An ancient history lesson.
Arstechnica.com has a post mortem of the KIN, one of Microsoft’s stabs at a smartphone. The KIN initially appeared as the Sidekick by Danger, which MS acquired for about half a billion dollars in 2008. After 2 years of development, the KIN was released in 2010. If you’ve never heard of it, I’m not surprised. It sold less than 10 000 units when released.
How did MS manage to evaporate over half a billion dollars in 2 years?
The central theme of the article on Arstechnica is focus of the Sidekick, versus lack of it on the KIN. Think of the Sidekick as an Android smartphone with a keyboard and IM, but without an app store. Online integration of contacts, emails and media was offered, but the apps on the phone were all that you got. The upside of that was the price: just slightly more than the dominant Nokia style “dumb” phones. Pre-2008, that was quite a compelling offering. Heck, even now, it’ll probably have a substantial market.
The KIN was a similar offering, but somehow in 2 years, MS managed to take away features offered compared to the Sidekick, while still raising the price to near smart phone levels, with which the KIN could not possibly compete. How?
One of the central teachings of disruption is that when goals of divisions within a company differ, conflict over resources and direction will occur, leading to compromised, worst-of-both-worlds products. The recommendation is that these divisions be kept separate, reporting to and utilising completely different company structures.
However, the desire of most companies is standardisation and maximisation of resources. Let’s see what happens by using the Kin:
When Danger, who developed the successful Sidekick, was bought by Microsoft, they had already established their brand values as appealing to young customers who stored their contacts and info online. Their platform was also on Java.
This conflicted heavily with Microsoft’s push to use CE for everything, as well as a conflict over resources for the upcoming Windows Phone 7, a full on competitor for iOS. Cue a fight which the predicted higher profit potential team won. The KIN was starved.
Not only that, but instead of a lean custom-built Java platform, the team had to fight with a platform meant for more robust and powerful phones. The resource shortage meant they couldn’t win this fight in a reasonable amount of time.
The fatal mistake was the desire of MS to use CE everywhere for resource and cost efficiency, which ultimately led to inefficiency in values and goals, the vastly more important factor in determining product success.
The KIN’s goal was compromised heavily instead of enhanced. The CE base might have been great for WP7, as both of these are aiming at handheld computers, but the Sidekick was aiming for something different. The work needed to force CE in this direction is what ultimately killed the KIN. Even if they had obtained the resources to complete it quickly, the extra cost involved would have placed the KIN in smartphone territory anyway.
Replace all the proper nouns in this post and you can use it to tell the story of acquisitions with differing, established markets being brought into the parent company reporting structures. The drive is to reduce cost.
MS did so and saved a huge amount of work on the KIN by using CE. I wonder if the 500 mil plus development, together with the loss of market opportunity offset that saving a bit.