Sunday, October 30, 2011

The rise and fall of the great companies...

It is very interesting to read news about Apple's and ARM's successes on the market on the one hand, and the fall and strugle of some of the undisputed rulers of computing and consumer markets of the not so distant past. Actually, I first think about computing markets, but since it seems that computing market penetrated consumer market and it's hard to distinguish the two, I'll treat them combined.

The main premise of this post is that it seems to me that company's long term success depends on the ability of the top management to anticipate future trends. Let me try to explain that in some more details.

I could start with the illustrations from many time points. For example, DEC. DEC rose from the change cause by the invention of minicomputers. But DEC, as later IBM too, failed to anticipate the rise of personal computers and it costed it its existence (probably along with other management failures).

Then, there was IBM too. In 70-ties it was said that no one has been fired because of buying IBM equipment. IBM's mistake was also that it didn't foresaw personal computers. True, it did make PC and it also make it possible for others to produce PC clones. But that's all, and when they saw their mistake, they tried with PS/2 series, which was failure! Anyway, two giants emerged riding on the wave of PC revolution, Intel and Microsoft, frequently called Wintel. Transition period was 80-ties, and the world domination came in 90-ties. In those times, there were many players, among others HP, Compaq, AMD, Dell. All of them, more or less, managed to profit from PC sales. There was also Apple. Apple succeeded during 80-ties to position itself as a producer of successful workstations with GUI, but because it was expensive it was always niche, and because it was niche, it fall down during 90-ties. Possibly, it was also a lack of vision, but I think that somehow the main reason is that at that time computers were used by people that know something about computers and which wanted something cheap and rarely they were thinking about the design.

So, at the end of the 90-ties Microsoft was on a height of its power along with Intel. And very few people, including myself, saw anything that would change that any time soon. But then, something happened that triggered the change. Actually, we can see two different things that caused two different effects. Basically, two changes happened that damaged existing companies and allowed new ones to appear and/or rise.

The first one was the fusion of mobile phones and computers, and penetration of computers into consumer markets! Intel and, especially Microsoft, were caught unprepared. They didn't have adequate products for that segment of market, and what they had wasn't marketed appropriately. In a way they were prisoners of desktop mentality. Apple on the other hand had Steve Jobs that not only foresaw this coming, but in a way was the initiator of this change! This change cause damage to Intel and Microsoft. Intel was producing desktop and server processors, and had no product for mobile phone. Here ARM benefited. And not only that ARM dominates mobile phone markets (by mobile phones I also mean tablets and such) but this momentum is allowing them to slowly enter the server markets too (e.g. read this)! Now both, Intel and Microsoft, are trying to catch that wave.

The second wave is the shift from computer production to services. Mass computer production become less and less profitable, and notebook market is rising. The exemption here are high end Unix servers (and partially Windows server). That change was foreseen by Samuel Palmisano. He oriented IBM from mainly computer production company to services company. One of the notable steps he did is when he sold Thinkpad brand to Lenovo. Of course, IBM still produces high end Unix servers and mainframes. Anyway, that brought IBM from its knees to become stronger than Microsoft, something unimaginable 10 years ago.

It's very interesting to watch what's happening because it seems to me that this is in a way comparable to a fall of great empires of the past, and USA of lately. :) It's also interesting to find out how to predict those changes, because who manages to predicts the changes that will come, will have a chance to rule the global market of the future.

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scientist, consultant, security specialist, networking guy, system administrator, philosopher ;)

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