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Rail crash? You wait until they try to auction the 4G mobile phone spectrum

October 4, 2012

Business groups have launched  a scathing attack on the Government over the 4G spectrum auction and say it has revealed serious problems at the heart of public sector procurement. Simon Walker, director general of the Institute of Directors, expressed a typical view: “It is shocking that such a crucially important process has gone so seriously wrong. Businesses need a stable, reliable telecoms network and certainty in the provision of key infrastructure.” “Procurement mistakes increase risks for companies, threaten jobs and harm Britain’s reputation as a destination for inward investment,” added Adam Marshall, policy director of the British Chambers of Commerce.

Just joking. I’m sure Messrs Walker and Marshall will forgive me for quoting them out of context this once; after all, I’m investing them with seer-like prescience. Their cited words are real, but in fact relate to the very clear and present danger of the West Coast Main Line rail fiasco. The fallout from that will be a moon-cast shadow compared to what will happen if HMG manages to screw up the mobile phone spectrum in the same way it has screwed up our railway network.

As it happens, there has been some relatively good news on the 4G front recently. Maria Miller, the obscure former Grey advertising and PR executive recently catapulted to culture, media and sports secretary, has made a brisk start to her tenure by bringing forward the inexplicably delayed auction date of 4G spectrum to January and cutting through the legal wrangling among telecoms carriers which has deadlocked the introduction of the new, much faster, mobile phone standard to the UK.

But will her timely action be enough to avert a looming disaster? First, a little background. 4G is not some minor incremental improvement on the current standard, 3G. It can offer speeds of up to ten times that of the average current home broadband service. Data-hungry yoof, but more importantly business people and commuters, will love it. Miller herself observes that its introduction is “a key part of economic growth strategy” and will “boost the UK’s economy by around £2-3bn” (growth at last – the stuff that George Osborne’s political dreams are made of). America’s already got it, Apple’s got it, Germany’s got it, Korea’s got it. For God’s sake, Estonia’s got it. Britain, which prides itself on being at the heart of the digital revolution, has not. Why not? Because of years of government dithering over the auction structure. Gordon Brown made a bit of an idiot of himself by appearing to hand out the lucrative 3G spectrum to the telecoms carriers for a song. Successive administrations since have been determined not to make the same mistake twice, but seem uncertain how to prevent it.

Now events have caught up with them. The situation is complex, but distils down to a simple reality. Apple has launched its latest ‘must-have’ iPhone with a 4G capability that no one in the UK will be able to take advantage of in the near future. Well, almost no one. The exception: those who use EE, as of October 30th. Er, let me qualify that. No, not all users of Orange and T-Mobile, the brands which have had all their resources pooled into the Everything Everywhere receptacle (or EE, as it is now known – what a whoopee cushion of a brand name). EE itself has the exclusive iPhone 5 franchise, and only new subscribers, not old customers, will benefit from the 4G offering. Everyone else – that is, the vast majority of UK mobile phone users – will have to wait at least 8 months to subscribe.

It may well be objected that what gives the EE brand a timely ‘digital’ lift is actually brand suicide for the company’s premier and better known brand, Orange. But that’s one for UK chief executive Olaf Swantee and his strategy team to worry about. In the meantime, they can congratulate themselves on having – unlike their competitors – farmed existing spectrum to make space for the 4G platform. A merry Christmas is assured, thanks to the exclusivity of their iPhone 5 4G contract.

Once EE’s rivals, O2, Vodafone and Three, realised what Swantee was up to, cries of  “Unfair” and “Unlevel Playing Field” were heard to rend the air. EE had played the ant in Aesop’s fable, and harvested its existing resources wisely, but the grasshoppers were beside themselves with rage that they would have to wait another six months to grab their share of the new spectrum via a dilatory government auction – and then some before the service could actually be implemented. What’s more, they were prepared to act decisively: they threatened to blunt EE’s leading edge with legal action. That might have been explicable in terms of competitive advantage and buying extra time to build the necessary 4G infrastructure. But as a prelude to launching the 4G standard in the UK, it would have created a public relations disaster. How do you explain to an iPhone-crazy public that access to much higher broadband speeds is being blocked by red-tape, selfish industry interest and legal chicanery?

Miller has therefore done well to defuse the legal wrangling by agreeing to bring forward the spectrum auction date 6 months to the end of January. But implementation of the 4G dream is still a long, long, way away for most of us punters – we’re talking at least the latter end of next year. In the meantime, all sorts of teething problems will need to be sorted out: poor signal distribution, patchy network coverage, a quite possibly incompetent auction process that leads to further legal action and, let’s not forget, potentially incompatible 4G phones.

“Wrong spectrum”. We’re going to be hearing a lot of that in the next 12 months, while the phone companies sort themselves out. If my mobile phone contract were coming up for renewal (which it is not), I would be very tempted to let it ride until at least the beginning of 2014 …

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Apple outsmarts its competitors

March 31, 2012

Unmistakable stress signs among competitors appear to herald a tectonic shift in the smartphone sector – to Apple’s advantage.

One rival RIM – maker of Blackberry – has retired hurt from the consumer ring. Another, Apple’s principal adversary in the field, is having to carefully rethink its ‘open-door’ strategy.

No surprise, perhaps, that the cracks are appearing at RIM, which has been heading for the casualty ward almost since the iPhone first appeared. After a disappointing financial year and downright disastrous Q4, new RIM chief executive Thorsten Heins has cleared out most of the old guard, including former co-CEO Jim Balsillie – still on the board – as well as the COO and CTO. And announced at the same time that RIM is all-but jettisoning the consumer market in favour of the business and public sectors.

At very least this means RIM will cease to develop content and music services. But the strategic review could signal a lot, lot more where that came from. Why exactly should business and government be interested in propping up the failing Blackberry brand, just because consumers aren’t? Even if they are, would RIM – so pared – still be a scalable global business? These are two of the questions Heins has, understandably, failed to answer so far. And yet, even at this stage, he has admitted that the future is “outsourcing” and possibly a trade sale. Echoes of Palm here, the PDA innovator which – despite a superior operating system – was eventually gobbled up by Hewlett-Packard.

More nuanced than Blackberry’s rout is Google’s response to worsening sales figures in the most hotly contested smartphones sub-sector, tablets. Here, Android-powered product is being squeezed by the exotically priced but more glamorous iPad (entry-level, $399) and the bargain-basement ($199) Kindle Fire, made by Amazon.

Reportedly, the search and smartphones titan is preparing to sell Google co-branded tablets directly to consumers through an online store.

That shocking, you say. So what?

Superficially, Google adding its awesome brand to the Android-powered tablet platform looks like a sign of strength. But that’s not what the techno-commentariat to a man and woman believes is behind the move.

On the contrary, they say, Google is attempting to shore up its position in a fracturing market. Unlike Apple, which maintains a dictatorial control over its operating system at all levels of innovation, manufacturing and distribution, Google has always favoured a laissez aller approach. By opening up its Android operating system to outside manufacturers such as Samsung, HTC and ASUS. This strategy has the merit of reducing development costs and potentially speeding up market penetration, with the corollary of making a killing in the apps field. If it succeeds, that is. But the downside is a lack of quality control; meaning that the Android brand and, indirectly, Google will be tarnished by the poor performance of its weakest collaborators.

It is this perception of fragmented user experience that has driven Google to intervene more directly in the market by taking over distribution.

With what effect we shall see. Commentators have been quick to point out that Google has tried this stratagem before, with the HTC-manufactured Nexus One smartphone.

And failed. The co-venture was shut down in mid-2010.


Why the IBM brand made a comeback but Kodak never will

January 16, 2012

The imminent arrival of Kodak at the bankruptcy court underlines a curious paradox about technology brands. They come about by, in some way, incarnating a bold invention. They end because they have become too brittle and resistant to precisely the process of innovation that made them great in the first place.

No doubt the Kodak name will survive Chapter 11 in some guise. But it will be as a zombie brand, entirely reliant on its 131-year heritage. It can have no purchase in our future aspirations which, I would argue, is vital to the ongoing success of brands in this sector.

How did such a catastrophic failure come about after generations of success? The simple answer is that Kodak was a legacy company too heavily invested in analogue print technology to be able to embrace digital photography when it arrived, clearly suggesting a monumental lack of corporate vision. However, the simple answer ignores an inconvenient fact: in 1975 Kodak was the first major brand to launch a range of affordable digital cameras.

It’s not so much that Kodak failed to respond to the digital challenge as that it failed to provide a full and satisfactory answer. Actually, it tried very hard with a number of solutions, which included chemicals and medical-testing equipment. Finally, it settled upon consumer and commercial printers but, unfortunately, long after Xerox and Hewlett-Packard had sewn up that market. Unlike one-trick pony Polaroid, which faced the same digital challenge, Kodak had plenty going for it. It just wasn’t enough.

Things might have been very different if Kodak had possessed the ruthless entrepreneurial culture to exploit its first-mover advantage in digital cameras. The sort of culture that drove its founder, George Eastman, back in the 19th century. But it did not. Not only had it to confront a cash-cow legacy (who ever found it easy to jettison money-making assets?), it also had institutional shareholders to placate. Publicly quoted joint-stock companies aren’t about strategic risk; they’re about steady shareholder returns. Why worry about the day after the day after tomorrow, when tomorrow looks just fine?

Ah, you say: but what about Steve Jobs? Apple was and is a joint-stock company, isn’t it? And it had the wisdom to take Jobs back on board.

Yes it did. But don’t forget that Jobs was entrepreneurial-drive incarnate – he wasn’t some whizz-kid corporate manager – and that by the time Apple took him back it was in such a mess that he was able to dictate his own terms. The right-angled strategic turn into streamed entertainment, the iPod and all that followed from it was a huge corporate risk. Even Jobs may have been a little surprised by its eventual success.

More analogous to the case of Kodak, though in a lesser state of decay, are RIM, maker of Blackberry (which has seen its shares drop 75% in value during the last year), Nokia and Yahoo.

What these companies share is a great past, present profitability but no visible purchase on the future. On present trajectory, they will end up like Palm, the PDA specialist: they will be bought, eviscerated then discarded on the junk-pile of corporate history.

An inevitable fate? Not necessarily. Rare though they are, not all turnarounds in the technology sector depend upon a messianic figure like Jobs – although they do demand pretty extraordinary corporate skills.

A good case in point is IBM. Like Kodak, IBM – whose roots go back to 1911 – found itself struggling with a destabilising transformative technology. It had grown great on the mainframe computer, which by the 1980s was obsolescent. Again like Kodak, it was not ignorant of the nature of, or need for, change. At one point it became the world’s largest manufacturer of the new game in tech city – the personal computer. What, unlike Microsoft, it failed to grasp was that the new technology was all about software control. Microsoft cleaned up the market with its PC operating system; IBM fell a prey to PC cloning, which cut its margins to ribbons.

It took an outsider to fix IBM’s cultural obsession with hardware. And not one from within the industry either. Lou Gerstner, who was appointed chief executive of IBM in 1993, hailed from tobacco and food conglomerate RJR Nabisco. Previously he had held a senior position at American Express.

The key to Gerstner’s remarkable 4-year turnaround of IBM was his realisation that the company had to harness its elite skills to not the current, but the next trend in digital evolution. Forget the PC, concentrate on the internet and make IBM the businessman’s natural friend with software solutions that embraced such issues as intranets and electronic commerce sites. While IBM prospered, Digital Equipment Corporation, its great mainframe challenger in the sixties and seventies, failed to embrace change and went under. Or rather, it was acquired by Compaq, which was acquired by Hewlett-Packard – itself now painfully struggling with its future corporate identity. Who now remembers the Digital brand name?


Chevrolet Volt crisis gives General Motors’ recovery plan a nasty electric shock

November 29, 2011

Effervescent General Motors marketing supremo Joel Ewanick now has a lot more on his bulging agenda than reviewing global ad agencies. GM is facing a full-blown image crisis, thanks to its flagship vehicle – the hybrid Chevrolet Volt – having an unfortunate tendency to burst into flames.

I should say it’s not the car itself which is a fault, but the lithium-ion batteries critical to powering it. And “smouldering” rather than “spontaneous combustion” is nearer the mark. Plus, there aren’t, as yet, many recorded cases. Never mind, all the ingredients are there for an outbreak of public hysteria, ventilated by the media.

As with most of these PR crises, the actual threat to human welfare is difficult to assess. Much more certain is the disproportionate negative impact on the manufacturing company’s reputation once the matter has entered the public domain. Especially if the beleaguered company fails the test of  immediate and effective remedial action. A few years ago the self-same problem of lithium-ion batteries catching fire (in this case in laptop computers) caused Dell to instigate the biggest computer product recall in history.

For GM, the Volt crisis could not be more serious. Last Friday, the federal authorities, in the guise of the National Highway Traffic Safety Administration (NHTSA), decided to launch an official investigation. A successful Volt – which is the halo product of GM’s biggest car marque, Chevrolet – is integral to GM’s hopes of recovery, not in numbers sold (heaven forbid, about 6,000 so far!), but in terms of perception as a leading-edge automobile maker.

You may smile at that, but GM’s senior management is deadly serious. Not long ago, Ewanick suggested that Apple, rather than other car-makers, was the benchmark by which his company’s future performance should be judged. The hybrid range has been used to curry public favour and convince the world that GM no longer equals “gas-guzzler.”

And it gets worse. President Obama has made it clear that the e-car is critical to lessening America’s dependency on oil. He wants one million electric vehicles on the road by 2015. What’s good for America is clearly good for GM. But not if the public is put off hybrid technology (of which it is, in any case, sceptical) by the suspicion that batteries may catch fire.

Predictably for a company under siege, GM’s immediate response to  the federal safety investigation was to issue a bland statement stressing the car’s safety – classic procrastination. Its crisis management team has now moved up a gear with the announcement yesterday that GM will provide free loan cars for any owner inconvenienced by a Volt “incident”. I wonder what other measures are on the way.

In the meantime, GM’s flagship remains firmly anchored in port. The Volt global export-drive has been beached.

Volkswagen – which has hugely benefited from its rival Toyota’s set of reputational issues – will be watching GM’s discomfort with interest. Toyota and GM are its principal competition. VW has come from behind and is now comfortably cruising towards being the world’s largest car-maker.


Who says Apple is a bloodsucker like Goldman Sachs? Pete Townshend

November 1, 2011

“Oh Wow,” as the late, great Steve Jobs might have said. Apple a “digital vampire”, sucking the blood out of the music industry.

How so? The sound bite comes from Pete Townshend, the Who’s prolific songster, and inaugural John Peel lecturer at the Salford Radio Festival.

The chances are we would never have noted the festival if it hadn’t been for Townshend, and never noted Townshend if it hadn’t been for the emotive “vampire” epithet.

It’s an echo, almost certainly deliberate, of what was said about Goldman Sachs in Rolling Stone a couple of years ago:

The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Powerful stuff, that few outside the investment community – and perhaps not all of them – would seriously dispute. But is the parallel seriously applicable to Apple, which thanks to iTunes virtually reinvented the music industry about a decade ago?

The Townsend thesis, in a nutshell, is that Apple has abused its now dominant market position. Indeed, he makes direct reference to banking (mal)practice:

Music publishing has always been a form of banking in many ways, but – in cooperation with record labels – active artists have always received from the music industry banking system more than banking.

Not so, it seems, in the iTunes era. Apple, whose “fantastic piece of software” Townshend readily acknowledges, does no more than provide the minimal services of distribution and paying royalties, while bleeding artists dry with its “enormous commission”.

Excuse me, you may be saying by now, wasn’t it ever thus? Isn’t the old rocker (well, Mod, actually) looking at what we quaintly refer to as the record industry with rose-tinted spectacles? It may have served him and his cronies well, but thousands of other deserving artists ended up on the scrapheap.

In fact, Townshend’s critique of the music industry (which is well worth reading) is much more searching than the “vampire” headlines suggest. But that doesn’t mean it isn’t wrong-headed.

To make Apple the villain of the piece may be mediagenic, but it’s also somewhat misleading. iTunes is a symptom, not a cause, of the problems afflicting the music industry. And it has, in its way, created a financial solution to those problems which, fundamentally, stem from the internet’s copyright-averse “free download” culture. Arguably, without iTunes or something very like it, artists – including old rockers – would be very much worse off than they are today.

Nevertheless, Townshend is surely right to point out that the Apple tariff is too high, and that the company gives relatively little in return. In his view this “return” should include a great deal more help at the seedcorn level, whether in the form of incubator finance, marketing, creative nurture or advice on the protection of copyright.

The old music industry may have been a corrupt, exploitative, shambles that occasionally stumbled on talent, but at least it was filled with entrepreneurs with a passion for the business. Today, that business is dominated by anoraks.


iPhone 4S launch highlights flaws in Apple’s culture of secrecy

October 5, 2011

The mountain shuddered in labour – and produced a ridiculous little mouse. The mouse in question is the iPhone 4S; the mountain, the hyperbolic rumour machine which would have had us believe, until the very last moment, that Apple was in fact launching the no-doubt-iconic iPhone 5, instead of a mere upgrade.

If the result has been widespread disappointment, the secretive folk at Cupertino, California, have only themselves to blame for their botched PR. Journalists, rather like Nature, abhor a vacuum. And when there is only rumour to fill it – owing to Apple’s paranoid obsession with controlling every detail of a launch – this is the sort of thing that results.

As far as I can tell, the foundation of these “iPhone 5” rumours was some cryptic remarks made by former US presidential candidate Al Gore at the Discovery Invest Leadership Summit in South Africa. Gore is an Apple non-executive director (which is why he was believed) and he let slip that Apple would imminently be launching two models, dubbed the 5 and the 4.5.

I have no idea whether this was simply mischievous misinformation, or Gore himself being ill-informed and indiscreet. Believe me, the latter would not be surprising, even at board level. Apple prides itself on a degree of internal information control, policed by fear, that would have been the envy of the KGB. It’s not your job title that counts in this corporation, but how much you can reliably piece together from your internal contacts just before a big launch. Under a supremely capable autocrat like Steve Jobs, this system of divide and rule has worked well for Apple. It remains to be seen whether his successor, Tim Cook, will be equally successful in manipulating it.

Early signs are not promising. The iPhone 4S, which will appear in the UK on October 14th, may not be the great technological leap forward that was expected. But it is a useful and innovative launch whose value will probably be dissipated in the flotsam and jetsam of deflated hype.

Point one: it embodies Apple’s latest operating system, iOS 5. This, among other things, will give Apple a better handle on technical elements of its Android competition, by allowing customers to access cloud technology that dispenses with the need for desktop computers when downloading music, photos and apps. Point two: the 4S launch will now allow Apple to start offering the older 3GS phone free with a contract. By making iPhones more attractively priced at the lower end, Apple may well be able to blunt Google’s growing stranglehold on the total smartphone sector.

And not before time. Recent research released by Nielsen reveals that, within the UK market over the past 6 months, 44% of smartphone purchases were powered by Android, well ahead of RIM/Blackberry’s 25% and Apple’s 18%.

Premium pricing and its “walled garden” operating system put Apple at a disadvantage when it comes to market share. Interestingly, however, Apple products seem to inspire the most loyalty, with 86% of iPhone users saying they were “highly satisfied” compared to 74% of all smartphone users.

Which is all very well, except you’ve got to persuade the blighters to buy your product in the first place before you can inspire such laudable brand loyalty.

UPDATE 6/10/11: Appropriately, perhaps, the pithiest epitaph to Steve Jobs, who died late last night, can be found on Twitter: “Three apples changed the world. First one seduced Eve, 2nd fell on Newton and 3rd was offered to the world half bitten by Steve Jobs.” Or minor alternatives to the same effect.


Why Joel Ewanick’s Apple comparison is just pie in the sky for General Motors

August 24, 2011

“Feisty” is the word that most often comes to mind when describing General Motors global chief marketing officer Joel Ewanick.

Since arriving from Hyundai (where he held a similar position) last year, the man seems to have barely slept as he implements a whirlwind catalogue of changes. This month alone, while others absent themselves on their summer vacation, Ewanick has reorganised his marketing department and called a review of the $3bn GM global media account.

But restless energy – commendable though it is – should not be mistaken for vision. The limits of Ewanick’s intellectual rigour, although not his soaring ambition, were also on display earlier this month – at GM’s second annual Global Business Conference.

In it, Ewanick made the extraordinary declaration that his goal is to transform GM not into a better car company, but a future Apple.

Nor was this just a rhetorical trope dished out to a friendly audience. He’s deadly serious. “It’s time,” Ewanick said, “To clearly differentiate our brand and align closer to a true global brand like Apple. It’s time for an automotive company to step out and address consumers and their needs in a way that’s never been done before.”

Admirable sentiments of course. But just what does he mean? Technological innovation is integral  to selling cars, but that doesn’t mean the motor sector is in any way comparable to Silicon Valley. And even if it were, rust-belt Motown marques, with their high social costs and Chapter 11 legacy, are not where you would start. Ironically, in fact, the US car brand with the most potential for eye-catching product innovation and design is not American at all: it’s one whose marketing Ewanick has already captained – Hyundai.

But if the future is elsewhere, Ewanick has, in a curious way, scored a debating point about the past. GM is comparable with Apple: but only in the past tense. Back in the fifties, when Americana and US global power were at their height, a new Chevvie or Cadillac was a potent symbol of the consumer dream. It encapsulated the freedom to travel anytime, anywhere worth travelling to, on the interstate highway. So potent was this dream that GM – like Apple today – was the world’s biggest company by market capitalisation. It even became a mantra in US foreign policy: “What’s good for GM is good for America.”

No chance of recapturing that distant eminence, now or in the future. Cars are simply not the must-have consumer products they once were; even in fast-growing economies like China’s – where they may well be viewed as status symbols, but not on the level of fifties America. Who, on the other hand, would not break their neck to acquire the latest Apple iPhone?

It’s possible, of course, that I have misunderstood Ewanick’s apparently ludicrous aspiration. All he was really talking about was the much more modest goal of creating brands with universally accepted global appeal. I don’t think so, though.

What’s certain is that neither Ewanick nor his boss, GM CEO Dan Akerson, is the next Steve Jobs – despite the superficial brand-turnaround comparison.


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