The Two Most Dangerous Words in Technology Marketing

"Just wait."

So powerful.  So easy to say.  So appealing when your current products are behind the curve, and the press and analysts are beating you up about it.  You can shut up the critics instantly if you just drop a few hints about the next generation product that's now in the labs.

So dangerous.

The phrase "just wait" ought to be locked behind glass in the marketing department, like a fire extinguisher, with a sign that says, "Break glass only in emergency."  And then you hide the hammer someplace where no one can find it.

Saying "just wait" is dangerous because it invites customers to stop buying your current products.  You're basically advertising against yourself.  If your company is under financial or competitive stress, the risk is even greater because people are already questioning your viability.

This danger is especially potent in the tech industry (as opposed to carpeting or detergent) because tech customers worship newness, and they use the Internet aggressively to spread information.  One vague hint at a conference in Japan can turn into a worldwide product announcement overnight.

 This danger has been well understood in the tech industry dating at least back to 1983, when portable computing pioneer Adam Osborne supposedly helped destroy his PC company by pre-announcing a new generation of computers before they were ready to ship (link). Palm reinforced the lesson in 2000 by pre-announcing the m500 handheld line and stalling current sales (link).

But maybe memories have faded, because we've been hearing "just wait" a lot lately:

--Nokia announced that it's switching its software to Windows Phone, and promised new devices based on the OS by this fall.  Nokia executives have hammered that message over and over, even making detailed promises about features including ease of use, battery life, imaging, voice commands, cloud services, and price (link).  Some execs have even told audiences that they have a prototype in their pockets, but coyly refused to show it (link).  What's the thinking here?  Does refusing to show the product somehow nullify the fact that you just told everyone not to buy what you sell today?

--In February 2011, HP pre-announced a series of new smartphones that were supposed to come out over the next year.  The most attractive-sounding one, the Pre3, was supposed to ship last.  Not only did this obsolete HP's current products, but it also overshadowed the other new products HP launched in the interim.  HP's interim smartphone sales turned out to be so bad that it killed the business before the Pre3 could even launch in the US.

--Speaking of HP, the company just announced that it will be selling its PC business because it's not doing well.  As Jean-Louis Gassee pointed out, that's like inviting customers to switch to another vendor who actually wants to be in the business (link).  That forced HP executive Todd Bradley to boost confidence by going on tour pre-announcing himself as future CEO of the theoretical spun-out company, even though HP's Board won't even meet to decide on a spinout until December (link).

--RIM announced that it's moving BlackBerry to a new operating system, which will apparently not run on its existing smartphones.  It has spent much of the last year telling people how great all the new features of the OS will be.  The company also pre-announced that it will enable Android applications to run on its future phones.  Meanwhile, market share of its current products has been dropping steadily.  The latest rumors say RIM's new phones will not be out until Q1 of 2012 (link), meaning the company has probably sabotaged its own Christmas sales for 2011.

--Microsoft announced that it's replacing Windows in about a year.  That's not necessarily a problem, since it says the new version of Windows will run on existing hardware.  But Microsoft also said it's introducing a new development platform based on HTML 5.  This set off a huge amount of teeth-gnashing among today's app developers worried that their skills are about to become obsolete (check out the excellent overview by Mary-Jo Foley here).

Why are companies doing this over and over?  Sometimes you have no choice.  For example, Nokia couldn't lay off the Symbian team without saying something about its OS plans.  However, it didn't have to be so noisy about the plans, so I think that wasn't its only motivation.

Sometimes the cause is a mismatch between the needs of a hardware business and the needs of a software business.  If you're making a software platform, you pre-announce it as early as possible to build confidence and get developers ready at launch.  But if you're selling hardware, you want to keep new stuff a secret until the day you ship.  When you mix hardware and software, you are pulled in both directions.  I think that disconnect probably affected Nokia, which is now run by a CEO who worked in software for most of his career. 

Companies also sometimes pre-announce products because it placates investors.  Wall Street analysts always ask what you're developing in the future, and executives sometimes can't resist the urge to tell them and prop up the stock price.  Ironically, this may help the stock for a quarter, but often has the long-term effect of hurting a company's value when the pre-announcement slows sales.  But each CEO always seems to believe he or she will be the one who gets away with it.  I believe investor pressure was one of the drivers when Palm pre-announced the m500, and I believe it also explains some of the pre-announcements by HP and RIM.

Sometimes internal company politics also plays a role.  An executive may pre-announce a product in the hope that the announcement will put more pressure on the development team to deliver "on time."  Or a business leader will pre-announce something to pre-empt internal competition from another group.  I've seen both of those happen at places where I worked.  Needless to say, any company that allows internal politics to drive external communication has much bigger problems than its announcements policy.

Pre-announcements also create other problems.  They educate the competition about what you're doing, and give them time to prepare a response.  This is especially dangerous if you're trying to come from behind, which is usually the situation when a company pre-announces.  So a competitor is already out-maneuvering you, and now you're giving them more notice of your plans?

But I think the worst effect of a pre-announcement is that it invalidates any signals you get from the market.  You can't actually tell if your underlying business is healthy or not.  Did HP's smartphone sales slow down because people hated its products, or because HP had invited customers to wait for the new ones?  Have BlackBerry sales been suffering because customers don't want them, or because RIM invited people not to buy?  Was the enormous drop in Nokia smartphone sales due to flaws in the products, or due to Nokia's relentless promotion of new phones that aren't yet shipping?

There's no way to tell for sure.  And so, if you're running one of those companies, you don't know whether or not you should panic -- or more to the point, what exactly you should panic about.  You have now trapped yourself in limbo, and there is no way out until your new products ship.

So, as you can guess, I am generally against pre-announcements.  But they can be very powerful, and there are a couple of special cases in which they're appropriate.


When it's safe to pre-announce

If you're entering a new business.  If you don't have any current sales to cannibalize, it's relatively safe  to pre-announce.  You're still alerting the competition, which I dislike, but at least you won't tank your current business.  Apple pre-announced the first iPhone and iPad before they shipped, but you'll notice that they've been very secretive about the follow-ons.

A variant on this is when a competitor is ahead of you in a new category and you want to slow down their momentum.  You pre-announce your own version of their product, in the hope that customers will wait to get it from you rather than buying from the competition.  This can be especially effective in enterprise markets, where IT managers tend to develop long-term buying relationships with a few vendors.  IBM used this technique relentlessly during the mainframe era, and Microsoft picked up the habit from them.

Pre-announcements are less effective against competitors in consumer markets, where people are sometimes driven by the urge to buy now.  They also don't do much in cases where it's easy to switch vendors.  For example, Google pre-announcing a web service isn't likely to stop people from using competitors to it in the interim.  A pre-announcement can intimidate venture capitalists, though, and I wonder if Google doesn't sometimes announce a direction in order to hinder a potential competitor's ability to raise money.

If there is a seamless, zero-hassle upgrade path.  If customers will be able to move easily to your new products, without obsoleting what they use today, and without big expense, a pre-announcement can be safe.  For example Apple generally pre-announces new versions of Mac OS, and it's not a major problem because currently-available Mac hardware can run the new OS.  Where RIM went wrong with its OS announcement is that its current hardware apparently can't run the new OS.  So RIM has announced the pending obsolescence of everything it sells today.

If you are messing with the mind of a competitor.  Theoretically, if you're dealing with a competitor who's very imitative, you can make them waste time and money by leaking news of future products that you don't actually plan to build.  The competitor will feel obligated to spin up a business unit to copy your phantom product, leaving less money to respond to what you're actually doing. 

When I was at Apple, we used to joke that we could waste $20 million a pop at Microsoft by seeding and then strenuously denying rumors that we were working on weird but plausible products.  Handheld game machines, anyone?  Television remote controls?  Apple today is so influential that it could manipulate entire industries by doing that, not just individual companies.

But when you do this you gradually erode your credibility with your customers. If the rumor is plausible enough to dupe a competitor, it will also dupe some customers, who will then be disappointed when you don't deliver.  Eventually you won't be able to get customers excited when you announce real products.  Look at the skepticism people often express today when Google announces a new initiative.

The most famous case in which misdirection supposedly worked was not in business but in international politics.  Some historians say that the collapse of the Soviet Union was hastened by the huge investments it made trying to keep up with Reagan Administration defense initiatives, some of which had no hope of actually working, but which still seemed plausible enough that the Soviets felt obligated to cover them. 

I'm not so sure that really caused the collapse of the Soviet Union; big economic changes are usually driven by big economic forces, not by tactics.  But more to the point, you're not Ronald Reagan, this isn't the Cold War, and if you try to pull off a fake this complicated you'll probably just confuse your customers and employees.

So unless you're entering a new market, or have a seamless low-cost upgrade path to the new product, your best bet is to grit your teeth, shut up, and next time plan better so you'll be ahead of the market instead of playing catch-up.

34 comments:

Anonymous said...

It was good of Google not to pre-announce their grand expansion of Android. There was Apple getting tied up with AT&T, restricting customer phone choice, and boom-Android on many carriers, diverse form factors, the iPhone is now getting further and further behind Android

The Apple brand has no credibility for most people-the Apple brand is all overhype and overprice. When Jobs pushes the “post-PC” vapor-meme, that just ridiculous for most people who do much on PC’s. They reject Jobs’ hype and Apple’s prices as out of touch with the reality

Michael Mace said...

I don't know, Anonymous. I think Apple and Google both have really strong, credible brands with the average consumer in the US and Europe.

Anonymous said...

RIM FY 2012 start in the summer if I memory serve me right. that means before X'mas not after for the Q1.

Michael Mace said...

You're right about RIM's fiscal year, but the article was referring to calendar quarters.

However, when I checked on that, I found a later article saying the device may be out in late calendar 2011 after all (link).

Anonymous said...

Great analysis... Spot-on!

Jose said...

Wow, If Apple has no credibility I don't know who has it, maybe anonymous people on Internet.

Apple is not overprice for what is worth, people say: hey, look!!, this Acer plastic laptop (with a terrible screen and a hard drive and fans so noisy and a two hours battery) is so cheap compared with this (aesthetically pleasant light metal structure, low noise, ssd with 7 hours of battery) thing!!

How could people buy this?

Well, some people use computers to work and don't care about investing money on quality products so they can run circles around the penny wise, dollar fool people.

Anonymous said...

Michael - Agreed. Spot on. Amazing how many companies choose to ignore these basic facts!

Reda EK said...

As usual, great post!

Regarding Nokia, I don’t think the problem was in the priorities of HW strategy vs SW strategy. I think the “mess” was in the lack of a unified OS/SW strategy that made sense to everybody (i.e. internally and to developers). Whatever the reasons (HW vs SW or redundancies plan or clear OS strategy) I still believe the execution was completely unprofessional.

Tatil said...

I would leave Nokia exempt from this criticism. Its CEO had to explain why he was cutting down Symbian and MeeGo projects. He had no hope of keeping it a secret, as the strong internal opposition and dismayed employees would leak the plans very quickly. He would quickly lose the control over the message, both internally and externally. He also had to shake up his organization to push it in a new direction, overcome internal opposition and add some urgency by communicating to employees direness of the circumstances and how strongly he was betting on WP7.

Elia said...

How do you think your analysis/advice should be taken by a start-up company?

Michael Mace said...

Interesting question, Elia.

I'm going to assume that a startup won't have any existing products to cannibalize, so there isn't a sales risk from a pre-announcement.

But I think a startup has to worry about two other potential problems. The first is that you're giving advance warning to competitors who probably have more money and engineers than you have.

The second risk is that if you talk about your products before you ship, customers may have lost interest by the time you actually do ship. You don't have much of an advertising budget, so it's very hard to get attention back once you've lost it.

The most effective pre-announcements I've seen for startups have been teaser campaigns that didn't say much about the product but got people excited. Even those are risky, though, as it's easy to build up excessive expectations (can you say "Segway"?)

So maybe the best approach is to mostly shut up, other than dropping occasional vague hints on your blog.

Anonymous said...

When you pre-announce a product, aren't you in effect announcing it?

Announcement: We have a new smart phone model.

Pre-announcement: We wish to let you know that in six months we will announce that we have a new smart phone model.

Huh?

Michael Mace said...

Yup. The way the tech industry uses the term, "pre-announcement" specifically means announcing a product when it's not immediately available. It's just shorthand.

Timple said...

Tatil -

Nokia should have held off making those Symbian teams redundant until they actually had a hit WP7 phone to sell. They have lost way more in sales than the salaries of those teams. What is a matter of fact is that Symbian^3 (N8 with the E7 coming on stream) was selling very well until February - after that it nose dived. Not surprising when the CEO calls it a burning platform. I think Michael has it on the nose when he says the problem was a software guy put in charge of a hardware company.....

Daniel said...

This definitely happened with Sega's Dreamcast and Sony's Playstation2. Sony preannounced by a year, and took all the steam out of the (better) Dreamcast.

eas said...

Pre-announcing in order to slow a competitor fits into the category of FUD (because it is meant to sew fear, uncertainty, and doubt in the minds of your competitors customers).

People can certainly try to spin this Windows 8 preview as something other than FUD directed at Apple, but I don't buy it.

If past is prolog, Windows 8 is the first step in something that isn't really going to play out for 5-10 years. Windows 7 sold as well as it did not just because Vista sucked, but because businesses wouldn't have been in a hurry to upgrade to XP and Vista. The Y2K problem provided an impetus for businesses to upgrade their clients and servers, and Win2K and Office2K (and IE6) were good enough for their needs, so they stuck with them. With Windows 7, the hardware and software had finally come far enough to make it worth incurring the expense and difficulty of an upgrade cycle.

I think it is highly unlikely that they are going to be in a hurry to upgrade to Windows 8, especially since so much of the user experience is changing. The result is that Microsoft has another major release or two before big customers are really going to take a serious look.

Microsoft would probably say that they wanted to get this release in front of developers, but I don't buy it, because, well, both Microsoft and developers are going to have some time before things align to provide a strong market for Metro apps (if they ever do)

Mark Trade said...

What a great article. Fleshes out and explains so many things that confuse me about the tech industry.

It also highlights how effective a strategy it can be to make your competitors wait for things (e.g. for supply by securing so much of it in advance, a la Tim Cook).

davesmall said...

This is an excellent and very thoughtful article.

Microsoft and Nokia are going to be so incredibly late to market with a viable iPhone/iPad competitor that they had no choice but to announce early. Otherwise they might be forgotten.

I had to laugh at the poster who said, "The Apple brand has no credibility for most people-the Apple brand is all overhype and overprice." Quite the opposite is what's happening. Apple literally 'owns' customer credibility in smart phones and tablets. All of the other companies are playing follow the leader by putting out shoddy knock-offs most of which are rushed to market.

Danny said...

"Why are companies doing this over and over?"

Fantastic analysis of the possible reasons, Michael. Amazing how powerful CEOs of some of the largest companies on earth don't understand some of this basic stuff. If only they would read your blog and stop acting so stupid...

One additional reason you didn't mention: insecurity and the psychological need for validation. We all feel a need to boast about the latest project we've been working on to get validation from others that leaves us feeling more secure about our abilities and the choices we made. It takes discipline and self-confidence to postpone this gratification and shut your mouth until the results of your labor are ready to show to the world. This is as true in technology as in any other field.

Danny said...

And a related thing that comes to mind, following up on this excellent article and on my previous comment:

http://www.ted.com/talks/derek_sivers_keep_your_goals_to_yourself.html

Danny said...

Michael, a related mystery of the tech industry is: why do so many companies release incomplete products full of bugs and missing features? (David Pogue mentions this a lot, I'm sure he'd like to know the answer). This is a bit like pre-announcing but may warrant a separate discussion -- maybe you feel like writing a follow-up article on this? ;-)

Danny said...

And, of couse, this discussion brings to mind the classic Jobs-ism "Real artists ship", see:

http://www.folklore.org/StoryView.py?story=Real_Artists_Ship.txt

Danny said...

Sorry, this link is the more pertinent one re: Real Artists Ship:

http://www.ghostinthepixel.com/?p=24

(P.S. Michael, sorry for the multiple comments, I don't mean to spam your comments section but just thought the article was really interesting and struck a chord with lots of other things I read/think about, hence the stream of excited comments).

Michael Mace said...

That's OK, Danny, and thanks for being polite about it.

Relayman 5C said...

Hewlett-Packard's dropping of tablets and personal computers makes me wonder, what's next, printers? We have a software guy dumping hardware. I will hesitate before buying any product from HP just because I don't know if it knows where it's going.

fawaz said...

Great article! Just curious though, how did Apple avoid this during their transition to intel? I'm too young to remember this, but I heard that their transition was big news in the tech community, no doubt backed by constant rumors and hype. They also probably had to announce the transition early to get developers and partners geared up.
Then again, they were in such dire straits and their sales already lagging that it probably didn't matter as much.

Anonymous said...

<>

The iPhone is the#1 phone at both ATT and Verizon. So they are hardly falling behind. I'm still unsure how a single phone is preventing people from choosing other phones. That makes no sense. Google always mentions activations, but how many are to replace crappy Android phones and how many "deactivations" do they have with returns.

Anonymous said...

fawaz, Apple got through the transition from Power PC to Intel because they asked for "universal" binaries for the programs and the MacOS support Power PC with the last one being 10.5.x. They didn't kill Power PC support until recently.

Ivan Vučica said...

fawaz,

what poster above said, plus they also had a lot of cash by then from iTunes Store and iPod sales. OS 9-to-OS X was much trickier, but also much more necessary.

Stormchild said...

As I recall, Apple was basically forced to pre-announce the iPhone due to a requirement of obtaining FCC approval of the device (because of the cellular transceiver), which would have given away the secret ahead of time anyway. If that had not been the case, Apple would have almost certainly not lifted the curtain until the iPhone was ready to ship.

In the case of the iPad, I would guess the first one was announced early because they wanted to reveal it at Macworld, which was when major product announcements usually happened — a practise that Apple shortly thereafter abandoned when it stopped participating in trade shows altogether and moved all of its announcements to its own press events.

In other words, Apple shares your belief that pre-announcements spoil the party. I'd say it's not just because they slow current sales, but also because the initial excitement generated by a new product will wear off in the interval between the time of the announcement and when it's actually available to buy. Sure, you can take pre-orders (and that's what they did with the first iPad), but there's no immediate gratification in that, so there is still some amount of wasted opportunity in that scenario.

I've been to seven or eight Macworld events, and seen first-hand the crowds of people who immediately and literally run to the nearest Apple Store immediately after the keynote (not to be mean, but it's actually pretty funny to watch, as for many of those people it's the only exercise they'll get all year). Apple actually had to start providing extra security to corral the crowds to prevent injuries and fighting.

Michael Mace said...

Stormchild, if the FCC forces you to pre-announce a new phone, why hasn't Apple pre-announced every other model of the iPhone?

Anonymous said...

By this logic, why did people to keep buying Macs after Apple pre-announced the Intel switch?

They promised faster and cheaper machines that would run PPC code via Rosetta, but basically also told everybody that the PPC chips wouldn't be able to run new Intel-only software.

Much of Apples purchases come from people thinking Kacs will last longer than an equivalent PC because of the better integration with the OS, build quality and customer support. Apple threw those out and still survived.

Anonymous said...

to Anonymous: Apple provided a clear path to universal binaries that was going to allow future programs and upcoming OS versions to run on the current and pre-announced hardware. It also provided Rosetta for Intel Mac owners, so that they could keep on using the old software before developers got around to supporting the new CPUs. Intel only software has stayed very rare even a couple years after the transition. Besides, Apple also started and completed the transition to the new CPUs earlier than its first announcement.

Maybe you could shake off your "Mac owners are easily mislead" attitude and manage to contrast that with RIM, where the current apps will not run on new QNX based Blackberries and the apps that will run on the future ones will not run on the currently selling hardware. It is also behind schedule, as it still does not have a fully baked tablet.

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