Michael Eckhardt, Managing Director, Chasm Institute LLC

Tick, Tick, Tick: The Biggest Enemy for “HP (HPQ) / Palm (PALM)” is Time

Sun, 16 May 2010 05:51:00 GMT

There were multiple reasons for HP (HPQ) acquiring struggling smart phone pioneer Palm (PALM) for $1.2 billion a few weeks ago, including mobile computing, the WebOS, and core technology.

One of these reasons was to reinvigorate HP's (HPQ) mobile phone / smart phone offering. It's clear that Apple's (AAPL) iPhone, RIM's (RIMM) Blackberry, and Google's (GOOG) Droid are three of the current winners . . .

in today's smart phone Tornado market for "business customers throughout the US / Western Europe"
with "Tornado" being defined by us at Chasm Institute as a market that's growing at 45% or more (annulized, in units)

The good news is that this Tornado is currently raging - and there will be three, maybe four winners and thrivers (vs. losers) with Nokia (NOK), Sony Ericsson (SNE/ERIC) and others a big question. The bad news for HP (HPQ) / Palm (PALM) is that, based on our work, we know that Tornados in any one geography will last only two to four years . . .

and the smart phone Tornado has already been happening for the past year
so HP (HPC) / Palm (PALM) have, according to our calculations, only one to one and a half years time to make a real impact since the Tornado may not last the maximum four years

So time - not Apple (AAPL), RIM (RIMM) or Google (GOOG) - are the real enemies for HP (HPQ) / Palm (PALM) , , , and speed and time-to-market impact need to be HP (HPQ) / Palm's (PALM) key dashboard indicators for 2010 - 2011. Or else: game over, lights out and opportunity ends.

What do you think: Let me know your thoughts - I'd enjoy hearing from you.

So Who’s Gonna Win – Facebook or LinkedIn?

Tue, 30 Mar 2010 06:50:00 GMT

There are many devoted fans of Facebook - and also many, though fewer, devoted users of LinkedIn. A question that often arises is: "Who will be the social networking winner in 2011 and beyond - Facebook or LinkedIn?" Turns out, it is the wrong question. It's kind of like asking: "What's better, a digital still camera, or a digital video camera?"

The answer is that each of these two devices has its own specific role in the marketplace, as well as in the mind of the customer, and one device is unlikely to dominate over the other device anytime soon.

The same holds true in the social networking space, re: Facebook vs. LinkedIn:

· each is succeeding in its stated mission – Facebook with 300+ million users and LinkedIn with 50+ million users

· Facebook and LinkedIn both have a different, but loyal following by an all-important mainstream marketplace

· Facebook is much bigger, and aimed at a “broader worldwide set of customers” (and probably younger demographic) -- that mixes work life, networking, and personal life with good safeguards in place – your friend from high school or college might be an example here. If you doubt they’d be happy without having Facebook as a social networking site + resource in 2010 – then they are likely part of this group.

· LinkedIn is obviously a smaller play at this point, and currently focused on a “narrower and more U.S.-centric set of customers” (and probably older demographic) -- that aims primarily at professional work life and networking, with lots of safeguards for the risk averse – like yours truly. I might be an example here, as I wouldn’t be happy without having LinkedIn as a social networking site + resource in 2010.

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Based on recent discussions and inputs from author Geoffrey Moore, and further thinking on the topic, it looks -- from my Chasm Institute view -- that Facebook and LinkedIn have:

· both crossed the “adoption” chasm and have gotten strong traction in their respective mainstream / pragmatist marketplaces …

· but what neither of them have done yet is cross the “monetization” chasm, as neither one is close to generating the profitable $’s needed to justify their hoped-for-future-mega-stock-value

· what if they each charged $1 per year for access ? or $1 per month ? or maybe $1 per week ? Based on our Chasm Institute market and customer models that we’ve been working with the past 15 years – all three of these options would be strategic pricing errors, though a different and likely smarter pricing strategy could work.

BTW – there’s also a third type of customer. A smaller group for sure, but it represents those who are frequent users of both Facebook and LinkedIn. Certainly not a majority of customers today.

So there are 3 types of social networking loyalists at this point – Facebookers, LinkedIners, and a hybrid blend of both. Let’s see how this all plays out in the next few years, since the IPO scorecard will be driven by how many users stay committed to Facebook or LinkedIn, once a serious monetization strategy is put into place by each of the 2 companies.

Fun stuff to think about.

Let me know your thoughts on this – I’d enjoy hearing from you.

If the Palm Pre is so good – why isn’t it catching up with Apple iPhone’s market share?

Wed, 17 Mar 2010 03:27:00 GMT

Numerous news articles (Wall Street Journal, San Jose Mercury News, NY Times) have
been singing the praises of Palm’s newest user interface / WebOS platform.

Question:
So why the troubled Palm Pre quarterly sales outlook and market share disappointment? (Total worldwide smartphone shipments -- all brands -- in 2009 were 172.3 million worldwide, with Palm coming in a weak 7^th on the list of top vendors).

Answer:
Our answer, based on one of our favorite Chasm Institute topics – is the important difference between Product and Whole Product. The Palm Pre does have some significant smartphone performance strengths vs. Apple’s iPhone, but that is looking at it way too narrowly. The real advantage that iPhone enjoys among U.S. smartphone consumers is not in product performance (i.e. “product advantage”), but in Whole Product advantage.

We define Whole Product as the essential factors, over and above the core technology, that help predict market share wins or losses. These include the 6 Whole Product factors of:

Industrial design
Company brand name
Product sub-brand name
Degree of excited word-of-mouth among target customers with money and intent to buy (yes, that can be measured)
The # of applications available and the # of motivated developers committed to the platform
Compelling and motivated distribution channel(s)

Does this list seem like an uneven playing field -- with clear Apple iPhone dominance?

Sure does – iPhone wins against Palm Pre on all 6 of these Whole Product factors. That may explain iPhone’s 97.9% Q4 2009 year-over-year growth – besting Nokia (37.3%), RIM (41.2%) and all the others, including Palm.

Stay tuned for an interesting collision with Google’s Adroid in the year ahead.

Side note: by the way, Apple has previously (and ironically) suffered from the same disease – having a great product but weak whole product. Think Mac vs. PC from 1984 on. So Apple knows what it feels like to be on the losing end of the “Whole Product” battle !

>> What are some key Whole Product factors that your company overlooks? ... or perhaps dominates with?

Let us know your thoughts – we’d love to hear from you.

2 Common "Market Errors & Misunderstandings" ...that even the pros can get confused about

Thu, 12 Mar 2009 20:41:00 GMT

A recent news article (San Jose Mercury News: 3/3/09) was very enlightening – and provided 2 wonderful reminders of confused thinking that even high-tech marketing folks can make. The headline stated “PC Market Weakens for ‘09”, and the very well-regarded Gartner Group was quoted as saying that “a 12% decline in global PC sales is forecast for 2009”. Sounds like only bad news here – but it isn’t so. Our 2-day “Strategic Marketing Workshop” addresses numerous errors + misunderstandings that high-tech professionals make. Here are 2 that showed up in the 3/3/09 Mercury News article:

Error #1 -- Averaging Your Market Data

Too often, marketers lump together various product categories to come up with an average % rise or drop in demand. Way too superficial. And very dangerous, because it obscures what is truly happening. While it is correct that overall global PC sales will decline about 12% in 2009 – that 12% data point is actually made up of 3 very distinct PC categories, each in a different stage on the TALC (Technology Adoption Life Cycle).

Surprise, surprise. Turns out that Desktops will decline 32%, Laptops will grow only 3% -- but that Mini-Notebooks are exploding in growth (forecasted to be up 79%, representing a non-trivial 21 million units).

Bottom line: don’t combine various categories to reach average growth rates – very misleading. Kinda like averaging out AARP members and high school students to come up with an average age across these 2 groups. The answer of “46.3” doesn’t tell you much.

Misunderstanding #1 -- Tornado Success Can Indeed Occur in Lousy Economic Times (Really!)

Hypergrowth growth rates can happen in even the worst of economic times. Not for Early Market, Bowling Alley, or Main Street products, but definitely for those products fortunate to be in or near the Tornado stage on the TALC.

Examples include Digital Cameras in the slump of 2001-2003, and Mini-Notebook PC’s today (in the darkest of economic periods). In our workshop, we go into greater depth about what growth rates constitute a true Tornado, how long they will last, and whether / how they can be predicted.

By the way, what market errors or misunderstandings have you seen of late ?

Market Share Upside - in a Downturn

Tue, 24 Feb 2009 09:23:00 GMT

The recession reared its ugly head 14 months ago in both North America and Western Europe, with the rest of the world also getting hit hard by severe economic contagion. Is there any good news for powerful players in either the Tornado or Main Street stages of the TALC (Technology Adoption Life Cycle) ?

Yes and no. Depends upon whether you’re truly powerful, or just think you are. To be truly dominant in your category, you don’t need 51% share ... having 40% or more share, and 2X the share of your largest competitor ... is enough to make you the King or Gorilla (the latter is better. More on that in a future piece).

Who are these powerful players and what should they do in 2009 / 2010 -- despite the downturn ?

Double-down and drive even more assertive Go-to-Market efforts in key geographies. The strong don’t get stronger without real action. In our client work at Chasm Institute, we too often see key companies acting like me-too players – this is a road to no-where fast.

Google, Toyota, HP in printers and PC’s, SAP, IBM in services, Intel, and Nokia (a leader in Europe + Asia, but not in the U.S.) -- to name but a few -- have an incredible opportunity if they behave like the winners they are. Based on our 15+ years of work in helping high-tech companies gain and maintain competitive advantage, there are fundamentally 3 actions to take in a tough or slowing business environment:

strengthen loyalty in your installed base
reach out to worried customers who are buying from weaker or less stable rivals
launch relevant innovations and offers that re-invigorate (but don’t disrupt) your market

What an opportunity! It’s up to them to make it happen, and a downturn is THE time to move this forward.

What Are the Odds that Motorola's Mobile Phone Business Survives?

Tue, 10 Feb 2009 05:49:00 GMT

In its February 3 article, The Wall Street Journal described the grim news for Motorola last week – a shocking 51% drop in Q4’08 mobile phone sales, and a loss equivalent to $31 for each phone Moto shipped (http://online.wsj.com/article/SB123359016405939667.html).

Given where Motorola’s product portfolio competes on the TALC (Technology Adoption Life Cycle), the prognosis is not good for survival beyond 2010. With their voice-based phones, cable boxes, and public safety radios in “mid-or-late-Main-Street," and their smartphone business struggling as a potential Tornado looms, there is clearly trouble ahead.

My view is that there is a 75%-85% probability that Motorola exits the mobile phone business by 2010, unless they stage a remarkable “RAZR-like” turnaround in the next 12 months. Unlikely, yet possible. But recent moves -- slashing their dividend to zero, replacing their CFO, closing R&D and Design Centers, and watching their stock price hover near $4.00 -- suggests that this business will be sold, spun-off, or closed down.

When your Main Street products age and lose competitive advantage, and pre-Tornado products are uncompelling vs. Apple’s iPhone and RIM’s Blackberry, then the future is indeed bleak. Look for a sad end to this American icon, unless they do a complete overhaul of market strategy, address lagging software deficiencies, regain brand power, and become one of the top 3 smartphone vendors on the planet. Since the first 2 places already appear to be taken (Blackberry for business, Apple for consumers), the battle for third place will be ugly.

Consolidation is clearly happening in mobile devices. And Moto lacks the Mojo to survive, given their current speed and the direction in this economic downturn.

Google's New Browser - "Johnny Come Lately" or Smart Move?

Wed, 03 Sep 2008 04:16:00 GMT

Google has just announced plans for "Google Chrome", a web browser intended to compete with Microsoft's Internet Explorer, Firefox, etc. Is this a "too late" entry into the market for browsers, or a sly move by Google ?

Depends on Google's real objective with "Google Chrome", which will initially be released as a beta version...

Microsoft is clearly the "Gorilla" (not guerilla) of the browser market. And Google is the Gorilla of the Internet search market in the U.S. That means they each enjoy greater than 40% market share in their respective markets, have > 2X the market share of their largest competitors, and customer switching "costs" (money, time, hassle, risk, habit) are moderate to high -- not low. Both markets are on Main Street in the U.S., (mature but still growing), according to our TALC (Technology Adoption Life Cycle) 2.0 model.

If Google's objective is therefore to annoy and distract Microsoft, and cause them to divert resources to address Chrome, then Google's move is smart and realistic competitive action. But ... if Google believes they can unseat MS as the dominant web browser in the U.S. -- look out below (!) as their chances to achieve this are less than 10%, and would require some unintentional gaffes & errors by MS, given their current Gorilla status.