Tag: Microsoft

Digging Below the Surface of Microsoft’s Tablet Strategy

Posted on June 21, 2012

With the introduction earlier this week of the Surface tablet, most observers seem to agree that Microsoft got a lot of things right, launching a well-designed product with features lacking in its chief competitor — Apple’s iPad — including a cover that functions as a keyboard and the ability to run desktop software programs.

But the presentation also left many unanswered questions, including the exact price, release date and battery life of the device. Perhaps more importantly, it is still unclear what the Surface offers beyond hardware — and if Microsoft can leverage successful offerings such as its Xbox gaming system and Office productivity suite to create a vibrant ecosystem to rival that of the iPad.

“At first glimpse, Microsoft appears to have gotten a lot right with the Surface tablet,” Wharton new media director Kendall Whitehouse says. “Including an integrated keyboard with the Surface is a great idea. More importantly, however, is that the Surface runs Windows 8. In this regard, Microsoft has leapt ahead of the competition. This is the eventual direction for tablet and mobile products: To close the gap between the mobile/tablet environment and the desktop/laptop environment.”

Whitehouse adds that making Windows 8 the operating system for the Surface is a “big bet” for Microsoft. “But I admire their courage in going ‘all in’ with their new OS. And, if they can pull this off by successfully implementing a consistent user experience across desktop, laptop, tablet and mobile phone devices, they could be back in the game in a big way.”

The move is also reflective of a growing trend in the tech sector, with companies focusing more on offering a full range of hardware and software similar to the Apple ecosystem, says Wharton marketing professor Eric Bradlow. “Every portal is trying to get into the device game,” he notes. “They are worried that someone else taking over the device market will create a friction cost so that the other portals are ‘harder’ to use. I treat Microsoft the same way. They are trying to develop a portal that will keep the Windows 8 platform and the Microsoft suite of products top of mind.”

According to Wharton operations and information management professor Eric Clemons, the iPad is “nearly perfect” as an entertainment device. But it is lacking in the area of productivity, which is where the Surface may be able to make inroads with consumers.

“Providing the Surface with twice the memory of an iPad was a nice move. Adding a USB port was even smarter. Providing Office was smarter still,” Clemons notes. “Until now, when I travel, I need three devices: I need an iPhone. I need a MacBook Pro. And I need an iPad for the plane ride itself. Now I can get away with only two devices, at least on shorter trips…. And a Surface would allow me to write real documents, send real e-mails and view my camera photographs — I mean from a real camera, a Nikon Digital SLR, not a camera phone picture.”

Clemons suggests that sales of the Macbook Air and the iPad could be threatened by the Surface “except that I expected this some time ago from a Microsoft platform, and I bet Apple did, too. So look for an iPad … that runs Office and has a USB port very soon.”

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Yahoo: Let’s Make a Deal

Posted on October 24, 2011

As Google, Microsoft and other potential suitors continue to explore the idea of buying Yahoo, the question remains: Who would benefit most from such a purchase, and why? 

According to Wharton marketing professor Eric T. Bradlow, co-director of the Wharton Customer Analytics Initiative (WCAI), Google, with its prior acquisition of DoubleClick, “would have a unique opportunity to utilize its in-house technology to monetize Yahoo’s installed base. Revenue on the Internet is still driven by traffic, which is a function of having unique and important content.” DoubleClick, purchased in March 2008, provides ad management and related services for buyers and sellers of digital media advertising.

Google could also bring its recently launched social networking Google+ to Yahoo’s audience of nearly 700 million unique visitors, according to a report in the Wall Street Journal. In addition, Google would benefit from Yahoo’s relationships with content publishers like ABC News.

Kevin Werbach, Wharton professor of legal studies and business ethics, states that while Yahoo’s massive user base makes it valuable as a whole to acquirers, “the user benefits really come from the individual Yahoo offerings that are differentiated or have well-developed communities.”

Google is in talks with private equity investors to buy Yahoo’s core business, while Microsoft plans to invest “several billions of dollars” in loans to potential bid partners and preferred equity in Yahoo, the Journal report says. Yahoo and Microsoft already have a 10-year search partnership signed in 2009, a year after U.S. antitrust regulators frowned on a proposed Google-Yahoo partnership for web search advertising. Chinese Internet firm Alibaba Group Holdings, in which Yahoo has a 40% equity stake, has also shown interest in buying Yahoo, but has not yet made a formal offer.

If Microsoft’s strategy is successful, it may also push to integrate Skype, the Internet communications service it recently bought, into Yahoo, says a New York Times report. Already, Microsoft’s Bing search engine allows Yahoo to sell ads against responses to user queries.

The “basic question,” says Werbach, is whether Yahoo today is more valuable as a whole or in parts. “Any new owner of Yahoo must choose whether to extract as much revenue as it can from the existing platform, or to re-energize Yahoo as a distinct competitor. The second option would be better for Yahoo’s users, but it’s riskier for potential investors.”

Bradlow notes that while Yahoo has struggled in some ways, it has continued to provide content that attracts millions of unique visitors on a daily basis, especially “a very monetizable set of customers.” Yahoo’s visitors “tend to be heavier-than-average buyers of products and services, and provide a valuable audience for targeted advertiser content,” he adds. Yahoo’s news arm reported 81.2 million unique visitors in August, making it the biggest online news site, the Times report said.

Yahoo reportedly sought out potential investors after firing its chief executive, Carol Bartz, in September. Bartz made way for Yahoo CFO Tim Morse to become interim CEO after a study of Yahoo’s assets and performance by independent directors concluded that the company was not performing as well as it could. Yahoo is “still basically playing out the Internet portal model that it pioneered in the 1990s,” Werbach told Knowledge@Wharton Today at the time, adding then that “Morse, or whoever takes over as the permanent CEO, needs to make a major strategic decision: Sell the company or bet big on a big idea.”

Price could be a major sticking point as Yahoo’s suitors cobble together a deal, according to the Times. “Private equity firms have indicated they are unwilling to pay much more than Yahoo’s current market value of $20 billion, arguing that the stock price already includes the expectation of a sale,” the article says.

Putting the right price tag on Yahoo may be a tough call, but the space it operates in offers advertisers a value they cannot ignore. “What social media has allowed companies to do is listen to customers in real time,” said Bradlow in a recent Knowledge@Wharton interview. “You think about the biggest problem companies have: What is it? It’s customer defection and churn. You know why? Because you spend a huge amount of money on acquisition costs, [but] many customers don’t stay around long enough” to justify that expense.

 

 

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Defining Innovation — and Converting Words to Action

Posted on October 18, 2011

Innovation is a tough word to define, but most would say they know it when they see it. At the recent Wharton Women in Business conference, participants in the panel, “Driving Innovation through Careers in Technology,” were asked to discuss their personal definitions of the term and give a concrete example from their own experiences.

Here is a look at what they had to say:

Julie Anixter, CIO MagaDesign, a visual information mapping and communications firm.

Her definition: “My definition until about two years ago was doing something game-changing. But with the financial free-fall that the world is in today, my new definition is saving our great companies, saving ourselves and creating our futures by doing something really game-changing.”

An example: “The last great project that we did was with the CIO of the Air Force, who has lost a lot of budget and influence with the changes at the Department of Defense, but nonetheless needs to finance his strategy for an integrated Air Force. We worked with him to do a series of 18 maps where we got leaders in the room to co-create a visual strategy for the next couple of years for the Air Force.”

Linda C. Brigance, vice president, IT customs clearance and logistics, FedEx Services and chief information officer, FedEx Trade Networks.

Her definition: “Innovation is about people. It’s about putting an idea into motion.”

An example: “I always go back to an old example. FedEx.com was the first to put [package] tracking onto the web. At that point, the web was just a repository of information. This wasn’t an idea that came from the board room; we had a guy who just did it…. A more recent example is a GPS device for the health industry and a web portal collaboration that allows tracking showing if a package has been opened and the variance in [package temperature] because a lot of health care products are very sensitive and have to stay within a certain range of temperature.”

Brooke L. Eplee, director of strategy and corporate development for Sony Music Entertainment’s global digital business division.

Her definition: We live in such a fragmented world these days, especially in a place like the music industry, so a lot of good ideas out there haven’t been brought together. The dots haven’t been connected, and if you have someone who is thinking about how to connect the dots, often there are ready sources of information just waiting to be tapped.”

An example: “Vevo is a property that we launched in December 2009. The music industry had never monetized music videos; they were thought of as a promotional tool…. What we have done [with Vevo] is … built [a portal] where users could watch videos for free…. That way, we can curate the experience that people have on the website and sell ads against that. When the experience is a premium experience, premium-tier advertisers are more willing to put advertising behind it.”

Stephanie Ferguson, GM of Windows Phone, Microsoft.

Her definition: “At Microsoft, we think of [innovation] in terms of inventions and reinventions that are brought to the market … and actually transform the experience for the customer.”

An example: “Kinect is a sensor we built for the Xbox 360…. For the person standing in front of it, the Kinect builds a skeletal replica of you and uses software to process what the skeleton is doing and relates it to the application you’re using. There’s also voice recognition, so with those two natural user interfaces at work, you don’t need to use a controller anymore…. From a business standpoint, it is a huge opportunity to … break out of our traditional 17-27 year-old male customer base for the Xbox and really broaden the addressable market. It also opened up possibilities in terms of what could be done in entertainment….

Deborah Nelson, chief of staff, global sales and enterprise marketing, Hewlett-Packard.

Her definition: “[At HP,] we think about innovation as translating ideas into a meaningful impact for our customers. When we talk about innovation at HP, we mean innovation with a purpose.”

An example: “Counterfeit drugs are not as much an issue in the United States, but when you go into third-world countries, it’s a real problem. We don’t know much about counterfeit drugs, but we know a lot about counterfeit ink. We put together a partnership, and now drugs in Africa come with an area that you scratch off and see a number. You can send a free SMS text that goes to a database, which can tell you if the drug is actually what it should be.”

Caroline Strzalka, business development director, Sesame Workshop.

Her definition: “[At Sesame Workshop,] we define innovation as taking risks to make people’s lives better. It could be doing something that hasn’t really been done before or finding a workaround to a problem that currently exists.”

An example: “We’re working with [Microsoft’s Kinect technology] on Once upon a Monster, a new game coming out. We work with preschoolers, and for years, we’ve known that they don’t have the manual dexterity to handle normal controllers…. Sesame’s all about taking devices created predominantly for entertainment and figuring out how to make them educational.”

What does innovation mean to you? How are you seeing that definition play out at your firm?

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Everything New Is Old Again: iPad 2 Ups the Stakes in the Tablet Wars

Posted on March 3, 2011

“Six months ago, I was a pioneer. Now, I’m old school.” That comment — posted on Facebook by an Apple user — pretty much sums up the feelings of iPad owners following the roll out of Apple’s next-generation tablet.

The iPad 2, which goes on sale March 11 with data plans available through AT&T and Verizon, was unveiled by Apple CEO Steve Jobs, who made a surprise appearance at a launch event in San Francisco despite being on medical leave. The new iPad is 33% thinner, up to 15% lighter and promises to be much faster. There are two cameras — one on the front and one on the back — to assist with video calling, and a new adapter (sold separately) that plugs into a TV and allows content to be viewed on the big screen. Possibly the most visible new addition is the “smart cover” screen protector, which doubles as a stand for holding the iPad upright and comes in a rainbow of colors. (Watch Apple’s demonstration video for an example.)

What Apple hasn’t done is deviated from the key features that helped sell nearly 15 million iPads since the device was launched last year, according to Wharton operations and information management professor Eric Clemons. The iPad has “sufficient memory, a great screen, very low weight, a great user interface and access to the Apple App Store,” said Clemons, who bought an iPad 2 on Wednesday.

“Apple dominates because of the device itself, the App Store and the ease of integration with Apple’s laptops and desktops,” Clemons notes. “Nothing in the new machine weakens any of these.” While Clemons would have liked to see the next-generation iPad come with more memory, he says the company is providing the upgrades that consumers were waiting for, such as a streamlined design and the new camera. “Only the memory upgrade was missing. On the other hand, I did not expect to be able to play my movies on a hi-def TV yet.”

Forrester analyst Sara Rotman Epps predicts that in 2011, the iPad 2 will claim 80% of the U.S. tablet market share. “Apple understands desire,” Epps wrote in a blog post. “The first thing consumers will notice about the iPad 2 is how it feels: lighter (by a crucial two ounces) and thinner (at 8.8mm, thinner than an iPhone 4). Color triggers emotion: iPad 2 comes in not just black but white, with multiple colors in the thin ‘smart covers’ that snap into place with ‘auto-aligning magnets’ and clean those unsightly fingerprints off your screen. The rest is important but more cerebral: dual-core processor, HDMI video-out converter for the 30-pin connector, etc. Emotion enters back into the equation when consumers see what they can do with the device — see their loved ones through FaceTime, touch-edit videos in iMovie, improvise on touch-instruments in GarageBand and actually sound good doing it.”

After the iPad became a hit, Research in Motion, Motorola, Hewlett Packard, Dell, Samsung and others unveiled competing devices. “The tablet wars are far from over,” Epps wrote. “We have yet to see a play from potential disruptors like Amazon, who could enter the tablet market at a lower price point, or Sony and Microsoft, who could offer radically differentiated value propositions. Things could get rowdy. But for now, Apple still defines the tablet market, with a product consumers will desire at a price that’s hard to beat.”

In a recent Knowledge@Wharton story on tablets, Wharton experts agreed. Apple may have defined the initial rules of the game, but like the smartphone market, the tablet arena is expected to be one of multiple players. “It’s not too late for tablets,” management professor Saikat Chaudhuri said. “You can compete on technology or distribution as you try to reach your installed base. You can also compete in a niche segment if [that segment is] large enough.”

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