It was apparent, soon after Steve Jobs' return to Apple, that he'd not only studied Louis Gerstner's turnaround at IBM, but also had decided to go one better. He set what is now the gold standard in turnarounds. Jobs did that by cutting Apple to the bone, massively simplifying its product lines, and convincing Bill Gates to invest in Apple (which had to be incredibly painful for him). Dell, on the other hand, appeared to be at the top of its game, tied at the hip to Microsoft and doing very well. All was not well under the covers, however. Michael Dell wanted to retire, and Microsoft was well into making what likely was its biggest mistake: pivoting from a focus on users to a focus on companies. Microsoft also was reeling from an antitrust action. On top of that, and likely because of it, Bill Gates wanted out. HP was sick, in need of fresh blood, and basically treading water. It wasn't clear if it knew who its customers were. It was in far too many businesses, with little resources to fully fund any of the efforts. It looked a lot like IBM did before it collapsed in the 1980s, and if one word could have summed up the firm, it might have been "geriatric." Lenovo largely was unknown in North America. It was a powerful company in China, but China had yet to become a true world power in technology -- and like most Chinese companies, Lenovo was having trouble breaking out of the region. It desperately needed an edge, but it wasn't clear where it could get one, and few outside of China took the company seriously. 2010: The Decade It All Changed Again This decade found Apple as the most valuable company in the world and Steve Jobs the CEO of the decade. He had done something amazing at least twice -- first in seeing the opportunity of the iPod and pivoting the entire company to it, and next in cannibalizing the iPod for the iPhone. He nearly singlehandedly created the impression the PC was dead, which is kind of interesting since Apple really launched the modern PC. Dell had been through a number of changes and was in the midst of a major transformation. There were doubts that Dell would survive. Its attempts to follow Apple in both MP3 players and smartphones had failed spectacularly, leading some to doubt the firm had long to live. There wasn't a death watch, as there had been with Apple, but Dell was in trouble -- largely because Microsoft had lost its way, and its pivot from users to enterprises had gone very badly for the PC business. HP, which was headquartered near Apple and followed IBM closely, had observed both successful turnarounds -- but it ignored everything it learned. It seemed there was no mistake it didn't want to repeat. Then it brought in an industry expert, Mark Hurd, and he was making solid progress. HP seemed to be out of the weeds, and it even bought Palm and had a solid plan on how to pivot the company to compete better with Apple. Everything was looking pretty good. After acquiring IBM's PC business, Lenovo had become a force to be reckoned with. It reversed a bad decision to divest phones and was back in that business, but still mostly in China. It was the only company heavily in the PC business, other than Apple, that could showcase success in phones as well. Lenovo was making it clear that a Chinese company could execute out of China. Its headwinds increased animosity between the U.S. and Chinese governments, which created a drag on business but not execution. 2016 Status Report Apple is weakening, but it's far from being in trouble. It doesn't seem able to lead anymore, however. Rather than following Steve Jobs' model of focused, simple products, it now offers products that are starting to look like the industry standard. They are relatively difficult to use (compared to earlier Apple offerings), and there's an increasing number of products to choose from. Tablets are in decline, smartwatches have yet to take off, and the company's risky pivot to cars has yet to materialize. The move away from phone subsidies appears to be killing its unusually high market share for a premium product (it's typically closer to 10 percent than the near 50 percent it once enjoyed) and forcing it to bring out cheaper phones. Instead of leading, it appears to be following -- at least with tablets. Dell did the impossible and went private, realizing that a big part of the problem with every company in this segment is the forced focus on quarterly results and expensive efforts to prop up valuations. For once, Apple seems to be following it into business with a tablet line (iPad Pro). However, Dell still lacks any smartphone presence, and that is likely its biggest client exposure. Microsoft has a subject matter expert running the firm, and it appears to be recovering as a result, though its move into hardware with the Surface line has introduced a new exposure for Dell. Dell currently is in the process of buying EMC -- and if successful, that could make it the most powerful company in enterprise technology, with a blend of software, services and hardware that could be unmatched. That potential has yet to be realized, though, because the merger isn't complete. Having seen the Apple turnaround, the IBM turnaround, Lenovo's growth after buying the PC business, Sun's failure to pivot to software, and Mark Hurd's success, HP came up with a new plan. After being proven right in deciding that keeping PCs was a good idea, it first decided to pivot to software with a new CEO who didn't even last a year. Then it brought in a CEO who had even less industry experience than Carly Fiorina had, and she decided to ignore everything -- most recently spinning off the PC and printer business. What remains are two companies -- both now far better focused, but also with reduced economies of scale. HP Inc. has the stronger management team, but it is saddled with both massive debt and printers. HP Enterprise is relatively debt-free, but it lacks experienced leadership. HP's last 16 years -- with the partial exception of Mark Hurd's time there (he did showcase why office affairs are dangerous) -- provide a strong example of what not to do. Lenovo is now a world power, on paper. Having recently acquired both Motorola and IBM's server business, it now is the only company with credible presence not only in every major market, but also in every major computing arena. It has a significant world presence in smartphones, tablets, PCs and servers. It is light on software, preferring partnering to owning, and it is light on services. However, in terms of computing hardware breadth, it is unmatched. Lenovo currently is experiencing financial pain as a result of two huge simultaneous mergers, but it actually appears to be pulling the move off, and it has been making major staffing realignments to finish the process.
Monday, April 25, 2016
boys like it
It was apparent, soon after Steve Jobs' return to Apple, that he'd not only studied Louis Gerstner's turnaround at IBM, but also had decided to go one better. He set what is now the gold standard in turnarounds. Jobs did that by cutting Apple to the bone, massively simplifying its product lines, and convincing Bill Gates to invest in Apple (which had to be incredibly painful for him). Dell, on the other hand, appeared to be at the top of its game, tied at the hip to Microsoft and doing very well. All was not well under the covers, however. Michael Dell wanted to retire, and Microsoft was well into making what likely was its biggest mistake: pivoting from a focus on users to a focus on companies. Microsoft also was reeling from an antitrust action. On top of that, and likely because of it, Bill Gates wanted out. HP was sick, in need of fresh blood, and basically treading water. It wasn't clear if it knew who its customers were. It was in far too many businesses, with little resources to fully fund any of the efforts. It looked a lot like IBM did before it collapsed in the 1980s, and if one word could have summed up the firm, it might have been "geriatric." Lenovo largely was unknown in North America. It was a powerful company in China, but China had yet to become a true world power in technology -- and like most Chinese companies, Lenovo was having trouble breaking out of the region. It desperately needed an edge, but it wasn't clear where it could get one, and few outside of China took the company seriously. 2010: The Decade It All Changed Again This decade found Apple as the most valuable company in the world and Steve Jobs the CEO of the decade. He had done something amazing at least twice -- first in seeing the opportunity of the iPod and pivoting the entire company to it, and next in cannibalizing the iPod for the iPhone. He nearly singlehandedly created the impression the PC was dead, which is kind of interesting since Apple really launched the modern PC. Dell had been through a number of changes and was in the midst of a major transformation. There were doubts that Dell would survive. Its attempts to follow Apple in both MP3 players and smartphones had failed spectacularly, leading some to doubt the firm had long to live. There wasn't a death watch, as there had been with Apple, but Dell was in trouble -- largely because Microsoft had lost its way, and its pivot from users to enterprises had gone very badly for the PC business. HP, which was headquartered near Apple and followed IBM closely, had observed both successful turnarounds -- but it ignored everything it learned. It seemed there was no mistake it didn't want to repeat. Then it brought in an industry expert, Mark Hurd, and he was making solid progress. HP seemed to be out of the weeds, and it even bought Palm and had a solid plan on how to pivot the company to compete better with Apple. Everything was looking pretty good. After acquiring IBM's PC business, Lenovo had become a force to be reckoned with. It reversed a bad decision to divest phones and was back in that business, but still mostly in China. It was the only company heavily in the PC business, other than Apple, that could showcase success in phones as well. Lenovo was making it clear that a Chinese company could execute out of China. Its headwinds increased animosity between the U.S. and Chinese governments, which created a drag on business but not execution. 2016 Status Report Apple is weakening, but it's far from being in trouble. It doesn't seem able to lead anymore, however. Rather than following Steve Jobs' model of focused, simple products, it now offers products that are starting to look like the industry standard. They are relatively difficult to use (compared to earlier Apple offerings), and there's an increasing number of products to choose from. Tablets are in decline, smartwatches have yet to take off, and the company's risky pivot to cars has yet to materialize. The move away from phone subsidies appears to be killing its unusually high market share for a premium product (it's typically closer to 10 percent than the near 50 percent it once enjoyed) and forcing it to bring out cheaper phones. Instead of leading, it appears to be following -- at least with tablets. Dell did the impossible and went private, realizing that a big part of the problem with every company in this segment is the forced focus on quarterly results and expensive efforts to prop up valuations. For once, Apple seems to be following it into business with a tablet line (iPad Pro). However, Dell still lacks any smartphone presence, and that is likely its biggest client exposure. Microsoft has a subject matter expert running the firm, and it appears to be recovering as a result, though its move into hardware with the Surface line has introduced a new exposure for Dell. Dell currently is in the process of buying EMC -- and if successful, that could make it the most powerful company in enterprise technology, with a blend of software, services and hardware that could be unmatched. That potential has yet to be realized, though, because the merger isn't complete. Having seen the Apple turnaround, the IBM turnaround, Lenovo's growth after buying the PC business, Sun's failure to pivot to software, and Mark Hurd's success, HP came up with a new plan. After being proven right in deciding that keeping PCs was a good idea, it first decided to pivot to software with a new CEO who didn't even last a year. Then it brought in a CEO who had even less industry experience than Carly Fiorina had, and she decided to ignore everything -- most recently spinning off the PC and printer business. What remains are two companies -- both now far better focused, but also with reduced economies of scale. HP Inc. has the stronger management team, but it is saddled with both massive debt and printers. HP Enterprise is relatively debt-free, but it lacks experienced leadership. HP's last 16 years -- with the partial exception of Mark Hurd's time there (he did showcase why office affairs are dangerous) -- provide a strong example of what not to do. Lenovo is now a world power, on paper. Having recently acquired both Motorola and IBM's server business, it now is the only company with credible presence not only in every major market, but also in every major computing arena. It has a significant world presence in smartphones, tablets, PCs and servers. It is light on software, preferring partnering to owning, and it is light on services. However, in terms of computing hardware breadth, it is unmatched. Lenovo currently is experiencing financial pain as a result of two huge simultaneous mergers, but it actually appears to be pulling the move off, and it has been making major staffing realignments to finish the process.
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