I’m prepared to offer. It will be generous, and it will be accompanied by a Covenant Not To Sue, sundry legal verbiage that caters to reparations, confidentiality, and not taking one another to Court. I’d rather give money to you and your family than to lawyers.

That’s as far as you need to go during the interview; anything more would be ghoulish.

If the day comes, the offer should be generous, an amount that sometimes horrifies Board members and investors. “What? You’re giving six months to that [expletive deleted]. We shouldn’t be rewarding bad behavior!” (And it could be more than six months, depending on age, the suspected proclivity to sue, the company’s own mistakes, and other issues.)

After the persphinctery Thank You For Sharing and other exchanges of wisdom, we get to the meat of the matter, paying for a clean, peaceful resolution versus a messy, distracting dispute, one that never endears Management to the people performing actual work.

Of course, the employee can refuse the offer and sue, and will very likely win something. But…

It could take years to get “there”, and the award may be a pittance after legal expenses — if an attorney will even take the case after reading the proposed settlement.

The battle will certainly cause emotional trauma, loss of sleep and other pleasure functions.

The ordeal will result in a reputation for litigiousness. Yes, I know: California Law forbids giving bad references by phone. But we know the routine: To slam a candidate, all I have to say on the phone is “According to California Law, all I’m allowed to do is to confirm Job Title and Employment Dates”. The prospective employer promptly hangs up, fully warned.

I learned to Fire Well after two contrasting turnaround situations in France, in the late eighties. The first was needlessly complicated and acrimonious, but during the second, at Exxon Informations Systems, I was fortunate to meet a savvy attorney, Bertrand Nouel, of the Gide Loyrette Nouel firm. He kindly explained I shouldn’t worry too much about being manacled by French Labor Laws. A suitably drafted Covenant Not To Sue forestalls legal complications because it generously compensates the individual and is proof of full and informed consent and provides a bargained-for reparation of the injury, including an offer to pay for legal consultation elsewhere.

It worked like a charm, if that’s the right word, including one case where the individual was laughed out of the Labor Inspector’s office and advised to quickly run back to her ex-boss before he’d changed his mind.

Moving to Cupertino in 1985 for another turnaround challenge, I told HR I wanted to use the same process. “Oh, no, you can’t do that in California. You need to give a written warning as part of a Performance Review [you see why I wrote this HR-Less Performance Review Monday Note]. After that, we’ll take the person through a 90-day Corrective Action Plan. Then and only then can you walk the individual out.”

My protest that this would demean the individual, demoralize the organization with the spectacle of a contrived process, and label Management and HR as manipulative bureaucrats wasn’t enough to change the charade.

Later, when I set up the legal framework for Be, I asked our attorney about the process and template developed in France. His answer was diametrically non-HR: “Yes, absolutely, that’s exactly how you should do it. I’ll just touch up your translation of the French template and you’re good to go.”

All of this depends on having a fully informed and consenting adult on board… which is why it’s so important to set things straight during the interview.

In the unlikely event that you reach the point of no return, things will be much less stressful. As promised, you walk into the individual’s office, close the door, and ask for permission to sit…

The last time this happened, the executive saw me close the door and promptly asked: “Is this The Conversation? Does the arrangement stand?” Not much left to discuss but the date of his public My Work Is Done valediction, with yours truly applauding from the front row.

JLG@mondaynote.com

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Three Slides? You’re Nuts! OK. How About Seven?

by Jean-Louis Gassée

In practice, the three slide pitch may be impossibly concise. This week, we’ll look at the seven slide variation.

After last week’s Monday Note, Three Slides Then Shut Up – The Art of The Pitch, I was subjected to a bit of email ribbing. My honorable correspondents, many of them entrepreneurs themselves, questioned my rationality, insisting that it’s psychologically and emotionally impossible for entrepreneurs to be so boldly concise as to limit their presentations to three slides. Indeed, how many three-slide presentations had I actually seen in a decade+ of venture investing? Upon the fourth slide, is the presenter sent packing?

True, I know how difficult it is to restrain yourself when you’re given a chance to present the breadth and depth of the miracle that you’re but one investment away from realizing. I know, because I’ve been there…but thanks to the pressure of an IPO Road Show and the robust ministrations of investment bankers, I crossed the threshold into frugal enlightenment.

Sadly, I’ve not seen more than a dozen three-slide pitches during my VC career, but I’ve been part of the decision to fund many dozens of others. Clearly, prolixity isn’t an insurmountable obstacle to getting funded. Perhaps I am just an irrational, impatient purist.

Instead of a terse trio, seven slides might give the presenter more breathing room. The extended template goes like this:

1. Who we are. Same as before.
2. How we’ll change the world. Ditto.
3. Our market. This one’s new, and here we hit a double bind

If you pose your product as a breakthrough in an established market, investors may worry about the capital required to battle the incumbent giants. On the other hand, if your pitch proposes a whole new genre, your audience could question the wisdom of investing in a market that currently has no customers, even though the segment may be poised to explode (of course!).

The choice you make in how to position your product and the response it elicits will sort the visionary sheep — investors who merely follow — from the ones who believe in technology and have faith in the entrepreneurs who create new markets. Huge returns are only made by catching a nascent wave at just the right angle (the product/technology) and the perfect surfboard (the founding team). Uber and Airbnb come to mind.

But no matter how ardently an investor believes in technology, you can’t assume a blind faith. As retroactively obvious as Uber and Airbnb are now, these companies demanded a tremendous amount of trust on the part of their investors. It’s the job of the pitch to engender this trust.

You could present your Fortune Teller vision in a manner similar to this beautiful, if ill-fated, Wattage pitch deck:

366_wattage

 

(I prefer the more traditional lower-left-to-upper-right to right up to signal a bright future, but I’m an irrational purist.)

4. Our Competition. Another new one.
Don’t tell us you have no competition. It’s a bad way to start a conversation and, in any case, there’s always competition, even if you’re simply competing with the ways in which consumers currently spend their money.
But, please, spare us charts like this:

366_Spar_us_final

Or the dreaded Gartner Magic Quadrant:

366_Gartner_Quadrant

 

Just tell us which of your adversaries concerns you the most, where they could hurt you, and how you will win.

5. What you own.
This can be your IP (patents, trade secrets) or your exclusive access to Unobtainium suppliers… but we don’t place too much stock in any of that. The most important thing that you own is your team of gifted, energetic people, the alchemists who will magically transform easily obtained, common ingredients. Uber is a good example again: The Uber team built a huge business using technology that was available to all, including the lazy incumbent taxi companies.

6. The Money Pump. No change from the three-slide deck.
7. The Overview.

This is another Fortune Teller chart. Over a series of three-month increments, it describes  parallel company activities ranging from Product Development to Financing:

366_Financing

 

This is more than a lot of noisy detail: It outlines your command of your project’s universe. The explicit checkpoints show your willingness to take authority and responsibility. It belongs at the end of the presentation so it can be left on the screen when you shut up and look at your hands or shoes. The minutiae of schedule, partnerships, and financing plans are yummy bait for questions and arguments.

So which is it? Three slides or seven?

I still prefer the three-slide version because it’s easily memorized and can be delivered on a white board or performed on air guitar. Certainly, the concluding Overview in the seven-slide format is attractive. It provides a strong, natural coda and caesura, but it’s much more difficult to recreate on the spot from thin air.

Either way, neither format will induce the First Seventy Minutes of The Hour blight mentioned last week. Neither provides enough breathing room for you to bore your audience by dumping all your knowledge and wisdom on them. You decide.

Lastly, I’d be remiss if I didn’t mention The Demo. First, If you have a spectacular demo, lead off with it. It will act as the action sequence before the screen credits in a James Bond movie. Sufficiently adrenaline rushed, your audience will be ready for some calm exposition.

Second, your demo should require little or no explanation. Don’t tell us what you’re about to do, what you’re doing, and what you’ve just done. We’d rather see the demo twice to better get the point than be submitted to laborious explanations.

A demo that does the selling by itself will get you way ahead of the fundraising process. If your demo is a poor salesman, rework it… or don’t give it at all. An old VC joke contends that there’s no better time to raise money than when you have nothing but words, no prototype to break at an embarrassing moment during the demo:

“What does your software run on? PowerPoint.”

JLG@mondaynote.com

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Three Slides Then Shut Up – The Art Of The Pitch

by Jean-Louis Gassée

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This week, we look at pitches, at the stories entrepreneurs tell investors. The best pitches aren’t really pitches. Dumping one’s entire body of knowledge on easily bored investors won’t help. The best pitch is one that quickly moves from monologue to conversation.

The First 70 Minutes of The Hour. When, in 2002, I was invited to join the ranks of venture investors by Barry Weinman, my Gentleman Capitalist mentor, I voiced a concern: I didn’t want to go blind looking at PowerPoint presentations for the rest of my life. Gentleman that he is, Barry didn’t — and didn’t need to — remind me of the two hours investment pitches I had inflicted on his kind during my early entrepreneur days.

I finally learned to curb my prolix talk during the Be IPO road show in 1999. The investment bankers who helped prepare the show soundly disabused me of my prolix ways. I was relegated to the clean up position, following the VP of Marketing, our experienced CFO (three IPOs before ours), and the demo. Putting me last before the hard stop enforced concision.

Now that I’ve joined the VC brotherhood and am on the receiving end of money-seeking tall tales, I can attest that my fear of mental cauterization by PowerPoint wasn’t misplaced. I’ve found a name for the blight: The First 70 Minutes of The Hour.

The condition is caused when an entrepreneur uses the allotted hour to dump everything he or she knows about his/her business. I’m a sinner reminiscing: I’m anxious, I’m unsure which of the product’s many arcane features and benefits will click, I’m terrified that I’ll leave something out. My desperation induces acedia as the allotted hour ticks past, and, as a reward, I receive non-committal California-speak: Great, Interesting, We’ll Circle Back To You.

This is an unfair caricature, but not by much. Too many presentations concentrate on the needs of the speaker instead of addressing the interests of the audience. Fortunately, there’s a simple remedy: Show three slides and shut up. Say just enough to engage us and then move on to a lively conversation, to questions, arguments, suggestions.

The canonical three slides go like this:

  1. Who we are: The founding team’s résumé, its technical, business, and academic background.
  2. A nice, sharp dichotomy: The world before us, the world after us. Show a substantial, practical impact, not just a marginal improvement of something that’s already in place. The more impossible or unthinkable the better — it will become retroactively obvious once understood. The mouse is a good example.
  3. The Money Pump. Your business plan. I like the Money Pump image, the pipes that allow the cash that’s temporarily residing in customers’ pockets to flow into the company’s coffers – legally, willingly, and repeatedly.

After that, shut up.

The silence will be unbearable. It might help to look down at your shoes, your hands, something on the conference room table. But the awkward moment won’t last, no more than an interminable 12 to 15 seconds. If you don’t get questions, you have your answer: We’re not interested.

But if we poke holes in your story, demand explanations, play devil’s advocate, we’re hooked. You may now dig into the 253 backing slides you have under the table, whip out the market research, competitive analysis, academic studies, financial projections, and casually lay out your roadmap. Show us that you’re not afraid to think on your feet. You can even gently flatter us that we’re the visionaries, you just want to help make that vision a bit clearer.

You’re either in or you’re out, but you won’t have wasted our time or yours.

There are benefits to this approach even if we don’t buy your pitch.

If we’ve turned you down, you can call us back six months later, remind us of your “failed” three-slide presentation and offer to show us three new ones. If the first pass was quick and painless, we might ask you back in. You won’t get this welcome if you bored us for 70 minutes the first time around.

Moving forward, sharpen your internal characterization of your business. You can’t have ten success factors that are equally important. Concentrate on the top level features in your Before/After slide and leave the “really cool” pet tricks for the ensuing conversation. Remove the branches that blur the picture, but don’t hack away at the graphical details in your slides. Edward Tufte, the world’s pre-eminent “data visualizer”, has posited the counterintuitive notion that by adding visual cues we enhance comprehension. (We’ll get back to Tufte in the postscript.)

And the most important benefit: If you’ve distilled your presentation into three slides, you won’t even need them. The effort will have been so intense that they’re now burned into your brain. You can walk into a conference room, ask for a white board and a marker, and impress us with your command of your business by “extemporaneously” drawing the three slides. There will always be time to whip out your laptop, tablet, or big smartphone for the 253 FAQ (Foire Aux Questions, in French) slides.

All of this is easier said than done, of course. I can relate to anxious entrepreneurs who have a hard time sorting through the wonderful ideas brewing inside the garages in their heads. Afflicted with what Buddhists call monkey brains, I, too, have a hard time quieting the noise so I can “hear” the most important, reality-changing element of a product/service/business. Only the most gifted and focused (or perhaps the most delusional) can see the edge of the blade with unfailing clarity. The rest of us muddle through.

One point remains: The goal of the presentation is to start a conversation, the sooner the better.

JLG@mondaynote.com


Speaking of presentations, you might want to read Edward Tufte’s The Cognitive Style of PowerPoint: Pitching Out Corrupts Within, a searing indictment of mindless slide presentations ($7 paperback on Amazon):

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(Also available in PowerPoint, er, PDF format here)

Tufte’s seminal work, The Visual Display of Quantitative Information ($29.62 for the hardcover edition on Amazon and also, it seems, in PDF form here), includes this celebrated chart that tracks Napoleon’s ill-fated march to and from Russia during the abominable Winter of 1812-1813:

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The chart makes the French Army’s unimaginable losses imaginable.

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Comcast Folds. No Dancing In the Streets Yet

by Jean-Louis Gassée

We may have dodged the Comcast/Time Warner bullet but we’re still far from getting rid of the antiquated set-top boxes and cable modems that only exist to protect juicy old business models.

We can breathe a sigh of relief: The proposed $45B merger between Comcast and Time Warner Cable (TWC) is dead. When the merger was announced with size-appropriate fanfare just before Valentine’s Day, 2014, normal humans saw the deal as clearly dangerous. How could “Concast”, a company that’s unanimously despised and indisputably abusive, be allowed to bear down with even greater weight on our collective neck?

In a salvo of Orwellian doublespeak, Comcast assured us that less competition and a more dominant provider would translate into a dream come true for consumers and competitors:

“Transaction Creates Multiple Pro-Consumer and Pro-Competitive Benefits, Including for Small and Medium-Sized Businesses…This transaction will be accretive and will yield many synergies and benefits in the years ahead.”

This Freedom Is Slavery agitprop is evidence of Comcast’s belief in our passive idiocy — but it’s more than that. It’s a testament to the company’s faith in its political chicanery. Combined, Comcast and Time Warner Cable spent an outlandish $25M trying to persuade lawmakers to endorse the deal, and showered campaign donations on both parties – a little bit more on Democrats. (And let’s not forget that Comcast CEO Brian Roberts is President Obama’s golf buddy.)

The political machinations don’t stop there. As uncovered by The Verge, Comcast ghostwrote pro-merger letters that were delivered to the FCC:

“…Mayor Jere Wood of Roswell, Georgia, sent a letter to the Federal Communications Commission expressing emphatic support for Comcast’s controversial effort to merge with Time Warner Cable… Yet Wood’s letter made one key omission: Neither Wood nor anyone representing Roswell’s residents wrote his letter to the FCC. Instead, a vice president of external affairs at Comcast authored the missive word for word in Mayor Wood’s voice.”

Dipping into this bag of tricks has worked before. After all, Comcast got away with an anti-competitive deal when it acquired NBC in spite of the obvious anti-competitive distribution advantage stemming from its huge Cable TV footprint.

Yet, Comcast insists that the sentiments are genuine, an “outpouring of thoughtful and positive comments“. The company pronounced itself “especially gratified for the support of mayors and other local officials, […] underscoring the powerful benefits of this transaction for their cities, constituents, and customers.

As Consumerist reminds us, this is the company that resorts to tortuous customer rentention tricks and foments a culture of customer disrespect. We’ve all experienced the poor customer service and bad attitudes, the last minute appointment cancellations, the phone reps who know nothing about our accounts. During a visit to Comcast Palo Alto,  one rep tells me I can self-install while another rudely insists that I ignore what I’ve just been told.

I can’t blame the customer service employees. Deprived by management of any ability to access data or to exercise judgment, they’re just following the script and emulating the examples set by their bosses. I blame the execs who don tuxedos and put on airs of benevolent prosperity at charity balls in Washington and Philadelphia. They’re the ones who created the culture and then feign bewilderment and concern when they discover that customers don’t like Comcast. About a month ago, when the merger hung in the balance, the @ComcastCares Twitter account suddenly displayed increased activity, after repeated apologies and the appointment of a Senior VP of Customer Experience last September.

But arrogance, mendacity, and poor customer service weren’t enough to stop the merger. ‘Twas Net Neutrality killed the Beast.

The Comcast/TWC deal was initially seen as a Cable TV merger, with a combined market share that approached 30% of Pay TV. But Pay TV is sliding into the past. Internet connectivity, broadband speed, and reliability are what matter now, and an expanded Comcast would have garnered more than 40% market share. That’s a portion that can’t be squared with the concept of a free (as in freedom, not free beer) and open Internet. After the FCC issued Net Neutrality rules — which were immediately challenged by our freedom loving carrier friends — the notion that 40% of public access and about 50% of “triple play” services would be handed to a single company became intolerable.

So, we dodged that bullet. But entrenched players and their convoluted business models still keep us far from where today’s technology wants to take us.

First, an old issue: Extortionate channel bundling. Why must we buy a bunch of channels we’ll never watch just to get the few we actually want? A la carte distribution should be the norm.

Second, everything ought to be on-demand from the Cloud. It’s not that much of a fantasy: today, I can set up a recording from my Xfinity set-top box and then watch it from my laptop or tablet anywhere in the world — especially in places where Internet access is better and less expensive than in the US. See the following graph and sigh:

Broadband Worldwide Price Performance

As Joe Palmer, a former colleague and current friend likes to say: It costs more, but it does less.

Lastly, our regulators should force carriers to let users connect a Brand X, Y, or Z box to the Cable network. Why must we put up with the clutter of a Comcast Internet modem and Wi-Fi access point, an Xfinity set-top box and DVR, and a Microsoft Xbox? Satya Nadella would love to sell us a single, universal Xbox. I have no doubt Tim Cook would look kindly on an all-in-one Apple “iBox” that replaces the two Comcast boxes and combines it with an Apple TV and a Time Capsule.

There will be dancing in the streets when we throw away today’s cable modems and set-top boxes. It will happen…but I won’t hold my breath. It will take time and repeated attempts to tear down the blockades erected by Comcast, AT&T, and the other carriers.

JLG@mondaynote.com

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FrankenNokia

 

by Jean-Louis Gassée

Stitching together the disparate body parts – and cultures – that make up Nokia-Alcatel-Lucent is not a task for the faint of heart. This week we look at what Rajeev Suri, the CEO of the combined companies, is up against.

April 15th 2015: Nokia “agrees” to the $16.6B takeover of Alcatel-Lucent. On the surface, the acqui-merger makes sense. Both companies make networking gear and they’re of similar size, each with 2014 revenues of about $16B. (Nokia’s latest financials; Alcatel-Lucent’s 2014 annual report.)

It’s a financially complex transaction involving two complicated and venerable companies. Debt is assumed, debt is exchanged for shares, new debt is issued…there are a lot of ifs and buts.

As expected when a deal isn’t a straight shot, Wall Street’s reaction is mixed. Some think Alcatel-Lucent’s shareholders are on the short end of the bargain. Others, such as Standard & Poor’s (S&P), the haruspex that fondles financial statements and divines the value of securities, buys into the deal partners’ obligatory rationale and opines that the merger will result in a stronger product portfolio and less financial risk. (Let’s keep in mind that this is the same S&P that contributed to the 2007 housing bubble and the resulting depression. It recently agreed to pay the United States $1.38 billion to settle civil fraud charges that the firm had inflated the value of mortgage investments.)

Regardless of the prognosis, these analyses have concentrated on the numbers, the regulatory hurdles, the challenges of competing with ascendent Chinese companies, or the rise of Software Defined Networking (SDN) competitors. They blithely overlook a more fundamental element that determines success or failure: Culture. As an old but eternal saying goes: Culture Eats Strategy For Breakfast, a saying attributed to management sage Peter Drucker.

Consider the paths that led the two companies to the altar.

Alcatel was founded in 1898 as Compagnie Générale d’Électricité (CGE). For more than a century, the company accretes and sheds businesses, mostly in France, but never achieves a solid, lasting market position.

Embroiled in a fraud and corruption controversy in 1995, Alcatel hires Serge Tchuruk to clean house and reshape the old electric equipment and electronics company. Tchuruk, a life-long chemical and energy man, had seen success as CEO of oil giant Total, but at Alcatel things don’t go his way and the company continues to lose money.

In an attempt to right the ship, Tchuruk explores a merger with Lucent, the telecom equipment company that was born from the AT&T breakup. The deal fails to conclude amidst accusations, from both sides, of “unreasonable demands”.

But Tchuruk is persistent. Five years later, in April 2006, he finally gets his way: “Alcatel and Lucent Technologies To Merge and Form World’s Leading Communication Solutions Provider”.

As part of the deal, Patricia Russo, Lucent’s CEO, relocates from New Jersey to Paris and becomes CEO of Alcatel-Lucent. Tchuruk stays on as non-executive chairman of the combined entity.

This was a deal based on weakness, a marriage of convenience between two struggling companies whose culturally incompatible teams were fixated, understandably, on surviving the impending “workforce optimizations”. Lucent carried habits of heart and mind that had been deeply embedded during its grand days nesting in Ma Bell’s well-regulated system. To top it off, no one believes that Russo and Tchuruk can work together.

The marriage doesn’t last. In October 2008, after two years of finger pointing and a further slide into industry irrelevance, both Tchuruk and Russo resign. (Tchuruk returned to the energy industry as CEO of Joule; Russo is back in the US as an HP Director and will almost certainly become Chairperson of HP Enterprise when the company is spun-off.)

Russo is replaced by Ben Verwaayen, a well-regarded, well-liked, and more restrained telecom industry veteran. He lasts for six years; the company continues to suffer.

In 2013, the task of turning Alcatel-Lucent around falls to Michel Combes, another respected and experienced telecom industry exec. Combes immediately launches a two-year mission aimed at cutting costs by 1B€. We’ve come to the end of the two-year time limit…and it looks like he made a reasoned decision to throw in the towel and go for the Nokia deal. Combes has let it be known he won’t stay on as a Nokia exec.

Nokia is a different story. Formed in 1865 as a paper pulp business, Nokia expands into galoshes and other rubber products around the turn of the 20th century (you can still put Nokian Tyres on your vehicle – a separate company). Soon after that, the company gets into electrical equipment (such as cables) and electronics.

After a long history of ups and downs, Nokia, under CEO Jorma Ollila, makes the fortuitous decision to get into the GSM networking business (late 1980s) and then the handset business (early 1990’s). By 2010, it’s the world’s largest handset maker, shipping 100M phones per quarter.

With its long history, its ability to ride crises and invent new businesses, its hard-won preeminence in the high-tech sector, it seems as though Nokia can survive anything.

Well, almost.

Nokia can’t compete in the new world of software platforms and ecosystems. (See a June 2010 Monday Note: Science Fiction, Nokia Goes Android.)

When it becomes painfully obvious that its too-many Symbian and Linux derivatives won’t cut it, Nokia makes a grievous mistake in appointing a former Microsoft exec, Stephen Elop, as CEO. Elop promptly Osborns the existing product line by prematurely announcing a new and improved Microsoft OS that takes a year to materialize.

After Nokia sells its collapsing handset business to Microsoft in 2013 (the deal finally closes in April 2014 for about $7B), the company is left with three businesses: Nokia NetworksHere (mapping technology), Nokia Technologies (guardians of a fat patent portfolio).

363_nokia
[From Nokia’s latest quarterly numbers]

Nokia Networks is the result of the difficult absorption of Siemens’ networking operations, a joint venture once known as Nokia Siemens Networks (NSN), started in 2006 and fully “resolved” in 2013. Despite the birth pains, it’s Nokia’s main breadwinner, garnering 90% of the 12.7B€ achieved in 2014 (about $14B US at today’s rate) with decent operating margins (lately between 12% and 14%).

Nokia Technologies and Here don’t really matter. Combined, they weigh less than 12% of total sales. The patent licensing activity provides decent margins, more than 50%, but it doesn’t matter much with less than 4% of sales. Here’s 6.8% operating margin guarantees that it will be disposed of.

Throughout it’s history, Nokia has been decidedly and unabashedly Finnish. In its heyday, Nokia remained proud of its strong culture and gutsy sisu, even as its factories, Supply Chain Management operations, and carrier relations spanned the globe.

Today, the company is no longer the old Finnish Nokia; it’s now a kind of FrankenNokia assembled from disparate body parts and cultures that CEO Rajeev Suri, a 20-year veteran of Nokia, will have the thankless task of stitching together.

We’ll be watching to see if Nokia can regain its once-proud culture and overcome the “foreign bodies” introduced by the Alcatel-Lucent acquisition.

JLG@mondaynote.com

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An Apple Watch Meta-Review Reimagined

 

by Jean-Louis Gassée

Product reviews of the Apple Watch launch are reaching new summits — and depths. A Business Insider post gave me an idea for a revealing experiment.

This isn’t an Apple Watch review — I don’t even have a Watch, yet. I’ve been told that my 42mm alumin-ium Sport model will arrive in “4 to 6 weeks”, mid to late May. Even then, I’ll hold out for my third impression. I’ve learned to distrust my first reaction: I thought the iPod was a bad idea because MP3 players had already been commoditized. The Apple Store? It will never catch on because it threatens the livelihoods of independent Apple retailers. When I came home with my first iPad five years ago, I resented the fact that my new tablet wasn’t very good at the “productivity tasks” I performed on my Mac… (I still think this, and, last year, called the iPad a tease – but I’ll leave the continuation of that saga for another day.)

As the first wave of Apple Watch reviews shows, waiting for impressions to settle down isn’t part of the Product Review genre. The psychoactive toxicity of Apple product launches that I made fun of two weeks ago is in full display as reviewers climb to the rooftops in a race for income-producing pageviews.

The Wall Street Journal’s Joanna Stern wore a helmet strong enough to support a full-size Canon DSLR while researching her review:

Joanna Stern w Tweet

No flimsy GoPro camera, we’re professionals here, this is a Wall Street Journal production. How this relates to your everywoman’s user is left to us to figure out. That said, I sincerely bow to Joanna Stern’s stamina and dedication to her mission.

Or we have the (presumably) unintended humor of a reviewer who felt “ridiculous” wearing the Milanese Loop on his left wrist:

Nilay Patel Big Band Edited 2

I’m not the only person who questions the “hot take” nature of modern Product Reviews. In his Above Avalon post, Neil Cybart says Product Reviews are Broken [emphasis mine]:

“There were 21 Apple Watch reviews published, but the 4 reviews that were more critical of the device got the most attention, leaving the 14 glowing reviews behind. Meanwhile, most of the important features of the Watch such as watch bands and durability were either not included or buried within lots of other text. Simply put: product reviews are broken.”

Our historian/philosopher Horace Dediu concurs:

Dediu Cash Register Experts

…and…

Dediu Don't Read Reviews

Ignoring Dediu’s advice, I stumbled upon a Business Insider “meta-review”, an edited summary of other reviews ominously titled The Apple Watch reviews are (quietly) brutal. The piece starts well:

“Apple Watch reviews are out today.
At first, they seem positive.
For example, New York Times tech reviewer Farhad Manjoo writes that he ‘fell’ for the gadget — ‘fell hard.’
The Verge’s Nilay Patel says it is ‘the first smartwatch that might legitimately become a mainstream product.’
Joshua Topolsky of Bloomberg Business says, ‘you’ll want one…After using it, I had no question that the Apple Watch is the most advanced piece of wearable technology you can buy today.’”

The article then attempts to demolish this happiness by citing carefully chosen damnations from the same reviews (“Topolsky says the Watch isn’t a very good watch.” “Patel says the Watch is too slow”), and concludes with a back-handed compliment [emphasis mine]:

“The most exciting thing about the Apple Watch isn’t the device itself, but the new tech vistas that may be opened by the first mainstream wearable computer.”
“For now, the dreams are hampered by the harsh realities of a new device. The Watch is not an iPhone on your wrist.

These initial reviews say more about the Product Review genre than they do about the Apple Watch. As the word genre implies, there are rules. One is that you have to provide quotable fragments that support your view — think of how movie posters and trailers quote reviews. Second, write what you want but remember you still need to eat in this town. In the case of tech reviewers, “lunch” is being among the select few invited to do the next “under embargo” product review — you don’t want to go hungry. Third, you have to be “fair and balanced”: You must provide at least a hint of negativity, no matter what, so you won’t be perceived as having “sold out”. Lastly, you have to write quickly, steamroll annoying counter-narrative trifles, and use strong words.

As an experiment, I cherry-picked quotes from the same sources as the “(quietly) brutal” Business Insider meta-review to see if I could come up with a different result. Much like the BI review, I decided what I wanted to say and then found the quotes that supported my thesis.

Here goes…

_______________________________________________________________

Burning Insider Meta-Review

The Apple Watch reviews are (giddily) enthusiastic

Apple Watch reviews are out today.
At first, they seem negative.
In his New York Times tech review Farhad Manjoo sounds disappointed:

“Third-party apps are mostly useless right now. The Uber app didn’t load for me, the Twitter app is confusing and the app for Starwood hotels mysteriously deleted itself and then hung up on loading when I reinstalled it.”

Out of the gate, The Verge’s Nilay Patel is unimpressed:

“Let’s just get this out of the way: the Apple Watch, as I reviewed it for the past week and a half, is kind of slow. There’s no getting around it, no way to talk about all of its interface ideas and obvious potential and hints of genius without noting that sometimes it stutters loading notifications.”

Another noted blogger, Joshua Topolsky of Bloomberg Business says:

“Yes, all these new functions, notifications, and tapping do make the Apple Watch very distracting. In some ways, it can be more distracting than your iPhone, and checking it can feel more offensive to people around you than pulling out your phone.”

But once you move past the obligatory “fair and balanced” negatives and get into the details of what the writers really say, it’s clear: The reviews are giddily enthusiastic.

Topolsky concludes:

“So Apple has succeeded in its first big task with its watch. It made something that lives up to the company’s reputation as an innovator and raised the bar for a whole new class of devices.”

Nilay Patel concurs:

“There’s no question that the Apple Watch is the most capable smartwatch available today. It is one of the most ambitious products I’ve ever seen; it wants to do and change so much about how we interact with technology.”

The NY Times’ Farhad Manjoo sees the Apple Watch as an extension of his body – one that makes him more sociable [emphasis mine]:

“I began appreciating the ways in which the elegant $650 computer on my wrist was more than just another screen. […] the Watch became something like a natural extension of my body — a direct link, in a way that I’ve never felt before, from the digital world to my brain. The effect was so powerful that people who’ve previously commented on my addiction to my smartphone started noticing a change in my behavior; my wife told me that I seemed to be getting lost in my phone less than in the past. She found that a blessing.”

David Pogue, one of the industry’s most thorough, experienced, and prolific tech writers, concludes his Yahoo Tech review thus:

“And this much is unassailable: The Apple Watch is light-years better than any of the feeble, clunky efforts that have come before it. The screen is nicer, the software is refined and bug-free, the body is real jewelry. First-time technologies await at every turn: magnetic bands, push-to-release straps, wrist-to-wrist drawings or Morse codes, force pressing, credit card payments from the wrist. And the symbiosis with the iPhone is graceful, out of your way, and intelligent.”

__________________________________________________________________

I think I can stop here.

If you, too, decide to ignore Horace Dediu’s advice, I found two reviews that stay away from the rooftops and make a serious attempt at providing insights into the nature of the Apple Watch, its user experience, and its future in the nascent “wearables” industry segment. (Keep in mind that while I have my own biases, the Monday Note doesn’t have advertising or other sources of revenue.)

Ben Bajarin’s Techpinions synthesis:

“Ultimately what I am convinced of is the Apple Watch represents a completely new computer interaction model. A PC is for when we have a few hours. Our smartphones is for when we have a few minutes. Our smartwatch is for when we have a few seconds. Each device, and the software and experience built for it, should help us maximize those hours, minutes, and seconds.”

John Gruber’s insightful Daring Fireball walk-through:

“Loosely, the path of all consumer electronic categories is to evolve as ever more computer-y gadgets, until a tipping point occurs and they turn into ever more gadget-y genuine computers. The sample size (in terms of product categories) is small, but Apple seemingly tries to enter markets at, or just after, that tipping point — when Moore’s Law and Apple’s ever-increasing engineering and manufacturing prowess allow them to produce a gadget-y computer that the computer-y gadgets from the established market leaders cannot compete with. That was the iPod. That was the iPhone.”

Those are nice exceptions to the Broken rule.
In the end, reviews don’t seem to matter much outside the kommentariat. In Neil Postman’s Amusing Ourselves To Death classification, most reviews aren’t Information but Entertainment. As recent Kantar World Panel research shows, consumers don’t pay them much attention:

Kantar Consumers Attention Edited

In the end, only Word of Mouth matters. After two or three months of actual availability, real humans will talk amongst themselves and decide the future of the Apple Watch, just as they did for the iPod and the iPhone. And, come to think of it, their conversation explains sagging iPad sales.

JLG@mondaynote.com

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The Internet of Amazon Things

 

by Jean-Louis Gassée

With its new ordering system of one-push buttons spread around the home, Amazon wants to simplify lives, theirs more than ours as we’ll find out. In doing so, we’ll face – again – still unresolved issues for the Consumer version of the Internet of Things.

Amazon has just announced yet another tentacle into our homes and wallet, the Dash Button:

place_it

The spirited Don’t Let Running Out Ruin Your Rhythm intro video gives a quick overview of the process: Affix a button near your stockpile of essential goods, push it when the cache runs low, go to the front door and pick up your delivery.

Unsurprisingly, wags have seized the opportunity to suggest a button that might be legal in Amazon’s home state and other enlightened places:

weed

(From a comment on a Gizmodo post.)

As I’m in charge of laundry operations in our house, I went to the Amazon site, typed “Dash Button”, and was greeted with a series of enticing Get it by Monday April 6th offers such as this one for my favorite brand of detergent:

tide-2

But, no… I clicked on the link and was sent to the Dash Button main page with its By Invitation Only message [emphasis mine]:

dash_select

Picture the excited crowd behind the velvet rope, waiting for the opportunity to stick Dash Buttons on their washer/driers and coffee machines.

On the surface, the Dash Button makes sense. It’s the logical, Internet-of-Things extension of Amazon’s 1-Click ordering: Hang buttons on the objects that surround you and forestall the dreaded Running Out surprise. No complicated calculations, no need to leave your house. Just press the Dash Button when you stick the last ink cartridge in your printer, or when you see you’ll run out of diapers tomorrow. Peace of mind at your fingertips.

In practice, the process requires more mindfulness and skill.

The Dash Button connects to your home Wi-Fi router, set up via a dedicated smartphone app. In most cases, the person doing the setup will remember the Wi-Fi password. If not, the task will have to wait for the resident geek’s availability. Then there’s the matter of proximity. Does the Wi-Fi network reach your washer and dryer in the basement or garage?

Once you have the hardware set up, you return to the app to specify the replenishment quantity, and to decide whether or not you want Amazon to ignore subsequent Dash Button presses before the order arrives — a prophylactic against active toddlers, no doubt.

Everything’s ready. A tap on the button brings up a confirmation message on your phone with the opportunity to cancel the order in case you’ve changed your mind.

It sounds well thought-out… But why spread buttons around the house and go through an elaborate setup when you already have everything you need on your phone? Why not have an app that presents commonly-ordered items on its main page? When you see the bottom of the diaper drawer, you take out your phone, pull up the app, and click the Pampers button. You get an instant confirmation and you’re done.

No Wi-Fi set up; no worry about accidental “elbow ordering” as you unload the dryer; no besmirching your pristine appliances with branded, phosphorescent buttons (a strongly worded injunction from my high-end home-builder spouse). You don’t even have to be at home: You can order from anywhere, just as you do now.

I’m not the only person asking this question. As I was writing this note, I saw this Steven Sinofsky tweet:

sinofsky

Indeed, Sinofsky’s watch idea goes Amazon one better, and it plays to Apple’s central pitch: No need to whip out your smartphone.

Others, my son-in-law Christian Baxter included, have demonstrated how to build proof-of-concepts apps such as The Anything Button that make abundantly clear how you just need a smartphone, nothing else, for pre-programmed actions. There’s also the ingenious Pressy Button for Android phones.

Amazon is recognized as a sophisticated, long-term thinker. Is there more to the Dash Button than the added complications that we’re seeing? Possibly… but let’s remember that this is the company that came up with the “what were they thinking?” Fire smartphone. (See The Real Story Behind Jeff Bezos’ Fire Phone Debacle And What It Means For Amazon’s Future, in Fast Company magazine.)

In a recent must-read Andreessen Horowitz post, Benedict Evans provides some clues to Amazon’s occasional lack of coherence:

“Amazon is in fact organized not just in these segments, but in dozens and dozens of separate teams, each with their own internal P&L and a high degree of autonomy.”

This autonomy might be a well-calculated attempt to encourage experimentation, to provide a harbor for projects that would be impossible in a centralized command-and-control organization. A well-run, data-rich failure could calibrate the aim that leads to the next bull’s eye… or it could just be someone’s poorly thought-out vanity project. And/or an attempt to extract product placement or slotting fees for brands prominently featured on the Dash Buttons.

This led me to thinking about the nearly-forgotten Amazon Echo:

echo-4

Wi-Fi and Bluetooth enabled, the Echo provides access to an intelligent, always-listening agent called Alexa, a sort of Apple Siri or Microsoft Cortana. Alexa plays your music on demand and gives you the latest news and weather… To replenish my stash of Tide, why can’t I just ask Alexa to do the job? I’ll report back when I get my Dash Button and an Echo. (Announced last November as a “work-in-progress” the Echo is, to this day, available by invitation only. )

The Dash Button’s needless complications and the Echo’s tepid reviews (and privacy issues…would you want an “always-listening” agent in your kitchen, living room or bedroom?) are indications of the long difficult birth of the Internet of Things – in the Consumer space.

For industrial applications, the Internet of Things is already a reality. Teams of technicians install, extend, and maintain the complex array of “always-listening”, far-reaching devices that control the factory, gas refinery, or a server farm. This is what Cisco, IBM, and many others do for their customers, a continuation of their work in Enterprise applications.

Consumer instances of the Internet of Things are different. The setup and maintenance of an array of Internet objects in the home requires consumers to be their own IT support technicians. The home version of the Internet of Things assumes the ability to internalize and maintain a mental model of the network’s functions and exceptions. For non-geeks, this is an unnatural act.

Amazon’s own techies might be experiencing a failure of empathy:

circles

(From a now disappeared Mike Monteiro post.)

Someone, someday will make the Internet of Things work for The Rest of Us. That we still struggle with a Basket of Remotes shows how far we are from the goal.

JLG@mondaynote.com

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Notes From The Road: Apple Watch, Apple Car

 

 by Jean-Louis Gassée

Taking a closer look at the size and precision of Apple’s manufacturing operations has made me rethink my skepticism about the putative Apple Car.

I’ve been in Paris for the last two weeks, mostly disconnected. I won’t wallow in specifics; suffice it to say that the struggle with cable TV, Internet, and cellular providers here is eerily similar to what we commonly endure in the Valley. There is one difference, however: A few hours ago, I watched as a cable technician spliced a fiber connection into our apartment, something I can’t get in downtown Palo Alto.

A few Web-free days watching people and eavesdropping on conversations in Left Bank cafés helped me rethink my position on the Apple Car – because of the Apple Watch.

The local level of interest in the Apple Watch is mild at best, nothing like the paroxysms in the States. Never have we seen such large-scale derangement over an Apple product announcement, not for the iPhone or for the iPad, Steve Ballmer’s and Dan Lyons’ shouts notwithstanding. Google “Apple Watch fail” and you’ll get more than 61M hits – and this is before anyone has had a chance to pay for and use the product.

The latest instance of mental poisoning comes from the NewYork Times’ tech columnist Nick Bilton. The (original) title of his anti-Watch column, “Could Wearable Computers Be as Harmful as Cigarettes?”, sounds like the work of a netwalker striking a provocative pose to attract pageviews. But Bilton is no carnival barker; he’s a real journalist with an otherwise impeccable professional record and a solid reputation for insightful writing. As you’ll see when you click on the link, the title has been changed to a less prurient “The Health Concerns in Wearable Tech”, and a long Editor’s Note and a Correction have been appended. If that weren’t enough, Margaret Sullivan, the Grey Lady’s Public Editor, has weighed in with an apology of sorts, calling some of Bilton’s assertions “pseudoscience”.

As detox, we can turn to “How Apple Makes the Watch” on Greg Koenig’s tech-porn blog Atomic Delights. Using pictures from the Apple Watch films, Koenig offers a lovingly detailed exploration of Apple’s industrial design decisions and manufacturing feats:

“Apple appears to have eschewed any revolutionary alchemy and instead, applied an innovative work hardening process to create gold that is (claimed to be) significantly harder than the typical 18kt used by other watchmakers. “

From gold alloys and steel forging, to CNC (Computerized Numerically Controlled) machining, laser clean-up, and in-process measurement exploits, Koenig’s post impresses us with the depth of the technical organization behind the product.

360-Mak_of_watch

After mentioning “rumors of entire German CNC mill factories being built to supply Apple exclusively” and the disappearance of manufacturing experts who later reappear in Cupertino or Shenzhen, Koenig concludes:

“While we all are massively impressed with the scale of Apple’s operations, there is constant intrigue as to exactly how they pull it all off with the level of fit, finish and precision obvious to anyone who has examined their hardware.”

(I can safely say you won’t be bored with Koenig’s blog. After reading about the Watch, you should continue down the page to his article on Mac Pro Manufacturing, followed by a 15-second video that shows how objects we can’t live without, springs, are made.)

After a couple of readings, Koenig’s thoughts on the scale and precision of Apple’s manufacturing process got me to rethink my views of the putative Apple Car. In two Monday Notes, The Fantastic Apple Car and Apple Car: Three More Thoughts, I expressed strong skepticism.

In the first place, I wrote, a long history of eating and drinking at the best restaurants on the planet doesn’t qualify you to become a successful restaurateur. More important, Jony Ive’s justly renowned prowess in coming up with exquisitely polished objects misses the point of car manufacture where the focus isn’t on the object itself, but on the machine that excretes the cars in high volume, high quality, and well-managed cost. It’s the Industrial in Industrial Design that matters.

On the weight of these two points I concluded that while the idea of an Apple Car is attractive, Apple shouldn’t confuse its love of cars and its high regard for beautiful swage lines with an ability to become a successful car maker.

Now, I wonder if I ought to Think Different.

The scale of Apple’s Supply Chain makes it clear that the company knows how to make the machine that makes the machines on a very large scale and at a high quality level. In a comparison at the beginning of his post, Koenig helps us grasp the otherwise unimaginable size of Apple’s manufacturing [emphasis mine]:

“Apple is the world’s foremost manufacturer of goods. At one time, this statement had to be caged and qualified with modifiers such as “consumer goods” or “electronic goods,” but last quarter, Apple shipped a Boeing 787’s weight worth of iPhones every 24 hours. When we add the rest of the product line to the mix, it becomes clear that Apple’s supply chain is one of the largest scale production organizations in the world.

787 of iPhones

(Initially, I read Koenig’s statement as “one 787 full of iPhones everyday”. But, no, this is the entire unladen weight of the 787 itself.)

How does this compare to cars? US sales of the 3,000 pound (1,500 kgs) Nissan Leaf averaged 2,500/month in 2014. That’s 7.5M pounds worth of cars. The iPhone’s monthly weight (240K lbs * 30 days) is…7.2M pounds. As another reference point, Tesla sold 2,500 cars in September 2014.

Such number play is just that, a feeble attempt to seize sizes. And even if we grant Apple the numbers — if we stipulate that Apple can manage a supply chain that produces a month’s weight worth of electric cars that are equivalent to the size and weight of a Nissan Leaf or, two notches up, of a Tesla — the next question is whether or not such a product will move the needle. Will it sell in multiples of Apple’s new unit of currency: $10B?

(Apple 2015 sales are expected to significantly exceed $200B.)

For this to happen, the putative Apple Car would have to sell in volumes about 10 times higher than what Nissan did last year in the US: 30K vehicles/month, at $30K each, times 12 months = $10.8B.

Of course, I’m looking at the putative Apple Car in terms of the car as we know it today, just as we all initially looked at the iPod and the iPhone using existing products as the frame of reference. Perhaps Apple has something more imaginative, more in keeping with its Think Different mantra than a mere derivation of existing designs. But whatever it intends, I no longer believe that Apple can’t design a machine to make cars.

JLG@mondaynote.com

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After The First 3 Million AppleWatches

 

By Jean-Louis Gassée

We’ll soon know what the AppleWatch is and what it can do…it may take a while to understand why Apple has gone to such lengths to hype the device.

Under Steve Jobs‘ leadership, Apple 2.0 obsessed over the marriage of form and function. Starting with Jony Ive’s Bondi Blue iMac, Apple products stood out in a sea of beige and black boxes. But even so, fashion, the providential spawn of this fecund marriage, has always been a by-product — welcome, but not a first-order pursuit

With the AppleWatch things have changed: Fashion is now a primary component, co-equal with silicon and software. The assertive, carefully planned, and richly resourced entrance into the world of the dernier cri is as notable as the device’s technical challenges (battery life, user interface, sensors…).

357-applewatchPSD

We saw fashion writers at the September unveiling. Karl Lagerfeld and Anna Wintour attended the private event at Colette, one of Paris’ chicest stores on the ultra-chic rue Saint-Honoré. That these two fashion world divas — who don’t make paid appearances —  “found the time” to drop by speaks to the depth and strength of Angela Ahrendts’ (ex-CEO of Burberry), Paul Deneve’s (ex-CEO of Yves Saint Laurent), and Jony Ive’s various connections into a new world for Apple.

This recognition that  “fashion matters” has shown us something new: Apple is buying its way onto the covers of fashion and lifestyle magazines. (Search for “Apple Watch magazine covers” and you get about 57.6 million results; this may be a pittance compared to the 559M hits for a plain Apple Watch search, but it’s an impressive number, nonetheless.)

This is novel. Apple has a history of spending zero dollars advertising products it hasn’t delivered yet. Pre-launch rumors, whether erroneous or pinpoint accurate, are erogenous enough to enflame desire. On the first day of physical availability, customers happily line up at Apple Stores around the world.

Before we address the question of Apple’s foray into the world of Vogue, let’s admit that none of it will work until we know what the AppleWatch actually is, how it will affect and infect customers’ brains and entrails. We’re impressed by the physical objects we see in pictures on the dedicated website, including some famous Marc Newson designs for bands and clips, but the “live” experience, its intellectual and emotional nature will have the final word. For this we’ll have to wait — but not for long.

The first three million watches will sell “instantly”, in a couple of weeks, maybe less. These first sales won’t matter as much as will their consequence, the all-powerful Word of Mouth.

Let’s consider one scenario: The eager purchaser explores the device and shows it off to friends — who will want the full tour. As a result, the battery is exhausted in much less than the presumed day, perhaps a couple of hours in the most enthusiastic hands.

Bloggers shout from the rooftops: Let’s add the AppleWatch to the list of failed Apple products.

If this were a real problem, such as Antennagate or Apple Maps, we’d see a reaction from Apple, whether in the form of contorted explanations and settlement checks, or a sincere apology from Tim Cook — followed by management changes.

In the battery-exhausted-by-enthusiasm scenario, I don’t think Apple execs will wait and react. I expect them to be proactive. One law of good salesmanship is you don’t let the customer discover an important limitation – you proactively adjust expectations to forthcoming reality. (On that note, 9to5Mac has an good post on Apple Watch sales training for store employees. This old salesman agrees: Just help the purchase decision that’s already been made come to the surface.)

On Monday, when Tim Cook and other Apple execs do the AppleWatch Launch 2.0, let’s listen to the battery-life proaction. With months of field-testing by a large number of insiders, chances are management has an accurate view of early-adopters’ reactions.

One caveat: insiders might be just a bit too competent and thus consciously or unconsciously avoid the traps “naive” users will fall into. I’m optimistic, the Maps fiasco hasn’t been forgotten.

When we look beyond the first few weeks, it’s tempting to adopt the mercenary position and just consider the numbers. For the first year of sales, projections range from 8M to 30M units. Just for fun, I’ll use an iPhone-like average price, about $650. This adds up to revenue between $5B to $20B. That’s a wide range, from a minimally-noticeable contribution to the projected $250B company-wide (again, an approximation), to an insignificant blip.

Now let’s step back a bit and think about the AppleWatch’s place in Apple’s business.

The play, at least initially, is for the AppleWatch to make iPhones more valuable. The first iteration doesn’t pretend to stand on its own, it depends on the iPhone in the customer’s purse or pocket. For example, navigation might look good on the watch, but it has no GPS and thus needs the iPhone for geolocation. No sin, at least not in my book: The AppleWatch is an innovative and fashionable device that makes the iPhone, Apple’s monster money machine, more pleasant and more valuable.

Second, user interface innovations (the crown, pressure sensors on the screen) will generate new apps, new ideas, new usage patterns that will be adopted by other Apple products.

Third, critics may deride the enthusiasm of Apple devotees and cast them as cultish zealots, but given this level of unforced devotion, why spend so much advertising effort on the AppleWatch, particularly when the articles that accompany the pricey magazine covers do nothing to clarify what the product actually does?

Apple’s equal investment in both the technology and fashion of its watch may be glibly mocked, but I don’t think it’s so easily dismissed. I doubt Apple would go to such lengths for just one watch.

JLG@mondaynote.com

Afterthoughts…
One: John Kirk offers yet another of his literate, fun and relevant posts, this time, about AppleWatch, a cure for the pervasive malady of Premature Evaluation.

Two: Personally, if I had a choice between an AppleWatch and a new, even slimmer MacBook Air with a Retina screen and the latest Intel processor… I know which screen I’d look at the longest, which object I’d tinker with the most. But, of course, I want both.

Three: For perspective, see the March 24th, 2014 Wearables Fever Monday Note.

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Apple Car: Three More Thoughts

 

by Jean-Louis Gassée

[Update appended]
Beside free publicity, and huge amounts of it, the putative Apple Car raises interesting questions about car manufacturing, the future of automobiles, and the part that an interloper such as Apple could play in this century-old industry. 

The volume of comments and Twitter traffic in reaction to last week’s Monday Note, The Fantastic Apple Car, was just one small rivulet in this week’s gusher of rumors, jokes, and proclamations about Apple becoming a car manufacturer. Bloomberg takes the car as fait accompli, telling us that “Apple…is pushing its team to begin production of an electric vehicle as early as 2020”. A recent 9to5mac post provides a long list of car experts and executives hired by Apple, thus giving more than gossipy credence to the story of Apple committing huge resources to such a project.

There are many products and services I’d love to see Apple get into. For example, how could Apple not do a better job than Comcast, Verizon, and AT&T at providing wired and wireless broadband? But the Cupertino company stays out of that arena for a number of reasons: regulations, fragmentation, manpower, equipment both under and above ground.

One could argue that cars present a simpler challenge. Roads are roads and country regulations are well understood. And, yes, a car made and serviced by Apple could be an affordable quality product.

Still, I remain a skeptic. Monday Note commenter Hamranhansenhansen does a good job of summarizing my position:

“[…] if Apple were doing a car, why not just buy Tesla in the exact same way they bought Beats? Apple already made headphones for about 14 years and then bought Beats anyway. Tesla is the Beats of cars, and it is local to Apple and already has a factory and really great mindshare. If they did not want Elon Musk, he has SpaceX and could likely make a graceful exit. Apple’s car line would then be named “Tesla” same as their PC’s are named “Mac” and headphones named “Beats.” The price of Tesla right now is excellent, especially considering the battery crossover to iPhones and iPads.
It makes much more sense to me that Apple is going to become a car component manufacturer, so that BMW, Bentley, Ferrari, etc. can buy Tesla-style in-car dash systems from Apple, just as Ford bought the awful Sync from Microsoft. The itch that needs to be scratched is Jony Ive getting into his Bentley and his iPhone won’t hook up reliably and sits in a bolt-on cradle.

This week, I’ll add three vignettes, three morsels of food for thought about the hotly desired AppleCar.

For more than twenty years, two Apple execs roamed the Earth in search of technologies, suppliers, contractors, and entrepreneurs to acquihire. In their travels, they fortified themselves at many of the best restaurants on the planet, becoming friends, or so they thought, with the astute chefs, sommeliers, and maîtres d’hôtel.

Impressed by their own accumulated knowledge of the restaurant industry the two decided to parlay the money and ambition they had been soaking in at Apple and open a high-concept, high-end saloon. They spared no expense on location, decoration, wine cellar, state-of-the-art kitchen, big name chef, experienced front-of-the-house staff and, of course, a publicist.

After two miserable years of quarrels with prime donne, theft and drug use by the staff, bad reviews planted by rivals, and calamitous “surprise” food inspections, our two wannabe restaurateurs closed their dream place, millions of dollars gone to waste.

They got confused. After all the years they spent in the best restaurants in the world, they thought they knew the restaurant business. What they did know was how to be great patrons… how to talk wine with the sommelier, when to compliment the chef, how to respectfully send back a dish that isn’t just so. They were customers, not restaurateurs.

You know where I’m going with this: Some Apple execs are great car connoisseurs — one senior VP is even on the Board of Directors of Ferrari. They have the resources to own and operate, on roads and tracks, many of the choicest automobiles on the planet, but that doesn’t automatically give them the knowledge to be manufacturers.

The second vignette takes me back a few decades to Northern Italy. During my years at Apple, I took an Industrial Design team to pay a visit to Giorgetto Giugiaro, a towering figure in the automobile industry who would later be recognized as one of the Car Designers of the Century. (Both Wikipedia articles just linked to make for terrific reading – if you’re into cars.) Our goal, in visiting Giugiaro, was to find fresh inspiration, new stanzas for our design language. I had long admired not only the aesthetics of the cars Giugiaro had designed, but also their practicality and efficiency. The historic success of his work on the Volkswagen Golf re-started the company and put it on a trajectory to one day challenge Toyota.

When we walked into Giugiaro’s Italdesign offices, a surprise awaited us. When I thought of Industrial Design — Esthétique Industrielle in French — aesthetics first came to mind, industry second. But what Giugiaro showed us was the opposite: The industrial side of his practice was, for him, truly foremost. In his own words, his job wasn’t to design an award-winning shape for a car, his job was to design the process, the factory that would eventually excrete a continuous flow of vehicles.

An example from Giugiaro’s portfolio: The Renault 19. At a time when the French manufacturer saw a hole in its product line, Giugiaro raided the corporate parts bank, designed a production line, installed it, and trained the production technicians.

More than 25 years later, the conversation is still with me: One doesn’t design a car, one designs the machine, the process, the supply ecosystem that produces the vehicle. As Horace Dediu puts it, innovations are in the production system:

(Beside his Asymco blog and @asymco Twitter stream, Horace also produces Asymcar, a podcast series dedicated to the auto industry.)

I would love to be wrong about the AppleCar — I join the choristers who would love to see what Apple could do with a car — but we’ve heard a bit too much about Apple’s ability to design an interesting electric vehicle and not enough about the industrial part, about the machine that makes the machines.

Finally, there’s Carlos Ghosn. (Again, you won’t regret reading the Wikipedia article.)
How do you compete with this man?
The Brazilian born Ghosn spent his early school years in Lebanon, attended the prestigious École Polytechnique in Paris, and started his automotive career at Michelin, the very techie and idiosyncratic tire maker. After rising to CEO of Michelin North America, Ghosn was recruited by the ailing Renault, and Ghosn managed to turn two companies around by creating a global alliance with Nissan. He’s now the CEO of both companies – and a hero in Japan, featured in manga (a comic strip genre). He speaks Portuguese, Arabic, French, English and some Japanese.

As CEO of Renault-Nissan, Ghosn was instrumental in the creation of the best selling electric car on the market today, the Nissan Leaf (another interesting Wikipedia read). With 158,000 units sold, representing about $6B, the Leaf is a well-rounded implementation of an affordable “pure” electric car (as opposed to hybrids such as the Toyota Prius, or the Chevy Volt, or BMW i3 and i8 that are assisted by small accessory gasoline engines).

I don’t know which fine cars Ghosn drives for pleasure, but he certainly knows how to make the machines that create them. If Apple wants to make and sell electric cars in numbers large enough to garner revenue in multiples of 10 billion — the unit of currency for Apple in 2020 — they’ll first have to figure out how to beat Carlos Ghosn at his game.

JLG@mondaynote.com

Update
Tim Bradshaw, the author of the Financial Times article referred to above, points out his story came out before the Wall Street Journal piece and resents the “rewrite” label for his work.
I regret the error.
What led me astray is this, on FT.com, with a Saturday Feb 14 date:
“The Wall Street Journal reported on Friday that Mr Zadesky’s team was overseeing a project code-named Titan that had produced an initial design for a vehicle resembling a minivan.”
And that’s why I thought the WSJ (Fri 2/13) got there first.
It looks like the Feb 14th date was the stamp for the latest update to the article, not the 1st publication date that appears to have beaten the WSJ by “several hours” according to Arash Massoudi, one of Tim’s colleagues at the FT.”

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