All Things

With calls for yet another government bailout, right after the last one, it’s hard for Americans not to be really frustrated about the state of the domestic car industry. I’ve been watching its decline my entire life. It’s kind of like watching the slow decline of Sears (starting maybe a decade later), which was so big and dominant, it’s taking a very long time, but when it comes the end may be pretty ugly.

For a business starting out so high on the totem pole, it can be quite a challenge to acknowledge a severe turn of events. This happened in the car biz by the late 1960s, but I really think Detroit is still - after four decades - in denial. They’ve never had their Sputnik moment, their Pearl Harbor or 9/11. Instead, they’ve been like the frog in the pot that’s slowly warmed up.

Congress has made sure the frog stays reasonably comfortable, but for how much longer? American cars have improved quite a bit in recent years, but do GM, Ford & Chrysler get it yet about how relentlessly competitive the auto biz is nowadays?

They need to entirely overhaul their company cultures, because it’s not going to get any easier by just surviving to 2010 or whenever. Detroit automakers must get rid of their quick-fix mindset and adopt company cultures that embrace continuous improvement and place engineering & quality above marketing. Otherwise all the king’s (president’s?) men aren’t going to be able to put humpty-dumpty’s brand back together.

Zappos.com CEO Tony Hsieh really hit the nail on the head recently when he pointed out that a company’s culture and its brand are really two sides of the same coin (Video, quote at about 9:20). Detroit doesn’t seem to get this. Unless they overhaul their entire businesses, then their brand message is never going to stay aligned with reality for long.

Cadillac is just one example. Way back in 1990, the GM division won the Malcolm Baldridge National Quality Award, and appeared to be on its way to establishing a quality reputation for its product line. Sadly, the other day I was looking at the current Consumer Reports, and several of Cadillac’s most prominent models are listed as not recommended by CR because of less-than-average reliability.

Maybe today’s Cadillacs are quite a bit better-made than those of a decade or two ago, but so are Toyotas, not to mention Hyundais and even Kias. Consumers are smarter, too.

I know there’s some folks in Detroit who’ve been working really hard for a long time trying to make things better and I’ve been rooting for them as much as anyone, but until the leaders there get past the idea of just surviving the current crisis and start thinking strategically, any government bailout is probably just money down the drain. It’s the culture that’s got to change.

Astroprof’s Page has an interesting discussion of the difficulties of science journalism.

I think the quality of science coverage is improving at many of the major newspapers at least. As Astroprof mentions, Mark Carreau has, for example, done a good job for the Houston Chronicle. Perhaps it’s a positive outcome from the Challenger tragedy, but it seems that about that time many of the media outlets here in Houston started giving a lot more attention to manned spaceflight. The “main” industries in Houston have long been oil & gas and real estate, but for quite a few years now space has also been accorded that sort of status by the Chronicle and several of the TV and radio stations.

An experienced, knowledgeable science reporter is hard to replace. I subscribed to Science News for years, but after Dietrick Thomsen and Jonathan Eberhart left, the physics and space coverage were just not the same. I doubt most publishers have the means to get into a bidding war for the limited supply of top talent, and no one could expect a relatively new science journalist to be able to match their reporting.

One of the problems with science and tech journalism is that folks in these fields often expect journalists to do all the work. Such a mindset would seem ridiculous in politics, where there’s whole staffs of hacks feeding carefully-crafted sound bites to the media and identifying “talking points” for their candidate’s every appearance.

Businesses likewise spend vast amounts on marketing and public relations, but most researchers, and even technical staff inside many businesses, somehow don’t seem to think these functions are part of their job. Of course, a lot of engineers, scientists and programmers aren’t that good at communications skills, or just plain don’t like to talk about themselves, but somebody in these research groups and engineering departments needs to take up the role of communicator, so the outside world can understand the value and needs of their efforts.

Journalists are under a lot of pressure with the kind of deadlines that most of us couldn’t even imagine, so it’s only smart to realize they’re going to need some help. That’s one of the things I’m trying to do with some of my sites, particularly AeroGo (for aerospace and engineering education) and RealCurrents (for current events), in which I’m trying to provide important but little-known background information and to point out things deserving more attention (which I generally categorize with the tag “Press Coverage Holes”).

Where there are failings in science/tech journalism, beyond just ignorantly trying to cover a field the reporter knows nothing about, I’d say that one of the biggest problems is that of naively swallowing pronouncements from big research groups without knowing what is going on elsewhere. We saw some of that a few years ago, for example, with some coverage of the Human Genome Project, that focussed too much on the government research, ignoring Celera Genomics’ private effort that ended up getting done first.

The result is that journalists are often lacking in understanding about the overall policy and business aspects of research, and consequently end up focussing too critically on superficial technical aspects. We saw that just this past week, when many media outlets were talking about the possible abandoning of the International Space Station, due to computer problems - what was a rather remote possibility, technically, while saying not a word about how NASA’s busily going about building a station they expect to abandon anyway, not too many years after completing it.

It seems to me that journalists ought to be a little easier on programs that suffer technical glitches that are really just part of the normal course of research & development, but be discerning enough to realize when an effort has really lost its way or when a policy has serious unresolved issues. With so much needless technical criticism, a lot of R&D managers are understandably gun-shy about the press, which just perpetuates the disconnect to journalists described above.

I’ve been reading about the rekindled Microsoft/Yahoo talks; perhaps it’s a good sign. It just seems so obvious that Microsoft doesn’t yet understand the internet, and so inevitably can’t really take it seriously enough. It’s got a dozen years of half-hearted efforts under its belt and not much to show for it, other than the dominance of Internet Explorer, which continues to slowly lose share to Firefox.

A BBC report quotes one analyst, Matt Rosoff, as saying, "I do not understand what Yahoo would get out of the deal, including that there are people there who don’t want to work for Microsoft." Well, that really says it all!

Nowadays, there are a lot of people who are trying to get away from Microsoft. After 27 years of being their customer, and 23 years of using a Mac, I’ve learned to pick and choose their offerings, rather than just drink their kool-aid and swallow the whole enchilada. I don’t at all want them to go away, but it would be really nice if they would be honest with themselves, accept what their true strengths and weaknesses are, and stop trying to be all things to all people, in order to keep most all the pie to themselves. That strategy is just not working anymore, and after years of disappointments, the reality is starting to be generally acknowledged.

As I’ve noted before, I thought MSN Spaces (where I have my personal blog) was one of the better things they’ve done, but they’ve made it increasingly Windows-centric as the Live Spaces rollout has continued, which has made it clunkier and more difficult to use, at least for non-Windows/IE users. I don’t expect Microsoft to be Apple, but after all their years of vaunted usability testing, they still don’t get basic design principles.

Everyone knows that Toyota’s cars aren’t that stylish, but they’re well-made, and Toyota (as it has recently) will put the brakes on to ensure a consistently high-quality product. Microsoft isn’t going to have the style of Apple, but they need to develop some decent processes like Toyota, so they can produce a quality product that meets customers’ needs.

Quality is a long-view strategy. In the short run, Toyota sells a bit fewer cars because they last longer, but in the long run, they sell a lot more, and pretty soon even more than GM. Bill Gates once said that his favorite business book was Alfred Sloan’s My Years With General Motors, but the days when one company could dominate a global market and put out mediocre products, in a strategy of planned obsolescence, are long past.

At least Microsoft is reaching out to a company that has some insight. I’ve always thought Yahoo was a bit clunky itself, but they are innovative and do understand the potential of the internet. Maybe Microsoft is at last acknowledging that they don’t get it, and that their culture needs to change.

I suggest that they start by returning to a more inclusive strategy on their online offerings. Don’t automatically expect users to be running all Microsoft software (e.g. IE and Windows), and so don’t penalize users who are using some MS software, just because they aren’t using all Microsoft software! In an era of open source and global markets, all that strategy will do is ensure that eventually no one will be using any Microsoft software.

Microsoft has to accept that they can no longer expect to get the whole pie, except for the crumbs, and that they better be glad for whatever share than can get, without coercion. They still have a lot of talented people; if they revitalize their culture and get their processes right, they could still do really well, and I hope they manage to pull it off.

As I did earlier with the Education category, I’ve decided to generally put articles related to the Christian Church and various religions in another space, in this case my blog RealCurrents. That’s where I’ve just posted a discussion of the management issues behind the controversy reportedly flaring up over churches attempting to move to a more “purpose-driven” approach promoted by pastor and author Rick Warren.

This controversy raises an issue which is common to all organizations - the tension between decentralization and centralization, between external results and internal order. This is a central problem in management, similar to how the paradox of free will is a central issue in philosophy. I note, for example, how Intel’s Andy Grove discusses the subject at length in his book High-Output Management.

Anyone interested in management needs to be very much aware of this inevitable tension between mission/projects/results and function/bureaucracy.

I wrote about Ford’s selection of former Boeing Commercial Airplanes President Alan Mulally as its new CEO on my blog AeroGo. As I note there, I don’t agree with William Clay Ford’s assertion that there are many parallels between Boeing’s recent challenges and Ford’s.

In a narrow sense, maybe yes, you can say that Ford needs to renegotiate union and supplier contracts, etc., but really Ford Motor Co. has been its own worst enemy, and is much more a victim of its own ineptitude and lack of decisiveness as any external circumstances. It was only a few years ago that it was the strongest of the Big Three, and now it appears to be the weakest.

If you want to draw parallels, a much better comparison could be made between Ford and Apple Computer than Ford and Boeing. As a long-time Apple user, I can assure you that Apple has long been its own worst enemy. Even when Apple did make outstanding products at intelligent price-points, for years it would suffer severe logistical problems that cut into the potential gains. Even in recent years, I suspect continuing skepticism of Apple’s ability to ramp up production of hot products is one reason folks underestimated its iPod business for so long.

The difference with Apple now is that it finally has a clear, focussed direction for its products and the brand is healthy again. In the same way, Ford needs to make up its mind what kind of car company it is and develop clear differentiators for each of its brands, whichever ones it decides to keep.

It wasn’t too many years ago that William Clay Ford was declaring that Ford was going to be a leader pushing for better fuel economy and lower emissions. Along came a few problems, and apparently that vision was tossed, and now, with gas prices up and highly dependent on truck sales, the failure to follow through on that vision is really hurting them.

Product-driven companies like Apple and Ford must set a course and stick to it long-term, and not constantly adjust to every external up and down, whether in the market for their products or their stock. Even recently, nearly a decade into Apple’s turnaround, analysts were calling Apple’s plans for the Mac unrealistic, that they needed to focus on market share, etc. Of course, the reality of the computer business has long been that significant market share gains are made on the mistakes of one’s competitors, mistakes which are all too common, and which even Microsoft has been making of late.

In other words, stability and staying the course are far too under-rated. On the other hand, there is one crucial difference between Apple and Ford - even when things were their worst, Apple had large cash reserves, something Ford may not be able to count on. But any “quick fix” that damages the Ford brands will probably just end up making things worse.

The sad thing is, William Clay Ford’s “greener” vision for Ford may well have been on the mark, and it’s a shame they didn’t stick to it. Perhaps a return to his vision coupled with Mulally’s demonstrated management ability can turn the company around. As with Apple, there’s probably a lot more life left in the Ford, Lincoln, Volvo and Jaguar brands, at least, if they can set a clear direction and stick to it. For a few years things may not look so good, but a consistent product vision will eventually yield leading products and strongly-differentiated brands.

IBM is once again giving away some software; after donating its VisualAge tool to Eclipse and so many other products to greatly invigorate the open source movement, this isn’t so surprising. What’s more interesting is that these donations seem to be moving higher up the value chain, as IBM will reportedly begin giving away a Universal Database Express-C version of its high-end DB2 database that will run on up to two-chip systems.

It seems to me that a sign of a healthy software ecosystem is the gradual price decline of particular packages as they grow more complex. One example would be Microsoft’s bundling of Word, Excel, PowerPoint and various other packages into Office, which doesn’t cost nearly as much as the total prices of individual packages 15 years ago, especially after adjusting for inflation. Excel itself, when introduced on the Mac, had consolidated functions previously handled by Multiplan, Chart and some other programs.

One of the common signs that a particular software ecosystem is declining is that this trend of generosity on the part of the ISV reverses, and it starts to look for ways to increase unit revenues. This is one of the reasons why I suspect that much of Microsoft’s software business isn’t as healthy as it once was, as they have at least begun to make changes in their licensing/pricing that for some customers might be viewed as an effective price increase.

Some vendors, such as Computer Associates, seem to have done fairly well by buying up aging software and gleaning what they can from the remaining user base, many of whom may prefer to stay with what they have been using for quite a few years. Though potentially an opportunity for exploitation, if managed with restraint such a business can provide a valuable service, by keeping users from languishing without vendor support.

Nevertheless, in a healthy, growing software ecosystem the price of packages should normally decline, since the user base is growing (allowing development costs to be spread over more units) while development costs should be moderating as the product matures. Actually, while the first effect is often realized, for some reason (perhaps Parkinson’s Second Law - expenditures rise to meet income) the second is more difficult to achieve.

As sales of its software rises, a successful software vendor will typically add features while keeping steady or lowering the price. Though holding the line on costs, in the real world the size of programming staffs generally seems to balloon, which gradually works to reverse the virtuous cycle of generosity. This excessive growth in programming staff is a curious outcome which I suspect results from management’s desire to speed development in response to competition, despite Fred Brooks’ showing over thirty years ago, in his classic essay “The Mythical Man-Month“, that such an approach is generally counterproductive.

Peter Drucker frequently argued (e.g. Managing for Results, Ch. 9) that one of the biggest problems in business is vendors’ unwillingness to kill off their own aging products, thereby retarding innovation and eventually causing loss of markets to more innovative upstarts. I suspect a software ecosystem requires a modified form of systematic abandonment, where products gradually decline in price and eventually are given away, either as open source or as an inducement to attract new users who may upgrade a to a vendor’s more advanced offerings.

Vendors also ought to consider still selling at a lowered price older versions and upgrades of their software (at least as long as these are supported) since this might be a good approach to segmenting the market between higher-spending customers with newer hardware and budget-conscious buyers using older hardware (and might induce additional upgrades as the cost declined).

Of course, much of the business motivation for open source comes from recognition both of the need to continue stimulating a software ecosystem to attract new users (as many are attempting to do now with Java) and that much of the revenue opportunity comes from services and other add-ons, which seem also to be a fairly effective way to segment the market.

Every industry has its own unique economics. I remember a database seminar once in which a vendor rep described how he had worked with grocers, where the prices, discounts and other factors changed constantly. Airline economics, with which I’ve been fascinated for years, is another very difficult area.

Software, too, has its own sort of economics, driven by the vendors’ desire to smooth out the revenue stream (development is steady but revenues tend to bunch around releases), the extremely low unit marginal cost, and intense competition amidst constant technological change. I’m surprised there doesn’t seem to be more active discussion of the unique economics of software, as this might help to reconcile vendors and the open source community.

Software has been the “sick man of technology” for some years now, with disappointing advancement (despite incredible gains in hardware) and recurrent schedule slips. A better understanding of the underlying economics might go a long way in producing a newly healthy software industry.

One thought that keeps turning up again and again in reading about businesses and individuals alike is the need to recognize and compensate for weaknesses. Anyone who has read various of the excellent books on this subject coming out of the Gallup organization (Soar With Your Strengths; First, Break All the Rules; etc.) will know what I am talking about.

As Peter Drucker noted in The Effective Executive (Chs. 3-4), managers must capitalize on an individual’s strengths in order to make him productive. Drucker goes so far as to declare that “Organization is the specific instrument to make human strengths redound to performance while human weakness is neutralized and largely rendered harmless.” (Ch. 4, p. 75)

In other words, as Drucker clarified and the Gallup books have backed up with extensive studies of top performers, part of the essence of management is using strengths to advantage while compensating for weaknesses. This practice of compensating for weaknesses applies at a lot of different levels, and the need to do so persists over time, yet I keep running across examples of this having been forgotten.

Perhaps the latest example is Dell Computer. Computer Reseller News had a good cover story on Dell last week, highlighting the serious service and quality problems that seem to be plaguing the vendor. Never well-liked at CRN, especially when Dell would run down the role of value-added resellers and the channel, these quality problems are certainly not news to CRN readers. Yet it seemed to take Dell management a long time to get the message.

What makes the situation interesting is this article notes how many buyers are now aware of the problems and taking their business elsewhere. Since this has been going on for some time now, and months have passed since the DellHell fuss, I can’t help wondering why Dell is only finally starting to make some changes.

Back when people ridiculed the idea of selling PCs direct, the argument was that Dell was asking the buyer to trust it an awful lot to buy sight unseen and without a local dealer available for service. Back then, it was clear where Dell’s weakness was - without a local presence they needed some way to demonstrate to the buyer that they would be there for them, both at the time of sale with initial quality and support and later for service.

In other words, perceived trustworthiness was Dell’s weak spot, and a good reputation was key to compensating for it. Back then PCs cost quite a bit more, which cut both ways since there was more money to be saved, but also more risked on a relatively unknown vendor. In Direct From Dell, Michael Dell observed (p. 24), “One of the biggest barriers to selling direct was that many potential customers had a perfectly understandable fear of shelling out $4,000 to a company they’d never heard of without a physical store … Quality was another big differentiator. … So we dedicated more resources toward designing PCs that were compatible with IBM’s and had the highest-quality components.”

The point I’m trying to make here is that every person, every business, every product has weaknesses, and we must always keep these in mind and watch them closely, the way North Korea watches the DMZ or NATO watched the Fulda Gap (or Europe today ought to be watching demographics). Somewhere along the way Dell obviously stopped watching their weak point and now they are paying for it.

Another example from the area of technology is the PDA. Interest in PDAs is supposedly drying up, as cell phones become more capable. I don’t buy it. The real problem is that Palm, the prior leader in the field, has lost sight of the product’s natural weaknesses.

Back when Palm was introducing the first viable PDAs, it was clear that the small screen and lack of keyboard were serious drawbacks. To compensate for the lack of screen real estate, Palm made a simple operating system and easy-to-use applications that required a minimum number of taps to do something. Unlike Apple’s Newton, Palm used Graffiti handwriting recognition that was much more reliable.

Somewhere along the way Palm, while spawning Handspring and spinning off PalmSource and then gobbling up Handspring, lost sight of these weaknesses. They were slow to improve screen quality, and keyboards have been put on only a few of their models. In the meantime Blackberry, which put a priority on a usable keyboard, has taken much of their market. Even the relatively simple Sidekick, with a wider screen and a keyboard, has done well.

The cameras and other stuff Palm has put in their PDAs are nice, I guess, but there’s been little progress on addressing the weaknesses of the form factor. Even though screens have improved, most still only show the same dozen lines as the early ones. At the same time, quality of Palm’s PDAs, especially the Zire line, has really declined, whereas before that was a strong point.

To sum up, whenever someone’s in charge of something, it’s key that they determine where the weaknesses are and apply some generosity in those areas. The weaknesses must be identified, and then a commitment made to apply substantial, ongoing resources to compensating for that weakness and bringing it up to at least an adequate level. Once accomplished, a manager must never presume that things are fine, but always keep clear in their mind where those weak spots are, and keep watching to catch problems early when they arise.

Friday Peter F. Drucker, often credited with founding the field of management science, died at his home.

It was perhaps ironic that Drucker died on Armistice (Veterans) Day, as he once attributed the quick start in his career to being placed early in positions that should have been given to men in the middle of their careers, except Europe in the 1930s didn’t have such men. They had most all died in the War. Gifted with the ability to see and clarify trends years ahead of others, Drucker left Hitler’s Germany in 1933 and London, for the U.S., in 1937.

Drucker was one of a handful of prescient Austrians of the 20th century, able to see past the blur of rapid technological change and political upheaval to discern more fundamental social issues and the need for moral action. Unlike Ludwig von Mises‘ analysis of macroeconomics or F.A. Hayek’s work in sociology, Drucker ostensibly focussed on management of profit and non-profit organizations (including government), and managing oneself. Nevertheless, his insights into social trends were some of his most valuable contributions.

Drucker’s own preference was for French economist J.B. Say, who supposedly coined the term “entrepreneur” around 1800. Innovation and “knowledge work”, a term Drucker himself originated, were always important topics in his writings, including his valuable Innovation and Entrepreneurship. Drucker frequently emphasized the need for receptivity to the unexpected market and for disciplined abandonment of yesterday’s successes. In this he seemed to parallel the thought of yet another Austrian, famed economist of innovation Joseph Schumpeter, with his similar concept of “creative destruction” as the driver of growth in an economy.

Regarding Drucker’s impact on my own life, I first discovered his works as a sophomore engineering student, while volunteering with an organization known as the World Space Foundation. WSF was trying a new, non-profit approach to space exploration, and garnered some attention for its work on developing a solar sail spacecraft, though its greatest contribution was likely in the area of Earth-crossing asteroid research.

At this time NASA was really in a funk concerning lunar exploration, which had completely dried up (and would remain so for another dozen years, until the military’s Clementine spacecraft and, after a long history of determined development, Lunar Prospector). I was intrigued with the possibility that maybe we could do a lot with even modest funds in a non-profit context.

Having already concluded some time previously that innovative organizational forms might play an enabling role in space development, over the next couple of years I developed an appreciation for management science and for Drucker’s works in particular. Drucker’s thought-provoking books have always proved fascinating, even if not so easy to apply directly, and were an engrossing introduction to the study of management.

Eventually I concluded that a non-profit organization would have a difficult time maintaining enough control to pursue a long-term research program, but that for-profit enterprises might do this effectively, though much discovery and innovation in the areas of organizational and individual function was still needed. This area of research, in fact, has been my primary focus for the past 18 years.

Perhaps Drucker’s best-loved book is The Effective Executive, originally published in 1966. Drucker described it as a real-world treatment of the subject, and argued that effectiveness was a set of practices that must be learned - and practiced - starting with the executive’s managing of his time, not the work itself. Newt Gingrich, after capturing the House of Representatives for the Republican Party and becoming Speaker, credited the book with guiding his success, which led to a new surge in its popularity.

One of Drucker’s strengths was his ability to see that management, as a discipline, transcended particular organizational forms. He was equally interested in improving effectiveness in both the profit and non-profit sectors, and his latest brief but valuable work, published this year, was Managing Oneself.

It is in the profit realm, however, that Drucker’s comments are sometimes most difficult to unravel. His discussion (Management: Tasks, Responsibilities, Practices, Ch. 6) of the role of business, and of profit in particular, is thought-provoking yet seemingly incomplete. Similarly, some of the concepts brought out early in Managing for Results beg to be pursued at a conceptual level rather than with the detailed analysis of product contributions that follows.

As with any great researcher, Drucker was as adept at asking the right questions as answering them. I continue to find his works profitable reading, however that may be defined!

Software giant Microsoft is a subject I’ve wanted to write about for some time, but since it seems like everyone is quick to voice an opinion about them, usually either harsh criticism or fawning adoration, I’ve been reluctant to do so. Nevertheless, it does seem like we may be reaching a turning point in public perception of the company, so maybe this is a good time to contribute to the discussion.

What’s been lacking is a balanced view of Microsoft. People outside the tech industry often hold them up as a paragon of American innovation and a poster child of capitalism. Most folks inside the industry seem to scowl at the incredible naivete of such a perception of Microsoft, maintaining that it is actually an 800-pound gorilla fast-follower and a monopolist. While I tend to agree more with the second view, these arguments have become well-worn and not very useful.

My perspective is that of a long-term Microsoft customer, but non-Windows user. I’ve been watching Microsoft ever since I bought Level II Basic for my TRS-80 Model I in 1980. Way back then, I noticed there was a certain professionalism about that product, and the assembler software I bought soon after, that impressed me. It was certainly untypical for the time.

Because of that professionalism, I was not at all surprised Microsoft thrived in following years; in those early years it seemed they were succeeding from having a superior product. In the mid 80s, it seems to me their success started to stem as much from taking advantage of other companies’ missteps, which were many as these grew and often went out of control, typically by trying to do a major rewrite of their software that seemed to never ship.

Microsoft has always been adept at acquiring good software from the outside, and its purchase of the Excel package in the mid 80s was probably one of their best moves. If I remember correctly, it was offered on the Mac by late 1985, long before it took over the DOS market (Lotus never did well on the Mac), and I have used it ever since.

Having made the jump to Mac in Spring 1984, I am well aware of how Apple squandered its early advantage in operating systems. Today, however, the situation is very different. Apple is executing well and has a coherent, forward-looking strategy, whereas Microsoft seems rooted in the past, unable to move beyond its Windows franchise and embrace change from the outside world.

Peter Drucker has often commented on how companies need to kill off the past before they have to, in order to preserve their position in the market for the future. I can’t help but wonder if this is the point Microsoft has reached regarding Windows. Apple spent years trying to build a great operating system from the ground up and finally threw in the towel, bought NeXT and moved to Unix.

I wonder if Microsoft is really not doing that much better. Maybe they should embrace Linux or Unix or something rather than fight it. In any case, Windows is their past, not their future, and their recent enhanced emphasis on MSN as a platform is a long-overdue step away from Windows and toward the internet.

By making everything revolve around Windows, they are stifling product development. They need to gradually wean themselves off their Windows monopoly and put more resources into Office, which despite new competition could have a bright future, Visio, and many of their other productivity packages, as well as MSN and various internet opportunities.

Perhaps one of the greatest threats long-term to Microsoft is the Eclipse tools platform, which continues to rapidly gain momentum. If the theory holds that whoever attracts developers ultimately gets users, then Eclipse’s growth relative to Microsoft’s Visual Studio toolset could have a long-term impact.

In general, while Microsoft prides itself on the billions it spends each year on research and development, I suspect years from now it will be regarded as a case study on how not to do R&D investment. It’s not at all obvious that they have gotten much for their billions. For years they have been touting natural language and usability testing, for example, but there seems to be little to show for it in the first area and still a lot of frustrations at times in the second.

One concept Microsoft needs to embrace is the realization that usability ultimately revolves around proper interoperation with other vendor’s tools, both on the device and the web. Microsoft’s strategy of relying on lock-in at the expense (often deliberate, it would seem) of interoperability has worn out its usefulness as more and more innovation comes from outside the Windows platform. As technology and life in general continues to get more complex, user expectations for interop, security, and other types of stability will continue to increase.

Ultimately, what Microsoft needs to do is to grow up. Gates and Ballmer have long touted the need to be “paranoid” in order to survive in the tech industry. This may have worked when Microsoft was small and IBM was the giant, but now that Microsoft is dominant, the idea of a paranoid 800-pound gorilla doesn’t bode well for the industry as a whole or for the users.

Like a teenager, Microsoft shows much promise in an industry that is entering a new era of innovation, but it must mature and come to grips with its own limitations. It can’t be everything to everyone and must learn to coexist with other independent players who aren’t chained to Windows, such as Google and Adobe/Macromedia. Microsoft must conscientiously incorporate standards from the outside and adjust its business model to one that acknowledges users may want to use its products in a mixed environment with those of other vendors.

The pace of change in the software business is speeding up again and Microsoft will be left behind unless it embraces the change, rather than trying to control it.

I really wasn’t expecting to write another post about retail anytime soon, but this week the news came that Office Depot is closing some stores and moving its Viking catalog operations to the Office Depot catalog in the U.S. (I believe Viking also has a substantial business in Europe).

I guess this shows how difficult it is to get mergers to really work. A lot of times, instead of the whole being more than the sum of the parts, it turns out to be substantially less. One recent example that keeps bothering me is Sears’ acquisition of Lands’ End, which was a $2 billion catalog seller of clothing, with a very loyal customer base in the U.S.

I was delighted when that deal was announced, because it looked like it opened all kinds of positive possibilities. Sears was always weak in clothing, so it would potentially shore up a real weak spot in their stores, while giving Lands’ End instant widespread distribution.

At the same time, adding Lands’ End’s catalogs could help make up for what seemed like the ultimate bone-headed business move in the early 1990s, Sears’ shutting down their wide-ranging catalog operation just when the internet was making it possible to run such an operation efficiently. I assumed Sears would still have enough mail-order competency to get a lot out of that.

Of course, none of that worked out, and following its acquisition by K-Mart, Sears is now apparently unloading Lands’ End.

In reflecting on Office Depot/Viking, I can’t really say I’m surprised. I used to be a very loyal customer of both, but while not really “dissatisfied”, noticed I’ve been buying from each less and less in recent years. I’m not really all that certain even why. This shows how the little things in retail really do make a lot of difference.

It should be noted that I’ve always received very good service from both, indeed really outstanding service from Viking. It was obvious, however, that like bookselling, the catalog office supply business is horribly competitive; whenever I’d do business with any of their competitors, e.g. OfficeMax, Quill, etc., they were always very good as well.

I guess the lesson here is that, while so many mergers appear unwise, even when they seem to make sense, they can be very hard to pull off. I can’t help but wonder if the smarter way to do acquisitions is to buy much smaller operations that fill in specific gaps in technology, product or customers and don’t cause wrenching change to the whole company while being digested.

I’m sure the failure rate for these type acquisitions is fairly high, too, but executives aren’t betting the whole company in these instances, and when they succeed the payback may be much higher. It’s interesting that Cisco Systems, which is perhaps more of an innovator in business methodology than technology, is a very aggressive acquirer using this approach. Whatever it is they’re doing likely deserves some study by anyone considering a merger/acquisition.