Twitter's Bad Idea

Twitter is searching for a way to make money -- a prerequisite for a Bubble II IPO.  An idea it's been pushing since April is something called promoted tweets -- auctioning the rights to place advertising at the top of popular Twitter streams.

Google places ads -- why can't Twitter? One big fat reason:  Twitter's ad imposes itself into a discussion among real people. It's as if you held a dinner party and an uninvited stranger barged into your house screaming self-serving non sequitors -- and you can't get rid of him. A search ad has the potential to help you; a "conversation ad" is simply disruptive. 

Promoted tweets appear to be directed at the B2B space. Only one problem: Forrester's research indicates that Twitter possesses very limited influence over B2B transactions, at least in the technology space. Twitter influences one half as many Business Technology (BT) buyers as Facebook, and only a third that of LinkedIn. You can find a very short precis of the report here. Promoted tweets are a bad idea on many levels -- Twitter should scrap them and head back to the whiteboard in search of a less intrusive way to justify its irrational market valuation. I'd love to get your comments...

The Code War

Intelligent CEOs scan the horizon for distant threats and unaccounted-for risks. Add this to the list:  getting caught in the crossfire of a growing trans-national cyber-war.

It appears that independent and government-backed hacking groups in China, North Korea, the U.S. and other countries are engaged in a contest of escalating computer attacks. The most alarming recent salvo saw the compromise of one of the most commonly used authentication mechanisms -- RSA’s Secure ID technology. Since the breach many government contractors including  Lockheed Martin and L-3 Communications have recently disclosed that their networks were targets of cyber-attacks apparently using information stolen via the RSA breach. The U.S. government has threatened to retaliate, putting the world on footing to begin a "Code War" mirroring the decades of Cold War between the former Soviet Union and the U.S.
 
The problem for you is that this quiet war will injure many innocent bystanders -- corporations whose systems are breached by the highly complex new attack technologies. Instead of employing a smash-and-grab audacious approach, the attackers are increasingly utilizing a "low and slow" attack methodology, gathering sensitive information over weeks or months. Increasingly these hackers are targeting intellectual property that companies and governments have built over decades. Google, Northrop Grumman, and Siemens have recently been caught in the cross-fire, and some have said that RSA, a subsidiary of EMC, may not be able to survive as a business given the breach of its core system.
 
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Google Chromebook: Business Model By Ideology

CEOs must assiduously guard against ideology. They should avoid choosing a path for their business based on a rigid worldview. Ideology has killed many great industries, from railroads to word processors to fax machines. It interferes with logical, market-sensitive thinking, leading CEOs to ignore, and ultimately offend, their customers.

Google's announcement of its Chromebook constitutes a real-time case study. Chromebook hinges on the idea that we no longer need local storage or applications on our computers -- that the Web can handle most tasks.

Without the Web, Google's business model fails. Every time we search, Google gets a chance to make money based on advertising. That's why the company wants us to ditch our powerful laptops and trade them in for Web-centric workstations that won't work unless they are linked to Google's servers.

There's only one problem. While networks get cheaper and faster every year, processors and storage devices improve at even faster rates. That's why the iPad 2 has the power of a 1990s-era supercomputer. This means that the dominant future architecture will leverage powerful local devices and services available in the Internet cloud. Forrester calls this App Internet, and we believe that it will push the Web (and Google's current advertising model) into the background. 

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Tech On A Roll

As shown on the left, Forrester expects the global tech economy to continue growing at fast rates. This is another signal to CEOs of all stripes that they should push to make their businesses increasingly digital and aligned with technology markets. Yes, Jeff Bezos sells books and Tony Hsieh sells shoes, but their advanced technologies give them enhanced growth and higher capitalization values for their companies...
 
Why is tech so healthy? It's a different story depending on where you sit. In the "Tech Twelve" (Canada, the US, Denmark, Finland, the Netherlands, Sweden, Switzerland, the UK, Israel, Australia, Singapore, and New Zealand),  the early adoption of fourth wave systems like smart computing,  app Internet, and cloud computing is fueling growth. In these countries, tech is driving GDP. But in the BRIC countries (Brazil, Russia, India, and China) the reverse story holds. Strong GDP growth is stimulating and necessitating higher tech spending.
 
CIOs tell us that both hardware and software spend is driving this growth. 35% of technology decision-makers will spend more on hardware this year than they did in 2010, while 34% will spend more on software. Our forecasts predict that computer equipment and IT consulting and systems integration services will be the leading categories of tech growth. Close behind are software and IT outsourcing services.
 
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What CEOs Want From Their CMOs

What do CEOs want from Chief Marketing Officers (CMOs)? I asked that question on Forrester's CMO community site, triggering some excellent comments. You can check it all out here.

The CMO must provide the basics: “Increase revenue, decrease costs, no embarrassments.” But what about the non-obvious?

1) Innovation. CEOs know that innovation usually lies outside of the company -- in the free market of partners, inventors, new channels, and new technologies. Procter & Gamble plays this game brilliantly -- partnering with AstraZeneca on Prilosec OTC, Clorox on Glad Wrap Press'n Seal, and with its customers on the redesign of Tampax. The CEO wants the CMO scouting the path ahead -- outside of the four walls of the corporation.
 
2) Mediate the cultural conversation. As Herb Kelleher of Southwest Airlines used to say, "Culture is what people do when no one is looking." Culture is the honest, unvarnished, beliefs and behavior of your customers and your employees. In an age of social, customer culture and undiluted company culture continually butt up against each other -- producing ugly or amazingly productive moments. The CMO must moderate that raw conversation, protecting and elevating the brand as they do so.
 
3) Translate and illuminate technology. The CEO can’t keep up -- the CMO must continually teach what technology change is brewing and what matters. "Here comes app Internet -- what does it mean for us?"
 
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eBooks Will Extinguish The Kindle

The Kindle is a young device, but it's already on the way out. If you're a CEO about to move to eBooks, I would recommend going straight to the iPad or an Android tablet.

I was an early Kindle user -- I always kept one with me on the road and one at home. But I recently ejected my traveling Kindle out of my backpack and, as you can see from the picture on the left, my home Kindle is gathering dust in the stack of books next to my bed.

What happened? Blame it on Keith Richards. I bought Richards' autobiography, Life, over Christmas. As an experiment I decided to read it on my iPad, using the Kindle app. The iPad offered a bunch of advantages:

1) The backlit screen made it easier to read, especially when my wife turned off the lights at 11:30.

2) Underlining text with a flick of the finger is far better than joy-sticking through paragraphs.

3) Moving between pages was seamless, with none of the slow refresh that you get with the eInk-based Kindle.

4) The iPad is a multifunction device -- I use it for music, pictures, email, browsing, applications, viewing business documents. Books fit naturally in this environment.

But the big difference was how I used the capabilities of the iPad to give me the "extended" eBook experience. When Keith referenced Altamont, I quickly took a look. When he talked about G tuning his guitar, I checked it out. I was getting his book+, in one look.

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CEOs Want Better Sales Forces

In my recent travels, I have been asking tech CEOs a simple question: "Are you satisfied that your sales force is advancing your strategy?" The answer has been a resounding "No!" They give it a C- grade.

Here are the problems, according to the CEOs I talked with:
 
1) “Speed.” The sales force is always 12 to 18 months behind strategy.
2) “Calling too low.” Sales reps aren’t getting to power.
3) “The sales force can’t tell the story.” The focus is on price and not on the full value and quality of products.
4) “We have the wrong people.” Not smart enough, not tuned in to the market.
 
CEOs are translating their frustration into action. Many are about to "completely overhaul" their sales forces. Here’s what CEOs have in mind:
 
1) “Make sales more like engineering.” Engender high collaboration, high touch, higher IQ.
2) “Become more customer-focused.” One CEO trains his sales force to ask about and respond to the top three problems of each client.
3) “Better technology.” 43% of salespeople say they have better technology at home than at work.
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The Top For Apple

Dominant market positions can do strange things to a CEO and his or her leadership team. In the case of Apple, the company's massive iPhone and iPad successes are leading it to miscalculate pricing of content on those devices. You can read the official Apple statement of its position here, or check out the Forrester analysis here arguing that ultimate fees from content providers to app platform players should be in the 5% range -- a long way from Apple's 30%. 

iPhone, iPad, and Android apps are not sideshow novelties -- in my estimation they signal a cataclysmic shift in the technology industry away from the Microsoft desktop standard and the cloud/Web paradigm. This is App Internet, representing a new model of applications that seamlessly combine the power of local devices with the scale of the cloud. App Internet is positioned to shift activity away from the Web to the app experience -- forever changing many, many markets. A recent Forrester survey shows that among tablet users, 39% spend more time using the web browser, 45% spend about the same amount of time using apps as using the web browser, and 16% spend more time using apps. These are the formative and critical moments in the development of the App Internet market -- the winners could become dominant for decades. 

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Leaders Say China To Pass US In 2029

This year at Davos I asked people how many years it will take for China to pass the US in gross domestic product. For context, China's GDP in 2010 was $5.7 trillion; the US was at $14.6 trillion. China is growing at 15.3% per year, the US at 3.6%.

Respondents to my question included tech CEOs, a former UK prime minister, a former US senator, and the head of one of the world’s largest banks. I polled entrepreneurs, economists, and businesspeople from many parts of the world. In all, 40 attendees answered the question. Here are the results:
 
1) The average was 18 years -- 2029.
2) Of the 40, only three said that China would never pass the US.
3) The low number of years was eight; the high was 55.
4) Many believed that there would be a political disruption for China, but this would not delay the eventual overtaking of the US.
 
A caveat: The World Economic Forum loves straight lines -- it celebrates stasis and is not adept at predicting disruption. So any so-called obvious trend (e.g., China up, the US flat-lining) is embraced and accepted. Only one problem:  The future rarely cooperates.
 
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My Notes From Davos 2011

Sorry for the long post. Here are my quick, random takeaways from this year's World Economic Forum in Davos. I hope you find this helpful...

1) European leaders felt activist, energetic, and up to the task of cleaning up their economies. David Cameron, prime minister of the UK, came off as decisive and vital. He's got a vision (make Britain more competitive, balance the budget, revive the country's export economy), and he's hell-bent to get there. I found him refreshing after the fuzziness of American politicians. Sarkozy of France and Medvedev of Russia also came off as forceful, opinionated leaders. Sarkozy was defending the euro ("We will never, ever let it fail") and kicking the bankers. Medvedev was soliciting investment in Russia...

2) The media cognoscenti believe the final nail in the coffin of newspapers will be local advertising going online. Believe it or not, that nail may be pounded by AOL...

3) When you meet a former president of the United States, don't make the mistake of calling him by his informal first name...you'll get a dirty look. Remember, it's "Mr. President."

4) Two years ago the negative nabobs of Davos were predicting double dips and potential depression. The elite love to draw straight lines -- they presume that whatever is happening now will happen tomorrow. So almost nobody saw the recovery of the past 18 months.

5) Paranoia about China was seeping out of the walls. Unlike in years past, the Chinese were much in evidence -- lots of press from China and a sprinkling of government ministers and businesspeople. As one Chinese executive said to me: "...1.2 billion consumers means something." More about this in my next post...

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