mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Sticking To Your Knitting

What a lot of time and money is being wasted duplicating other peoples’ products. Microsoft has spent years producing Bing – a sub-standard alternative to Google’s search engine, and Google has spent a fortune producing Android – now being dropped all-round as a Netbook OS – and gaining little traction as a Smartphone OS.

 

In its naivety, Google has pre-announced a new Netbook OS – Chrome – to be used in products at the end of next year – as if the Netbook market is going to wait a year for this problematic vapourware. Time, tide and technology wait for no man.

 

It’s tempting to look over the wall and think ‘that guy’s in an easy business’ and kid yourself you can do it better.

 

Intel has tried diversifying into: watches, video-conferencing, ASICs, programmable logic, consumer electronics and telecoms chips – all unsuccessfully.

 

National tried for years to break into microprocessors – ending with its x86 run via Cyrix – before retreating to its natural zone of analogue.

 

The pity of it is the waste. The waste of money, the waste of engineering effort, the waste of management time.

 

Maybe the current dearth of innovation in the high-tech industry derives from CEOs, blissfully ignorant in their eyries, cutting costs in their core businesses to invest in new businesses.

 

That’s an OK thing to do if the new business is a natural extension of the existing business, or if the CEO has figured out a way to do things significantly better, but it’s a pathetic waste if it’s just to do a me-too product.

Tags: microprocessors, new business, new businesses, time and money, video conferencing

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6 Comments

  1. El Rupester
    July 21, 2009 09:30

    This is a variant of ‘Innovator’s Dilemma’. Sooner or later a technology firm needs to do something new.
    Broadcom show the success of moving into new areas. Acorn moving from home computers to developing processors, Apple from home computers to music players and phones, Cisco moving from core routers to, well just about everything…
    These are all far more different than Intel moving from one kind of digital chip to another one. They may or may not have done a good job for shareholders but by providing exits they delivered a return for startups and VCs, encouraging them to create something else.
    Innovate or die.
    Most attempts will inevitably fail, but I’ll criticize the execution rather than the ambition.

  2. David Manners
    July 14, 2009 13:36

    That’s true, grumpy, better to keep the money inside the IC industry. But if Intel hadn’t bought all those young telecoms IC companies in 1999/2000 some of them might have amounted to something and delivered some valuable progress in the technology and a shake-up in the telecoms IC sector.

  3. grumpy
    July 14, 2009 12:42

    2/3 acquisitions fail, 2/3 new product launches fail, and I shudder to think how many girls said ‘no’ before I found one that said ‘yes’. A friend of mine, referring to a rather ugly acquaintance, memorably said: “only 2 girls on the planet would sleep with him, and he’s managed to find both !”. This is the exception not the rule and as it with life so it is with technology companies. Intel are STILL no.1 in semi world and I think that deserves a little more respect than they get. Incidentally, I recall they made a 1Bnusd writedown on their WiMAX investments, taking their total losses on wireless stuff to over 10Bn usd. At least a lot of engineers got paid some of that cash and (probably) a few good products surfaced along the way. All in all better this way than ploughing money into professional sports or some other nonsense.

  4. David Manners
    July 10, 2009 12:06

    Robert, in my view, Apple was sticking to Its knitting when it branched out from computers to iPods to iPhones – as a consumer electronics company that was a natural extension of its existing business and also an area where it could make a very siginificant improvement on existing products. If Apple had made a Nokia-clone we’d all have been laughing at Apple.
    As my original post said: if the new business is a natural extension of the existing business or offers a significant improvement in in performance then diversification is a good strategy. Just doing me-too outside your are of competence is not a good strategy – vis a vis Intel’s diversifications. It’s early diversifications – into EPROMs, E2PROMs, and Microprocessors were both natural extensions of its business and also offered siginificant improvments in performance – it’s later diversifications into PLDs, ASICs, Telecoms ICs etc were me-too efforts.

  5. Arun Demeure
    July 10, 2009 09:35

    I obviously agree – while there is value to increased competition, me-too investments waste a lot of talent for no good reason in the world. It’s as if most technology companies thought they were in a commodity business…
    I can think of only one current semiconductor company that hasn’t sticked to its knitting and is extremely successful – Broadcom. But there’s a critical difference: they don’t invest in a new field with their existing people. They buy a company, usually a start-up, and then invest more into it than it could have on its own. I’d argue that’s a very good thing for everyone when done correctly, which Broadcom has a pretty good history of: http://www.broadcom.com/company/strategicacquisitions.php
    Regarding Chrome: at least it *is* a different approach since it’s so browser-centric and Google has a strategic interest in web apps. Of course, as we discussed and agreed yesterday, we should be very skeptical of their prospects anyway. At best, I guess if Linux ARM netbooks fail and Android never happens there, maybe it might win by default in that market and benefit from the lower cost of ARM… But winning by default doesn’t generate consumer demand either.
    As for Android phones: I can’t think of any large manufacturer that doesn’t have its own proprietary OS (remember Nokia has Maemo) that isn’t working on one. Samsung, LG, SE, Huawei, Acer, Asus, etc. are all working on a few models, while HTC and Motorola are both working on extensive Android line-ups. Like everything mobile, it’s just taking longer than expected… :)

  6. Robert
    July 10, 2009 05:28

    “Stick to your knitting” sounds like the worst advice ever given to any technology company.
    Sure it is hard for any company to change direction and big companies have an even harder time, unfortunately it’s also essential. In the chip business you change or you die, it’s that simple!
    IMHO the real trick is to create a team that fights for change.
    Just think of the satisfaction Apple engineers must have with iPhone. No amount of stock options, salary or bonuses, can buy this motivation, it comes from within. These guys took on an impossible fight and KO’ed, Moto and Nokia with just one punch. Can you even imagine what the pessimists said about that business plan. I know several Nokia execs who probably laughed so hard that they fell of their chairs, when they first heard about Apple’s plans.
    The unfortunate truth is that fewer than 10% of companies can make the changes necessary to grow, but that is exactly what makes these companies such special cases. These guys trade at grossly inflated stock multiples because you never know what they’ll deliver next….
    Robert