In yesterday’s post on the Oculus acquisition (link), I focused on the idea that Facebook sees virtual reality as the future of social networking. I was skeptical of the Oculus deal because I see VR as a more fundamental change with much broader implications to the industry.
There is an alternate view, as a commenter on the post pointed out. Let’s assume for a minute that Mark Zuckerberg actually does understand the potential for VR to be far more than a communication technology. As I wrote last year (link), I think 3D displays combined with 3D printing and gesture interfaces can be the foundation of sensory computing, the next big computing revolution as important as the graphical interface revolution of the 1980s. Maybe Mark sees that, and the deal is really about him buying Oculus to remake computing, with Facebook just the vehicle he used to make the deal.
If so, bravo.
The companies that should be driving this new revolution are Microsoft and Apple, but computing incumbents are usually too wrapped up in their existing businesses to spot the next generation. Maybe it takes a relative outsider like Mark to see the potential. And in this case, it’s an outsider with oodles of money. Which is good news, because the new world of sensory computing will need a lot of investment to get it started.
When building a computing platform business, you have to hit a very careful balance between creating infrastructure that no one else can build, and leaving opportunity on the table so that others will invest. A successful computing platform is not a singular entity; it’s an ecosystem that wraps the platform vendor, developers, partners, and users into a network in which everyone invests and everyone benefits from the synergy between the parts.
In this world, the platform vendor is a bit like the conductor of an orchestra. You don’t play the instruments yourself; you make sure they all come together to make beautiful music.
To make sensory computing happen, Oculus will need to focus on four areas: technology standards, interface, economic model, and management.
Technology standards. Someone needs to define how the apps, software extensions, and accessories in the sensory computing world will communicate with each other. For example, how does a gesture recognition tool like Leap Motion communicate with the Oculus hardware and with applications built for it? Oculus needs to take the responsibility for creating the communication standards and APIs, and needs to write the sample code that will make it easy for developers to integrate them. This can’t be left to committees or the open source crowd. Committees are too slow, and open source is too chaotic.
Oculus also needs to write drivers. Lots and lots of drivers, to integrate its systems with the rest of the computing world. Most engineers hate writing drivers; they are boring and difficult and no one ever comes up to you and says, “killer keyboard driver, dude.” As a result platform vendors usually try to leave that detail to the open source community. But that doesn’t work, because volunteer open source developers are even less likely to do unsexy work. Building a platform without drivers is like building a city without sewer pipes. Mark, this is where your money will come in handy. Hire a bunch of good driver developers and put them to work interfacing Oculus with everything.
Some of the first drivers you need are 3D printer drivers. Make it easy for people to create in 3D and bring their creations into the real world.
Interface. Imagine the Mac without menus and windows and icons. A new computing paradigm needs new interface standards: how do we grab objects in a virtual world, how do we control the device, how do we move ourselves around, and how do we do all of that without inducing motion sickness (one of the biggest complaints from early users of the Oculus Rift hardware)? There’s some very subtle and challenging work to be done here. Oculus and its software partners have made a good start in the area of gaming (for example, how do you separate where you’re looking from where you’re shooting from where you want to move?) That same level of thinking needs to go into all aspects of sensory computing.
Economic model. The platform vendor needs to make sure that the people creating accessories and apps for the new platform have a reasonable chance to make money. The platform does not need to guarantee profit for everyone, but the good apps and accessories must have a reasonable chance to rise to the top and be rewarded. The App Store, for all its flaws, accomplished this on iOS. Facebook failed very badly in this area with its platform; it’ll have to do much better for sensory computing to succeed.
To go along with that economic model, you need evangelists: marketing/business managers who know how to recruit and motivate partners and developers. If Oculus had a staff of evangelists in place, they would have fanned out yesterday to explain the deal with Facebook and make sure it didn’t cause developers like Mojang to turn away.
Management. To run all of this, Oculus needs experienced people who have created platforms before and know how to avoid all the mistakes you can make along the way. This is a specialized area of knowledge, and not something you can learn on the job. Platform management is a skill set that doesn’t exist in either Facebook or Oculus today, and it’s also not available in Irvine, where Oculus is based. But it is available in Silicon Valley, 300 miles to the north.
The biggest challenge of all is figuring out how to make all of these changes and additions without overwhelming Oculus and losing its beautiful energy and vision and focus. I watched Palm turn from a spunky innovator into a bloated bureaucracy, and I don’t wish that fate on Oculus.
Some of the work, like driver creation, can be done in parallel without too much disruption to the core of Oculus. But many of the other changes reach into the heart of the company. It’ll take unusually skilled and patient management to implement all these changes. Mark Zuckerberg doesn’t have the time to do this, and I think Oculus doesn’t have all the bench strength it needs today. One of Mark’s key moves in growing Facebook was hiring experienced managers to supplement his skills. I think Oculus needs the same thing.
The big question
What does Mark Zuckerberg really want to do with Oculus? At this point there is enough contradictory information out there that you can read anything into the deal. But the most hopeful quote came from Oculus CEO Brendan Iribe, who described the early discussions with Zuckerberg (link):
“We showed him some of the internal prototypes, and he got so excited about the vision of what we were doing and about the potential that this is truly the next computing platform. He actually said that to us. And it’s like, ‘Wow! We are looking at this whole thing being just that gaming platform. But tell us more, Mark.’ And he started to describe it, and we started to believe it too. And we started to relate it to a lot of the experiences we were having.”
I’m still very skeptical about the risks in the deal, but computing desperately needs new leadership and ideas, and I hope the combination of Oculus and Zuckerberg will deliver them. I want to believe.
More Thoughts on Facebook/Oculus
Facebook, Ego, and Oculus Rift
When a big company is still controlled by its founders, its greatest strength is that it has the resources and the freedom to do almost anything, regardless of the shortsighted fears of investors. That’s also its greatest weakness. Case in point, Facebook.
I can rationalize reasons why Oculus VR is a good fit for Facebook, but I think the official explanation for the deal is pretty thin. To me, it says more about Facebook’s ego than it does about a coherent long-term strategy. Deals like this between dissimilar companies have a long history of failure in Silicon Valley; to make it work, Facebook will need to be skilled in some areas where it has little experience. The company is also creating important new competitors to itself, in ways that echo Google’s Motorola acquisition. I’m a huge fan of Oculus Rift, so I hope the deal ends better than the Motorola one. But history makes me skeptical.
Why Facebook wanted Oculus
Facebook’s explanation is that virtual reality is a new platform that, like mobile, could revolutionize social interaction. Facebook says it wants to be at the leading edge of that 3D social revolution, rather than trailing it the way it did mobile. That makes sense superficially, but the more you think about it, the shakier it sounds as the reasoning for this particular deal.
First of all, if you believe VR is a new platform, it’s not clear why you need to buy a hardware goggles company. It’s not like Oculus Rift is the only pair of 3D goggles in development. With Facebook’s market strength, it could have set a set a software standard and easily gotten it adopted by all the 3D vision companies. A small minority investment in Oculus would have been enough to secure their support. If you wanted a play in social VR, why not snap up SecondLife? Linden Lab has invested more than a decade in building software infrastructure for social VR, and would have cost a lot less than $2 billion.
Maybe you feel that the hardware and software have to be developed together. That’s a very Apple-like attitude, and therefore trendy in Silicon Valley. There have been persistent rumors that Facebook was working on its own phone. Maybe Facebook decided that it was too late to join the phone business, but it could get a jump on everyone else 3D.
But if hardware-software integration is the key, you’d want to drive deep integration between Oculus and Facebook’s software. You wouldn’t promise to run Oculus as a separate company, which is what Facebook claims it’ll do.
I think the real reason not to buy something like SecondLife is that it’s no longer trendy. Nothing smells worse in Silicon Valley than a company that failed to live up to its over-the-top hype, and the hype for SecondLife was astonishing about seven years ago. Oculus, on the other hand, is still at the takeoff stage in the hype cycle. It is the subject of a cult in the PC gaming community. The company promised to hit a sweet spot of affordability and quality for VR, and hardcore gamers embraced it enthusiastically through one of the first blowout Kickstarter campaigns. Although Oculus wasn’t mainstream news, there are literally millions of Oculus Rift-related videos on YouTube, most of them from enthusiasts drooling over the prototypes.
The cool factor. So by buying Oculus, Facebook makes itself cooler. The trouble is, it makes Oculus less cool. The enthusiasts who embraced Oculus because of its perceived authenticity and deep ties to the gaming world are appalled at the thought of it being owned by Facebook, which is seen as the poster child for lame low-res social gaming. It’s as if Motel Six bought the Ritz-Carlton. The Verge has a nice roundup of the angst here. My favorite quote: “even Microsoft would have...been better than Facebook.”
Fear of missing out. I wonder if another motivation behind the Oculus purchase was the fear that if Facebook didn’t act, someone else would buy the company. If you feel VR is important and if Oculus is a leader, then maybe you buy it just so you don’t get closed out. The big VCs who invested in Oculus have a playbook for acquisitions, and it usually involves creating competitive bids, or the fear of them, to drive up the price. If Facebook was afraid that a competitor might buy the company, it might have felt the need to make a deal fast at an aggressive price.
Fighting Google. I think the primary motivation for the Oculus purchase was competition with Google. Both companies are led by ambitious technophile founders, and both have more money than they can count. Google has a cool new thermostat company, lots of neat special projects, and a very strong play in mobile that it is leveraging to push its own services, to the potential detriment of Facebook. Google also has a smart glasses initiative. Now Facebook has its own headgear, and the hottest new technology in gaming. The social aspect is important, but I think Facebook just wanted to be a bigger, more dynamic player. As Harry McCracken put it over at Time, “the world's biggest social network is no longer satisfied with just being a social network.” (link).
Isn’t it interesting how companies impose their own mental paradigms on technologies? Google looks at glasses and sees a way to search and consume web services on the go. Facebook looks at goggles and sees a new means for social communication.
That’s exactly what scares the fans of Oculus. They wanted the next great gaming experience, not a communication tool.
Risks of the deal
That brings us to the dangers in the Oculus deal. Let’s start with the thing not to worry about: the money. Facebook has more cash than it can possibly spend. An acquisition like this is just a way of recycling some of it. It’s kind of like Japan Inc. buying golf courses in the US in the 1980s. They had to do something with the money.
What I’m worried about are the odds that the deal won’t live up to Facebook’s lofty expectations. Let’s start with the risks to Oculus.
Loved to death. Whenever a big company buys a little one, there’s a big risk that the acquiring company will smother its new acquisition to death with enthusiasm. Everyone in the parent company is excited about the sexy new partner and has great ideas on how they can work together. There’s no way for the acquired company to deal with even a small fraction of these new ideas; usually it was working flat out just to do the basics prior to the deal and has no bandwidth for anything else.
Often the acquirer will be aware of this mismatch, and authorize the acquisition to hire a bunch of new employees to deal with the overload. But then the acquisition finds itself consumed by the hiring process, and its capacity for work actually goes down while the new employees are hired and trained. Usually first hiring priority has to be given to the parent company’s own employees, meaning the acquisition gets flooded with the parent company’s culture and business practices, and loses much of the distinctiveness that made it valuable in the first place.
To avoid smothering the acquisition, senior management in the parent company has to rigorously limit contact with the acquisition, and allow it to gradually staff up and grow into its new role. Does Facebook have that sort of discipline? So far it’s saying the right things, but the proof will be in actions, not words.
Arrested evolution. I’ve seen this happen over and over again. New device paradigms, if they succeed at all, usually create their own new usage patterns that nobody can predict in advance. To put it another way, we don’t know what the killer app for VR will be yet. Oculus is still in early beta on its first product, so it hasn’t had much opportunity to learn from the market. Chances are that when it ships, it’ll find that customer reactions pull it in directions it didn’t expect. Features that the company expected to be hot will go by the wayside, while something they casually tossed in at the last minute will turn out to be the biggest differentiator. A nimble startup can usually pivot to follow these discoveries. Will Facebook be open enough to let Oculus find its own way in the market, even if that leads it away from Facebook’s core business? If so, it would be a rare big company indeed.
Dealing with developers. Although Oculus and Facebook agree that its long-term future extends beyond gaming, I think it’s fair to say that unless the company is successful in gaming it may not be able to branch to those other markets. Success in gaming means recruiting developers to support Rift. Oculus had a lot of momentum prior to the acquisition, but we’ve already seen one developer (Mojang, the creator of Minecraft) decommit because of the Facebook deal (link).
I don’t think Mojang is necessarily an opinion leader among hardcore gamers, but Facebook’s history with developers worries me a lot. At one time, in the race to defeat MySpace, Facebook embraced developers enthusiastically. It made itself a welcoming platform for them, and many companies, especially game creators, jumped in enthusiastically. But although Facebook offered a lot of technical support for developers, it never put much effort into helping them make money. It was almost as if the company lost interest in developers once MySpace was out of the way.
I’m not saying that Facebook deliberately mistreated developers, but I think it never understood that a successful platform has to be both technically cool and financially rewarding to developers. Facebook never made the economics of its platform work, and as a result its developer base withered way. Some of the survivors switched to mobile instead and became leaders in the new generation of mobile games. To this day if you get them talking in private they’ll tell you about their lingering distrust for Facebook.
Facebook seems a lot more comfortable evangelizing developers to use its login and advertising APIs, rather than creating an economic and technology platform that makes them successful. But that won’t be enough to make Oculus a winner. If Facebook is serious about VR as the next big paradigm, it needs to change itself to embrace VR developers and help them succeed as businesses. Will Facebook learn how to take care of a platform business? Or will it take orders from tiny little Oculus in this area? To me, that’s one of the most important unknowns in the Oculus deal.
Indigestion. My other concern is that Oculus could create internal and external problems for Facebook. Working on VR may pull Facebook’s attention away from other, more pressing competitive threats. To me, the most important near-term challenge to Facebook is the rise of the Asian messaging networks that combine free short messaging with games and other online services. The acquisition of WhatsApp was meant to counter that, but Facebook still has to figure out how it’ll be integrated with the core company. Do Mark Zuckerberg and his management team have enough time and brain juice to figure out how to integrate both WhatsApp and Oculus?
Buying Oculus also creates potential new enemies for Facebook. Until the acquisition, companies like Sony and Microsoft had good reasons to view Facebook as a potential partner in their struggles against Google (remember, Microsoft owns about 1.6% of Facebook). But Oculus founder Palmer Luckey has been outspoken in his criticism of both PS4 and Xbox, saying they don’t have the power to do proper VR. And he has speculated about building mobile wireless chips into the Rift goggles, making them a long-term competitor to the smartphone (link). How will Apple feel about Facebook buying a company that says it’s going to make the smartphone obsolete?
When Google bought Motorola Mobility in 2012, I saw the shock and fear it generated in the Android licensee base. Even though Google eventually sold off most of Motorola, those companies will never again fully trust Google. I don’t think Oculus is the same level of shock to Facebook’s allies, but I suspect they’re now asking themselves whether they can trust Facebook as a partner in the future. That could hurt Facebook in ways it doesn’t even imagine today.
So I’m hopeful because I believe in the potential for VR, but I’m also very worried. For the Oculus deal to work, Facebook needs to understand developers much more deeply, exercise self-restraint organizationally, and navigate a very tricky landscape of allies who are now also competitors. None of those skills are particular strengths of Facebook today.
I hope they can learn quickly.
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Edit: There's an alternate view of the deal: What if Mark Zuckerberg really does want to make Oculus into the next generation of computing, not just a social extension? That creates another set of challenges, which I discuss here.
Google the Conglomerate: After Nest, No Industry is Safe
I’ve spent many hours trying to puzzle out Google’s product plans. What’s the logic behind Google Drive, how does Motorola fit in a software company, and on and on (link). But with the acquisition of Nest, I think I’m going to stop looking for a single product strategy. I believe Google’s mission statement to “organize the world’s information” is no longer a meaningful guide to its actions. To me, the company looks less and less like a unified product company and more and more like a post-modern conglomerate.
The idea behind the “Internet of Things” is that network connectivity is moving into almost everything. If that’s Google’s investment thesis, it could rationalize an investment in almost any industry. Appliances? Absolutely. Shipping and logistics? You bet. Phosphate mining? OK, maybe not that. But any category of products that have electronics in them is fair game, as are any services that rely on data management. That’s going to be most of the economy.
You’re left with no grand product plan, other than the strategy of any conglomerate: Move into hot categories where we can apply our skills and expertise.
If that’s the case, we’ll need to evaluate Google’s strengths and weaknesses differently. We should worry less about the overall grand plan, and more about the management structure of its businesses, the skills of its general managers, and the efficiency of the support staff behind them. In other words, will Google be more like GE or like HP?
Here’s the key question: Does Google know how to manage itself this way? Does it have the right culture, processes, and team strength to run a conglomerate? Does it understand its weaknesses, and have a plan to fix them? For example, maybe the acquisition of Nest is less about its products and more about getting a team that knows how to apply high technology to a low-tech device category (link).
No industry is safe. The answers are crucial to many people. Investors obviously need it to understand whether Google stock is a good buy. VCs need to understand what categories of companies Google might buy. Competitors need to anticipate what Google might do next. And more broadly, the leaders in most industries should ask whether Google is now a competitor to them.
Wearability is Not Enough
I want to believe.
The forecasts for wearable computing are remarkable. The headline in Wired declared, “Wearable Tech Will Be as Big as the Smartphone,” but the article went even further:
“We’re...seeing an explosion of these devices on the market.... A new device revolution is at hand...wearable devices are poised to push smartphones aside.” (link)
So wearables aren’t just a new market, they’re the replacement for the smartphone.
The article acknowledges that may seem like an outlandish prediction, but argues:
“It may seem laughable to suggest that people will soon neglect their iPhones in favor of amped-up watches, eyeglasses, rings, and bracelets. But then again, 10 years ago it seemed laughable to think that people would use their smartphones to email, surf the web, play games, watch videos, keep calendars, and take notes.”
Just for the record, ten years ago the PalmOne website told people they could use their Treo smartphones to do e-mail, surf the web, play games, watch live TV, keep calendars, and yes, take notes. It didn’t work as well then as it does now, of course, but people weren’t just thinking about doing those tasks on smartphones ten years ago, they were doing them.
It makes you wonder if Wired’s editors are all under age 25 or stricken with a tragic case of group amnesia. But I digress.
I’m a gadget guy. I love devices, and I especially love the emergence of a new computing platform, because it creates so much opportunity for developers and so much innovation for customers. So the idea of getting in on another new platform is incredibly enticing to me. If you work in technology, it should be exciting to you too.
But precisely because a wearable revolution would be so enticing, we should be super-careful that we don’t get swept away by optimistic groupthink. For every computing revolution I’ve lived through, I’ve seen several others that arrived decades late or fizzled out entirely.
So while my heart wants to drink the wearable Kool-Aid right now, my head says to step back, think about it, and ask if the foundations really exist yet for a new computing revolution.
So far, my head is winning. I do believe wearable computing has a bright future, and in some vertical markets it’s already taking off. But is it the successor to the smartphone? Not now, and maybe not ever. Here’s why.
Two fatal flaws
I think there are two big problems with wearable computing today. First, the term is a catch-all, not a category. Second, even if you get the definition right, I think we haven’t yet found the killer app.
What is wearable computing, really? The term is kind of self-referential: wearable computing is computing gear that you wear. It attaches to your body or clothing, like a pair of glasses or a watch or a brooch. But those are extremely different form factors. I’m a Google Glass user and I’ve followed smart watches ever since Fossil worked on its late, lamented Palm OS watch in the early 2000s. Watches and glasses are completely different beasts, with different usage patterns and very different strengths. Grouping watches and glasses together in a single category makes as much sense as grouping together missiles and cargo planes and calling them flyable devices. The label is factually correct but meaningless in terms of predicting how the market will develop.
So rather than talking about a wearable revolution, we should be asking if there’s a smart watch revolution or a smart glasses revolution coming. When you look at the world that way, it gets a bit less exciting, because you see the weaknesses in each category of product.
Will wearables eat the smartphone? The tech industry is always full of predictions that some new type of device is about to swallow another one. It’s called convergence, and I’ve been hearing about it ever since the late 1980s, when Apple strategist Ken Lim started talking about it.
But there are always many more convergence predictions than actual convergence events. In an example of successful convergence, home stereo systems used to consist of separate modules: disc player, amp, tuner, etc. They eventually converged to a single unit for many buyers.
On the other hand, for decades many computer manufacturers predicted the imminent merger of the printer and personal computer. Converged computer/printers were promoted heavily in Japan, and several prominent efforts were made to bring them to Europe and the US. They all failed. Today PCs and printers are still separate devices.
Why do tech products sometimes converge and sometimes not? The general pattern is that devices converge only when the merged product is a fully-functional substitute for the devices being replaced. So smartphones rapidly killed the PDA because they could do everything a PDA could. Printers and PCs never converged because making a combined PC and printer required some pretty heavy compromises on the quality of the printer. Instead, printers merged with scanners and fax machines, which did not require major compromises. The only place where converged PC-printers got serious traction was Japan, where desk space is sometimes at such a premium that people were willing to accept a lower-quality printer in exchange for a smaller footprint.
So, for smart glasses or smart watches to replace smartphones, they have to be able to take over all of the functions of smartphones, without a major loss in functionality. Can they do that? Absolutely not. The screen is too small on a watch to browse, and smart glasses lack the touch controls that would let you control a browser or sophisticated app.
Even more importantly, neither device has the battery power needed to function as your full-time phone. In fact, today most of them rely on the smartphone to give you wide-area connectivity when you’re on the go. In other words, they are smartphone accessories, not replacements.
I can imagine a future wearable product that could do a lot more. You could browse the web or run a complex app if the glasses or watch had a full gesture-driven interface (something like Leap Motion, not the awkward stem-swiping interface of Glass). And eventually batteries will become powerful enough that a small one fitting in a watch or glasses could power a cellular radio for a full day. But that will require at least several years of development, plus a significant breakthrough in battery chemistry that can’t be forecasted. We’ve been waiting for it in smartphones for more than a decade; don’t hold your breath. By the time it happens, we’ll have bendable screens, and we’ll be able to create smartphones that collapse down to the size of a roll of LifeSavers candy.
So the real competition to a smartphone-replacing watch or pair of glasses is probably a smartphone so small that you can wear it on a cord around your neck or wrist. Everything eventually gets small enough that it’s wearable, and yeah I guess you can call that a wearable computing revolution. But it won’t happen this year, it won’t happen next, and we may all be quite a bit older and grayer before it becomes practical.
Where’s the killer app? If glasses and watches can’t replace a smartphone in the foreseeable future, the other way they’ll get broad adoption is if they do something else that a smartphone can’t do at all, or cannot do as well. This is the way most major computing platforms get started: They enable something new and compelling, people buy them for that purpose, and the devices then branch out into other usages. Mainframes started as military calculators. PCs started as word processing and spreadsheet machines, BlackBerry started as an e-mail pager, and the iPhone started as a phone that could also browse well and play music.
What’s the compelling, broadly appealing usage that could drive adoption of a smart watch or glasses? So far I don’t think there is one.
I’ve been playing with Glass for weeks now, and have put a lot of apps on it. It’s a bold experiment, I applaud Google for trying it, and there are some things I really like about it. I had tried camera glasses before, but without a screen you couldn’t tell where the camera was pointed. People often move their eyes rather than their heads, so a camera focused straight ahead often doesn’t show what the user is looking at. Because there’s a screen in Glass (and a surprisingly bright, readable screen at that), you can see exactly what you’re photographing. The sound playback also works surprisingly well (sound recording sucks in a noisy environment).
But for me, the negatives outweigh the positives. Battery life is very short, and the user interface based on swiping the stem of the glasses is alarmingly nonintuitive and limited (it’s like trying to have a conversation where you can only say “yes” or “no”). The spoken commands work a bit better, but I’m not comfortable speaking to my glasses in public, and I doubt most other people will be either.
But the biggest problem is that none of the apps I’ve seen so far makes me want to wear Glass on a regular basis. The apps are vaguely interesting, and the geek in me enjoys playing with them. But I’m not getting the sort of big revelatory feeling I had when I first used PageMaker on the Mac, or when I first browsed the web on an iPhone.
We have seen some traction for wearable devices in vertical markets, especially sports and health. Smart watches and other wearable fobs are a great way to track your exercise, and sports goggles are a cool way to make videos of your ski runs. It’s very telling that these devices have sold well on their own, without any need for hype or even a heavy marketing budget. That’s what happens when you find the right app -- it takes off on its own.
Unfortunately, fitness is too narrow a vertical to carry a platform to the takeoff point. You may get nice sales for the company that made a device, but the installed base of devices won’t get big enough to attract a large group of third party developers who then create the apps that take the device horizontal.
The main horizontal usage for wearables that’s being advocated today is notifications. You can configure Glass to show incoming messages, and most of the smart watches can display things like caller ID for your smartphone. The idea is to let you consume (and send) small amounts of text and images without taking out your smartphone. To save a few seconds per notification, you have to pay for a separate device, learn to use it, and remember to recharge it every night. Will the benefit exceed the cost and hassle for tens of millions of people?
It’s been tried before. Does anybody remember Spot, the smart watch platform Microsoft promoted in the mid-2000s? You could configure the watches to give you notifications, headlines, and messages, and they didn’t even require a smartphone because they received notifications from sideband FM broadcasts. Despite a hefty Microsoft investment and several licensees building devices, Spot went splat in the market.
That does not mean notification wearables are destined to fail forever. Many tech product categories fail repeatedly before they succeed. But Spot did prove, very decisively, that just adding notifications to a wearable device won’t drive demand. There’s some additional step of clever software, improved user interface, or integration with other products that’s needed to make the app a killer.
If it can become a killer at all.
So the reality is that today’s forecasts of a wearable explosion are based on faith, not analysis. If you believe a wearable killer app is coming, then it’s easy to convince yourself that many millions of these things will be sold. I want to believe that too. But I think I need to see the app first.
Has Microsoft Gone Nuts?
The rumors floating out of Microsoft these days are remarkable:
—Microsoft’s Nokia business is working on an Android phone, and Microsoft might let them sell it (link).
—Contrary to its entire business history, Microsoft may give away Windows phone and Windows RT for free (link)
—The Start menu will be restored in at least some versions of Windows 8.1, and it will be possible to run Metro apps in floating windows inside the traditional Windows interface (link)
Those are just rumors, of course, but they’re coming from multiple reporters who have strong ties to Microsoft, which means they’re probably genuine plans or at least serious trial balloons. Taken together, the reports give a picture of a company that’s laudably willing to revisit its assumptions, but that also seems to have lost track of what it’s trying to accomplish. Specifically:
—Making Windows Phone free is a nice idea and would have been a clever response to Android six years ago. Back then, the idea of a free mobile OS was appealing to handset companies, which are at heart surpassingly cheap. Faced with rampant iPhone sales and no good alternative, the phone companies were very willing at that time to give a try to the low-cost Google-backed approach.
But today, Android has huge market momentum, so a phone vendor switching off it would be abandoning most of the available customers, something they are extremely reluctant to do. Besides, getting a free OS is not currently the main concern for most handset companies – the big worry is finding a way not to be crushed by the dominant Android vendor, Samsung. Windows Phone has its own dominant vendor, Nokia, so it has all the negative aspects of Android without the customer base.
Nice idea, Microsoft, but you’re closing the barn door not only after the horses left, but after the barn burned down.
—I think a more interesting licensing strategy for Microsoft would be forking Android: Take an open source version of it and add your own services on top. That’s apparently the idea behind Nokia’s OS plan, in which Nokia would supposedly replace its low-end phone OS, Series 40, with a modified version of Android. Those phones could then tap into the Android app base, making them more attractive to low-end customers. (Heck, they might even be more attractive to high-end customers as well.)
But if that’s the right strategy for the Nokia business unit, it’s also the right strategy for Microsoft’s OS licensing. If you’re giving away Windows Phone for free, the only way you’ll make money from it is through bundled services. You could just as easily bundle those services on a forked version of Android, save the expense of creating and maintaining all the low-level OS plumbing, and get access to the Android customer and app base. That sounds like a much more appealing licensed OS than Windows Phone, even though you still have the problem of Nokia competing with your other licensees.
But that’s not the roadmap we’re hearing from the Microsoft OS team. Instead, they’re talking about creating a single Windows code base that runs across all types of devices, something that’s technically appealing if you’re a Microsoft engineer but thoroughly uninteresting to customers.
So the various parts of Microsoft appear to be working at cross-purposes. The Nokia unit has a nicer mobile OS plan but no intent to license it, and the OS group has a licensed mobile OS with almost no customers. Something’s got to give.
—Meanwhile, the rumored changes to Windows 8 are, to me, a mix of sensible ideas and bizarre improvisation. The word is that Microsoft’s going to offer three versions of Windows (link):
A phone/tablet version that runs Metro-style apps. Although I’m sure Microsoft will save money by unifying development, customers don’t care about that. They care about features. Unless there’s some dramatic change in functionality that we haven’t been told about, I think this new product will have as much appeal to licensees and customers as the current version of Windows Phone. So you can think of this as the version of Windows that no one wants.
A “consumer PC” version, which may or may not be able to run existing Windows 32 applications. If it can’t, I think it will sell as well as Windows RT did.
An “enterprise PC” version, which would run today’s Windows 32 applications in addition to “modern” (Metro-style) touch apps. The Start menu would apparently be restored in Win32 compatibility mode, and you’d be able to run Metro-style touch apps in windows inside the Win32 interface.
The only configurations likely to sell in volume are the ones that let customers run their familiar Win32 apps. I think reviving the Start menu in these configurations is smart; it makes it easier for current Windows users to move up to the new OS. That’s such a no-brainer that Microsoft should have done it in the first version of Windows 8. The question is not why they’re doing it but what took them so long.
On the other hand, running Metro apps in a traditional Windows frame is...I don’t even know what word to use. Bizarre? Crazy? I’d even say frightening, because it implies that Microsoft has lost track of why it did Windows 8 in the first place. The idea behind Windows 8 was to build a full-function PC that could also switch to work as a no-compromises tablet. I don’t think a lot of customers actually want that, but at least it’s a clear direction.
Mixing the two metaphors on the same screen completely undercuts Microsoft’s basic idea. Instead of switching between tablet and PC mode, you’re mixing two totally different usage paradigms on the same screen. How does the user know when to touch and when to click? It’s like driving a car that has both a steering wheel and a joystick. Instead of giving users a tablet and a PC that you can jump between, Microsoft is at risk of giving users an awkward combination of the worst of both worlds.
It feels like the people who were responsible for the original Windows 8 vision and strategy have left the scene, replaced by folks who are tactically tweaking the products they inherited, with no sense of where they’re going long term.
The focus on rationalizing code bases feels symptomatic of this. It’s a sensible thing to do and will cut Microsoft’s costs, but it does nothing to increase demand. In the tech industry we overuse the phrase “rearranging deck chairs on the Titanic,” but in this case it really seems to fit.
What it means
New CEO needed. It’s important to remember that Microsoft is in the middle of its biggest business transition ever. It’s simultaneously getting ready to merge with an enormous Finnish phone company, and hiring its first CEO who wasn’t a cofounder. That sort of situation typically encourages bizarre behavior. For example, groups will try to lobby for their favorite projects by leaking information about them, trying to build up public support that will influence the new CEO.
Think about it, why would Nokia possibly want to leak the news that it’s replacing the OS in its low-end phones? That’s very likely to stall sales of the current phones, driving down revenues. Nokia just made that mistake with Symbian, and now it’s repeating it? Somebody in the Nokia business apparently feels it’s more important to lobby for its OS vision than to protect current sales. It’s a triumph of business politics over short-term business sense.
Another behavior we should expect to see is business managers pushing forward aggressively with their plans, looking to prove that they’re dynamic leaders who don’t need to be replaced. It doesn’t matter if those plans contradict company strategy; the point is to look dynamic. The strategy’s going to change anyway. And what’s Ballmer going to do, fire you?
We should expect to see more odd behavior until MS picks a new CEO. Then it’ll be several months of strategic reviews, followed by ritual bloodletting and reorganization. So Microsoft is likely to continue to be confused for at least the first half of 2014, and that’s assuming they can choose a new CEO quickly, something they may not be able to do to do (link).
Windows Metro = OS/2. The big bet in Windows 8 was that Microsoft could re-ignite sales growth for Windows by tapping into the tablet market. A PC that could also work as a tablet, Microsoft reasoned, would be more attractive to customers than either product alone. I think it’s pretty clear that the Windows 8 bet is failing. Windows 8 is being pre-installed on a lot of PCs, but that’s because Microsoft is pushing it through the OEMs. Microsoft could ship a hamster wrapped in duct tape, label it Windows, and a lot of OEMs would bundle it. What hasn’t happened is Microsoft’s promised explosion in user demand for convertible Windows computers, followed by an explosion in developer activity that might drive future demand.
I think it’s increasingly likely that the tablet interface formerly known as Metro will be more or less stillborn as a development platform. It will linger for a long time as Microsoft’s software for touchscreen devices, but I don’t see it being embraced by the leading-edge developers who can drive new demand to a platform. Instead, it’s kind of the third option for developers who have already built for iOS and Android.
I think most PC users will stick with the traditional Windows interface, most Windows developers will follow them, and most people who want tablets will get iPad or Android or Kindle.
So the challenge for Microsoft’s new CEO is the same one Steve Ballmer has tried and failed to answer for years: Demand for Windows is declining because the platform hasn’t done anything new for a decade, while Microsoft doesn’t control the fast-growing segments in tablets and smartphones. Microsoft tried to use Windows 8 to take over tablets. That failed. What do you do now?
The traditional answer would be to break up the company and try to salvage parts of the business that can grow on their own. It’s the kind of big deal that consulting companies love to recommend and investment firms love to broker. Besides, it looks bold, even though it’s actually the path of least resistance. So I wouldn’t be at all surprised if the new CEO chose that path.
The alternative to a breakup is to actually fix the product problem: to offer new functionality for Windows that’s more attractive than the competition. That would mean new mobile software that’s substantially better than iOS and Android, and/or new PC features that will give people a compelling reason to recommit to personal computing. There are plenty of opportunities to create that sort of innovation (link), but Microsoft doesn’t have a great record as that kind of product leader.
So if Microsoft is to stay together, the new CEO needs to be either a product visionary or know where to find one. I wish them luck.
