The lesson from OQO

A lot of people online are lamenting the business troubles of the OQO mini-computer. Wired's commentary is pretty typical: "When OQO’s excited developers showed me a prototype behind closed doors seven years ago, it was clear that the company was ahead of its time. Now, its time appears to be up." (Link)

Baloney. OQO's time never arrived in the first place.

I'm always sad to see any startup run into trouble; especially a device company, because they're so rare. OQO did some beautiful things technologically. But in my opinion, they never had a chance as a business. There just wasn't a significant market for a shrunken, compromised PC at the same price as a full-size laptop. At first OQO was supposed to be a horizontal market device, and when that didn't take off the company went after business verticals (the place where struggling consumer technologies go to die). Sometimes that works, but usually it ends up being a gradual way to wind down the company.

But why, if OQO is failing, are netbooks taking off? Two words: They're cheap. It's one thing to ask someone to pay $900 for a less functional notebook. It's quite another to ask them to pay $300.

The lesson: Don't build something just because you can. Make sure there's a real market for your device before you create it. Geeky coolness will impress Wired reporters, but it won't get you a lot of sales from real people.


Anonymous said...

Michael -

" verticals (the place where struggling consumer technologies go to die)"

Interesting comment. Can you elaborate? Examples?

Michael Mace said...

Sure thing. Thanks for asking. It's a pattern that I've seen at a number of tech companies. They'll do a product that's aimed at a fairly horizontal consumer market. (I'm not talking about games, but some sort of productivity tool that's aimed at a broad swath of consumers. It's especially common with hardware.)

Then sales don't go as well as expected, and all of a sudden they are piling up expenses without the revenue to cover them. And someone will say, "you know, this product would be especially good in (insert vertical business market here)." So in more-or-less desperation, the company hires some enterprise sales reps and tries to flog the product to that vertical.

I saw Softbook do this (they were hot on using the device as a routing mechanism for newspaper delivery people). Palm did some of this for a while; we were really excited about medical and real estate.

In the case of OQO, when I was at Palm and first heard about them, the basic pitch was "this thing is about the size of a PDA but tons more powerful." A classic horizontal pitch. Years later I saw them at a trade show and they were all about verticals. I thought, "that sounds familiar." So I was not at all surprised when they announced they were in trouble.

I'm not saying that vertical markets can't work, but they require special organization and do not take off overnight. They also don't usually generate enough sales volume to make up for a missed consumer forecast.

RIM is a classic example of how to do verticals right -- they started with verticals like Wall Street, and then gradually went horizontal. But they planned for that from the start, and had years to execute on it.

Anonymous said...

I agree, OQO had the right technolog to be a great sucess but they did not use the technology the way people wanted. What I mean is that sure there is a good market for a pocket laptop running full Windows but IT IS NOT WITH A THUMB BASED COMPUTER!

What they should have done is make a basic true touch type pocket laptop. Something like a modern Psion 5mx so that it would have a good keyboard you could do real work. Full Windows requires a keyboard so making a computer and expecting us to change and want to type our next report with thumbs is just plain dumb.