After the government did not allow ATT to buy T-Mobile, T-Mobile needed to find a different way to achieve scale and cut costs. Today it announced buying and merging with Metro PCS. Will the firm be able to avoid the fiasco of the Sprint/Nextel merger?
T-Mobile and MetroPCS will continue to operate as separate brands. Throughout the morning, T-Mobile executives sought to allay one of the biggest concerns about the merger, the incompatibility of the company’s network with MetroPCS’ own. John Legere, who will become the chief executive of the combined network operator, argued that the company will slowly move MetroPCS’ customers to its own GSM standard — with the goal of moving the unified entity to the Long Term Evolution technology down the road. The aim was to avoid comparisons to Sprint’s merger with Nextel, which failed at the same task and left that merged company in a far weaker position.
HP has been falling behind Apple and Google and the race to be the leading Silicon Valley company. Now Meg Whitman is trying to turn this former star company around. The NYT reports.
So now Ms. Whitman is focusing her energy on H.P., the company founded by the tech legends William Hewlett and David Packard. Bill and Dave, as they are referred to at the company, spawned Silicon Valley. Last year, H.P. posted revenue of $127 billion. It employs 320,000 people directly, and easily that many again through a network of manufacturers and computer resellers across 170 countries.
TWENTYyears ago, people like Steve Ballmer at Microsoft, Larry Ellison at Oracle, and John Chambers at Cisco Systems heard Kenneth Olsen, then the leader of Digital Equipment Corporation, deride the PC as unsuited for business. Within a few years, DEC had been gobbled up by Compaq Computer. Everyone knows viscerally how fast change can overtake a legacy business — and how hard it is to change.
There’s little glory in managing decline, particularly in an industry in love with what’s next. Apple’s tablets are taking share from PC makers like H.P., but only after Apple had a near-death corporate experience that ended with the return of Steve Jobs. He created a new reality for Apple with its retail stores, something that H.P. can’t copy to sell PCs. I.B.M. also transitioned successfully after billions in losses and years of cuts. Most others ended like DEC.
Yesterday the Apple CEO apologized for Apple’s crummy maps application in iOS 6. The WSJ reports on the financial reason why Apple wanted to dump Google maps.
Maps are a big piece of the Apple-Google rivalry. Opus Research has estimated that mobile ads associated with maps or locations account for about 25% of the roughly $2.5 billion spent on ads in mobile devices in 2012. Google has had mapping software since 2005, and a Google Maps app was pre-installed on the first iPhone starting in 2007. Apple only began building its maps software in 2009 under Mr. Jobs, with an eye toward making its version the default mapping app on the iPhone and, later, the iPad. Apple acquired several companies to construct its mapping technology, as well as using information from third parties, such as navigation system maker Tom Tom NV, before it was ready to boot Google Maps.
Home Depot is not the first company to find out that the strategy that worked well back home does not work in a foreign country. Wal-Mart failed in Germany not realizing that the competitive landscape was different. Starbucks failed in Australia, closing most of its shops because the Australian consumer was used to much sophisticated coffee. The WSJ journal reports on the changes in the Home Depot China strategy after failing to implement the previous one successfully.
Home Depot Learns Chinese Prefer ‘Do-It-for-Me’
The largest U.S. home-improvement retailer, which entered China in 2006, has struggled to gain traction in a country where cheap labor has stunted the do-it-yourself ethos and apartment-based living leaves scarce demand for products like lumber.
Home Depot conceded that it misread the country’s appetite for do-it-yourself products. “The market trend says this is more of a do-it-for-me culture,” a Home Depot spokeswoman said of China.Home Depot is shaking up its strategy by focusing on specialty stores. Three months ago, it opened one paint-and-flooring store and one home-decorations outlet in the northern port city of Tianjin to cater to specific needs and shopping preferences shown by Chinese consumers, the spokeswoman said. It also plans to launch online operations with a Chinese partner, she said, without naming the company.
Home Depot debuted in China with a 12-store acquisition six years ago and the number has since dwindled as it found that Chinese consumers differ from their global counterparts. As Swedish furniture giant IKEA discovered, Chinese consumers will pay for people to do the work for them. Several years ago, the furniture store added services to help customers assemble their furniture.
Home Depot’s closures will cause the company to take a $160 million after-tax charge in the third quarter, a company statement said. The charge will be equal to about 10 cents per diluted share, and will include the impairment of goodwill and other assets, lease terminations, severance and other charges associated with closing the stores.
When a company has a very high financial targets, employees are encouraged to do everything possible to achieve it, which in turn may lead to an unwanted increase in the level of risk that the firm faces. As the FT.com reports, the new leadership of the Deutsche Bank determined that the target was to high. They may have felt that they needed to curb the risk taking in the bank.
Deutsche’s new co-chief executives are expected to make a decisive break with the decade-long era of Josef Ackermann, their predecessor, when they will drop a target of generating a 25 per cent pre-tax return on equity. At a strategy presentation in Frankfurt after 100 days in charge of the bank, Anshu Jain and Jürgen Fitschen are set to announce a “substantially lower return on equity target”, one person close to the situation said.High quality global journalism requires investment. They are also expected to unveil a strategy for much closer integration of the bank’s business lines, make significant changes to the bank’s bonus model and give more details on a plan to take out €3bn of costs.Analysts estimate that the new goal could be in the region of 12 to 13 per cent ROE after tax – a benchmark more commonly looked at by investors than the pre-tax figure.
This is the story of how Apple reinvented the phone. The general outlines of this tale have been told before, most thoroughly in Isaacson’s biography. But the Samsung case—which ended last month with a resounding victory for Apple—revealed a trove of details about the invention, the sort of details that Apple is ordinarily loath to make public. We got pictures of dozens of prototypes of the iPhone and iPad. We got internal email that explained how executives and designers solved key problems in the iPhone’s design. We got testimony from Apple’s top brass explaining why the iPhone was a gamble.
Put it all together and you get remarkable story about a device that, under the normal rules of business, should not have been invented. Given the popularity of the iPod and its centrality to Apple’s bottom line, Apple should have been the last company on the planet to try to build something whose explicit purpose was to kill music players. Yet Apple’s inner circle knew that one day, a phone maker would solve the interface problem, creating a universal device that could make calls, play music and videos, and do everything else, too—a device that would eat the iPod’s lunch. Apple’s only chance at staving off that future was to invent the iPod killer itself. More than this simple business calculation, though, Apple’s brass saw the phone as an opportunity for real innovation. “We wanted to build a phone for ourselves,” Scott Forstall, who heads the team that built the phone’s operating system, said at the trial. “We wanted to build a phone that we loved.”
Ina Fried of the WSJ’s All Things Digital is following the Apple-Samsung Trial and is providing an analysis of all the information the typically secretive Apple is forced to reveal.
At the bottom of the article are links to her other commentaries on the trial.
Dan Levinthal organized a workshop on Evolutionary Perspectives on Strategic Management. Dick Nelson and I faciliated the fourth day on Institutional Environment and Evolutionary Dynamics. Here you can download the syllabus for the day day and the presentation slides.
Tim Cook was interviewed about a range of topics at DX, including Steve Jobs.
Here is a summary on the remarks on Steve Jobs leadership style.
6:33 pm: Walt: How is Apple different with you as the CEO?
“I learned a lot from Steve. It was absolutely the saddest day of my life when he passed away.”
“At some point late last year, I sort of — somebody kind of shook me and said, ‘It’s time to get on.’” That sadness was replaced by his intense determination to continue the journey.
6:34 pm: What did I learn from him? Focus.
“You can only do so many things great, and you should cast aside everything else.”
Cook says that not accepting things good or very good, but only the best, “that’s embedded in Apple.”
“I’m not going to witness or permit the change of that.”
“He also taught me the joy is in the journey, and that was a revelation for me.”
Cook also made a reference to the fact that Jobs stressed the importance of owning the key underlying technologies.
As for moving on, Cook says: “I love museums, but I don’t want to live in one.”
6:37 pm: Cook says he is committed to preserving the culture of Apple.
“It is not that easy to duplicate, either,” Cook says.
“If they could, everybody would be like this,” Cook says. “You can’t get a consultant report” and change to be like Apple.
The origins of the turtle story are uncertain.
The most widely known version appears in Stephen Hawking’s 1988 book A Brief History of Time, which starts:
A well-known scientist (some say it was Bertrand Russell) once gave a public lecture on astronomy. He described how the earth orbits around the sun and how the sun, in turn, orbits around the center of a vast collection of stars called our galaxy. At the end of the lecture, a little old lady at the back of the room got up and said: “What you have told us is rubbish. The world is really a flat plate supported on the back of a giant tortoise.” The scientist gave a superior smile before replying, “What is the tortoise standing on?” “You’re very clever, young man, very clever,” said the old lady. “But it’s turtles all the way down!”
Getting 85% percent right in strategy implementation is not sufficient when it comes to airplane product. The previous example of the A320 which crashed on early test flights shows that it is crucial that plane crash is due to human error. NY Times reports:
Until a crash inquiry is done, analysts said, Sukhoi will have difficulty marketing the Superjet. “It would be entirely understandable for any potential customer to hold off until it’s determined whether the cause was human error or mechanical failure,” said Sash Tusa of Echelon Research and Advisory in London.
While it is rare for such a young aircraft to crash, it is not unprecedented — an Airbus 320 crashed during a demonstration flight in 1988, killing three people and injuring 50. Investigators determined that the cause had been pilot error and found no evidence of a malfunction. The A320 went on to be one of the world’s best-selling aircraft models.
If analysts identify human error as the cause of the plane’s crash, most of the existing 240 Superjet orders will stay on the books, Mr. Tusa said, but “if it turns out there is some kind of major design flaw with the aircraft, those orders aren’t worth the paper they are written on.”
The Economist reports an amazing on an amazing turnaround of Honeywell. It appears to be a great example of strategy implementation.
Honeywell likes its meetings short but plentiful. Every production cell, as the smallest shop-floor unit is called, starts the day with one. The aim is to try to identify problems and ideas for improvements, which are then pushed up to senior managers. Even the lowliest worker is expected each month to come up with two implementable ideas for doing things better. As an illustration of the firm’s devotion to “continuous improvement”, this is one of the pillars of what has become known as the “Honeywell operating system” (HOS).
This new production system, introduced over the past eight years, has helped transform Honeywell from a troubled giant to one of America’s most successful companies. Honeywell’s sales in 2011 were 72% higher than in 2002, and its profits doubled to $4 billion. A new emphasis on generating cash also means the firm has more money in the bank for every dollar declared in profit.
Full Story at Economist.com
Apple did not join the settlement of the lawsuit. This is a major win for Amazon. It will be fascinating to watch how the suit will unfold.