Lessons From the Fall of Palm

What went wrong?

Palm is now apparently prepping itself for a remainder sale, or new sugar daddy, or some other sort of deal that will change its current trajectory. I wish them well, and I hope they can remain independent and go on to accomplish great things in the future. But whatever happens, it's clear that the current incarnation of Palm has failed. Almost everyone I talk to in Silicon Valley is already speaking of the company in the past tense.

Most of the comments I've seen online blame the company's failure on the high marketing costs associated with selling hardware:

--Ed Snyder, an analyst with Charter Equity Research, told the New York Times: “They poured all their resources into developing a killer product. But they didn’t have the resources left to go to market.” (link)

--Engadget called Palm "a company that has more talent, history, and bright ideas than it has cash and customers." (link)

--Charlie Wolf of Needham & Company told Bloomberg: "It can't get scale. It doesn't have the resources to market the Palm OS and the Pre in a way that would break through the noise." (link)

--Even Palm CEO Jon Rubinstein blamed the problem on marketing challenges: "Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today....However, driving broad consumer adoption of Palm products is taking longer than we anticipated." (link)

The quotes reflect the tech industry's stereotypical view of hardware businesses: They require huge marketing budgets, making them incredibly high-risk, high-cost investments. That's why you see thousands of software startups in Silicon Valley and only a handful of hardware ones.

I think that's nuts. Hardware companies like Pure Digital (maker of the Flip camera) succeeded with virtually no marketing budget. Why? Because they made appealing products that filled a particular customer need. If you do that, hardware is easy to market virally. I think the lesson from Palm's failure isn't "making hardware is dangerous," it's "lack of focus in a small hardware company is dangerous."

I don't want to turn this post into an anti-Palm diatribe. As I said, I hope they survive, and I have enormous respect for the people who work there. But in the spirit of helping everyone learn from Palm's situation, here are the five lessons I think we should all take away from Palm's struggles:


1. Understand what problem you're solving. I asked this question when the Pre was first announced, and I'll ask it again now: What compelling problem does the Pre solve for what customer? ( http://sihanandi.blogspot.com /2009/01/palm-pre-think-similar.html">link) It's easy to answer that for successful devices:

--BlackBerry = great e-mail on the go for mobile professionals

--iPhone = the best entertainment and browsing on the go (later extended to include apps)

--Flip = the easiest way to capture video and share it online

What's the short pitch for Pre? Go check the Palm website. As of April 18, it featured three different positionings right on the front page: "Social networking at its best," "Advanced 3D games," and "Work smarter, stay connected." So it's a business / social networking / gaming tool. For all of those millions of people who want to do serious business, 3D games, and Facebook posts all at once.

This isn't a recent problem. At the time of the Pre announcement, Palm advocates described it as a device for people who want better e-mail than the iPhone and better entertainment than the BlackBerry. The implication was that there's a big center to the smartphone market that's frustrated by the lack of a keyboard on an iPhone and the lack of a music player on BlackBerry. Re-read Jon Rubinstein's quote above: "webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today." The assumption there is that millions of customers are looking to buy a "smartphone experience," as opposed to a tool that solves a particular problem.

If that unsatisfied center existed, Pre would have sold like hotcakes.


2. Take care of your friends. When Elevation Partners took control of Palm, the company wasn't just a famous brand. It also had a fairly large base of loyal customers and developers who had stuck with the Treo through a lot of angst and adversity. The new Palm did very little to keep those people loyal. The developers weren't given any way to bridge their existing applications to the new OS. Faced with starting over on webOS or starting over on the much larger iPhone base, guess what they chose. And Palm, which once prided itself on simplicity, made the Treo to Pre migration process into the sort of marathon experience that we used to tease Microsoft about. Here are some of the instructions from Palm's own website (link):

Decide where you want to move your Calendar/Contacts

The Data Transfer Assistant moves your info out of the desktop organizer and onto your phone. From there, your phone sends the data to the web account of your choice.

Your choices: Google, Microsoft Exchange, or Yahoo!.
Need help deciding where your info should go?

Skip this step if you already have an online account where you want to move the info from your old desktop organizer.
Create an account for one of these web services:
Google

1. Go to Google.com: Create a Google account and set up a new account.
2. If you've never used Google Calendar, you'll need to sign in at least one time before proceeding. Go to google.com/calendar, and follow the login & activation steps until you see your calendar.

Microsoft Exchange for corporate users

Ask your IT Helpdesk for these four pieces of information.

* Incoming mail server name
* Domain name (if it's different from your incoming mail server name)
* Exchange username
* Exchange password

Yahoo! Calendar & Contacts

Contacts are transferred from Yahoo.com to the phone, but not from phone to Yahoo!

1. Go to Yahoo.com: Sign up for Yahoo! and create a new account.

Or back up your info to your online Palm profile

Ready to go - you already created an account when you set up your phone.

Set up the account on your phone

After creating an online account, add it to your phone. This ensures that your info moves correctly to the account.

1. On your phone, open Contacts.
2. Open the application menu and tap Preferences & Accounts.
3. Tap Add An Account and select the account you created above.
4. Enter the username and password for that account.

Sync your old device one last time

Skip this step if you do not have a previous Palm device.

To make sure you have the most up-to-date version of your info in Palm Desktop or standalone Outlook, synchronize your previous Palm device and your computer one last time.

Export your info using the Data Transfer Assistant

For fastest results, turn on Wi-Fi (if available) and plug in the charger before proceeding.

Download the tool: Data_Transfer_Assistant_1e.exe

After the download is complete, double-click Data_Transfer_Assistant_1e.exe in the location on your computer where you downloaded it.
Follow the onscreen instructions.
Note: When you connect the phone to your computer, some applications may launch automatically, moving the Data Transfer Assistant to the background. To return the Data Transfer Assistant to the foreground, click the Data Transfer Assistant icon on your computer's taskbar....

You can find some more discussion here.

This in itself wasn't a disaster. Any company has to set priorities, and Palm just didn't make the links to its legacy customers and developers a priority. But it meant Palm couldn't draw on a pool of friends to help it get sales off to a quick start. That put even more pressure on Pre to be a knockout hit from day one.


3. Move faster and slower. After the Elevation deal, Palm went through a very strange management transition. Jon Rubinstein was installed as Chairman and head of product development, Ed Colligan remained as CEO (so he was Jon's employee and boss at the same time), and Jeff Hawkins was supposed to remain as product guru. Palm said at the time that Jon would be the execution person and Jeff the visionary. "The combination of those two guys is one of the most dynamic... combinations on the planet," Palm said. Yeah, right. The real process was a creeping reorganization in which Rubinstein replaced the old Palm executive team in stages. I think Palm would have been better off with a single quick transition in which the new team was put in place all at once and given time to coalesce.

But if Palm moved too slowly on organizational change, it probably moved too quickly on product shipment. The Pre shipped without a finished development environment, frustrating the developers who were most motivated to create interesting software on it. And it had an OS that hadn't been tuned properly for performance, so even its most enthusiastic users had to apologize for its lack of responsiveness. Although there was a lot of pressure on Palm at the time to ship, in retrospect the company would have been far, far better off if it had waited a few more months and shipped a product that delivered a great user and developer experience.


4. What you do, do well. The old Palm's "zen" design principles said: "Find a problem, find the simplest solution, punt the rest." It was an appliance design philosophy translated into computing. The new Palm tried to boil the ocean. Its ambition to create a smartphone platform superior to iPhone forced it to compete on a very broad range of fronts, everything from OS to SDK to app store to hardware. Inevitably, Palm wasn't able to execute equally well in all areas, and some of the Pre's features were compromised due to lack of resources. Apple can get away with a flawed version one product because it has the financial resources to go back and fix its mistakes. Which brings me to the fifth lesson...


5. You're not Apple. Trying to beat Apple head-on is a rich man's game, the computing equivalent of fighting a land war in Asia. There are effective ways to compete with Apple on a budget, but they all involve avoiding or neutralizing its strengths, and targeting segments or tactics that Apple can't or won't pursue. Instead, Palm attacked head on. I'm picturing that Warner Brothers cartoon where Black Knight Yosemite Sam charges at full speed into the wall of a castle and bounces off flat as a pancake (link).


What it means for the rest of us

You'll notice that I didn't say anything about Palm's bizarre ads featuring a Borg hive queen (here and here). That's because they were a symptom, not a cause. When your product is right, the message will be simple and you won't need creepy ads to stand out. Often you won't need ads at all.

The mistakes highlighted by Palm are common in the tech industry. Here's what I think we should do about them:

--I know there are device companies out there right now where the employees are whispering to each other, "we've committed to shipping on a certain date, but the product won't really be ready." You know who you are. Don't let your company pull a Pre; speak up. If nothing else works, print this post and send it to your boss. The Board of Directors might fire you if you delay the launch, but they definitely will fire you if the product fails.

--I frequently talk with companies that are creating bundles of technologies rather than coherent solutions to problems (anybody want to buy a Verizon Droid? link). Ask yourself, who is my customer, and am I solving a problem that they care about deeply?

--I know investors who say, "I'll never touch hardware, it's too risky." Understand that you're missing opportunities where you could invest with a higher return, because valuations aren't being bid up by competing investors. The fault, dear investor, is not in our product category, but in our execution.


That's my take. What do you think? Where did Palm go wrong (if at all), and what do you think the lessons are for other companies?