Flip
Mobile Opportunity | Michael Mace | The Real Lesson of Cisco's Billion-Dollar Flip Debacle
Presenting a stationary target is enough to doom any consumer electronics product. For example, what would have happened if Apple had stopped evolving the iPhone after version 1? You'd have no app store, no 3G. Today we'd be talking about iPhone as a cute idea that was fated to be crushed by commodity competition from Android.
Just the way we're talking about Flip.
This is a very interesting piece.
Personally I think Mace is smart to reject the "smartphones killed Flip" story line that seemingly everyone else is pushing. For one thing, he is correct to identify that explanation as the cause being given for pretty much every change in consumer electronics, and smartphones can't explain it all. It's too facile an explanation.
For another, my three closest family members use Flips semi-regularly, and none of the ways they use them are amenable to replacement with smartphones. Mrs. SB7 isn't going to have a student record her lesson as a student teacher on their phone and send that to her supervisor. That's not going to work for several reasons; she needs a dedicated camera.
Now maybe my wife and parents are atypical and people like them don't comprise a big enough market to make the Flip a success, but I think it establishes that there is at least a basis for a market of people for whom smartphone are not an acceptable substitute, but prosumer-grade video equipment like a EOS 5D Mark II is overkill.
That's not an unusual story. It's almost impossible for any enterprise company to be successful in consumer, just as successful consumer companies usually fail in enterprise. The habits and business practices that make them a winner in one market doom them in the other.
The lesson in all of this: If you're at an enterprise company that wants to enter the consumer market, or vice-versa, you need to wall off the new business completely from your existing company. Different management, different financial model, different HR and legal. [...]
The other lesson of the Flip failure is that we should all be very skeptical when a big enterprise company says it's going consumer. Hey Intel, do you really think you can design phones? (link) Have you already forgotten Intel Play? (link)
I'll give the final word to Harry McCracken (link): "You can be one of the most successful maker of enterprise technology products the world has ever known, but that doesn’t mean your instincts will carry over to the consumer market. They’re really different, and few companies have ever been successful in both."
Right on.
I think this is actually a lesson the Big Three ought to learn.
One of the anecdotes that stood out to me in The Lords of Strategy was the disdain Ford, GM & Chrysler had for understanding their customers. Because they are prohibited from selling directly to car owners* they came to treat the dealerships as their "real" customers. As I see it, that pushes them further toward being a enterprise systems company like Cisco, and further from being a consumer company like Pure Digital was, even though their products are ultimately consumer goods.
It's not a perfect analogy, granted, but I think you see a lot of the problems in Detroit that Cisco seemed to struggle with when it came to the Flip: long development times, little innovation, attempts to shoe-horn things in to what they already know and do rather than search for new opportunities, a focus on lower volume higher margin products resulting in an inability to produce high-volume, low-cost products as well (video conferencing equipment for corporate clients in Cisco's case; trucks and SUVs in Detroit's).
(* And seriously, how much bullshit is that? It's easier for me to pick up a 911 from the factory floor than a Focus. I know dealerships are hugely influential ith Congress, but if we were so concerned with the state of American-founded car companies wouldn't step #1 be to let them sell directly?)
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