WRFest 9Mar08(Business):Auto, Pharma & Tech News
Somehow or another all the business news is either finance or technology news these days. I'm sure that's not true but that's the net effect give my readings. The huge wave of finance industry news is, under the circumstances, not a surprise and we covered it yesterday. It's worth bearing in mind that the Industry was a whole appears to a) be as badly broken thru its' own self-inflicted wounds compounding and b) as the credit markets go thru an extensive de-leveraging process that the industry will be badly shaken up and re-structured. And perhaps c) we may have a long way to go.
The first two stories below are on Chrysler and Pfizer - both of which industries have backed themselves into similar corners. The Auto industry by getting stuck in its' own rigidities and denying the need for change for 3+ decades. As we've mentioned the core of the Pharma industry is their R&D activities and, very unfortunately for them, their core business model of chemistry-based drug development is broken by exhaustion. And the nextgen replacement (bio-chemical/biological) is not a near- or intermediate-term potential (though depending your horizon you should be lookin at systems biology and what's going on with "synthetic" life). Whic leaves us a bunch of Tech industry stories. Which in turn are stories about escalating pressures for cost control and change, companies failing to innovate and some succeeding.
In the latter class are Apple and TIVO both of whom have focused on defining and delivering value. Preceeding them is a story about one MS fantasy about Yahoo - that it'll help take them into the on-line software arena by combining Yhoo's on-line DNA and MS's software development DNA. Excuse me - their core strategic value propositions at which they've been failing miserably for years now ? Yahoo obviously but for those of you not enchanted with Longhorn, excuse me Vista the pitiflul remenants of a grand(iose) vision terribly executed and perhaps flawed in conception (btw do a search on Code Red and MS sometime for an understanding of how badly their supposed core competence in programming failed them). The other side of the coin is HPQ which is well on it's way to re-balanced and re-factoring itself, illustrated by a story on Hurd's moving to the next step by starting in on re-directing their R&D labs toward a stronger commercial focus (a step Gerstner took at IBM back around the mid-90s).
The first two tech-related stories are more general interest tech stories which define the ecology of the industry. One counseling IT departments to start putting pricing pressure on their vendors. The other on the topic of business vs technology alignment. We've all heard the stories about businesses able to change an industry thru the strategic use of technology. The problem is that for 20 years it's generally the same small handful of exemplary firms, e.g. WMT, FDX, Schwab, et.al. What you may not be aware of is that there's a huge gap between the MIS department and the operational business which the industry has been struggling with for decades. And despite the bottom of the "stack" becoming a commodity the top part where business solutions live is as much about magic, mis-communication and 70% failure to deliver rates as it ever has been.
As a friend of mine with almost 40 years in the business said:
And tha'ts coming from a guy who was a junior member of IBM's original OS360 architecture team - you know the first major modern computer that changed the company, the industry and how we define a computer (the stack, modularity, plugin/plugout) to this day. SIGH !La plus ca change, la plus ce meme chose.
Eight-Brand Pileup Hinders GM For dealers like him, GM's move to populate many of its divisions with vehicles that look alike largely for the sake of maintaining each brand's market share amounts to "robbing Peter to pay Paul," he said. After three years of restructuring, GM is still racking up billion-dollar losses and isn't ready to say when it will return to profitability. The slumping U.S. economy is certainly a big factor, and one reason GM reported a drop in February vehicles sales yesterday. But Mr. Maguire's predicament is an age-old one that continues to undermine the Detroit auto maker's efforts: The eight brands in its portfolio often compete with each other -- both for customers and a slice of GM's marketing budget. For example, GM has four mass-market midsize sedans. There is no doubt GM has made some progress in its restructuring. Since 2005, it has cut yearly fixed costs by $9 billion, shed a third of its unionized work force, closed several plants and improved the quality and feel of its cars and trucks. But to make money again, the company has to rev up sales in all eight brands. Mr. LaNeve said GM will slim down the product lines in the future, taking out underperforming models, or models that unnecessarily duplicate others. GM is also working to reduce overhead and overlap among its brands. Buick, Pontiac and GMC vehicles are sold mostly through dealers that carry all three makes. To keep them from competing with each other, GM has trimmed their product lines so that Buick offers premium cars and wagons, Pontiac offers sporty models and GMC concentrates on trucks. Still, internal competition continues, and nowhere is that more evident than in GM's push into crossovers, which look like sport-utility vehicles but are lighter and more fuel-efficient.
Can Pfizer Deliver a New Prescription? More than a year and a half into his tenure at Pfizer, CEO Jeffrey Kindler doesn't have much to show for his bold predictions that he would transform how the company does business, and investors are getting restless. The company also hasn't demonstrated how it might solve its biggest problem: The impending loss of about $13 billion of annual revenue from the cholesterol fighter Lipitor, which could face generic competition as soon as 2010. There is nothing apparent in Pfizer's late-stage research pipeline that could come close to replacing those sales, and Mr. Kindler has made no acquisitions significant enough to fill the void. Mr. Kindler initially delighted Wall Street as he visited with analysts to get their input. But his strategy update in January 2007 disappointed some investors because it featured well-worn solutions such as layoffs and manufacturing-site closures. In a January preview of this year's plan, Mr. Kindler told analysts of five initiatives, including finding new opportunities for established products and fostering a culture of improvement. But within Pfizer, Mr. Kindler has revealed plans that "are really aggressive," including new products, sizable takeovers and further cost cuts, according to this person.
Technology Environment
Now's the Time to Exact a Better Deal from Your IT Vendor The last time we sweated through an economy as harsh as today's environment--back around 2002--the technology market looked very different. CIO's, fresh off a multiyear technology-buying spree fueled by the dotcom boom, were trying to justify their spending in an uncertain post-9/11 economy. Sure, the economy stunk. But CIO's could negotiate better deals thanks to a competitive vendor landscape.
Today, CIO's have mostly mastered the case for ROI but are under new pressure to come up with ways IT can generate revenue for their companies. And the economy stinks. Again. But you're wrong if you think a potential recession, combined with big-time consolidation in the software market, has stripped CIO's of all bargaining power. Now is the right time to push technology vendors for a better deal than the one you have, even if you've recently signed contracts, say CIO's and their heavy-hitter negotiators.
Next-generation CIOs Should Focus on Change, Not Just Business CIOs who think of themselves as savvy technologists skilled in aligning the work of the IT department with the goals of the parent corporation are in serious trouble and don't even know it. They're smart, well trained, fully adapted to the last major wave of technology-fueled business innovation – and as anachronistic as a T. Rex expecting a giant meteor strike to bring great new opportunities for giant carnivorous saurians. "Aligning IT with business – which has been a CIO's main goal since forever – that's gone," "IT is too integral to the practice – to the operation of the business – to be something separate that you align. You can't align IT decision-making and business decision-making; you have to treat them as an integrated decision-making process." That ability to go beyond IT-business alignment was an important factor in what made companies named to the Baseline 500 among the most effective users of technology in the business world, according to Paul Strassman, the productivity expert, IT consultant and former senior IT executive at Xerox, Kraft and NASA who did the principal analysis of Baseline 500 companies in 2007. During its first 40 years of existence, IT's role was to reduce costs, increase the efficiency of existing operations and automate what it could, Strassmann said. As the structure of global business and economics changed, however, so did the requirement of IT to be more than a support structure for business decision makers.
Tech Business
HP to announce revamping of famed HP Labs Silicon Valley is too familiar with the failure of the research lab previously known as Xerox PARC to capitalize on its early innovations for the personal computer in the 1980s. Their work provided the seeds for the point-and-click user interface commercialized first by Apple and then Microsoft and Xerox got only Apple shares. Amid this backdrop, Hewlett-Packard will unveil a big push to ensure that its famed research group, HP Labs, about a mile from PARC, contributes more to the printer and computer giant's bottom line. HP Labs, PARC, SRI and IBM's Almaden Research Center are the elders among the Valley's research institutions that are now all confronting new ways to turn some of their research into commercially viable projects at a faster pace. This Thursday, at an event hosted by HP CEO Mark Hurd, executives will sketch out new directions for HP Labs. This revamp is expected to be the biggest reorganization of HP Labs in more than a decade, and details are expected to provide the key areas of focus for the future for one of the tech industry's most prestigious research laboratories.
Yahoo's software potential Microsoft Chief Financial Officer Chris Liddell cited Yahoo's potential role in response to a question on how the major shift in the way software is sold could affect the tech company's business model -- even as he maintained that Microsoft is still weighing its options after the board of Yahoo rejected its acquisition offer.Microsoft emerged as tech behemoth by selling software mainly as a shrink-wrapped product from which it derived hefty profits from licensing and other fees. However, a growing number of tech companies have shifted to a new business model in which customers, particularly businesses, pay a fee for access to software programs through the Web. Is Yahoo a wrong turn for Microsoft?
What makes Apple golden The mass market is supposed to be dead, but you would never know it from Apple. In February the iTunes Store became the second-largest music retailer in the U.S., right behind Wal-Mart. The iPod is to music players what Kleenex is to tissue or Xerox is to copiers. Almost everything Apple makes transcends gender, geography, age, and race. An Apple Store is a demographic melting pot, with computer games for kids and a Genius Bar for their parents and so much cool stuff to touch that it's a magnet for teens and twentysomethings. Apple scoffs at the notion of a target market. It doesn't even conduct focus groups. "You can't ask people what they want if it's around the next corner," says Steve Jobs, Apple's CEO and cofounder. At Apple (AAPL, Fortune 500), new-product development starts in the gut and gets hatched in rolling conversations that go something like this: What do we hate? (Our cellphones.) What do we have the technology to make? (A cellphone with a Mac inside.) What would we like to own? (You guessed it, an iPhone.) "One of the keys to Apple is that we build products that really turn us on," says Jobs.With that simple formula, Apple not only has upstaged the likes of Microsoft (MSFT, Fortune 500) but has set the gold standard for corporate America with an entirely new business model: creating a brand, morphing it, and reincarnating it to thrive in a disruptive age. Now, just seven years after it unveiled the first iPod, fully half of Apple's revenues come from music and iPods. Interest in the iPod and iPhone has rubbed off on the Mac, whose sales growth outpaces the industry's. Apple has demonstrated how to create real, breathtaking growth by dreaming up products so new and ingenious that they have upended one industry after another: consumer electronics, the record industry, the movie industry, video and music production. The trouble with Steve Jobs
How TiVo won Apparently, the revolution will be televised - and recorded - on Tivo. With apologies to '70s jazz-poet Gil Scott Heron, Tivo is poised to continue the media upheaval it began more than a decade ago with faster growth and a new plan to help advertisers, and cable and broadcast providers, rethink their relationships with consumers. So why is this small, money-losing company so hot? In the 11 years since the Alviso, California, company was founded, Tivo has almost singlehandedly created "time shifting." The company's set-top device and installed software enables U.S. consumers in more than 4 million homes to unshackle themselves from appointment TV viewing, allowing them to record and then watch their favorite shows whenever they choose. That's not, of course, an earth-shattering idea; VCRs have been doing this for decades. Tivo's edge is simple but critical: it's easy to use. Thanks to broad appeal among consumers, Tivo (TIVO) shares have performed well over the last year, rising more than 52% while the S&P 500 dipped 4% over the same period.And now, at last, there seems to be a path to profitability. A successful courtroom defense of its software patents laid the groundwork for what many analysts believe to be a coming period of exponential growth