In all product marketing, one pays attention to the ‘whole product’, which is the sum of all the expected outcomes from using a product (this is a combination of features, benefits, services, price points, etc.)  Whole products are different for each market, each segment and each buyer genotype. Taken as a whole, a whole technology product can be very complex, and the complexity grows as the number of targeted segments grows.

Technology isn’t for wimps.

Thus, there is often a trade-off between a whole product and the product suited for new users (who can be considered a subsegment).  Often part of a whole product is offered as another whole product, but to a market or segment that is less sophisticated than buyers in the larger group.  Another common trick is to grease the skids for implementing a whole product or provide a stripped down whole product in order to create an “ease of use/implementation” feature.

HP seems to be doing both.

Implementing cloud computing is non-trivial.  Even battle hardened geeks, armed with cases of diet Coke and enough manuals to depopulate a rain forest are intimidated.  Yet the economics of cloud computing are nearly inarguable, and thus our nerd friends geek-up and grind through implementations seemingly designed by Inquisition engineers.  In smaller companies with limited technologists resources, implementation might never happen without the aide of outside service.

This is where HP’s CloudStart appears.  In brief, it is designed to ease implementation and operation of clouds by simplifying the process.  It is a cluster of hardware, software, consulting services (heavy on that last bit) and their Cloud Service Automation tools that allegedly allow an enterprise to build a private cloud (with four ported work loads) within 30 days.  In the history of IT, a 30-day implementation of any infrastructure is unheard of, especially for something as fundamental as servers.

HP’s offering is not entirely unique.  Many companies – most notoriously IBM – have offered quick-start programs for major IT implementation.  In each the goal is the same:  to simplify the process for the buyer while locking them into a one-vendor path for implementation.  Let us ignore the latter mentioned lock-in (it is a given, like your congress critter lying to you) and instead focus on applying grease to the implementation skids.  Doing the latter in parallel with outbound marketing reinforces a single golden rule for marketers everywhere:  reduce friction.

Aside from buying water, most purchase decisions are reasonably complex.  Technology more so.  The time required to make a complex decision, and the likelihood the decision will ever be made, is inversely proportional to how simple you make it for the buyers.  Every instance where a buyer encounters confusion or doubt is a place where the sales cycle elongates and your VP of Sales’ blood pressure rises geometrically.  One of marketing’s missions is to reduce complexity in buying decisions and keep your sales exec from encountering stroke, heart failure or a drinking problem (that last one is a jest … all sales people have a drinking problem).

This is why Best Buy allows you to compare good products with crappy ones online: it quickly eliminates a point of purchase delay.

With any product, guiding the buyer to a decision is a primary marketing responsibility (one web design analysis firm refers to the lack of such marketing effort as “allowing unsupervised buyer thinking”).  The parallel with HP’s CloudStart initiative is to reduce the customer thinking required to make implementation (and thus purchase) decisions for cloud computing.  Guiding geeks to glory, if you will. SalesForce.com did this amazingly well with sales people and CRM, making their discovery, learning, trial and acquisition a snap, despite their perpetually intoxicated states.

The marketing lesson herein is to stop spewing text and data on web page after web page, and start leading buyers by the nose through the paths of discovery, education trial and adoption.  Rent a passel of prospects and watch them as they walk through your materials, and wherever they stop or have a question, fix the problem that caused it, even if it is in the product itself.  Focus on eliminating friction, diversion or rejection.  And if you sell a complex product, build a selling tools that guide buyers through the same process at lower levels.

And buy your IT geeks another case of diet Coke.  Seriously, they’re putting on weight being locked and chained in the server room like that.

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Zealots … they are never more fierce than in geekdom.

The group in question is an invitation-only cluster of former gurus involved with a now obsolete mini-mainframe system.  Each member is brilliant yet more opinionated than a lame-duck congressman.  Aided in part by a member journalist who once covered that mini-computer beat, and who now chronicles everything Apple, the group exploded into strings of sneering over the viability of the iPad for people who want to do work as opposed to consume content.

I think it started with a dig about USB ports.  Who knows.  The rhetorical blood flowed regardless of who fired the first stray round.

One segment of this group maintained that the iPad was not ‘good enough’ for people who wanted to do ‘serious work’, two concepts that are completely personal in nature and thus entirely subjective.  The marketing jockey of this group (me) noted that the iPad was designed for the content consumption market, and that anyone wanting to do more with it might need to look elsewhere (yes, it is my job to pour gasoline on smoldering embers).  The discussion rapidly devolved into one camp who maintained the iPad was an expensive toy and others who felt Gawd himself shat it.  Each team grabbed whatever proof points they could to bolster their case and slay the other side’s perception.

Perception is the game.

Political advisors often echo the age old sentiment that “perception is reality.”  If the majority of the population believes the sun will rise in the west, it will … until it doesn’t.  If you think “they are out to get you”, then you will behave as if they actually are (and even if you are not paranoid, they may still be out to get you).  What the market believes is what your brand will be, and this shapes people’s preferences.

Which is why Apple products sell so well.

Apple has mystique, which my dictionary defines as “a framework of doctrines, ideas, beliefs … endowing the person or object with enhanced value or profound meaning.”  In other words, brand based on perception.  When iPods were still new I encountered a grown man in a Best Buy store who demanded an iPod.  When I asked him why not a different MP3 player, he had no reason.  He knew nothing of the technical specifications, competing price points, or even what restrictions the iPod might place on his music listening existence.  But he knew he wanted one because it was “cool.”

Like Mojo Nixon said, You Can’t Buy Cool.

This brings us back to the iPad and market perceptions.  It may be unfair to think the iPad cannot be made to do useful work.  The growing stable of apps offer some tools for office-like productivity, and there is even a smattering of apps for geeks (though these seem largely restricted to cheat sheets for programming languages and some iPad-specific modeling gizmos).  But given Steve Jobs death grip on the iPad experience – almost Disney-like in its wonderland fixation – a perception exists and grows that iPads aren’t going to serve buyers who need anything above content (when I tried to find a separate email client to install on my girlfriend’s iPad, none could be had and Apple discussion groups pointed to a prohibition against such software).  This perception will keep certain buyers from acquiring an iPad.

And LG knows this.

Faster than a congressman can say “kickback”, LG noticed this market perception and cast FUD concerning iPad dysfunctionality.  A VP-level LG spokesdroid said “It’s going to be surprisingly productive.  Our tablet will be better than the iPad.”  Granted, for a product that has not seen daylight, these claims are as vaporous as Britney Spears brain.  But the fact that LG has seized upon the perception of what iPads cannot do shows how one can take perception and through PR try to make it reality.  “Honey, give the kids the iPad to watch movies during the trip to grandma’s.  I need the LG-Android so I can finish a proposal for work.”

Perception then is a weapon, either to make sales for yourself or prevent sales for your competitors.  Image caused Apple to sell 13 million iPads in under five months. Image also caused LG to try choking Apple’s sales flow until their Android pad enters the market.  Members of my techno guru group used either evidence to support their prejudice about the iPad.

The marketing lesson is that perception is imperative.  A brand undefined or undefended will cause sales to suffer.  Applied against a competitor, it can cause their sales to suffer.  Steve Jobs’ crew knows branding and we can expect a backlash as more Android slate vendors (Acer, Toshiba, Motorola, etc.) jump on the iPad perception pig pile.

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Market research is a common conundrum for every business.  In a perfect world where coffee is always fresh, all women are drop-dead gorgeous, and government obeys, a businesses would buy plenty of primary research to be completely certain about their marketing decisions.  Not only would such circumstances stuff obscene amounts of money into my own pocket, but the risk side of the businesses risk/reward equation would drop to zilch and assure huge rewards.

Sadly, complete research would cost a fortune and never be complete.  Even Oracle has to guess once in a while, rolling multi-million dollar dice on limited research and a hunch.  Former Joint Chief of Staff Colin Powell – who led the rescue of Kuwait – once said something like “I research until I have 60% of all critical information, then I go with my gut.”

Most start-ups operate on 1% … or less.

This is the toughest part of raising a business from diapers.  Before funding (and even afterwards) the amount of cash available for research is limited.  Yet investing in research greatly reduces the probability of failure.  CEO’s of struggling tech start-ups need to invest in many things, but often scrimp on understanding their market, segments and buyers to the fullest rational extent.  This lack of insight causes their business to burn through cash in trial-and-error market outreach, which rather defeats the purpose of the CEO’s original frugality.

CEO’s need to invest in market research in incremented fashion, and in an order that is counterintuitive.  The pieces of information required are most commonly in this order:

1. 1^st segment whole product: Most products start niche, and in order to survive they need to achieve dominance in one key segment.  Knowing what constitutes a whole product for a chosen segment will help assure shorter sales cycles and sustaining revenues.
2. 1^st segment genotypes and motivations: In almost the same breath as above, knowing who actually influences a purchase decision and what their motivations are is critical to promotions.  You can have a whole product and still sell it in a way that attracts nobody.
3. Branding and messaging: Spending a few quid to perfect corporate and product messaging and your brand sets the stage for blocking competitors in your first segment and making you more buzzable.
4. Market definition: Once established, understanding the broad market and all the segments therein allows growth planning, which leads to long-term product planning.
5. Competitive positioning: Competition research, combined with your market definition map, shows which segments should be assaulted and in which order to effectively maneuver past competitors and ultimately surround them.  This is the key to market dominance.
6. Repeat 1-3 for each new segment: Those who do a good job in their first segment will be condemned to repeat it for every segment thereafter.  The process never stops – competitors, shifting markets and market lifecycles keep changing and this makes your marketing research life a living hell (which is why Silicon Strategies Marketing is in business – so your life can be less hellish).

Bottom line for budding entrepreneurs is that you need to research, but do so in an order that allows minimum investment at each stage, and in an order that assures success.  If Collin Powell had waited for a complete set of information Kuwait would be part of Iraq and Sadam Hussein would still be smoking stogies in one of his palaces instead of fertilizing crops in Tikrit.  But Powell did enough research to win.

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Not a smart phone, but a commoditized flip phone that handled voice conversations, kept a contact list and something that resembles a calendar.  A cell phone so fancy that two decades ago we would have taken a human life to obtain one, but today is so feature free that we might give it to a child so some day he can tell his kids how hard he had it.

Markets change constantly, but often products change faster than the markets that support them.  Take the cellular carrier market … please.  Given that the domestic customer base is saturated, carriers are in a constant struggle to keep customers locked into their networks and find new streams of revenue.  Yet they must also help finance your newer and more sophisticated cell phones in order to bring you (back) into their fold.  This is why a $600 smart phone costs you only $200.  The carrier makes back the money they spent on your handset by getting a guaranteed two years of revenue from you via the contract you signed.  Expanded continuing revenue also partially explains why they charge a mandatory network data fee for the newer and fancier phones (that and they want you to grow addicted to having data on demand 24 x 7 x 365 x everywhere and thus in the future perceive it as a necessity and not a luxury).

Despite a slate of new monthly charges for owning a cell phone, the industry has not changed much in decades.  Carriers subsidize handsets, pads and slates, earning their money on the backend.  This creates competition between hardware makers to gain favor and deals with carriers who erect barriers to customers using unlocked phones.  This game is fixed and the carriers are not interested in changing it much.

Which is why Google is breaking the system.

Anytime all competitors are content with the status quo, a great marketing strategy is to break the status quo.  We disreputable marketing types call this changing the rules of the market.  In a mature market you can gain first mover advantage by changing the rules.  The problem is that the more complex the market, with incestuous economics, numerous players and relationships, changing the rules is non-trivial.  Despite making a lot of cheap unlocked phones possible, Google found that Android by itself could not break the carrier subsidy model.  The carriers want money, and are unwilling to relinquish any tool that have for making more.

So Google is breaking the system in smaller chunks.

The hot part of the mobile market is apps.  Apple has a 3-to-1 advantage over Android in the apps department, though many of Apple’s 200,000 extra apps are of questionable commercial value.  This temporary Apple advantage is an Achilles heel since, from a functional level, Apple doesn’t offer much over Android.  Breaking Apple’s status quo of being an app leader is as important as getting more Android phones into people’s hands (though at their rate of growth, Android phones may dominate the market before the 2012 presidential election is over).

Google is breaking the system by changing the revenue model.  You know, that thing that is so important to the carriers.

According to reports, Google may share app revenue with carriers.  Currently carriers get glitch from the roughly $75M Apple earned from apps (another $175M went to developers).  With smart phones making about 5% of the market, this small-but-growing-like-a-virus market means real money down the road in just raw app sales, not to mention in-flow revenue opportunities.  Currently, Apple’s app share would contribute less than 2% of AT&T’s wireless services revenue, but 2% now beats 0%, and once smart phones make up the other 95% of the cell phone market, that number rises to 35% of services revenue.  Multiply this again by the growing roster of apps and their usefulness (sans meowing cat apps) and app revenues may well rival service revenues for the top-line.  Now multiply this revenue engine with pads and slates, many new flavors of which arrive this holiday shopping season.

Non trivial treasure.  Google knows it.  Verizon knows it.  AT&T knows it.  Apple knows it.

Given this new revenue stream, carriers have motivation to promote Android handsets.  Since they will be able to buy such handies from everybody (Motorola, HTC, LG, Demented Dave’s Cellular Designs, etc.) they in turn will focus on promoting the Google/Android brand as opposed to any specific manufacturer’s product.  By breaking revenue model, Google is also breaking the partner loyalty model, another Apple advantage.  AT&T may still sell iPhones … to 5% of the market.  They will sell Androids to the other 95%.

Several marketing lessons are intertwined herein:

1. First, in any market where partners own the customer relationship, odds are they will not give it up (i.e., allow unlocked phones to cheaply enter the space).
2. When partners have a lock on the end customer, you have to help partners make money.
3. If your competitor owns the partner relationship, you have to find ways of helping the partner profit that also hurts your competitors (in this case, robbing Apple of their app and partner-promotional advantage).
4. If the market ain’t broke, break it.

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PIGS (Portugal, Italy, Greece and Spain) managed to devalue the Euro through some rather reckless mismanagement (a.k.a. government).   The value of the Euro compared to other paper dropped when people weighed the risk of owning one fiat currency as opposed to another.  We can hope that George Soros was holding a pocket full of Euros when the slide started.

As the chart shows (and click on any of the graphics to see bigger, better instances) devaluation can happen instantly.  The same is sure in the technology business.  Aside from intellectual property (IP) protections via patents, there is no safety in innovation.  Creating something usable invites others to do the same.  Today’s glory product is tomorrow’s techno trifle.

Are you listening Steve Jobs?

With smart phones still a small part of the cell market, but one that is growing fast due to falling prices and increasing demand, watchers wager on the ways of Apple, RIM and Google (rumor has it that Microsoft has smart phone software, but it remains obscured by vapors).  When Nielsen – the company that likes to spy on your television watching habits – reported that Google’s Android smart phone operating system was rocketing upwards in sales, and was actually outselling iPhones, the technology world gasped in unison.  They passed out at RIM given stagnant sales, declining potential, and the poor taste Nielsen had in releasing their study the same week that Rim released a new phone and OS that offered nothing new.

(Before going much further, we must note that the numbers Nielsen proffered were through Q2 of 2010, which preceded Apple offering the iPhone 4.  Since the market anticipated i4, and slowed buying of iPhones in expectation of the new device, the numbers are somewhat skewed against Apple in the interim.  However, trends are trends and that is where this story is going).

From this jumble of numbers we see (as vividly portrayed on the chart we lifted from The Register) that Android is rising rapidly against everybody.  Aside from some added Google goodies, one cannot claim that Android is fantastically better than iOS.  Indeed, given the tight integration between iPhones and iEverythingElse, one could deride Android.  Yet its rise in popularity is eclipsing iPhones in current sales, and in less than a year Android has risen from obscurity to having half the market share that Apple enjoys.

iPhones have been devalued.

In all markets, things drift toward commoditization.  In high tech they race to that condition.  When differentiation between products is diminished, companies that win tend to have lower price, better overall value, and make their money on more than the core product (why do you think Coke sells merchandise).  Software is where devaluation to commodity status occurs most rapidly in tech, and it occurs when other motivations beside core product profit margins exist.  Linux developers don’t have a profit motive and thus changed the server operating system market forever.  Google isn’t interested in profiting from mobile phone operating systems either – they have better ways of making money and dislike being eviscerated by commodity products (hardware).

The differentiation between smart phones – in terms of core functionality – will disappear.  They all will sync with Outlook and Exchange, they all will have cameras, they all will play music, tether, have GPS navigation, Bluetooth to your dashboard, cook your breakfast, double on keyboards and wax your back … by next Thursday.  Thus price, selection and availability become key factors for buyers.  Techno lust drops to third place at best.

This is where Apple and RIM are missing the mark.  Apple is Soviet in its approach, insisting on top-down control of everything, including hardware, channels, and apps that locate new internal organs for Steve Jobs.  RIM rested on its laurels in the corporate email addiction market, and watched this thin differentiator evaporate without creating new business functionality to keep it ahead of competitors.

Google mimicked the Microsoft model.

Microsoft is huge because they purposefully let other people profit from their products.  They could have been a hardware company, and had the same success Apple did in the desktop market, which was a fraction of Microsoft’s.  Instead Microsoft worked with hardware vendors (who Microsoft knew would commoditize themselves) and made Windows ubiquitous, much to the gastric discomfort of IT support teams everywhere.  Google is taking the same approach with Android, allowing hardware vendors to make Android ubiquitous.  The primary difference is that Microsoft made money on every instance of Windows aside from the 99 out of 100 copies distributed in China.  Google is making their profit on the back side.  Front, back … irrelevant.  The issue is that Google is encouraging every hardware maker – HTC, Motorola, Samsung, Sony Ericsson, LG – and every cellular carrier to make Android available to everyone, driving prices down to commodity levels.

Which erases top-line revenues for Apple, RIM and Microsoft.  Several marketing strategy lessons can be found herein.

Force devaluation: Competing toe-to-toe with established players is a rough game.  Finding an alternate way to make money and accelerating commoditization changes the rules of the game and leaves competitors gasping.

Everything is a commodity: Maybe not today, but eventually.  It is great to be in a market before commoditization occurs, but once it does, you need to either play on price or avoid the market entirely.

Catching up is bad: RIMs answer to their declining smart phone fortunes is at best parity (or parody if you find similar sadness with the now missing Palm).  When the market is running far ahead of you, being equal means falling behind at a slower pace.  You have to bring something new to the market, which Rim didn’t.  People buy value, not features.  When your features only equal those in competing products, you failed to create value worth buying.

UPDATE: On 2010-08-24, Dell launched a $99 smartphone running Android (granted, this is subsidized by AT&T, but the no-contract price is $299).  This begins the drive downward, putting something as smart as Android in every pocket.

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Organizational structure is strategic by nature.  How an organization is arranged influences other strategy, such as marketing and product development, and thus a whole host of daily activities and tactical initiatives.  Who your boss is and what her objectives are determine what you will do, such as replacing her coffee with decaf in order to encourage afternoon naps and thus allow you to get some real work done.

IBM almost went bankrupt due to their organizational structure, as their former president and resident cookie monster Lou Gerstner confided in his book Who Says Elephants Can’t Dance? Given their early and dominant lead in mainframe computers, IBM developed an organization structure that made the mainframe the center of their universe.  Everything IBM did evolved to support sales of mainframes.  When the minicomputer revolution ignited and UNIX (the original computer virus) escaped its petri dish, IBM’s intellectual inbreeding disallowed agility.  Their organization structure –software was subservient to hardware – made even suggesting alternatives heresy.  Though Gerstner did many things to disable IBM’s dementia, the single most important one was to decentralize and make all IBM divisions profit centers.

Nothing like sinking or swimming on your own to make you dog paddle furiously.

Recent IBM news should thus be disheartening to investors.  Organizational shuffling has merged software and hardware units together, with software being the overlord (and if a forced marriage was wise, software should be the top given market trends toward commoditization of hardware).  Two services divisions – technology and business – have also become conjoined twins, with tech services being the bigger brother in that particular carnival sideshow. In a statement almost copied from every start-up’s venture capital pitch, IBM’s CEO said “There are logical synergies across our services units, including the increasing value of leveraging our intellectual property in business process management and transformation projects for our clients.”

Stockholder should be scared when a CEO’s press release is littered with cliché buzzwords like ‘synergies’, ‘leveraging’ and ‘transformation.’

Granted, these internal mergers are not completely reflective of the old IBM.  There is no plainly visible central altar on which every blue suit must sacrifice chickens and Lenovo laptops.  Yet CEO Sam Palmisano has started the slow march away from decentralized entrepreneurialism to central planning … and we all know how well that worked for the Soviet Union (“Who?” asks the intern with authentic confusion).  Decentralization worked for IBM as a means to prevent going belly-up, and it worked for Hewlett-Packard before the Fiorina error, so Uncle Sam Palmisano’s decisions appears demented.

How an organization is arranged influences other strategy, such as marketing and product development, and thus a whole host of daily activities and tactical initiatives.  IBM’s recently released zEnterprise system, though not the hallmark of utter innovation, shows that hardware still matters.  Putting IBM’s systems and technology group under bit twiddlers means that hardware innovation will be limited to the needs of IBM’s software (instead of the entire software universe, which despite IBM’s thinking, is larger than Armonk city limits).  Product design is reflective of product marketing, and if hardware product marketing labors for people who peddle DB2, Lotus and Cognos, then there may well be very little IBM hardware innovation.

Which is when HP, Oracle and Dell will pounce.

The marketing lesson herein is really a management lesson.  People don’t do what you tell them, they do what you watch.  Every bureaucracy is designed to watch what employees do with some end goal in mind.  IBM’s consolidations causes employees to be watched over an artificial hierarchy of product group priorities instead of markets.  When markets matter less than internal organization, then the end will be near … again.

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Back when I had a regular job – during the Taft administration – my co-workers loved to drop Dilbert cartoons on my desk whenever marketing was the strip’s topic.  In one installment a customer asked Dilbert if he was lying about a product, to which Dilbert replied “No, that’s marketing’s job.”  This naturally reinforces the very stereotype that Seth Godin outlined in his masterwork All Marketers Are Liars.

The reputation of marketing people has been rightfully sullied because many marketing “professionals” destroy reputations – of their companies and themselves.  They fail to grasp both the mechanics of reputation as well as its essence.  Much has been written about the former since reputation in social media is a hot topic, yet the latter has been incompletely analyzed for high technology.  Reputation for a company and its technology products are intertwined, and failed market reputations have a number of causes.

I assert that marketing must be in charge of maintaining corporate reputation.  Marketing is not responsible for defining corporate/product reputation as that involves strategic business decisions and tradeoffs.  However, assuring the reputation is maintained and grows falls in marketing’s domain because they define the interaction with customers who in turn defines the public’s perception of your reputation.

The dictionary declares that reputation means “the estimation in which a person or thing is held, esp. by the community or the public generally.”  Thus marketing’s role is to assure the perception by the public is sufficient to achieve corporate objectives.  In order to do so, marketing operatives need to understand the elements of reputation, which are slightly more complicated than a typical Starbuck’s order (“I’d like a triple shot soy mocha, cinnamon frapomaco, extra foam, nutmeg, with a twist and a half gainer.”)  Though not exhaustive, the following short stack of basic reputation elements common to business and technology are essential and ones that marketing staff should have tattooed in reverse on their foreheads so they can review it every morning in the bathroom mirror.

Delivering on the promise: Everybody makes promises.  With technology the basic promises are that it will deliver some features, cause some expected outcomes to occur, and works reliably enough that your tech support staff will not require extra medication (and given some recent tech support interactions I have had, I fear some support teams are over medicated).  Failing to keep these basic promises is a fast path to fiscal oblivion.

Exceeding expectations: Merely meeting customer expectations give them no reasons to discuss your reputation.  Under delivering will, though in ways slightly less pleasant than attending confession after a Vegas bender.  However, exceeding expectations, even slightly, creates positive reputation and one that people will communicate to future customers.

Timeliness: Great products or service delivered late might as well have not been delivered at all.  Lack of timeliness is frustrating to customers, so you have to deliver within what they think is reasonable (no matter how unreasonable) or at very least within your promised timeline.  I once told Nokia the battery on my new cell phone didn’t hold a charge.  The department in charge of replacements took over a week to call and tell me they would send a replacement.  In that week Nokia’s reputation in my alleged mind fell, and I quit recommending their products.

Consistency: I’m an Oakland A’s fan because they consistently disappointment me.  Sure, it would be better if they won, but at least I know what to expect of them.  Consistency has value because customers know what to expect.  You can set expectations low as long as you meet or exceed those expectations consistently (in fact, there may be danger in setting expectations low and occasionally exceeding them by a wide margin, because customer may expect such surprises in the future).

Let’s put these four precepts into practice using Microsoft Vista as an unfair example.

• The promise of a better and simpler operating system was broken.
• If failed to meet expectations by a large margin.
• It was very, very late.
• However, it maintained Microsoft’s consistency in disappointing the market.

One out of four ain’t bad.  Oh wait, it is!  Perhaps this explains Microsoft’s faltering reputation.  Let’s try a different technology for contrast.  The iPad would be appropriate:

• The promise of a “wow” device that redefined the relation between man and media was met.
• It was beyond the public’s expectations, which for Apple are pretty high anyway.
• It was delivered on time.
• It arrived in a manner and style consistent with the public’s expectations.

Four out of four is a good score, and explains why Steve Jobs can afford to buy a new liver yet Steve Ballmer can’t acquire hair plugs.

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This week the geeks at Google released a gizmo that lets average people create Android apps via a brain-dead-simple user interface.  The reaction from the technical community involved hysterical laughter, deriding the tool and the alleged limitation of the applications it could craft.  Uniformly they snickered noting that while Apple’s App Store is loaded with professionally honed software downloads, Google was encouraging point-and-meow apps.  They used the news to lambaste Google’s Nexus One handset, which had a short life before cellular carriers started selling their own Android handies.

The technical community doesn’t get it, which means the market is about to shift.

Nexus One and the Android App Inventor served similar purposes, namely market seeding.  Android was a relatively new entrant into the handset OS market, and going up against Apple, Microsoft, RIMM, Symbian and other established players.  Adopting Android presented a risk to everyone – handset makers, software developers, carriers and consumers.  In order to reduce risk and encourage experimental adoption, Google needed to get a handset into people’s hands.  Thus they conscripted HTC to build One that showcased Android (and HTC was smart to exploit the opportunity to showcase their design and manufacturing capabilities).  This assured that developers, early adopters, carriers, analysts, reporters and even competitors saw what Android could do and in turn created both desire and FUD in the market.

Google used Nexus to move Android past a market hurdle.

Apple’s most significant remaining advantage in the market is its app store (face it, Android, Symbian^3, WebOS and maybe even Windows 7 mobile-whatever-they-are-calling-it-this-week have similar/identical/good-enough capabilities at the OS level).  Apple app richness is a market hurdle.  To get past that hurdle requires people believing that Android is a good environment for which to build apps (and given how well the durn things are selling in the East, Asian Android apps is a redundant phrase).  Android App Inventor is a simple tool for creating apps, and is the Nexus One of applications – it exists to reduce risk of discovery, and as a side effect, maybe cause a user to instigate the next great idea for an mobile application.

The reason misreading the intent of an event is an indicator of a market shift is that those slinging misguided rhetorical missiles are those of inert thinking.  When conventional viewpoints prevail, unconventional thinking succeeds.  Google recognizes the app market hurdle while various tech industry pundits don’t.  “The goal is to enable people to become creators, not just consumers, in this mobile world,” was how the Android App Inventor project leader phrased it.  “I think Google’s App Inventor tool that enables anyone to program an Android app could be profound,” opined one wag.

The unconventional thinking here is the same that drove social networks.  People, the unruly bunch that they are, have more net ideas than all the professional developers combined and raised several orders of magnitude, then multiplied by the number of interns politicians sleep with (that last item being a truly staggering sum).  Any of these end users may never perfect an app, but they will invent more apps that Steve Jobs has in his digital wet dreams.  Android App Inventor unleashes imaginations.

The best parallel I can recall was Borland.  In the early days of MS-DOS, a compiler cost a couple of thousand 1980’s dollars.  Borland put Turbo Pascal onto the market for $49 and every two-bit hack started writing applications.  Borland and shareware marketplaces, not Microsoft, made MS-DOS successful.  Rough hacks created by hobbyists were hijacked and converted into mainstream applications.  Android App Inventor follows the same path, taking it one step further by putting programmer power into the hands of every man, woman, child and highly functioning dog (though congressmen are still not yet advanced enough).

Android App Inventor is a game changer.  The pundits just don’t understand the game.

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Every product and service may have an advantage, and it is your competitors’ job to make that advantage disappear.  In early markets everyone tries to out-invent the other fellow, and they continue this until there are a handful of nearly identical offerings that end-up competing on price and +1 differentiators.

This includes Bangalore.

As much as techies will hate this, we have to admit that programmer time is nearly a commodity.  All other things being equal, a Java programmer in San Jose is no more or less valuable than one in Bangalore.  Yet San Jose is the 91^st most expensive place to live and Bangalore is much further down the list at 165.  Thus, the commodity that is a Java programmer has price as a key differentiator, with the Indian working for less.  Cheap labor is why Silicon Valley companies have been willing to deal with twelve hour time zone differences, cultural misalignment and accents so think that old Scottish men are intelligible by comparison.

Until now.

Like any other hot product, price rises with demand.  The demand for cheap Indian IT laborers caused a demand/supply imbalance.  This caused the price of Indian programmers to rise, often at 25% a year.  Cumulatively this has caught-up with the Indians whose success is beginning to price them out of the market.

Which is where Ireland and Mexico enter the arena.

India is now outsourcing to Ireland.  An Indian IT integrator and development shop is opening offices in Belfast to exploit the local advantage, namely workers with culture and language similar to the local buyers.  Whatever relative price advantage Indian IT once had is rapidly vanishing, resulting in on-shoring.  Granted, in this instance there will be some degree of cross breeding, with low-level and non-critical tasks still being performed in India.  Yet the desire of an Indian firm to recruit locals for IT work in markets like financial services shows there is no permanent economic advantage in price.

The same story is told differently by our friends NearSoft.  They do what many Indian IT companies do – they cut code for less.  However, NearSoft sells against Indian disadvantages, bragging about more closely aligned cultures and being in the same hemisphere as their customers.  In other words they sell all the benefits of offshoring to India without any of the head-throbbing pain.

Marketing strategy has to do largely with creating real or imagined “expected outcomes” from using a product or service.  India had one clear advantage, which was price.  With the expected outcome of Indian outsourcing (less cost but worth the hassle) going away, so is India’s advantage.  Since programmers are commodities, there is nothing that India can do to change this, so they are eliminating their disadvantages in the market by buggering Belfast. All the while Mexico tries to capitalize on those same disadvantages.

Competing on price is never a long-term strategy.  Your prices will rise, your competitors prices will fall, or someone will devise better features.  Since genetically mutating Java programmers is frowned upon, there are few ways of improving the product, thus India’s price position will inevitably erode.  Always invent, even if it is just a +1 feature.  Invention, be it new products, new markets, new segments or new features is the key to creating new value.

Until everyone clones what you did and drives you to commodity status.

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Social networking is more than a fad, though the surrounding hype makes it sound like one (with the possible exception of Twitter, a fad that I hope will fade fast).  Social networking serves a real purpose, namely uniting people who have common connections.  Facebook facilitates all types of unions from the common to the outrageous (if you can get jihadists to threaten you, then you know you have some power in the world).  The secret to social media systems is that they let people decide what common connections are important and that do not occur through nominal daily activities.

Which is why most corporate social media experiments have been misguided wastes of your bonus check.  Corporate life is all about getting people with common purpose together – even sales and marketing, though the bloodshed between those camps makes cleaning up conference rooms an added expense.  Social networking applied to corporations has few benefits because it lacks a real purpose that isn’t already being met.  While judging entrees in last year’s CODIE Awards, I was subjected to a number of enterprise-focused social networking suites that in practice produced no benefits for the enterprise or its employees.  They were, almost to the last, mere playthings without tangible end-games.

Which is why Connect2health is a delightful departure (full disclosure: Private Social Networks, the makers of Connect2health, is a Silicon Strategies Marketing client).

Connect2health was designed to achieve specific things for a specific market, which according to the units-squared principle means that Connect2health is already four time more viable than any other enterprise social networking suite.  Specifically, Connect2health is designed to help hospitals grow communities and thus create marketing opportunities and control brands.  Hospitals – at least those in major metropolitan areas – compete, and they know that creating and exploiting a lasting brand is difficult.  Sure, Kaiser Permanente knows how, but they have been mastering the trade for ages, they have more money than Moses and can establish for themselves almost any brand (except that of being the low cost provider).

When getting into the private social networking business, Private Social Networks decided to pick an industry that had a demonstrated need, apply social networking mechanics to customers in that industry, and find ways of having the product fulfill business missions.  Stated succulently, Connect2health helps hospitals connect patients, families, friends, doctors, nurses and administrators online together with the express purpose of centering healthcare around the patient.  The backend that excites hospital management is the ability to market to the patients, their families, their friends and everyone else who connects into the application.  This amplifies and targets hospital outbound marketing, inbound talent, and for the non-profit hospitals, donations.

More importantly though is that by creating long-term customer connections, in an industry that normally connects only for the duration of hospitalization (and the funeral if it is a lousy institution), this is a brand defining tool.  Patients bring in new people, demographic profiles develop, connections are kept long after patients are discharged, and the hospital (who owns the data) can continue to establish and expand their brand to these people.

Where enterprise social networking plays have gone astray was not providing concrete benefits.  Most of the vendors in this space talk in vague generalities about “synergies of connected teams” and other effluvium written by junior marketing people who have never had P&L responsibility.  Social networking companies that identify and address specific needs of specific industries and create specific payoffs will make some serious cash.  Expect to see some players become “specialists”.

That is if they can keep up with Private Social Networks.  Hospitals are only the first segment in their sights.

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