When It's Time for Entrepreneurs to Give Up the Ghost

Thankfully, entrepreneurs are optimistic creatures.  Most launch their companies on a wing and a prayer and then work with their radically under resourced teams to create their first product and gain initial customers. Sometimes, things go smoothly.  Funding comes in, customers sign up, and product reviews come back positive.  A majority of the time, however, young companies struggle and ultimately don't survive to fight another day. In fact, most start-ups hang on longer than they should, because, as I said before, entrepreneurs are optimists.  They glom on to any shred of evidence that might indicate that they could be successful and ignore or minimize the rest.

Here are the signs that an entrepreneur might want to pursue another career path:

• Your competition is way ahead of you.  Way ahead can have several definitions.

• Your competitors are much better funded and are using that funding effectively to create a lead in product capabilities, marketing, and customer penetration. 

• Customers prefer competing products.  Many entrepreneurs may reason that the next version of their product will fix that, but your competition will have a next version, too, that will probably be much better. 

• You can't sell a date to a sailor on leave.  Some products sell themselves, but yours is incredibly hard to sell and the reasons for this tough sales cycle are a mystery.  Meanwhile, your competitors are making lots of sailors happy.

• Your market is more limited than you thought.  Sometimes, a market looks good, and it just doesn't pan out.  This happens for two, main reasons:

• Customers just aren't interested.  For example, right now, consumers aren't buying nearly as many 3D TVs as consumer electronics companies expect, and, when they are buying them, it's because really good 3D TVs tend to have really outstanding 2D picture quality.
• Your market is subsumed inside of a larger market, and your product becomes a feature of a larger solution as opposed to a discrete product category. This happens a lot in software, where customers prefer integrated enterprise suites over point solutions that need to be supported in the IT department.  One or two targeted solutions is okay, but 30 or 40 isn't. 

• You don't have the talent and determination to compete.  Markets aren't won and lost through analyst reports.  People win markets by creating great products and selling and supporting them effectively.  Usually, victory is relative as in:

We did a better job of making fewer mistakes and spending our money more wisely than our competitors.

From 1980 to 2000, Microsoft did the best job of any company of using its talent and resources to compete effectively.  In 1980, Microsoft was tiny and unproven but able to face a larger competitor, Digital Research, head on and win its PC-DOS contract with IBM.  Going forward, Microsoft faced an unending list of powerful foes from IBM to Compaq, Novell, Sun, Apple, and Netscape.  It's not Microsoft didn't make mistakes; it is that, when the chips were down, its competitors made more. Plus, Microsoft hired the best people and let them figure it out. And Microsoft didn't give up when its first attempts didn't go well. Version 3 of a Microsoft product seemed to be the one that changed the game.

So, for all you entrepreneurs out there, please try to think clearly. Customer feedback, competitive actions, the quality of your team, and access to capital are the most important factors in the success of your business.  If you get low scores in any of these areas, chances are that your company has issues.  If you're behind in most or all of these areas, it's probably time to figure out how to bow out gracefully and find the next thing to do.

The Big Consumer Tech Questions for 2012

When it gets to be early January, pundits like to prognosticate.  it doesn't matter whether the subject is technology, politics, or the love lives of celebrities, the news sites, blogs, and TV airwaves are filled with predictions.  This blog is no exception.

Since I am not a celebrity and abandoned my political ambitions in 10th grade, here are my tech predictions for 2012:

• Apple's slow product refresh cycle finally causes headwinds for the world's best run tech company.

There's no doubt about it.  In the last ten years, Apple has more "hit record" products than the Beatles had hit songs in their prime.  Or at least it seems that way.  However, in key areas, Apple is now way behind or at parity.  Beginning next week at CES, the market will be flooded with Ultrabooks, the Intel-based PC architecture that aims to take on the iconic MacBook Air.  The thing is, the first ultrabooks from Lenovo and Thoshiba are very promising.  They match the Macbook Air spec for spec and are very competitive on price.  Windows 7 performs well, and boot up times are much shorter than on traditional laptops.  This morning, Ina Freed of AllThingsD noted that Ultrabook prices are expected to drop by a third in the next 12 months.  Plus, Windows 8, which doubles as a tablet OS, will debut at the end of the year.  Expect Ultrabook/tablet combo devices by this time next year.  Personally, I think there's pent up demand for a Windows tablet that runs all those Windows desktop apps.

Innovation in the Mac hardware area seems to have stopped for an extended nap?  I read rumors of a 15-inch MacBook Air, updates for the Pro and iMac lines, and maybe even an update to the behemoth MacPro desktop, but the roll-out is very slow.  

The 4G revolution is in full swing.  All of the major handset manufacturers have credible 4G devices running on multiple carriers, and, with the broad roll-out of Google's Android 4.0 "Ice Cream Sandwich" OS, Android phones may finally come close to matching the "simple and elegant" look and feel of Apple iOS.  Plus, Google, not Apple, is leading the charge into mobile payments.  I love my iPhone, but I am part of the 10 percent of the US population that is Mac-centric.  The Mac ecosystem is the best solution for me.  Google's cloud apps, social network, integrated mapping and payments, and 400,000 app store get more credible and compelling every day.

Apple faces additional challenges expanding iCloud, broadening its media offerings, inventing its mythical TV that has been coming for years, and getting the next-gen iPhone 5 and iPad 3 out the door.

The bottom line is, Apple needs to step up its game - delivering more products faster with typical Apple quality.  My prediction is that Apple will live up to the challenge.

• Microsoft makes a comeback and becomes a player in digital media in the living room and over connected devices like tablets and smartphones.

Microsoft's biggest problem isn't weak products or poor customer satisfaction; it's snooty members of the tech press that call them a corporate dinosaur or discount innovations in areas like media streaming or mobile phone OSes.  If you look at Microsoft's product history over the last 3 or 4 years, you'll see a bunch of winners:

• Excellent new versions of Office for Windows and the Mac. 

• Windows 7, which largely erased all of the annoying features of Vista and made things faster, too.

• Superior media streaming built into the XBox 360, which is the largest streaming platform in the world.

• Excellent online games.

• Significant upgrades to its enterprise apps and development tools.

• The purchase and relaunch of Skype, which is expanding dramatically.

• A mobile phone OS in Windows Phone 7.5 that many reviewers grudgingly admit is just as easy to use as Apple's iOS.  Maybe the Microsoft-Nokia alliance will see some traction this year.  

Eventually, reporters and analysts will notice.  Microsoft is still insanely profitable with massive amounts of cash in the bank.  It is still a market leader in the most of the segments where it elects to compete aggressively.  Plus, it's a major investor in Facebook, which will go public this year and create even more available cash.  I wonder what they will buy with it.

The tech pundits talk about the Big Four Platform companies - Facebook, Google, Apple, and Amazon - like they will decide the future of the consumer cloud.  Well, 90 percent of consumers use PCs and software from Microsoft and don't seem inclined to change.  The Xbox is the number one selling game console in the US.  None of the Big Four has these advantages. 

My prediction is that, when the battle for the living room reaches maturity 3 or 4 years from now, Microsoft will be a serious challenger.  Eventually, even tech reviewers can recognize quality.

• Cord Cutting is coming, but slower than the pundits predicted and with higher margins for cable and telecom companies.

For several years now, the digerati have predicted that consumers will begin to cut cable/satellite TV connections in an effort to save money and gain access to programming on an ad hoc basis.  I have a client that sells subscriptions to digital services, and the number two top questions in their call center are:

1. "Can I get Netflix with that?"
2. "Can I get rid of some of those stinkin' channels that I don't want and pay less?" 

The answer to both questions is yes.  Someone will do a better job of streaming on-demand TV, although the jury is out on Netflix as the eventual winner.  And your cable/telco provider will be happy sell you TV a la carte by delivering to you through your connected TV over an even faster and more profitable Internet connection.  With the escalating cost of content - particularly ESPN and a few other network bundles - pay TV has become a low profit business, and it's not like the cost of content will decline any time soon.   

Broadband is another story.  It's hugely profitable, and consumers can't live without it in the way they can - say - ditch their home phone line or the Food Network with impunity.  For digital service providers, speed upgrades are a minor cost when compared to putting the lines in the ground to begin with. TV shows look just fine over the Internet, and then there are all of those tablet apps and websites, like Watch ESPN and the Verizon and Comcast programming apps.  It turns out that consumers will watch TV just about anywhere, including on much smaller tablet and smartphone screens.  In fact, yesterday, Comcast and Disney inked a ten year agreement to facilitate content delivery of the most popular pay TV properties on every platform imaginable.  Plus, broadband is the gateway to new services like home security and monitoring, which is hard to turn off once it's installed and is much less expensive to deliver than pay TV.

So, yes, you'll be able to cut the TV cord, but it's likely to be replaced over the next few years with a much more profitable cord or two and more expensive and faster broadband service.