Monday, October 24, 2005

Innovation Management, the talking e-book and the faith of PalmSource

Misinformed (not necessarily bad) management is the often the reason why innovative companies goes bad. An old, but interesting subject.

A couple of years ago I was in the e-book business. We tried to develop the e-book concept further with speech and multimedia. We had a deal with Microsoft to make multimedia applications for Microsoft Reader around StoryML, an XML-like framework where you could define a storyline, its structure, theme and actors as separate style sheets.

We presented the technology, based on the Digital Accessible Information SYstem (DAISY) together with Swedish Dolphin Audio Publishing AB, at the Audio Publishers Association Conference (APAC) 2001, in Chicago if I remember right.

We did “Christmas in the Bible” and ”Berättelser ur Bibeln i Jultid”, as a pictorial e-book with audible excerpts from King James Bible and the new Swedish Bible translation Bibel 2000. The books were narrated by leading Swedish and English professional actors.

I still think it is a nice idea, but the e-book market is more or less dead nowadays. It disappeared over night when the dot-com bubble burst.

Anyway, Palm OS was great at that time. I remember it had a much resemblance to the old MacOS. Microsoft had only the complex half-baked PocketPC. But somehow Palm OS 5 got stuck in countless patches. The much-promised big upgrade Cobalt never materialized. That was “launched” winter of 2003 as the vaporware Palm OS 6. Tom Frauenhofer has a good analysis. Development tools for both systems were at best rudimentary, lacked support and were expensive. And both companies changed the APIs constantly. Developing applications was hard and expensive for all the different flavours of Palm and PocketPC.

Today Microsoft is much better off and Palm OS is lagging even more. I have both a Palm T5 and a Qtek phone with Windows Mobile. The T5 has bugs and PalmSource has a lousy technical support.

So, have Palm given up innovating Palm OS? David Beers think so. At the latest press conference Palm representatives not only launched a Windows Mobile Palm smartphone, but also said they were teaming with Microsoft to make improvements in Windows Mobile itself.

Why did Palm lose its lead? I honestly believe that Palm got engage in too much activity of the wrong kind. It started when initial owner 3Com spun off Palm and original founder Jeff Hawkins and Donna Dubinsky left. They were replaced with CEO Carl Yankowski, a marketing guy (who left Palm only two years after he took the job, mainly as a result from a series of missteps by the company.) Interestingly Carl Yankowski is not a lawyer or economist as you might expect, but an engineer “prepared to be what they call a lab rat”. He had experience from corporate giants like Proctor and Gamble, General Electric, Pepsi and Reebok, which is the big clue in this case. Industrial experience is one thing, experience in innovation and entrepreneurship is a completely different thing.

Lack of managers experienced in entrepreneurship and innovative companies is a big problem in Sweden. A disproportionately large number of Swedish companies are big multinationals.

Carl Yankowski made one of the most spectacular IPOs in Silicon Valley history and Palm got a lot of cash. The company was at that time around 500 employees. But Yankowski had only experience from large companies of 10,000 employees, so his goal was to get to 10,000 as quickly as possible. This meant massive hiring and acquisitions without any real strategy. And as a result extreme growing pains with intense corporate infighting between divisions.

Palm quickly became a victim of its own success. It had been so successful that the managers assumed they’ve found the winning formulas. But the same formulas become rigid and no longer worked when the market changed significantly, like cell phones becoming PDAs or the iPod revolution.

Good managers recognize these kinds of threats early, which also the management within Palm did. They unleashed a flood of initiatives in response. The problem was not an inability to take action, but an inability to take the appropriate action. They followed established patterns of behaviour, even in response to dramatic environmental shifts. As a result strategic frames became blinders, processes hardened into routines, relationships became restraints, and values hardened into dogmas.

Thus, the managers were not leading Palm where the market is going.

Compare to Microsoft, which have had a steady increase in both market shares and a reasonably well thought-out development strategy. Today Windows Mobile is a better product.

(I must admit that the Qtek user interface (Windows Mobile 2003 4.21.1088) sucks plenty for being a cell phone.)


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