There is a very good article in the current issue of Vanity Fair (with Alec Baldwin on the cover) about Microsoft. In “How Microsoft Lost Its Mojo” Kurt Eichenwald recounts the failures and bad decisions of the company’s “lost decade” a time overseen by current CEO Steve Ballmer.
If you are in this business you can probably recall at least some of the major inflection points related to missed opportunities and in-fighting that cost the company its market leading position. I thought it was just me, but Eichenwald even compared Microsoft to Detroit auto makers and their past glory. For good measure he ends with a long quote from Steve Jobs’ biography about the difference between having a sales or ops guy running the show and having a product guy in charge. Sad. Worth reading.
According to the article, Microsoft’s stock has barely budged over the last ten years while other tech companies flew by — Google, Facebook and of course Apple. In one recent quarter iPhone alone made more money than all of Microsoft.
The article quotes Ballmer saying he wants to remain at Microsoft till 2018 but I don’t think the company can wait that long. The article also implies that Ballmer might be a smart pick to break the company up and to take the legacy products into the sunset while more product oriented people try to salvage the core of innovation, if it still exists.
Fun fact: According to Wikipedia, “Ballmer was the second person after Roberto Goizueta to become a billionaire in U.S. dollars based on stock options received as an employee of a corporation in which he was neither a founder nor a relative of a founder.”
Ten years of stagnation can’t be sitting well with Wall Street. What will it take to orchestrate a palace coup?
There was an interesting article in the January 2012 edition of Vanity Fair a magazine I’ve come to enjoy though for many years regarded as another of those things my wife would like more than me. But VF carries an interesting blend of current events and politics as well as the glossy pictures and stories of pop culture icons that seem to be necessary to sell a magazine these days.
I say necessary but for the exception of the New Yorker. How those people continuously pump out the level of quality journalism that they do, on a weekly basis, always amazes me. Malcolm Gladwell and James Surowiecki write for the New Yorker even after several books each and strong public speaking careers. That magazine has a formula that is no longer being emulated, I fear.
At any rate, the VF article is from the issue with Lady Gaga on the cover, and is titled “You Say You Want a Devolution?” It’s about the apparent ossification of American culture over the last couple of decades or a bit more — roughly the span of time that I have tried to be an adult. The article’s main point is that we’ve made precious little progress in style, design and culture in that time. One hypothesis is that our creative juices have been consumed by the tech revolution.
Internet, WiFi, social media, video, audio, telephony all running through the gadget plus DVDs and a long list of other inventions that weren’t readily available or even invented two or three decades ago have consumed that part of our waking hours that other generations dedicated to style and culture. For emphasis, the article asks us to ponder pictures of street scenes from various decades. If you did this you could easily discern the difference between the 1960s and, say, the 40’s, but the 90’s and today? Not so much.
Not long ago I suggested that straight-line extrapolation from the present to some point in the future is not very good but it is what we often settle for when forecasting. VF seems to be telling us that lately the straight line is fine. But here’s the kicker, straight lines work best within a paradigm. If you can identify the paradigm then maybe you can reconnoiter and find your place a few pages forward. If you are transitioning paradigms all bets are off.
I don’t think 2012 will be like what came before. I think ’12 will be the beginning of a new paradigm and I have no data to support this idea other than the knowledge that paradigm shifts, like unexpected guests for the holidays, don’t warn you that they’re coming.
So, what’s in store for ’12? Well, we’ve been in a quasi recession for almost four years, unemployment is stubbornly high and in case you’ve been napping all this time, ’12 is a leap year, I mean, an election year. If there’s one thing that galvanizes politicos of all stripes it’s an election and while everyone in Washington might hate everyone else’s guts, there will be enough collaboration to cobble together enough votes to do something about the economy. That means a few more jobs and more meaningful growth than has been the norm lately. Perhaps there will even be an extra bowel of gruel for us ninety-niners.
So I look for a bounce in economic activity, that’s the easy part. What’s harder is figuring out where the bounce happens. I watch fuel prices and note the relationship between them and economic activity. Low prices correlate with slack demand but goose the economy and watch the price of benchmark crudes like West Texas Intermediate and Brent go north.
Note: I am not advising you to buy or trade crude oil or to do anything else investment wise with this analysis.
But if crude does go north companies that want to catch the economic rise will need to be smart about keeping carbon out of their business processes. That means conventional business — Dare we say business as usual? — breaks down and that is where the new paradigm comes in. Smart companies will be cranking up all the front office tools and social ideas they’ve accumulated over the last five or ten years and realize that a lot of it fits together and changes life as they know it.
The fit drives more frictionless business that naturally reduces reliance on face-to-face meetings and all the travel and expense that goes along with it. I am not simply saying that we’ll simply substitute a social encounter for the physical equivalent and be done, though we will. But the actual need for some of those more elaborate interactions will simply evaporate as we use social and other technologies to know more in the first place.
Marc Benioff is fond of quoting some of his company’s data concerning Chatter, one of its social media tools, and I don’t remember the exact numbers but they include categories like reductions in email, meetings, phone calls and more and the reductions are significant. The information people need and that they’ve historically received through these older sources has been rendered in a more available and efficient format through social media. This has yielded a new term in the industry, the social enterprise, and it typifies the paradigm shift that I am talking about.
The social enterprise is not limited to a few startups at Routes 92 and 101 south of San Francisco. We saw companies like GE Capital, Burberry and Toyota drinking the lemonade in 2011 and ’12 will be the year they start to show results. 2012 will also be the year that middle adopters and laggards in general wonder why they aren’t feeling the warmth of the recovery and this will be their answer and motivation.
We’re fond of saying that the economy turns about every ten years and we are also fond of remembering that the year of the network actually took a decade to be realized. These are not contradictory. Networking’s early adopters got value right away from their investments but the economy made a dramatic turn once networking got to critical mass and I think we’re in an analogous situation with social technologies.
We’ve been messing around with social for a long time but two important threads are being woven together. Technological dispersal and personal understanding of the technologies is meeting economic demand for better, faster and cheaper ways to do business in an era of limits. That is what’s driving the new paradigm.
We might have to wait a bit longer to get new hairstyles, music genres and fashions but I think the thing that’s driven us in the tech era (innovation) is a live and well and we’ll see plenty of it in the new year. Who knows? I could even be right.
Nobel Economics laureate, Joseph Stiglitz, has a fascinating column in the January issue of Vanity Fair and it sheds much light on the current economy and our lack of meaningful recovery nearly five years post-meltdown.
If I had to guess I would say Stiglitz is a salt-water economist—industry shorthand that implies more macro economists of the Keynesian school populate the economics departments on the Atlantic and Pacific coasts while Neo-Classical folks (think Milton Friedman) gravitate to the great lakes and the University of Chicago. At least that is how insiders describe the distinction, though not being an insider myself I can only report.
Stiglitz compares the Great Depression with the today’s Long Slump and concludes that there is more commonality between the two events, separated by 80 years or so, than first meets the eye. Conventional wisdom says the Depression was caused by bad monetary strategy, tightening the money supply when it should have been loosened. But that theory falls down in the present because we’ve done all the loosening we can and it seems like the Federal Reserve is simply pushing on a proverbial string.
So, what’s going on? Stiglitz believes that the cause of the Depression and the cause of today’s dysfunction stem from the same root, a paradigm shift. In the 1920’s the economy was transitioning from agriculture to manufacturing. Farmers borrowed heavily to make ends meet as their hyper-productivity made crop prices crash. The more they borrowed and the harder they worked, the more productive they became but that only fed surpluses and weakened prices. The financial sector became over extended to farmers as well as to speculators on Wall Street and before you knew it soup kitchens were sprouting up all over.
Stiglitz contends that a paradigm shift, moving the economy from agriculture to manufacturing, was the cause of the meltdown. Farmers were put out of work and many went bankrupt as they were unable to pay back their loans. They moved to the cities looking for work in factories but because they had made up such a large part of the population and they had lost their purchasing power, they were unable to buy manufactured products and without their demand the economy entered a downward spiral.
Moving the economy to make its paradigm shift from agriculture to manufacturing was too big a job for the private sector and government had to fill in. As proof, Stiglitz offers the accidental stimulus government gave manufacturing at the beginning of the Second World War. Demand for war materiel provided full manufacturing employment and within weeks ended the Depression.
In Stiglitz’s view the paradigm shift today is from manufacturing to services. Some may find this hard to fathom believing that this transition happened decades ago when steel making left Pittsburgh for Japan and other parts of Asia. But the rapid further decline of manufacturing in the last dozen years (after China joined the WTO in 1999) has served to further erode manufacturing in much of the world by transferring it to the Far East.
Displaced manufacturing workers like the farmers of the 1920s find themselves without employment prospects and in many cases without the skills to compete. At this writing the unemployment rate for people with college educations and some work experience is a mere 4.4 percent (November 2011, U.S. Bureau of Labor Statistics). In comparison, people with high school educations and work experience suffer double the brunt of unemployment; their rate is 8.8 percent as of November 2011. People without a high school education have an unemployment rate of 13.2 percent
Stiglitz contends that government is the logical player to help manage the economy into the new service paradigm and there is much work to be done because the jobs of that paradigm scarcely exist. Flipping burgers is the archetype of a service job but there are only so many burgers. Services range from healthcare, to finance (I think we have enough of those jobs, personally) to construction trades. But given the other challenges we face from depleting resources we can also expect to see new demands for services in areas like clean energy provisioning and environmental repair and much more. And, of course, there is a CRM element to all this.
Services require at least a modicum of skill, training and experience to be delivered properly. Services are ephemeral, in the moment and customized to one degree or another. They rely on information of a specific kind, which is increasingly delivered through social channels and that is key. The social revolution we have been watching for the last five years will be key to the success of the next paradigm shift.
Socially sourced information will be key to inventing new services and to proliferating them throughout the economy. Information shared through the social web will inform all services skill levels and help drive rapid expansion.
Stiglitz believes we have already entered the transition state between stable paradigms. Making the switch to a robust services economy will take a different mind set, one that values process at least as much as low prices. We see evidence of this in movements to boost local economies through such things as supporting local farmers and community farms. Hidden from our view right now is the desperate shape our agricultural lands and water supplies are in and we already know about the air and climate.
Stiglitz doesn’t talk about it but others like by Richard Heinberg in “The End of Growth” certainly does. If we want an economy that grows again we’ll need the services of modern CRM to remove as much friction from our business processes as possible and we’ll need a healthy services sector that incorporates some new services like managing the ecosystem. It can happen.