Monday, 27 June 2016

Brexit is symptom of lack of vision and leadership since 1992

Last Friday morning Britain and Europe were shocked by the result of the British EU referendum. As the British vote to leave started to sink in, feeling of shock quickly changed to uncertainty about the future, about the British place in Europe and the world, about the structure and future of the European Union itself. As the day went on politicians, business leaders, media commentators, etc. all gave their responses and tried to assess the future. Few people regretted David Cameron’s election pledge on having a referendum on remaining in the EU. Some commentators blamed British media and politicians on their long history of Euroscepticism and outright lies. What people haven’t really asked is how things even got to this point. I believe that the referendum and its result were the only logical out turn of decade’s long lack of vision and leadership in Britain.

It all started in 1992 when members of the European Economic Community were negotiating new treaty to advance European co-operation into a new level. With Maastricht treaty EEC member states created an entity with its own internal market, with its own currency, with its own foreign- and security policy, with definition of its own citizenship, etc. were all about creating European federal state in all but in name. The writing was in the wall for everyone to see. The British leaders at the time clearly understood the situation and opted out from the last chain that would lead their country into a federation without no easy way out, they opted out from the single currency.

Since 1992 the British political establishment has been turning from side to side on what their relation to EU should be and are they on in its development or not. When in other countries such as Finland joining the EU and single currency was seen not only as economic question but a question of security and politics, British establishment continued to pretend that everything was just about economics and trade. When Euro as currency finally saw its daylight, Britain joining it or not was seen as only as economic question. Most famous example of this thinking are Gordon Browns, then Chancellor of the Exchequer, five economic tests that were designed to give any answer that Brown and then Prime Minister Tony Blair wanted them to give. This indecisiveness can be best underlined from Tony Blair’s interview in Newsnight in May 2002 where he said…

“Should we stand apart from the alliance right on our doorstep as a country? It would be crazy to do that.”
"It is an economic union. We shouldn't, for political reasons, stand aside. I don't believe that would be a fulfilment of our national interest. I believe it would be a betrayal of our national interest."

This is an excellent example of the British establishment’s double think on understanding fully well that EU isn’t just about trade and economics while pretending that is all about economics and trade. Politics of pretending reached their ultimate height in signing of the Lisbon Treaty that the then Prime Minister Gordon Brown signed hours after others alone in a back room.

The British EU referendum result is a wakeup call for the political establishment in the UK. They have to accept that EU is not anymore just a free trade area, but a de-facto federation that will keep advancing on future integration. They and especially British Eurosceptics also have to accept that EU is not going to collapse, they have been predicting imminent collapse of the Euro since 1999 and been wrong every time. The question that British need to ask is do they want to be part of possible European super state and if not then what will their relationship be with it. There was time and maybe there is still to negotiate for creating truly multispeed Europe with Britain being part of it, but the time will run out if British political establishment isn’t truthful to their people. What Britain needs is vision and leadership to implement it, be it vision of Britain in or out of the European Union.

Wednesday, 22 June 2016

Finnish smart watch makers at a crossroads

Ever since Apple introduced iWatch in 2014, market for smart watches has been under great amount of change and turmoil. Virtually all smart phone makers have pushed their own smart watches and smart bands to the market. Traditional watch manufacturers have also reacted, Tag Heuer publishing their Connected smart watch running Android wear. Companies from other industries have also shown interest on the nascent market, for example Nokia, manufacturer of mobile networks, acquired French connected health appliances maker as part of their Internet-Of-Things strategy. Fast change and evolution of the market with introduction of new competitors have put Finnish sport watch makers Suunto and Polar at crossroads.

Suunto and Polar both have shared history on being specialists on heart rate monitoring. Polar received its first patent on wireless heart rate monitoring in 1979 while Suunto expanded from being a compass maker to manufacturer of wrist computers with build-in navigation and instrumentation capabilities. They both have expanded and moved to become specialists of sports and health’s instruments with sport watches being at the core of their offering. While concentrating to serve a special niche market have allowed them to grow and show profit, it has also left them to be small companies. In 2015 Suunto reported total revenue of 63 million euro while Polar in 2014 reported revenue of around 203 million euro. Suunto is owned by Amer Sports, of sports equipment conglomerate, with yearly revenue over 2.5 billion euro and EBIT of 212 million euro. Polar on the other hand is family owned business.

The key problem that both of these companies share is that they are too small and have very limited resources compared to their competition. Big technology giants such as Apple, Samsung and Microsoft have more or less unlimited money to spend. Even smaller competitors such as Garmin has yearly revenue of over 2.8 billion USD with fitness products counting for 662 million USD. Both companies have responded to the changing market structure with different strategies. Polar has chosen to seek revenue growth by introducing multitude of different products such as activity and fitness trackers in lower price points. This strategy has enabled the company to keep up with the overall growth of the market. Suunto on the other hand has chosen to concentrate on higher end of the market with mix of design and usage of premium materials. This can be best seen in the new Spartan collection where the all titanium model retails at around 749 euro. This strategy of concentrating to a niche has caused company revenue growth to halt.

When looking at the future, what can be seen is that the sports and smart watch market is moving from being appliance centric to being application and service centric. When Apple first introduced iWatch, applications running in the watch were dependent of the phone. With Apple watchOS 2 and Android Wear 2, applications now run independently in the watch itself. What this means is that device functionality and offered value is not anymore tied to the manufacturer, but is largely created by independent third parties. While Suunto and Polar have resources to create few supporting services to their devices like, they don’t have enough resources to serve the whole wider market and even if they would, they would be playing catchup all the time. The question isn’t will there be a killer application for smart watcher or not, the question is when that application and service will come out.

What currently protects both companies is slow progress of battery technology and computing power requirements of both watchOS and Android Wear. While Suunto sport watches have battery life of weeks, smart watches running watchOS or Android Wear have in best day scenario battery life of 1-2 days. As technology develops this will change. The big question that both of these companies need to ask, how are they going to respond to technological change and how will that impact their overall strategy. There are three options for these companies to take: 1) develop offering based on Android Wear; 2) develop offering based on fork of Android or Linux; 3) continue using and developing in-house operating system.

In my honest opinion the most difficult option for these companies to take would be option number 2: to develop offering based on their own fork of Android or Linux. The reason is that keeping internal version of Android or Linux active and update needs lots of developer resources, not to forget the need to create their application stores and keep up connections to developer community. Clearly this option is too expensive and offers too little return of investment. Unfortunately other options are not much better. The biggest problem of using Android Wear is that Google doesn’t allow individual manufacturers to customize it and thus prevent creation of unique user experiences and offerings. With Android Wear manufacturers can only compete with hardware which essentially will lead into commoditization of the Android watch market where low cost and scale of economies only dictate winners. Finally the third option is to continue developing in-house operating systems which suffer from missing out the application market.

So what should Suunto and Polar do? Whatever the technical solution will be, as small companies they should target higher price segments and compete with specialization and quality. Suunto has already geared its strategy towards this and Polar should do the same. In case of technical solution, be it creating a new version of Android or Linux, or further developing their in-house operating systems, it is necessary to move away from developing closed source software and instead move on to develop open source platforms and components as group of companies with same interests. If Suunto or Polar would take the lead and create an open source project with a small dedicated team for creating either operating system or application runtime for future wearable devices, they could make big impact on how the market will develop.

Personally I see application runtime environment as the key ingredient that will make or break any future wearable project as there is no benefit with the project if it doesn’t achieve more applications to be available for the platform. Instead of inventing the wheel again, I would instead choose to copy an already popular platform like Google’s Java-language based runtime environment. The good thing about this is that there are already lots of available tools and companies specialized on enabling Java based programs to run both on embedded Linux and on real time OS’s. Whatever the specific solution will be, time is of the essence as it is easier to develop solutions for a market that is just about to bloom than to a market that has already formed. I believe Suunto and Polar can response to the challenge that Apple and Google have created, but they have to move very quickly.

Monday, 5 March 2012

Will Windows 8 enter the living room? - Part I

Lately one of the most talked new software projects in works has been the new Windows 8, and specifically its new Metro UI. Some people like it, some people hate it. However all the people I know think that it is mainly designed for tablets and other portable devices, aiming to compete with Apple of the hearts and minds of home users. This is certainly not a wrong view, but I myself think that Microsoft has even more ambitious goal: to take over the living room, to replace traditional television and peripheral devices connected to it with Windows. Even Steven Ballmer, the CEO of Microsoft, hinted about it in his CES 2012 keynote.

Before going further, let us remind our-self of the importance of the living room and the television. The television has been and is an inseparable part of the modern way of living, it is a centrepiece of home where individuals and families come to share time and experiences together. Such is an importance of the television and its place in our life that it annually generates nearly 50 billion dollars in advertising revenue alone in the US. That is the market where Microsoft is aiming at, and incidentally a market that Google is trying to erase.

Now many companies have tried to take over the living room from the television, however all of these attempts have more or less failed. The reason for their failure has been simple, offerings to replace or amend the television have been too complex, needing either set-up-boxes, peripherals or too complicated to use remotes. The only new technologies and services that have been successfully introduced and become ubiquitous have been those embedded into television itself like the EPG which came with the DVB standard. So how can Microsoft think that they can succeed where other have failed?!

The answer to why Microsoft can take the television is because they have the technology and vision to make using of Windows driven televisions as simple and easy and intuitive as using our current televisions. The two key things that Microsoft have are the Metro UI and Kinect motion capture technology. By combining these two and embedding them into an Internet enabled television, they can create a market proposition for consumers that offers more with simpler terms. What Windows driven television means is no more hassle with remotes, no more usage of  incoherent OEM UIs and added services, instead there will be one coherent and intuitive user experience that combines all services together.

However the television market is too big and established for Microsoft to take it alone, the change has to come and supported from industries tied to television, from device manufacturers to cable operators and from broadcaster to advertisers. Microsoft has to offer more than just renewed consumer proposition, they also have to create new value for all current stakeholders to succeed in their quest of conquering the living room. I will continue with this subject in my next blog post.

Monday, 2 January 2012

We are at the end of the road for home computer

During the last year, I have wanted to write about multitude of changes that are happening and are going to happen in the PC industry. Topics that I would have liked to discuss were the upcoming Windows 8, emergence of endless stream of Android tablets, wireless technologies, mobile optimized chips from Intel and AMD, etc.. However I had a writers block, I couldn't write about these topics because I had not made my mind on what the bigger picture was. Now I know. The bigger picture is that we are at the end of the road for home computer, and that is a major cause of change in the computer industry.

Why is it happening? There is basically two reasons for it, one being driven by technological development, and the second on being changing usage patterns of people. In the past home computers were used as productive tools, then as a way to access information and the Internet, and now they are used mainly for consuming media and engaging entertainment. Home computers, be it desktops or laptops, can fulfill these needs, but not optimally, and certainly not with ease of usage. Instead of a home computer, a better way to fulfill these needs is to use range of different devices like gaming consoles, Internet enabled TVs and tablets linked to each other and other peripherals via wireless connection.

One might ask why is the change coming now and not before, the reason is that technology is becoming ready, it is powerful enough and more importantly easy enough to use. For example you can stream music from your phone or tablet to your stereo system; you can print to wireless printer; etc... In short, your devices are talking to each other, thus you don't need one uber device to do everything.

When will it happen? This is a tricky question to answer, but essentially it is all about consumer perceptions on what is needed to fulfill their needs. The day when your average Joe says to himself that instead of getting a new computer to use Facebook and YouTube, he will instead buy a new tablet with a wireless keyboard and printer if needed. This change can happen very rapidly, maybe even a time frame of just few years. However to speak frankly, we are not there yet. The technology isn't powerful enough, when we have for example AMD Fusion or upcoming Intel Ivy Bridge processors with 4 gigabytes of memory packed inside a tablet or other media device, then the technology will be ready. This would more or less put the time frame from end of 2012 to 2014.

What does it mean? End of Windows monopoly in the home market if Microsoft doesn't successfully retake markets from Apple and Google Android with Windows 8. End of open access and free usability of various devices for the majority of users, in short everything will be locked, users download their software and content from their designated shops or use Internet delivered applications and services to fulfill their needs.

From a point of view of a professional working in the software industry, this upcoming change will create both opportunities to be taken and dangers that need to be counteracted. One pit fall that I see is that companies will be spending too much time and money on tailoring applications for different platforms, a dangerous trend that we are already seeing with smart phones. Instead companies should use this opportunity to get rid of all native applications and technologies, moving to pure web based technologies that can be offered to all platforms. It may not be optimal, but cost effective flexibility is something that will be needed in the coming years.

Saturday, 10 December 2011

Creating business around of the next billion

One of the strategic goals of Nokia is to bring out mobile phones and devices to the next billion people in the developing world, namely in Africa, India and Asia Pacific. To this day reaching out this goal has only seemed to provide value and opportunities for phone vendors, network manufacturers and mobile operators. However this perception is going to change due to evolution of affordable mobile devices. Just few years ago an affordable handset in the developing world had only basic phone functions, now new devices like the Nokia Asha series handsets offer specifications that are enough to enable functioning of wide array of software applications and services in these phones. This creates an opportunity for third parties to reach out the next billion and create business around them.

Now many people are probably wondering what kind of business can be created. When answering this question it is important to remind us on how market in the developing world differs from the market in the developed world, and what consequences and opportunities it has...

Computers aren't ubiquitous, in fact they are very rare in the developing world. For example in the United States there were 762.152 computers per 1000 people in 2004, in India the figure was 15.531 per 1000, and in Niger the figure was as low as 0.716 per 1000. What this means is that people aren't using software and services that people in the developed world have accustomed to use with their computers, software like spreadsheet and word processing are virtually unknown for the most people in the developing world. This is a clear market opportunity to offer already invented and tested software products to new markets.

Information is expensive. In the developed world we have gotten used to buying books from the Internet or from our local bookshop without giving a notice on the price of the book. We also have gotten used to looking up information from the web or streaming it over the network. Things change much in the developing world: books are expensive even if you discount the cost of content, this is due to both people having much lower incomes, but also due to smaller scale of operations increasing costs such as logistics. The same is true with electronic distribution, electronic distribution that relies on data connectivity is out of question as the cost of connectivity if available is out of reach of regular consumers, and distribution based on tangible goods such as Compact Discs suffers from small scale of operations and everything that comes with it.

The opportunity here is in making the information and distribution of it inexpensive. This can actually be done by creating a peer-to-peer distribution framework where people can swap content between their phones with Bluetooth connectivity. With this method we can minimize costs by a large degree and as an added benefit marketing and advertising can take advantage from natural social networks of people. The challenge in this method is how to ensure digital rights management and compensating content authors. Other opportunity for content distribution is by binding affordable service offer like the Aircel Pocket Internet with a walled garden content delivery platform.

External entities can also be customers. In developing countries there are multitude of external entities ranging from non-governmental to governmental and intergovernmental organizations working in multitude of different projects. These organizations are potential customers with some having quite deep pockets, even better is that these organizations can be easily approached as their administrative functions are usually located in the developed world. Potential projects to offer can range from digitization of information into mobile form to different kind of educational applications that can either assist learning or help in some other way.

Overall I deeply believe that reaching the next billion can create business opportunities for a large number of parties. However to reach this goal, software companies need to be brave and open minded, things work differently in the developing world, but that doesn't mean that they work poorly, they work differently and one who masters taking advantage of this difference can create value if not in large scale then at least in adequate numbers.

Thursday, 13 October 2011

Why my startup failed...

Today is the National Fail Day in Finland. It is celebrated because the Finnish culture is very risk averse and failure is seen as not being an option - if you fail, you are a failure. This part in our culture has to be changed as if we don't allow ourselves to fail, then we never get courage to try out anything new or risky, but we also don't make the best of our eventual fail. To advantage this cause, people are encouraged to share their failures to get the message through that failing is not a sin. That is why I now share the story of my startup and why it failed...

The startup
In March 2006, I and my friend started a software company specialized on survey research software. I had started the project at the end of 2004 when I wrote first lines of code to test out some ideas that I had. Fast forward the little software project matures and my friend joins the project as a business lead. More time goes on and finally as our software matures and starts to look as real enterprise software, we decide to try out and found a company.

The software itself that we planned to run and sell as a service was pretty impressive. It had a modern styled web UI with everything rounded and shaded as was the custom. It had more features and functionality than any other competing service had. And it was fast and lean piece of software. It was written completely with J2EE, used MySQL as its database, supported Active Directory and many enterprise features. But the best thing was that the database code that was hand written had built-in sharding implemented. Sharding is horizontal partitioning of the database. In our case every survey had its own shard, its own tables that insured that our database didn't wasn't slowed down by having too many surveys or too much data in it. The code was so good that when we started our company, we didn't buy our own server nor did we rent one, we rented a cheap Linux virtual server that did the deal. Everything looked good, we had our software in order, we had our service running in lower costs than our competitors, and we thought that nothing could go wrong...

Screen capture - Making a question
Screen capture - Reporting results

Time flies and soon it is 2008. Our company had signed customers. We had sold and delivered our software both as a product and as a service to number of customers. However the number of customers and the money we were making was abysmal. Our company and our software seemed to have failed in the market. We make the only rational decision that we can and put our company into end-of-life care - continuing delivering service to our paid customers, but not signing or seeking any new ones.

The failure
So what had happened? Why did our startup failed? Well there was large number of different reasons, but in the end the fatal mistake and failure that much contributed to our other failures was the failure of understanding how our customers experienced value.

We as a couple of university students had thought that what customers wanted was a versatile tool with multiple question types and options and various optimized schemes to enhance information gathering from surveys. We thought that the more features and advantaged features we would have the more value customers would experience. We were wrong! We were biased, we were power users, not irregular users of survey tools that most of our potential customers were!

Our potential customers did want a versatile tool, but their experience of value didn't follow our pattern. Instead they got most value from the single function of just having a simple form to gather answers. Of course additional features did add value, but in a diminishing manner. At the end we estimated that at some point more features in our software would actually lower customer experienced value than increase it. This was because more features essentially meant more complex user interface and software, making customers unable to use the tools power.
Experienced value / number of features
Of course one mistake doesn't mean a total failure, but it can help you to make other mistakes that will in time cause the eventual fail of the service and firm. In our case because we burned more time and money to build our product, and when we went to the market and failed to reach our potential customer base, we were already in a thigh financial position. We understood that we need to angle for professional users, but they were both hesitant to try a new product from a startup and wanted additional features, and because we were in too thigh spot to negotiate good enough deals, we took in deals that involved too much work for too little money. We were essentially living from month to month being unable to really break from that death spiral. It was too much and we had to just confess that our startup had failed.

Lessons learned
There were many lessons learned during our startup. I for one don't regret at all that we started the company. If I hadn't been there and done that, I still would be asking myself on if I could have done it, could I have started a company and what would have come from that. Now I know the answer to that and it brings me great satisfaction that I tried. I failed, but I tried and learned some lessons and that is what is important to me.

And when I look back our company, there were some innovations that came from our customers that were actually very good ideas and our implementations of them worked quite nicely. One could build a successful startup based on one of them, however the business model would be completely different than the one we had. I don't know what the future brings, but maybe I will try entrepreneurship someday, after all it was very fun and exciting time. :-)

Friday, 16 September 2011

Nokia N9 is a strong sign of revival

Testing the new Nokia N9
Few days ago I visited the Helsinki Nokia store to try out the new Nokia N9, the long awaited Meego handset. As I had expected, the N9 was a smooth and pleasure experience, proving that Nokia can really deliver a world class smartphone with an operating system and user interface that not only compares well with the iPhone 4, but goes in certain areas over the benchmark and delivers a better user experience and more functionality than the model of the industry. However the N9 isn't the handset that is going to allow Nokia to make a comeback and put it back to being the leading smartphone vendor. What the N9 provides is a taste of future of what is coming from the company.

You probably have already figured out that I'm not talking about the operating system or the user interface of the device, as Nokia has aligned itself with Microsoft and committed to use only Windows Phone operating system in its upcoming smartphones. The thing that I'm talking about, and what sets the N9 apart from other handsets is the hardware. The hardware is the real star of the N9. When I first picked up the handset, I couldn't believe how good it felt in my hands. In the same time it feels both very light and very hardy, much thanks to the unibody construction of the device. The surface of the device also feels very smooth in hands, but in the same time not slippery at all, there is absolutely no feeling at all that the device would slip out of my hands. The display is also beautiful  with its curved glass that makes the icons and user interface to float over the handset. The design and hardware are very innovative.

The reason why I put so much importance to the design and hardware of the N9 is because these innovations are likely going to appear in the first Windows Phone  handset that the company is going to deliver to the market. In the leaked internal video of Nokia, Stephen Elop, the CEO of the company, demonstrated a Windows Phone handset that looked much like the N9. This is important because I believe that the reason why handsets with Windows Phone haven't sold well is because of two reasons: A) they haven't offered quality design and hardware; and B) their overall delivery of value to the customer has been at best average. In case of Nokia, from the get go of the Microsoft alliance, it was clear that Nokia could deliver more value to the customer, Nokia Maps with offline navigation being one of the best examples of unique selling points. With the introduction of the N9, Nokia has demonstrated that it can offer the best design and hardware, thus enabling the company to cover the two falling points that have plagued other manufacturers of Windows Phone devices. This why I think that the Nokia N9 is a strong sign of revival, it offers a glimpse of what is coming to storm the market.