Blogs

Doing a Ratner

Dave Reeder, Editorial Director, CPI

It may be known only in the UK, but people in business anywhere in the world can recognise ‘that Ratner moment’.

Loosely defined, it’s that instant when a company or senior executive implicitly or explicitly draws aside the veil of illusion and reveals the company’s business model, products or services as little more than snake oil and mirrors. The illusion crumbles. The vision cracks. And the business often crumbles.

It happened this way, in the UK. Every high street, every shopping centre used to have a branch of Ratners – a jewellery and watch retail chain that pitched its business at the regular buyer, fiulling a near insatiable demand for bling. In sharp contrast to the rather staid competition, the Ratners Group used bright colourful advertising to shift large amounts of ‘bargains’ – the bricks and mortar equivalent of a market trader shouting louder than his competitiors.

And the business model worked, until CEO Gerald Ratner made a speech to the Institute of Directors in 1991. In it, he made the rather unwise observation that the company’s earrings were cheaper than a sandwich “but probably wouldn’t last as long”. He compounded the error with this comment: “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, ‘Because it’s totally crap.’.”

The result? $750m wiped off the company’s value in a stock collapse. Near complete destruction of the business. Ratner’s resignation. And a rebranding of the group to Signet.

Quite a dramatic reaction to a couple of throwaway remarks during a private gathering…

However, we’ve seen in the IT industry a couple of similar moments over the last few weeks. Not quite as dramatic or just plain dumb perhaps, but hugely symbolic to some commentators for what they reveal about the companies involved.

Doing an IT Ratner 1 – Steve Ballmer at CES. Even the fiercest supporter of Microsoft would have to admit that the company has lost its gloss since Bill Gates stepped aside and Steve “Developers! Developers!” Ballmer became the public figurehead. But the last few months have seen clear and unarguable indications that all’s not well in Seattle. Of course, it’s perfectly ethical and legal for a chief executive to divest himself of large slabs of equity shares, but when Steve did it the tongues started wagging. Of course, it’s perfectly normal for not all IT products to be instant hits  – not even the Steve Jobs’ magic touch seems to be able to make Apple TV a ‘must have’ product – but when was the last ‘killer’ Microsoft release? And, of course, it’s perfectly normal for senior industry figures to make positional rather than inspirational keynote addresses at major exhibitions, but how could Ballmer face CES with nothing to say or demonstrate of any import?

Let’s just go over that again. CES is the world’s number one annual focus for consumer electronics and personal computing. Not Ballmer’s fault that a power failure delayed his address by half an hour, but there’s a delicious irony about that. This consumer space is what Microsoft used to dominate and needs to gain real traction in again. What was Ballmer’s big announcement? Mediaroom 2.0! Not a consumer product, but a component for IPTV providers to deliver programming to an Xbox 360 or Windows 7 Media Centre. Wow! That was, like, really cool back in 2003 when Microsoft first started talking about it…

What it reveals today is that Microsoft is a company that has lost its vision and doesn’t know what the word innovation means. Over 100 iPad wannabes were launched or announced at CES – what was Microsoft’s response? A fast demo that showed how slowly a Windows-powered tablet actually works. Fail! After last year’s CES when the big deal was the already announced Windows 7, this year’s revealed only one thing: in ten years time, when Microsoft has followed Netscape into the big dustbin of history, people will recognise Ballmer at CES as doing a Ratner.

Doing an IT Ratner 2 – which brings us to another major ICT company, Nokia, whose response to a less than shiny last few years sees its future as working hand in hand with Microsoft to dominate the smartphone market? What?

Think it through. Nokia’s Symbian was a dead end. Apple iOS, RIM and Google Android already have the market sewn up. Nokia plus Windows Phone 7 was just about the only game left in town, rather than a visionary alliance that was game-changing for both parties. Going Apple or Android would have opened Nokia up to more patent infringing law suits. However, going Windows has effectively removed a major block for Apple – its own law suit with Nokia that Microsoft, with all it has invested in the Mac app market, will not want to create problems with Apple and so will likely not pursue the legal issues.

Symbian will remain, though not be stressed. Work on the mysterious MeeGo OS apparently continues. But commiting to Windows Phone 7 could well have been Nokia’s suicide note – a long way down for the global phone leader. Put simply, the question Nokia CEO Stephen Elop needs to answer quickly and decisively is this: why will Nokia as a Microsoft mobile collaborator work when so many – LG, Motorola, Palm and Verizon, amongst others – have proved duds in the market? If Windows Phone 7 is such a good platform, why can’t HTC, Dell and Samsung find success with such a phone?

At the heart of Elop’s Ratner moment is this question: would you buy a Nokia-branded Windows Phone 7 smartphone rather than a BlackBerry or an iPhone? And, if you would, can you imagine millions of other people who would also? If not, it’s game over for Nokia in a rather shorter time frame than it’s going to be game over for Microsoft.

I mean, what’s so hard to understand about this business? Vision. Innovation. Delivery. That’s all it takes – maybe these guys should get some off-the-record advice from Steve Jobs…

Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

x
Huawei Fit Band

Competition

Win a Huawei Fit Band worth over 300AED!

0 168We’re giving away one Huawei Fit Band, a high-tech fitness watch with up to 6 days of battery life that …

GET TAHAWUL TECH IN YOUR INBOX

The free newsletter covering the top industry headlines

Send this to a friend