Artery Calcification

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There were two very large pieces of news in the tech world last week: Google cancelled Reader, its RSS feed reading service, and Mailbox, an innovative mobile email client, sold to Dropbox.

These are both interesting news items to me for primarily the same reason. Let me explain through the Google Reader example. There’s a lot of angst in the tech community about this decision. Those of us who use Reader use it avidly and its disappearance leaves a huge hole. The problem, though, is that Google has stopped any innovation in RSS feed readers years ago.

Big companies, in my opinion, are like plaque in an artery. They enter a market, clog it, and then stop letting anything get through. The shear size of these big companies clogs all innovation and we, as consumers of these products, are left wanting more. Google with Reader isn’t the only example. Microsoft has done this for years with Outlook and Office. Intuit has done this for years with Quickbooks. PeopleSoft did this for years with CRM software. In each case, these solutions calcify until some major change happens to blow things up. Generally this change occurs around a shift in technology. In the past 15 years that has been a rise in the web and a rise in touch, mobile systems like smartphones and tablets. In Google Reader’s case it is Google blowing it up. When these changes occur we see amazing innovation with new winners. Eventually, of course, those winners calcify, too. We get Twitter, Facebook, and Salesforce.com, for instance.

And that leads me to Mailbox. In the old days a company like this could never compete with Microsoft’s Outlook. They could have built an email client that sucked in Outlook data, even streamlined and improved it, but to compete? Wasn’t going to happen. But because of the web and mobile over the past 15 years, Mailbox has a chance. In just a few short weeks 1.3 million people joined its waiting list and the company received multiple acquisition offers, with Dropbox dropping as much as $100 million to own it.

The combination of web as plumbing and mobile as front end is doing that to a lot of software areas now. We’ve mostly seen this in social and pure consumer apps, Instagram for example, but that’s temporary. It will happen to productivity apps, too. The key is looking at the old problems and old solutions in a brand new light, re-orienting around the customer and the problem he is trying to solve but utilizing usage paradigms perfected in the technology generations before. Mailbox didn’t look at email and see it as solely a communication tool or CRM tool as Google and Microsoft had done before. Mailbox looked at email as a way to organize the things you need to do instead, realizing that a lot of people use their inbox as a task list.

This pattern is very straight forward and has occurred every time the technology changes. First we get solutions which are the same as the old platform but now available on the new platform. Think the email client on every mobile device today. Then you see innovation around those ideas, Mailbox as an example but there are others, too. Then one of these solutions becomes dominant and, over time, solidifies its control of the market, overserving it, and slowing innovation. Finally, technology changes and the cycle starts all over again.

When markets change and technology change, that’s when real innovation occurs. Google canceling Reader is a huge pain in the short term. But in the long-term this creative destruction is the only way things get better.

Cut Off: 40 Years Without Human Contact

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This is an amazing story from the Smithsonian Magazine on a Russian family that was cut off from civilization for almost 40 years:

Siberian summers do not last long. The snows linger into May, and the cold weather returns again during September, freezing the taiga into a still life awesome in its desolation: endless miles of straggly pine and birch forests scattered with sleeping bears and hungry wolves; steep-sided mountains; white-water rivers that pour in torrents through the valleys; a hundred thousand icy bogs. This forest is the last and greatest of Earth’s wildernesses. It stretches from the furthest tip of Russia’s arctic regions as far south as Mongolia, and east from the Urals to the Pacific: five million square miles of nothingness, with a population, outside a handful of towns, that amounts to only a few thousand people.

When the warm days do arrive, though, the taiga blooms, and for a few short months it can seem almost welcoming. It is then that man can see most clearly into this hidden world—not on land, for the taiga can swallow whole armies of explorers, but from the air. Siberia is the source of most of Russia’s oil and mineral resources, and, over the years, even its most distant parts have been overflown by oil prospectors and surveyors on their way to backwoods camps where the work of extracting wealth is carried on.

Karp Lykov and his daughter Agafia, wearing clothes donated by Soviet geologists not long after their family was  rediscovered.

Thus it was in the remote south of the forest in the summer of 1978. A helicopter sent to find a safe spot to land a party of geologists was skimming the treeline a hundred or so miles from the Mongolian border when it dropped into the thickly wooded valley of an unnamed tributary of the Abakan, a seething ribbon of water rushing through dangerous terrain. The valley walls were narrow, with sides that were close to vertical in places, and the skinny pine and birch trees swaying in the rotors’ downdraft were so thickly clustered that there was no chance of finding a spot to set the aircraft down. But, peering intently through his windscreen in search of a landing place, the pilot saw something that should not have been there. It was a clearing, 6,000 feet up a mountainside, wedged between the pine and larch and scored with what looked like long, dark furrows. The baffled helicopter crew made several passes before reluctantly concluding that this was evidence of human habitation—a garden that, from the size and shape of the clearing, must have been there for a long time.

It was an astounding discovery. The mountain was more than 150 miles from the nearest settlement, in a spot that had never been explored. The Soviet authorities had no records of anyone living in the district.

Great read for this weekend!

Apple, the Business Chameleon

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Interesting data out of India. According to IDC, Apple jumped from almost no revenue to 16% of smartphone revenues, second to only Samsung, all in one quarter. And according to this Techcrunch article:

Apple’s move up has been prompted at least in part by a major change in the way it sells the iPhone in India, by employing the help of small local retailers to distribute the device, and creating amortized payment plans that defray the significant upfront cost of buying an iPhone in India.

I remember a story, maybe falsely, about how General Motors beat out Ford. As you probably know Ford was the king of cars in the early 20th century. Henry Ford, the “inventor” of the assembly line, the man who famously said you can have a Ford in any color as long as it was black, was winning by lowering the price to the point that anyone could buy one. GM wanted to compete and by the 1940s had trounced Ford. How? By offering credit plans to buy their nicer, more stylish cars.

The hardest thing about predicting what will happen in the mobile world is figuring out what Apple will do. Apple built its US revenues off Apple Stores and carrier subsidies. Pundits everywhere ask how Apple will compete in countries without subsidies and without stores, and Apple changes their business model for the realities on the ground.

When I wrote about the next billion smartphone customers a week ago, I practically skipped Apple. Will the company figure out unique distribution models to bring devices to low-income people? Will Apple figure out less expensive devices? Completely different types of devices? Something the rest of us can’t fathom today? Impossible to know.

But just like General Motors in the first half of the 20th century, I wouldn’t count Apple out.

You Know You’ve Lost When…

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Sounds like the start of a Jeff Foxworthy comedy routine. Instead, we have Microsoft at its saddest:

In the ongoing battle between Microsoft and Google over the market for office software, Massachusetts legislators are now considering a bill that would restrict cloud computing services from using student data for commercial purposes like (but not limited to) advertising. According to The Wall Street Journal, the bill is the work of Microsoft, which is trying to protect its lucrative Office business from encroachments by Google’s free Apps for Education.

I’m not saying that Microsoft is wrong and that privacy for schools and students shouldn’t be a concern but come on! Battle this out in the market, not by crying to your local legislature.

More Value Off-Contract?

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This is a chat I had with a very friendly support person at Frontier Communications. Frontier acquired Verizon’s FiOS high-speed Internet connection business a few years back. I changed the support person’s name.

Elia: Hi. I received a flyer in the mail regarding re-upping my contract and it offered an Apple gift card. I missed that window but thought I’d check in regarding re-upping, see if there are any deals, and what the rate would be to do so. My contract expires in July, I think.
Tom: Yes if you renew your services on a 2 year term and added a security product it would be a $150 apple gift card if you just renew on a 2 year term it’s the $100 gift card
Elia: Has the price changed? I’m currently paying $50/month plus taxes.
Tom: Looking at your current plan for the price you have the best service as you would lose upload speed and pay $5/mo more
Elia: So extending my current plan would still get me 35 Mbps up/down at $50/month + taxes?
Tom: no it would be on new pricing and services 59.99/mo pretax for Fios 35/15
Elia: That’s significantly worse then what I have now.
Tom: yes
Elia: If I don’t renew what happens?
Tom: nothing your services continue as they are
Elia: Same price as I have now?
Tom: yes
Elia: Not much incentive to renew then. 🙂
Tom: correct
Elia: Okay… thanks for your time Tom. I will leave my account as is.
Tom: OK. Is there anything else I can assist you with today?
Elia: Nope. Have a good day.

I’ve been a happy FiOS customer since I could get it but I really don’t understand this decision from a business perspective for Frontier. In essence, if I don’t sign a new contract, I will get significantly faster upload speeds at a lower price. Seems backwards to me.