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Innovation Wars: Tablet Edition

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The tech industry is characterized by brutal competition. Ongoing patent wars, massive company acquisitions, aggressive marketing strategies, all of these in an effort to get the bigger slice of the marketplace. One recent casualty in this race for supremacy is Hewlett-Packard. Unable to keep up with the "tablet effect," HP recently killed its line of webOS devices and is also spinning off their PC business. Is there a way that this could have been prevented?

The demand for the PC has been steadily decreasing since the release of the iPad. In response, other companies like Samsung, Motorola, HP, RIM, Asus and LG started producing their own tablets, thinking that the tablet itself as a design is what attracted people to the iPad. They have all since gone back to the drawing board, resizing, increasing, shrinking and tweaking the hardware and software. Now we see tablets in all different shapes and sizes, all claiming to be better than the next. "We run flash!" "We are smaller." "Our battery lasts longer." "We are thinner." Some of these tablets have created a short-lived buzz, but Apple still controls the vast majority of the market, no less than 68.7 percent in 2011.

The Blackberry 4G Playbook was thought to be a potent contender as an all-around multimedia tablet but it "hasn't caught on with business customers" says Sprint, who recently decided to cancel their plans to sell the Playbook. The HP TouchPad was also very promising. But it was pulled shortly after its release at Best Buy, which sold only 25,000 of the 270,000 units shipped. The TouchPad has gone on to be a number 1 bestseller on Amazon after its priced was dropped to $99. But each of these sales resulted in a loss for HP and every company understands that competing on price is almost always a losing strategy. But pricing seems to be the only effective strategy to take on iPad. According to Gartner, Inc., Apple and its iOS will continue to dominate the media tablet market through 2015 at 47.1 percent.

The problem here is that none of Apple's competitors are innovating. They are copying the leader, a strategy which automatically positions them behind. They are not competing; they are just trying to keep up. I admire Steve Jobs for the way he directed Apple away from the PC-race and paved a new road by innovating. With iTunes and the iPod, Jobs reinvented how music is experienced. He wasn't the first person to build an MP3 player, but he made it work for common people by making it sleek, simple and sexy. With the iPhone, Jobs repeated this same story. Many other firms had built smartphones, but Apple delivered a simple, one button interface that your grandma could use, and again the design was sexy. With the iPad, Jobs was the first to really venture into an untapped market. Others had built tablets, but there is little to no traction. Again, Apple's formula of keeping it simple and making it sexy proved to be incredibly effective. Business lesson: If you want to succeed, you must innovate, take risks and, yes, be prepared to fail.

We should also learn that great ideas don't always lead to innovation. Ideas and innovations, to succeed, must also happen at the right place at the right time. Timing is a key. Take these innovative technologies that failed:

  • MSN TV (formerly WebTV) is a product that allows a TV set to be connected to the Internet for web browsing, email and more. Microsoft bought WebTV in 1997 for 425 million and relabeled it MSN TV. Eventually MSN TV was scrapped, not getting enough subscribers to keep it alive. More than 10 years later, we now have the Xbox 360, Google TV and the iTV from Apple.
  • Friendster is a former social networking website and is considered the "granddaddy" of social networks. It went live in 2002 and was quickly adopted by millions of users. Sudden increase in website traffic brought technical problems to the site, making it unable to cope with the increasing demand on its service. Next came MySpace which grew rapidly and eventually sold to News Corp for 580 million, but was abandoned by users because of anonymity, trolling and its messy user interface. News Corp recently got rid of the company for a measly 35 million. It took Facebook to recognize Friendster and MySpace's failures. The college social network learned from them, demanding users to use their actual identities to create profiles and keeping the user interface clean. Facebook now has over 750 million users and a valuation approaching 100 billion.
  • Yahoo is another great example of early innovation that languished and fell behind. Through out the 1990s, Yahoo was the most popular search engine and an enormous web portal. They were a darling of the dot com bubble. As they grew, they ignored their core product -- search. In the 1990s, search engines more or less relied on websites to tell them whether they were relevant or not. Google recognized that this was an easy system to manipulate and invented the PageRank algorithm to fix the problem. PageRank is basically an online popularity contest. It judges a website's relevance based on how many other sites link to it, how popular those sites are (their PageRank), and what those sites say about the website (anchor text). This changed search completely, and people quickly adopted Google as their search engine of choice. In 2000, Yahoo gave up and decided to use Google for search. Today Yahoo is in shambles and they are worth close to one-tenth of what Google is worth.

Even though these companies had their failures of innovation, these started as catalysts for other companies to improve. Companies build on failure. Those who are able to learn from and capitalize on the failure of others generally win the race. Consumers benefit from competition because it gives us options. Competition pushes innovation. Companies should learn to compete, innovate and learn from each other's mistakes. If you have to go down, go down swinging. The world does not need another quitter.

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