IBM’s Watson scores brand win on Jeopardy

I’ve been awakened from my blogging coma by IBM’s Jeopardy! Challenge.  In case you have also been in a coma, IBM’s Watson computer just trounced the two top Jeopardy! champs (legitimate smart guys).  It got the same information at the same time, inclusive of slang, turns-of-phrase, and jokes.  And while not perfect, it essentially won going away.

I’m probably the bazillianth person to write about this event, but my thoughts are not on the technological accomplishment (sure to become a staple of evolution-of-computing graphics), nor the imminent subjugation of humanity.  My mind is occupied by the coup de brand just delivered by IBM.

As IBM has become a services company and shed its PC business, it has become formless, lacking a physical representation.  Watson fixed that.  “Oh, IBM still makes great hardware.”

As computing has become a MIPS utility, IBM’s image as inventor of important things has faded.  Watson addressed that.  “Oh, I can imagine ten ways to use this IBM natural language and decision making capability.”

As the generation that witnessed IBM’s ascendency leaves the workforce (or this bodily state), the IBM image has become dated.  Watson made IBM current.  “Wow, it even knew that Eminem / Danger Mouse reference.”

And while the Smarter Planet campaign does a decent job of giving the brand some personality, it is still weighed down by stodginess.  Watson made IBM cool and approachable.  “That’s funny, Watson couldn’t get Voldemort, but it smoked ‘em on Sauron.  And look at that, most of those IBM geniuses have Macs.”

One of the things I enjoyed about my eight years at IBM is that we occasionally did something big.  Watson is big.  Years from now, people will talk about IBM’s Jeopardy! win.  They probably won’t talk about branding, but they will still be experiencing it.

The benefits of technology battles

Gizmodo produced this helpful map of the battlefronts between Microsoft, Google, and Apple.  One could expand this endlessly, but a couple of other fronts to note might be Amazon’s commerce/content/cloud platform, and mobile/internet carriers fighting to keep from being commodity pipes.  Notice none of the device-centric players are on the map – a bummer for one who appreciates devices and design.

As a person with a strategic bent, I find the dynamics of the tech market scintillating.  This is why I left the food business for the personal technology market.  In food, with all of its marketing know-how, if unit sales were growing faster than the population growth, you had a winner, and then almost always at someone else’s expense.  In tech, the internet happens, Google search happens, and iPhone happens.  Competing tenaciously, companies with a lot of smart, creative people try to out-awesome each other.  Things change as a result — change which impacts and (mostly) enables the way billions of people do things.

As a matter of belief, I refuse to trust technology to fundamentally improve the state of the world.  For every boon (e.g., the ubiquity of communication counters ignorance and exposes badness), there is a bane (e.g., people consume and create as much unhealthy content as conscience allows).  The root of the world’s trouble is not a gap in the  sufficiency of wizzy tech.  But at least tech causes movement, and in movement comes opportunity — opportunities for profit, sure, but also for other goodness.

Despite conspiracy theories, I believe Larry and Sergey are sincere when they pledge Google to avoid “evil.”  Many might argue that their moral compass is out of alignment, but they do put forth efforts on clean energy and employ civil disobedience in the name of freedom.  And their search tool lets me find information and people instantly.  Microsoft’s success has funded the Bill & Melinda Gates Foundation.  And their Office apps are my favorite tool kit.  Apple has done many….hmmm.  Well, at least my wife finally can access my calendar via her iPhone (and Google).

One of the things I appreciate most about tech is that it creates new markets.  Instead of spending my (whole) day trying to ruin competitors by taking share, profit, bonuses, jobs, and livelihoods from them, I can add new value and new capability to customers.  Hopefully, they do good things with that capability, and hopefully, I’ll set a good example.

I get the value of competition in providing economic benefit and do my part in combat, but I advocate a balance of intent (I love the B Corp concept).  Let me work on the innovative front, climbing new mountains, rather than focusing exclusively on knocking people off the old ones.  And cheers for our God-given capability to invent things that create those opportunities.

Nook fans the flame Amazon Kindled

I’m impressed.

I’ve watched companies try to defend their outmoded business models with the Next Big Thing staring them right in the face.  It usually turns out badly.  The most personal of these for me is Kodak.

I grew up in Rochester, where they printed money at Kodak Park, a 7 mile long vertically integrated plant that made film.  My Dad’s group invented a better film process, and I can show you the building that exists because of that invention (unless they have imploded that building to reduce property tax).  Kodak also invented the Kodak Killer, the digital camera, in 1975.

Instead of drinking this hemlock, they stayed the course.  Later, a close friend led development (in Japan) of the world’s first  consumer digital camera, the Kodak DC40 (and Apple QuickTake 100), introduced in 1994.

It seemed obvious to him where things were headed, but Kodak missed it, and has been working to shift gears (transmission grinding sounds) for 15 years.  I know many who have suffered as a result.  Stock down 90% from 1994.  I do not think this will be Barnes & Noble’s fate.

B&N has been cheating death at the hands of Amazon by doing the old way really well.  Their stores are a pleasure.  But I think they saw an image of their ultimate demise on the screen of the Kindle.  So instead of installing fireplaces or offering free massages to shore up the store paradigm, they decided to make the best e-reader, period.  And credit to whomever set  the bar high for that product, because they have apparently hurdled it.  Many comparisons have already been written, focusing on features, standards, and content.  For my part, I would like to point out their Killer App, which is listed most of the way down the lengthy “Product Comparison” page.  Nook on left, Kindle on right:

Try reader in store before buying! Physically.  In a comfortable place with books to compare and people to answer questions.  It’s genius.

Think about what you know about adoption of new technology products.  The timing is perfect.  Kindle made a splash and spent big money to pioneer the category.  They sold a goodly number to bleeding-edge consumers, and are on version two.  Sony, Google, and others have validated the category.  Now the Majority Market, which has questions about readability, weight, quality, usability, and what the heck 3G is, can come and kick the tires at a store that knows books.  [This may be the fastest Chasm crossing ever.]  While there, they can’t open two browser windows and compare price, or choose 1-Click to buy.  They will even be able to come back in for help.  And they’ll probably notice a $100 photography book while they’re there.

We study the need to innovate your own business models out of existence, or be vanquished by the one who does.  This is a rare example of a company that sees the train coming, and runs to get on board, instead of just bracing for impact.  I hope B&N survives the leap.

Apparently, branding still works

Mac volume was up 17% last quarter, while other PCs were up around 2%.  Total Apple profits up 47%.

There you go about Apple again, Craig.  Acer is also up strongly.

Acer did take over the #2 worldwide unit share position, at 14%.   But Acer’s average selling price is low, and  prices are falling — laptop prices down 20% across the industry – so Acer’s margins are tight at 2%.  Volume gains are driving marked profit growth (percent increase in net income), but the law of small numbers applies.

C’mon, it’s bad all over, so of course margins are low;  Acer’s share capture puts them in the driver’s seat when things get better.

Acer’s 2% net income yields about 6% share of industry profit.  By my calculations, the average Acer PC generates $10 in net income, while Macs deliver around $120.  So Apple’s paltry 3.8% unit share captures 20%+ share of personal computer profits (iTunes, iPhone, etc. excluded).  Their shareholders like riding that bus.

Well, those same drooling sycophants Apple has tapped for decades must be propping them up.

Last quarter saw the highest number of Mac sales ever, with about half to new customers.  Mac average prices are UP (2-3X the average for a Windows PC), so they aren’t buying new Macophiles with low low price or free printers.

All this during the Great Recession.

They are only a player in the US…they control the OS…if not for iPod…

It is about the brand.

Much has been written on how this is done.  I can offer no new insight;  I’ll simply point out that branding is showing its worth under pressure.  While others cut, go low, and promote deals to survive the downturn, Apple widens the gap from competition with brand touchpoints –  beautifully simple design, cool but approachable personality, great buying and ownership experience.

I spoke to a solar entrepreneur this week about the commoditization of that industry.  He said “I want my company to be the Apple of solar.”  Good idea.

* Data quoted or extrapolated from public IDC and NPD sources.  I suggest calculating for yourself if you intend to rely on the figures.

Dear Google: how to market Chrome OS

Asking people to use a new OS is like asking them to change how their car works – steer with a joystick instead of a wheel, brake with the right pedal instead of the left.  Not welcome, or easy.  Here are three things you can do to increase probability of success of Chrome OS.

1. Use your brand power to help the PC OEMs.  They want differentiation, and they want low cost, but they will shy from the trouble of a new OS without the branding carrot.  I know you actively avoid creating Googzilla, but if you want the OEMs to prioritize Chrome OS over alternatives, give them a reason beyond a hole in the head shiny new OS.  I.e., surround the PC with a glowing Google brand endorsement halo.  I’m talking about visible branding, and spending actual marketing money.  This can’t be your tried and true “build it and they (geeks) will come” strategy:  geeks are not the netbook target, and you are too omnipresent to be coy.
2. Set up demos in Best Buy, under a very visible Google brand.  Microsoft is trying to emulate Apple’s retail experience, because people want to experience cool stuff that Just Works.  So show them the cool stuff you can do with Google.  Show them the hidden gems in search, Docs, Gears, Wave, Trends, Maps, etc.  Most people don’t have time to just happen upon this stuff.
3. Work with Apple to enable iTunes on Chrome OS.  People use netbooks for social media and content consumption (like music).  This gap is a non-trivial barrier to Linux on netbooks.

OK, 1 and 2 above are not very Googley.  They are counter-cultural for you, and therefore a risk to your brand position.  But if you want to play in the OS space, you’ve got to have distribution through PC preloads, and the above are dependable approaches.  But here are some slightly more Googlicious ideas that would help you stay on-brand.

1. Write an open letter to potential buyers explaining what is good about Chrome OS and asking them to try it.  People like to be asked.  Gmail’s launch, in which people had to ask you for permission, was clever, but you’ve outgrown it.  People root for the winners, until they win a lot;   then they fear and vilify them.  The only remedy is transparency, authenticity, and no evil.
2. Create and promote an online demo that realistically enables users to experience Chrome OS.
3. Offer a conversion tool.  Something that will help people move onto the cloud.
4. If it can be done in a non-gimicky way, run servers directly related to Chrome OS on renewable energy, consistent with your corporate pledge.

I’ll be interested to see what happens.

del.icio.us Tags: Google,marketing,Chrome

Spray-on computer design

Some people use spray-on hair.  Likely they are worried that their authentic hair is inadequate.  However, the look achieved tends to confirm and reinforce the shortcomings of the underlying thatch.

I was reminded of this by the new fashionable laptops from Dell.  Here is one of 110 options (the match to the shirt above is pure coincidence…or is it?).

This is like a Dell competitive strategy presentation in a single image.  Paraphrasing:  “We’ve lost the #1 spot to HP, which is dominating retail.  Note: HP puts graphics on their laptops. Acer is coming up our tailpipe like Speed Racer, with low priced products.  Note:  Acer likes to paint products to look like cars, and so does Asus, not to mention bamboo, etc. So we’re cutting costs at every turn, including through product compromises.  We got into retail at the low end (even Wal-Mart).  But good news: we’re covering those shortcomings with a vast array of low cost graphics options.  Customers can choose.  We’re going to out-personal HP!  Summary: we’re challenging HP on personalization, and we’re holding off Acer on cost.”

This is product differentiation through spray-on design, and I’m afraid it has mesmerized leaders across the PC business, not just at Dell.  How many car themed laptops have we seen?  I’ve counted four.  And HP has a new graphic pattern every month (I will admit, their taste in graphics is better than competition).  Concurrently, average build quality is not improving.

I question the wisdom of this trend.  Look at other durable goods categories, and electronics categories:  appliances, cars, TVs.  Do they use loud graphical patterns to drive brand choice?  No.  Because most people don’t want it.  [OK, Mini has an angle on this.  Keep reading, please.]

“But computers are personal!  Look, it’s even in the name.”  Even cell phones, the most personal of products, have gotten away from loud graphics and skins, in favor of materials that reinforce brand choice.  Shiny surfaces and metal = high tech, high quality.   Rubber paint and leather = user focused.  Do people put stickers on their favorite products?  Sure.  But the manufacturers don’t do it for them.

Please refer again to the picture above of the Dell Pastel Carpet Series.  Note the merits:

1)  The Dell brand is completely obscured.  2) The underlying product’s design is incongruous with the top surface.  3) The product is unrecognizable, unless they sell enough such graphics to cement an association with Garish.

PC makers are faced with a very difficult design challenge:  make it really desirable for no money.  Margins are tiny, and prices are falling.  So, I feel for them, and understand why they are trying this stuff.

But frankly, it is further commoditizing the PC space.  There is a lot of cheap plastic stuff in Wal-Mart with loud graphics, since the underlying design has no differentiating merit.  This is what I fear PCs are devolving to.

A few computers get a premium, with appreciable share and loyalty: Apple Macs and Lenovo ThinkPads are good examples (Sony used to be).  Their designs are recognizable, unified (the tops and bottoms look like they came from the same company), and authentic.  Authentic, meaning the materials, colors, shapes, usability elements, sounds, etc. are all based in the brand intent of the product – they are designed to earn an image consistent with the promise of value.

I hope the PC makers turn from this surface level design and attend to what really drives desire:  user experience.  If they firmly believe customers want expressive graphics, I suggest they turn to Mini for inspiration.  Customization of a Mini is part of a holistic personal experience.  And everything Mini lets you do to the car enhances its Mini-ness, rather than obscuring it.  They are firmly in control of the image of the car, while enabling the buyer’s self expression.  Very different.

Netbooks could change everything

When Intel introduced the Atom processor, which ushered in the netbook, they seemed very conflicted about it.  They wanted to sell some, but not at the expense of the mainstream Centrino business.  It turns out they had good reason for caution, because now everything could change.

Previously, any computer with less than a nine inch screen and not running a normal OS (Windows or Mac) was a tweener – too small to be a serviceable laptop, and too big to be a smart phone.  Netbooks, combined with a price/value focused market, open people’s eyes to the utility of a small computer that delivers decent Web functionality, very low price, great battery life, and not much else.

What could happen as a result…

Manufacturers have been testing the market for Linux netbooks, to save money on the OS.  But users are frustrated enough by computers they know how to use, so an unfamiliar interface has met resistance sufficient to keep Linux out of the tournament.  I think this will change, though.  Let’s look at a few trends and market enablers.

ARM processors enable smaller, cheaper, netbooks with better battery life.  But they don’t run Windows (yet).  So, to minimize cost, and make a thinner computer with longer battery life, PC manufacturers are motivated to invest more into Linux.  This investment comes in the form of software development to improve the user interface and drivers to make Linux less frustrating – like HP’s Mi on their Mini.  But will people accept a non-Windows interface…?

The iPhone brings the benefit of a browser in your hand, and shows that it needs to have a certain size to be great.  A barrier has been crossed.  What could only have been done on a computer, can now be done on a phone — not as well, but the user is thrilled that a phone can even come close.  All other phone manufacturers are following.  What OS is demanded by the user?  Answer:  they don’t care as long as it is good!  I buy a new phone, I learn a new interface.  So, if the netbook becomes more like a phone…

Along with browser-phones, wireless carriers are beginning to offer netbooks, because they can bundle wireless broadband data service.  The killer app for netbooks is being always online, kind of like the iPhone…

So.  Now we have phones moving toward the functionality of PCs, and we have PCs selling in phone stores, offering the utility of the iPhone, but with a bigger screen and better keyboard.  There are new PCs with smaller screens than nine inch 16:9 in the market already, and more coming.  The tweeners are back!  But this time they will stick.  Because…

If it is light, hot looking, with great battery life, and has good Web functionality, the user will accept a new interface, because they have learned from phones that it will be OK.  And they are standing in the cell phone store while they think this over.  Therefore…

Non-Windows, non-Intel computers will get a foothold. This is big.

There is a huge financial incentive for PC companies to gain more of the value capture (margin) available in the market.  They can’t do this without viable options to Windows and Intel processors.  So, the PC makers are surely eager to try the path I describe above.

On the other hand, Intel and Microsoft can read the tea leaves and will act.  Intel has already announced roadmaps for Atom variants designed to fight off ARM (and NVIDIA), and is assaulting the mobile device space which ARM has owned.  Microsoft, I predict, will enable lower power processors, like ARM, with Windows.  But they won’t have time to work on this until after Windows 7 launch, so there is period of opportunity for Linux.

There are lots of moving parts, forces and counter-forces.  I won’t predict the winner, but I will predict that we’re about to see a lot of enticing product experiments.

del.icio.us Tags: Intel,ARM,Microsoft,Windows,netbooks,iPhone,mobile