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You Can’t Fight What You Are

When asking why enterprise technology companies don’t succeed in consumer oriented spaces such as mobile or the desktop, my explanation is pretty simple: it’s all about the corporate DNA.

It’s generally not a lack of technical capability, which you would think would be the harder problem to solve. Enterprise companies, instead, either fundamentally don’t understand the consumer experience or actively don’t care, or both. Just look at their user experience. Or their marketing. Or their branding. Of course the reverse is true: Apple’s more or less completely uninterested in the corporate market, and Google’s recent forays into that world have been learning experiences, from what we hear.

None of which would be a problem if the enterprise and consumer spaces weren’t converging, rapidly. Cisco, HP, IBM, Microsoft, Oracle and the like have, after all, had little problem extracting profit from markets that advantage manageability at the expense of usability. Apple, Google and others, meanwhile, have decent looking balance sheets retailing hermetically sealed devices and small text ads, respectively.

What happens when the twain shall meet?

The dinner was at the Waldorf-Astoria on Thursday night, but I caught up with Mr. Anderson earlier for a preview of his after-dinner performance. One of his predictions, in particular, caught my attention. “Except for gaming, it is ‘game over’ for Microsoft in the consumer market,” he said. “It’s time to declare Microsoft a loser in phones. Just get out of Dodge.”

Regardless of Microsoft’s performance, amid the rise of Apple’s iPhone and phones using Google’s Android software, it seems unlikely Microsoft will heed Mr. Anderson’s advice. The smartphone is becoming the innovative hub of software development and applications, far more so than the personal computer. If Microsoft loses in smartphones, Mr. Anderson noted, “It is pretty grim. Those applications are going to move upstream.”

The underlying problem, Mr. Anderson said, is cultural. “Phones are consumer items, and Microsoft doesn’t have consumer DNA,” he said.

I think Mr. Anderson may be underestimating Microsoft’s drive, but he understands the problem precisely. Because mobile isn’t a space won by drive, or aggressiveness. It’s won with consumer DNA.

How many businesses are there, globally, that service with equal facility enterprise and consumer markets? You could make the case for Cisco, maybe, with their Linksys and Flip brands, or HP with printers and such. But that’s less than convincing, given that the “consumer” products they’re selling have a lot more in common with the unfortunate printer above than, say, an iPhone. Microsoft’s Xbox, which is profitable these days but a rounding error relative to the Office and Windows franchises, is the only real exception I can think of: most consumer products coming from enterprise vendors seem are just that.

As any geek that’s been asked to configure a Linksys router for his family could tell you.

All of which makes the future of this industry interesting. When was the last time you saw an enterprise talk about their mobility story without an iPhone icon?

The interesting question will be whether it’s easier to use gene therapy to graft consumer DNA on to enterprises, or the reverse. Or it’s even possible at all, because history indicates that it is not, though too few vendors have tried the hands off acquisition as a means of solving that problem. Still, vendors are going to try. For tactical reasons, like the aforementioned Microsoft in the mobile space, but for strategic reasons as well: enterprise vendors would benefit from consumer volume, and consumer vendors would like to tap enterprise margins.

Money, as ever, makes the world go round.

Disclosure: HP, IBM, Microsoft and Oracle are RedMonk clients. Apple and Google are not.

Categories: Business Models.

  • Dave

    Is the Xbox actually profitable? If your gains from your profitable years don’t outweigh your losses in the other years then you’ve still got negative ROI.

    I don’t know the figures myself and it seems a difficult question to answer from a quick Google but I do regularly see claims that don’t add up and I’ve seen some comments from Microsoft employees in their phone division that were a bit peeved at the celebration of the Xbox “success” as compared with their own efforts.

  • http://aqualung.typepad.com/aqualung/ Ric

    “enterprise vendors would benefit from consumer volume, and consumer vendors would like to tap enterprise margins” … both are likely to be disappointed; consumer volume doesn’t come with enterprise prices and margins. The respective DNAs are nourished by the volumes/margins they currently enjoy

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  • http://www.michaeldolan.com Mike Dolan

    Interestingly you mentioned Cisco and HP as two companies doing it. I’d actually counter that with the point that both of them are doing it via acquisitions they made. So organically their DNA was not wired to a consumer mindset, but through acquisition they were able to find new DNA and evolve.

    It’s tough – look at all the market opportunity IBM has created with its technology only to pass on it and focus on enabling other companies to innovate with our tech into consumer markets. It’s a strategic decision that can consume a lot of resources for no gain if done without the right execution.

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