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The Critical Path #2: Synchronized failure – 5by5

Jun 18, ’11 1:47 AM
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The Critical Path #2: Synchronized failure – 5by5.

Horace Dediu and Dan Benjamin discuss how smartphone pioneers Nokia and RIM falter while the market is booming.

  • Great thought process and discussion. One of the the things that caught me was a common point of failure for a company can be actually listening to its customers. I have thought of this but from a slightly different view point.

    One of the biggest complaints you hear levied against Apple is the concept of "choice". The idea that Apple is competitively weak because you have "Steve picking what I want" view point. To me this is what I call design. I see that Apple is really separated by much of their competition specifically because Apple does not listen to their customers as much as many companies. Apple makes actual design decisions.

    End users scream for physical keyboards.
    Apple delivers a virtual keyboard.

    End users scream for a stylus.
    Apple delivers a touch interface.

    End users scream for streaming.
    Apple delivers iTunes iCloud solution without streaming.

    End users scream for a tablet OS X computer.
    Apple delivers an iOS based iPad.

    The list can go on and on and on. One reason Apple is disruptive is because they actually design. They make decisions. Unlike Dell that designs and announces 3", 4", 5", 6" and 7" devices to see what sticks, Apple says: "The iPad is a 9.7 inch 4:3 screen. The iPhone is 3.7 inch screen. It is great. You will love it."

    More often, they are right. They actually use the product and design it.

    • claimchowder

      I think it was Henry Ford who said (something like) "If I had asked the customers they would have told me they wanted a faster horse". He gave them automobiles instead. That's exactly the way Apple acts today. They use their engineers' and designers' superior intellect and experience to create something that the customers (and competition) do not perceive as possible at a time.
      Then, of course, once the product appears on the market and proves it's existence, in come the cloners… :/

    • Jerome

      And, of course, "listening to customers" or "designing for customers" is different from "listening to tech blogs". One of the major fallacies is to believe that anyone outside of the tech-blogosphere cares or even knows about what those pundits scream for.

      That's why the ipad has no USB port, regardless of how much tech bloggers claim the device to be useless without the option to comnect some old inkjet printer to it.

  • claimchowder

    I have yet to listen to the podcast, so I hope I'm not asking something that's been answered already, but can you say something about the relative value of the Nortel patents to the respective players. I can't imagine they are worth for Google what they are for Apple. How about the other players?

  • I'm not convinced by the 'proofs' Horace adduces in the first five minutes as to why company failure is not to do with a failure of management.

    His first proof is that companies failed in the past but we don't remember who their management team was. Just because we don't remember them doesn't mean they weren't to blame.

    Second proof is that people don't go from smart to stupid overnight, and that today's object of ridicule was lauded a few years ago. But management failure doesn't necessarily equate to stupidity. And, especially in the quickly shifting mobile world, you could argue that it is often management's refusal to move beyond past successes that hampers future growth.

    So it's not that these people have become stupid, it's that they're too glued to what made them a success in the first place. You see it with RIM and Noklia – misunderstanding the market and wrongly assuming they could just carry on doing what they had been doing before.

    The third proof from Horace is that these companies tend to fail at the same time. I think this is a little stronger evidence of the blame being external. In the mobile example, Apple's emergence onto the scene, followed by Android, caused a huge downturn in the fortunes of RIM et al. However, it still remains a management fault that RIM/Nokia did not react quickly enough to the new threat. They dismissed (and ridiculed) it.

    Ultimately, a multinational corporation is not going to be brought to their knees solely based on one bad CEO, but a poor leader does inform the corporate culture and play a major role in its demise.

    • I think you missed his point. Failure is seldom a single point of failure. Successful companies, like RIM and Nokia, are successful because they create a seriers of policies from the management level to the lowest employee that form success. These companies fail because they miss "the next big thing" and this is often driven by what their customers are telling them.

      If you have 70% of the market share, it is typically safe to assume that what those 70% seem to want maps into the greatest majority of potential customers. Trouble is there is this other 30% (or 2% or 10% or whatever). It is possible to release a new product to this group that takes your enterprise by surprise. Not only that, you don't initially see the 2% of the lost market share as a threat. Even now, Apple has only 5% market share in mobile handsets and >55% of all the profits.

      For the most part, when companies fail, you have many of the same policies and people in place when the company was considered "gold". Failure is typically driven by outside forces that were almost impossible to predict at the time they started but look obvious in hindsight.

      • Much of what you say is covered in my original post. Companies fail because they so not react quickly enough to market disruptions. Companies hang onto policies which served them well in the good times, unprepared to accept that times have changed.

        Over the course of the show, Hoarce builds a convincing case. I just take issue with the three proofs he starts off with as I think they're a little flimsy.

      • Again, I think you missed Horace's point.

        Horace had a Hypothesis: Good companies do not fail simply because of "bad management".

        Horace offered up three reasons, he called them proofs, as to why.

        Horace offered a sound argument to support the three proofs.

        You accept the last part of his discussion but not the first two even though the discussion centers around the first two? I will accept the first one, we don't remember the leaders of failure, is the weakest of the three but the observation tends to be true.

    • asymco

      The other problem with the "bad management" theory of company failure is that it absolves anyone from looking for other causes. It also leads to disconnects between CEO pay and performance because boards place all their faith in the leader.

    • Rob Scott

      I think Horace makes a convincing argument. Explain to us why a smart management suddenly becomes stupid across the industry in unison and fail in unison just like RIM and Nokia are now. There are many factors that result in failure I think listening to your best customers is the biggest.

      I wish Critical Path was weekly!

    • asymco

      What I cited were not "proofs" they were "disproofs" that contradict the theory that management is the sole or predominant cause for failure. The weakest may be the first, but I use it because you won't find many examples where historic failures are attributed to management. Is the failure of Sears or Macy's due to bad management? Today typically people cite discount stores not bad decision making on the part of department store managers, but back in the day, I'm sure the prevailing assumption was that somebody dropped the ball.

      In other words, the further we are away from the point of failure the less likely we are to get personal in our blame. In contrast, no matter what the circumstances are, people *inside* a failing company unanimously blame the management.

      So if you zoom the scale from nearest to furthest away from failure, the more likely we are to blame people rather than systems. I think this selective causality condemns the explanation.

    • poke

      I think he's essentially right, that the cause of failure is most commonly external (market disruption, etc), but at the same time I'd say that the right management can do extraordinary things. Apple's management is clearly responsible for creating a company that's not only a disruptive innovator but is willing and able to knife its own cash cow for the next big thing. Not many companies can do that and Apple's flexibility in this respect is surely down to Jobs and his team's desire to "stay foolish, stay hungry." Everything about Apple, from its institutional structure to its focus on profitability to its tiny product catalogue to its willingness to simply ignore certain markets, is geared towards being able to take risks. But does that mean every other management team is failing? Or is Apple too exceptional in this case? Could every company function like Apple does?

  • 1) Love your work, but I believe that it does come down to management. Not necessarily that they move from smart to incompetent, but their inability to kill their cash cow before their competition does it for them. Apple is the first company that we have seen that is willing to kill their cow. The iPod was a multi-billion dollar business and it has been virtually changed into an app. It is almost like investing. When you have a small account you aggressively try to grow it. Once it become much larger – you go in to defense mode. The goal becomes more not to lose than to win.

    2) How does IBM fit into this boom/bust cycle? IBM has managed to be relevant in each computing era.

    • asymco

      IBM is a company that survived by moving from hardware to services. Services are a different cost and profit structure so in many ways it's a different company than it used to be. IBM was disrupted but was able to become something else. (Ericsson has been trying to do the same thing.)

      This is why if you try to see how Nokia or RIM would turn around you need to see what other business they will become, not how they will be big phone vendors again.

      • poke

        Maybe RIM could dump its hardware and open up its messaging service and enterprise infrastructure to other devices or partner with another manufacturer?

      • Walt French

        Yup. But they would be throwing away the profit potential that they think they have in the hardware, while competing in messaging with others, Apple merely the most visible today, who are incented to drive down the marginal cost of those services to zero.

        I think you point out the fundamental problem: RIM has had a GREAT messaging/enterprise email service, but only because nobody else was in the space. Now that there is competition, the cost of it is falling to whatever the low-cost provider wants for a rather generic product. Pace Horace, when your product is good enough is the time of greatest risk. Nobody wants BBM; they just expect messaging to work securely, instantly and reliably.

        Jobs's advice to “stay hungry; stay foolish,” or Andy Grove's “only the paranoid survive” seems more apt than ever. I am amazed by how suddenly Shiva swoops in and fells the greats, even as I think I have a fair view of the software competitiveness and development times for phones.

    • To me, that is only part of the puzzle. If you go with the hypothesis that a good company fails just because of management than you have to go by the hypothesis that a good company is good only because of management. By assigning all of the blame to management then all of the success must be attributed to management as well and this negates the hard work of the lowest employee.

      It is possible to make all of the right decisions and still have your company fail. That is because there are outside forces working on new directions and technologies the "company to fail" is not involved in. Look at all the computer companies that had tried and failed in mobile. HP and Dell had each tried their hand at WinMo. Both failed. Both were large well connected companies that new how to play the politics.

      In early 2007, I think few would have seen the rapid rise of what would become iOS. Most found the idea of Android a curiosity.

      NOTE: I love to look at senior management as the root of all that is wrong and evil but I also know that is not a valid viewpoint. I know if I allow myself that viewpoint, I will no longer be able to be objective.

      • I don't remember all of the points from the podcast. I wish that they were listed somewhere for our review. The problem is that there have not been enough tech companies that have survived multiple computing eras to study their success. I brought up IBM which has been successful in all eras and of course Apple. IBM reinvented itself in services. Apple has constantly innovated killing its cash cows along the way. In both of those cases, it was a management decision to pursue those paths. If we don't throughly exam the management decisions – it comes down to being in the right place at the right time. That is obviously hard to repeat.

      • John

        Certainly this is a complex issue. Upper management can be compared to the officers of a ship. They are the only ones able to steer the ship but they are also subject to the vagaries of the sea and weather. Anyone can sail in calm seas. It is rough seas and fog and failing instruments that test your abilities and sometimes the ship is struck by a rogue wave that no one could deal with.

        Having said that, I see a lot of odd things in corporations. Some managers are victims of their corporate structures. Nokia setup competing divisions thinking that the best products would rise to the top. Instead the losing divisions would join forces to take down the leader at any given time. As said elsewhere, management is human. They have a certain world view and level of intelligence and education. I think because information is noisy they feel comfortable making choices that fly in the face of some facts. (maybe another way to define hubris?)

        So I think that upper management has to take most of the blame for failure, but I'm willing to cut them slack based on circumstances.

        The more interesting question is how can management be taught to do well? Maybe they can learn this in B school. It seems that once they are in charge they don't want to be told anything.

  • WE'RE LISTENING: When a post is made on Ars Technica, AppleInsider, or MacRumors there can be 250 comments in a single day. That's not happening here on asymco.com, thankfully. It's a good thing that Horace is willing to delete comments that don't add to the conversation, but also I can't help but feel that asymco.com is instead causing people to listen and reflect more rather than speak. It's attracting the "observer" personality types, of which I'm one.

    FOG OF WAR: In this podcast you point out two facets of conducting business. One is "execution" — refining, polishing, and maintaining parity with the competition. And the other relates to "anticipation" — observing trends, "seeing" and acting on what's next, watching the puck, and the willingness to change direction at the expense of your own limbs.

    With Apple in particular, what I saw with the WWDC announcements was a little of both mixed together. iCloud, for example, is both execution and anticipation blended together in a mix that's a bit cloudy to most, he he, and it takes some effort to analyze and see which parts are what. There has been a lot of confusion and misunderstanding.

    CUSTOMERS: One thing not mentioned much is that it's the customers who fork over the cash that make or break companies. While customers may not know what ther really want next, understanding what they "respond to" is critically important. This is an area that gets very fuzzy and most have trouble discussing it and quantifying it. The "one big thing" that companies live and die by is one of the most misunderstood — the emotional, psychological creatures who pay for the trending gadgets (yet the people running the companies are psychological creatures as well).

    Your comment that sometimes leaders do need to go to the mountain to listen to their intuition is one mechanism by which we're using our psychological selves to include that which cannot be measured and quantified in cold hard analysis. Intuition is powerful, misunderstood, yet essential.

    Now… look directly at Apple's advertising. Heck, just look at the new ad that came out yesterday. PURE EMOTION!! One of the most critically important facets of all this is staring us right in the face. Sorry to be cliche, but it's another elephant in the room. If you haven't seen Apple's new ad, go to their site now and observe. 🙂

    If a company wants to be successful, they'd better understand human psychology as well. And people also know when you're trying to BS them too, so watch out for that. Motorola was BSing everyone with the XOOM ads at the SuperBowl. It's tricky, but if masterfully executed, you understand why the lines wrap around the entire mall when a new Apple product is introduced.

    THANKS. I'm a humble listener and observer. I can tell that what's happening here at asymco.com is something remarkable and can't get enough. And I appreciate the opportunity and privilege to share my observations here, even if they're still a bit off the "mark." 🙂 (wahh wahh wahh)

  • Walt French

    Horace, the more somebody has enough IQ to click on your link, the more s/he should be able to learn; I am amazed by the wealth of ideas. Thank you!

    My large-company experience was quite isolated from the strategy (which was opaque to outsiders, too), so I was especially taken by your sharp distinction between (1) engineered, metric-driven strategy, and (2) gut-feel, intuitive disruption. This overlooks the notion of “real options,” when a RIM hears rumors that Apple might be getting into its business, decides it probably has nothing to do with their high-reliability, high-security, Enterprise-based business, and THEN goes out and shells out the bucks for the “suppose they succeed” counter-strategy.

    Many times, the nay-sayers will have been right: Pets.Com will fall flat on its kiester; Apple will fail with Teh Social, and the money spent on Plan B will look like it was wasted. But just as I can profitably buy a stock option estimating that it is 75% likely to expire worthless, I might want to look carefully at the option value of having done the first 6 months of strategic planning when it turns out the iPhone sales are going a bit beyond the small circle of Apple faithful.

    Intuition is a horrible way to run a large company, but game theory or a host of other perspectives would emphasize the cost of putting all your eggs into your Plan A basket. There is nothing that company management is more responsible for than leading a company thru major market disruptions or strategic turns. And believing your own PR Dept's dismissals of a competitor is perhaps here the fastest way that management can ruin its organization.

  • Eric D.

    Another interesting show, Horace. Your general principle for the mentality that causes these big companies to fail could be summed up as "don't mess with success." You also contrast what makes Apple different: a relentless drive to innovate at every level of the game, regardless of how well a product is doing. When I hear the doom-sayers going on about how Android is going to eat Apple's lunch, I remind myself that Apple is certainly not going to sit on its laurels. New software, new materials (that liquid metal is going to be something), retina displays and evolving power solutions (I've read they're developing fuel cells) should keep the rest of the pack at bay for the foreseeable future. This technological sprint reminds me very much of the 60's space race to the moon. (OK, dating myself.)

    And so glad to see that there was a new podcast this week. It wasn't listed on the 5by5 schedule, so I feared the worst. I guess Dan Benjamin finally got his studio unpacked and set up. Can't wait for more.

  • Walt French

    One question: in the podcast you note services as “above” hardware in the value chain. What determines height?

    • AC88

      Height is a function of being farther downstream.

      In such a map of the value chain down is downstream and "above" or up is upstream.
      One other common value chain model maps this migration in accordance with traditional western reading practices of left-to-right, where left is downstream and right is upstream

  • Ian Ollmann

    Thank you for a second high quality podcast! I hope you are able to make this a continuing reality.

    I completely agree about the relative unimportance of management to the RIM and Nokia failures. Having a world class operating system is a tremendous competitive moat (c.f Buffet, e.g. Microsoft) and it has enabled Apple to sweep in with a disruptive product that is quite difficult and expensive to copy. I continue to be amazed that there is so much disagreement on this subject or that such a vigorous defense is required.

    What I wish I understood better is why the carriers seem to feel they had such a vested interest in providing uninteresting and unuseful devices on their networks. Here carriers seem to be working entirely contrary to the interests of their customers. That can't end well.

  • samirsshah

    There is a lot of food for thought regarding this topic in Clayton Christensen's books starting with "The Innovator's Dilemma". It was both Nokia and RIM management's fault to take on Apple blindfolded when this kind of management thought and help was available. Early fliers crossed the Atlantic with minimal instrumentation (essentially blindfolded) but now we have a lot of instrumentation help available.

    And I was surprised in finding many of Horace's thoughts already analyzed deeply in this set of books (management does not get foolish overnight, etc). Again, why should Horace reinvent the wheel when such deep analysis has already been done.

    • asymco

      Clayton Christensen is the source of most of the theories I cite. He was my professor and we still meet regularly at the Forum For Growth and Innovation at Harvard. You may want to search this blog for his name for additional citations.The application and extension of a theory allows us to find anomalies which may improve it. As far as I know this has not been done for the mobile computing market.

  • Great read on current topic I.B.M. at 100: Lessons in Tech Longevity – http://nyti.ms/lSb85G

    • From the above NY Times article – “It’s really hard to move a company when it’s doing well and not facing a crisis.”

      The more I think about this the more my finger points to management. We are talking about multi-billion dollar companies with vast resources and expertise. It is the management responsibility to determine how to direct those resources. It has nothing to do with becoming foolish overnight. IMO, it comes to recognizing the problem and reacting. The ship ain't gonna turn until the folks at to top believe it is time. If we were talking about small startups it may be a different story – where individual contributors have more pull.

  • Roo44

    I disagree that failure is not a result of management, It is not that management goes from smart to stupid overnight, it that they are human who succeed and fail by over drawing on their strengths and avoiding their weaknesses.

    The becomes successful in a organization because they perform well in that system. in the corporate it is a system that encourages consistency and avoid risk taking. When outside factors require the system to change, behavioral biases is to return to the practices, the familiarity that lead to their success in the first place. Organizations, like individuals, under stress will call on their strengths rather taking a risk of trying a different behavior, often when the situation require just a different approach.

    This is why it is usually very difficult for single CEO to manage effective at every stage of a business life cycle, different skills/strengths are required at different stages. An interesting observation of Apple is it has implemented a system based on a process of creative and disciplined, a behavioral combination not seldom practice with such consistency in business or individuals.

    • Walt French

      A great baseball player doesn't get on base the majority of the time. A great management team can still fail to comprehend the disruption and respond in time.

      'Course, the LOUSY baseball players strike out a bit more often. A single K doesn't prove much, no matter how it hurts the team. You have to go a bit deeper. In RIM's case, I see them waiting a crucial 18 months before they took iPhone seriously, by which time they were doomed. I sure can't say I'd have done better.

  • AlexUcla

    Interesting post. I didn't read everyone's comments, but I would like to add that for anyone interested into delving more into the debate of "managers vs. business structure" leading to downfall, 2 good books are The Little Book that Builds Wealth by Pat Dorsey, and How The Mighty Fall by Jim Collins (also wrote Good To Great). The Little Book that Builds Wealth actually calls out Jim Collins for being wrong about managements role in business success and attributes more to the moat a company builds. They are both compelling, fact-driven arguments, and are pretty quick reads. In terms of the moat (off the subject), I am surprised that most people are kind of laughing Apple's iCloud off, when in reality, it is just going to strengthen Apple's iDevice moat even more. I saw an interesting clip with Henry Blodgett on there kind of playing it down. It reminds me of everyone laughing off the iPad, and even further back, as Horace was saying, laughing at Ghandi. I guess history will repeat itself over and over again.

  • chandra2

    Mark Hernandez makes some great points in one of the comments above. Thanks Mark.

    I agree that asymco is indeed a different place, a calmer place to reflect and intelligently discuss and dissect the matters, all led by Horace.

    In baseball, when a hitter swings and misses a fast ball or thinks it is a ball but it turns out to be a strike, the tv shows the side view and the commentator laments what a sure thing he missed. I usually find that quite odd and laughable. A basic assumption there is that the hitter is in complete control of hitting the ball which is not true. There have been enough statistics to disprove that. Like hitting streaks are really streaks and does not correlate to some superior talent of the hitter. Second, that side view that is shown on TV is not the view that the hitter has. And what the TV commentator does is 'post-fact' analysis which has no bearing to the mental and physical process that the hitter goes through. It is not that he is swinging randomly, otherwise anyone can be a hitter. There are only a small % of people who can play at that level. But even at that level, hitting is not deterministic.

    I think this discussion has a lot of similarities to the above.

    Second, What is actually more useful for analysis and learning is:

    – Find all the correct things that a failing company did. This at least has a chance for us to learn why it still failed.
    – Find all the incorrect things that a successful company did. This at least has a chance for us to learn why it still succeeded.

    This will eliminate the survivor bias that is inherent in the other two forms of analysis, namely, finding the incorrect things of a failing company and the correct things of a successful company. These latter two are a bit easier psychologically for obvious reasons but their usefulness for the future is much less than the former two.

    • Kas

      Yes, Asymco has become my "place of peace" –


      🙂

    • George Slusher

      Chandra:

      I like your "second" points. They are counterintuitive and thought-provoking. The mistakes made by those who failed and the "right" steps made by those who succeeded are usually fairly obvious, so the "other to forms of analysis" are not only psychologically easier but a bit lazy.

      Re: baseball. I've been told (by a former minor-league player) that hitting a baseball thrown by a major-league pitcher is the most difficult action in any sport. The relatively low success rate, even by highly-skilled batters, should be testimony of that.

  • simply awesome

  • Walt French

    Some readers might find interesting some thoughts about how Google is the disrupter these days. For your consideration, and I'd love to hear a debate around it (not claiming it is the Whole Truth):
    http://abovethecrowd.com/2010/01/05/android-or-ip…

    • simon

      One thing I'm still interested in is this: Microsoft earned direct loyalties from selling Windows and Office. How much does Google get from giving away Android? I know Google earns some direct income from it, and the data mining opportunity must be enormous and I guess it does slow down the adoption of Bing that would've been inevitable if Microsoft was at Google's spot. However somehow I just cannot imagine Google earning anywhere near what Microsoft has earned through Windows and Office.

      • chandra2

        >I know Google earns some direct income from it

        Really? Who pays them? I thought Android is free.

        In fact, one chinese phone manufacturer with some chutzpah wanted Google to pay them to make Google as the default search engine on Android phones.. ha..ha… I think Bing is willing to pay money for that privilege.

      • Walt French

        Android may be free but there's no suggestion that Google Maps or Voice is. I don't know the platform or its arrangements that well, but especially given the $X billion lawsuit Oracle is pursuing, they must have given a smidgeon of thought to monetization.

        Or Not??? “Epic FAIL” seems to transcend the triteness and be appropriate.

      • George Slusher

        Google is interested in selling ads. Google's customers are not the Android users nor even the phone manufacturers or carriers, but the advertisers.

        Minor typo: "loyalties" should be "royalties," though your usage IS interesting!

  • Nokian

    We don't remember who was running the past's failing companies because most managers and executives do not get much personal publicity. This is a characteristic of business journalism, not an indication of lack of responsibility. I would argue that it is the responsibility of managers to identify market changes and adapt the company to meet them.

    In the case of Nokia, or (I imagine) any large company, I was present when both internal teams and external consultants warned management as early as 2005 about almost exactly what has occurred since. It was not clear at the time that Apple would be the one to "take away the candy", but the threat was certainly identified.

    Corporations exist in part to distribute responsibility. Nokia's top management is responsible for its failure, and also the teams and individuals who saw the problems but were unable to convince management to act also bear some responsibility.

  • What is Google's strategy for where the value in a mobile ecosystem is? It seems to be that there answer is outside the ecosystem entirely.

    Is that merely a fortunate coincidence that no other company will be able to copy, or is it a horizon of future disruptive potential vis-a-vis all other parts of the mobile value chain (OS, hardware, support, infrastructure, retail, software)?

  • Walt French

    I wonder whether part of our confusion about management's role is that we have multiple definitions of “responsible.”

    I don't think RIM management caused their current predicament; the “disruption” issue Horace has long tracked is too obvious. OTOH, there's absolutely no reason for CEOs to get the huge pay packages they do if they aren't able to captain the company thru whatever weather the ship finds itself in.

    The most shocking idea of their conference call was that they would announce layoffs. They are under fierce assault and Somebody Important is going to spend his time not on the many pressing problems (migrating OS6 or developing handset hardware appropriate to QNX or getting beta tools into developers' hands) but rather, deciding whether some talent is cost-effective.

    I can only imagine that the Board has lost confidence in the CEOs' ability to manage the situation, and is trying to cut their losses. Or that the CEOs have latched onto a bone-headed move to buy time with a Board that doesn't understand the extent of the challenge. Both explanations suggest new leadership inside of a year, no?

  • I need to go back and listen to your podcast, because I'm not sure what point you are trying to make anymore. Apple recovered by improving its computer offering, but more importantly branching out with the iPod. The same with IBM into services & software. I believe we agree on those points.

    However, Apple didn't rest on it laurels it developed the iPhone that has virtually cannibalized the iPod. How many tech companies have killed their cash cow? Most become defensive while the competition kills their cow.

    My question is why when Nokia & RIMM where dominating in mobile phones in '07 didn't they branch out into tablets? Instead they waited until their phone franchise was under attack and are now reacting to the competition.

    Maybe we will have to agree to disagree – I just can't see why management should be let off the hook….

    • That should have read that "I need to go back and listen to your podcast, AGAIN." Have listened to it once.

    • asymco

      It is somewhat paradoxical. Management is responsible for failure but what managers did generally can't be faulted. The problem is that management best practices are usually responsible for failure. Put another way, had management "done the right thing" at the right time to prevent failure, they would have been fired. It's therefore imprecise to blame managers. It's necessary to go deeper.

  • To save you checking the reviews of the Australian iTunes Store, my review:

    "Horace Dediu has been highly regarded by 5By5's other talk hosts including John Gruber of Daring Fireball (See "The Talk Show") and with good reason. His factual and acutely unemotional view of technology and the success and failure of products, platforms and companies is a refreshing change from the far more common sensationalist views on most other Tech Podcasts by most other Tech Pundits.

    Once again, Dan Benjamin has pulled in a big name and talent for another podcast/show on his pet project 5By5. Oddly he is mostly silent during the show – although it is early days in his relationship with Horace and with time I'm sure he'll loosen up a little more a-la The Talk Show.

    If you like a good, thorough analysis of the technology market, this is your podcast. I love it and highly recommend it."

    Love your work – can't wait for the next podcast. Regards, John.

  • Sebastian

    excellent podcast; comments that are worth reading; thank you!

    Do you think failure/ success to innovate has anything to do with a company's structure?
    less middle management = more innovation?

  • George Slusher

    I would say that a primary cause of problems with RIM and Nokia has been a failure of leadership. That's different from "management" (the efficient employment of resources to accomplish a task) and requires different traits and skills. We have to be careful to keep "management" as an activity distinct from "management" as a group of people and/or organizations. In the latter sense, RIM and Nokia's problems are failures BY "management" (the people in charge), not necessarily OF "management" as a set of activities.

    A corporate leader needs to inspire, rather than direct. She/he should embody the company's "vision" (their "why," as Simon Sinek says), as Jobs does for Apple. Leadership includes being able to anticipate and outfox external factors and competition, rather than merely react to them. This seems to be a major problem with both RIM and Nokia. The companies–and, thus, the employees, managers, partners, and customers–don't know just "why" the companies are in business. (It's not "to make a profit" nor even to make a product.)

    A more cogent question than, "Why have RIM and Nokia failed" is, "Why has Apple succeeded, where others have failed?" (This follows Sinek's TED talk, so it may be familiar to some.) Just about every external factor that one might cite as contributing to RIM and Nokia's failuree also potentially affected Apple. Apple's engineers aren't any smarter than RIM's or Nokia's. They have access to the same agencies, consultants, etc, as RIM and Nokia. RIM and Nokia both have large cash reserves and spend a lot on R&D. (I think it was Horace who showed that Apple spent less on R&D for ALL its products than Nokia did just for phones.) They have access to the same markets. (Well, RIM and Nokia had access to LARGER markets, especially as Apple launched the iPhone.) They all have significant intellectual property (patents) that they can exploit. They deal with the same suppliers. They're faced with the same external issues. RIM and Nokia have the added benefit of support from their national governments. The ONLY difference, in effect, has been leadership–not "management."

    My own experience with management and leadership came from 22 years as an officer in the US Air Force. There, a failure of leadership (and management) could be rewarded with poor evaluations, failure to be promoted (which could result in being forced out–not many organizations have an "up-or-out" system like the US officer corps), removal from a position, or, in extreme cases, death. (Yes, there have been plenty of military disasters, screw-ups, blunders, and failures, often led by people who had been very successful in the past.) As a young captain, I worked with an NCO with 30+ years service, who had reached the highest NCO rank. His specialty was maintenance. He asked me a question that came from the supervisory tests given to NCOs as part of their promotion system. A particular "shop" had frequently exceeded its labor standard (manhours to do a particular task, e.g., changing an engine in an aircraft) for several months. What was the best course of action for the senior leadership? The right answer: "Fire the shop superintendent." Why? Because he/she should have taken action to correct the problem, regardless of the cause. That the problem continued on showed a failure of leadership AND management.

    In some Air Force commands of the day, major units (wings) would have no-notice "operational readiness" inspections/tests. They would be tested on their ability to meet their operational requirements (e.g., get bombers off the ground). Every subordinate unit was tested–maintenance, supply, transportation, civil engineers, etc–not just the flying units. If ANY part of the test was failed, the whole test was failed. The commanding officer of the wing and any subordinate units that failed would be relieved of command–IMMEDIATELY, not in a month, week, or even a day. They would be reassigned to another base within a few days. (Their families might take a month or two to follow.)

    Unfortunately, this didn't seem to always apply at much higher levels, though, occasionally, a multi-starred general would get sacked. In the corporate world, all too often, management failure is punished with large bonuses. (RIM's CEOs shouldn't get any bonus–and their salaries should be cut by at least 50%. That would save 100 jobs or more.) I've just finished listening to the audiobook version of "House of Cards," by William Cohan, about the fall of Bear Stearns. The top executives of Bear Stearns were getting huge bonuses–among the largest in the world of banks–even as the company was heading into bankruptcy.

  • George Slusher

    Horace:

    Right on the money. In the US Air Force, I went through far too many reorganizations, structural changes, management fads (often came from popular books) and the like. Most had little effect except in the very short run.

  • MontRothstein

    I just got around to listening to this last night. Excellent and insightful.

    Regarding the survival/recovery of Nokia and RIM something occurred to me. The problem isn't one of improving what they are doing the problem is one of reinvention. As Horace so aptly pointed out Nokia and RIM are in the business of selling phones to carriers. Apple's disruption wasn't a touch UI, good web browser, or the App Store. Apple's disruption was to sell phone to end-users. This is done. Disruptions aren't undone. Therefore the business that RIM and Nokia are in is going away.

    The question is can they reinvent themselves and if so as what. Nokia has reinvented itself multiple times over the course of its history, so it certainly can be done. Other companies such as IBM have done it multiple times as well. Neither Nokia or RIM necessarily has to re-invent themselves as a mobile phone manufacturer that sells to end-users. In fact, this might be the most difficult course for them to take given the similarity to their current business (and therefore difficulty in truly re-focusing) and the players that have already become established in this space

    I don't know what they should become only that reinvention is necessary for their survival. If they realize this and are brave enough to undertake reinvention then they both probably have enough internal talent to have a good shot at pulling it off. My fear for both of them is that they don't realize that selling phones to end-users is almost as different from selling to carriers as it is to selling boots.

    • MontRothstein

      As I go back through the earlier comments I see that Horace made this same point much more succinctly than I.

  • WaltFrench

    @MontRothstein, I want to say a word to you. Just one word: orifices. ;^)

  • pvt_zim

    I just listened to all of The Critical Path podcasts again over the weekend while driving aruond visiting family. It was well worth it, again. Thanks!

    I can not help but ask a provocative question though: Analysts and journalist can be called out but management can't? 😛 http://www.asymco.com/2011/03/04/flummoxed-again/

    I'm in the camp that says management has to shoulder some of the blame for failure.

    Dynamic systems tend to diverge without a feedback loop to enable control. It's management's reponsibility to make sure that they have objective feedback about their and their competitors' performance. Emphasis on objective. And they need to listen to the feedback even if it does not reinforce their views. http://www.asymco.com/2010/05/18/will-apple-rule-…

    We may not be wired this way but that does not make it less of an error.

    Shortly: if they were not aware of this site they made a mistake and I for one blame them for it.

    I'd bet a moderate amount of money that Steve Jobs is reading asymco.com. 🙂