Palm and Competitive Shakeouts

One business area that is of some particular interest to me is that of smart-phones. Because of this I paid some attention to the announcements this week from Palm about their new phone, the Pre, and its operating system and features.

It's getting rave reviews, yet it may not matter. I don't have a crystal ball so I won't foolishly predict whether or not this will turn around their fortunes (or even bump their stock back up to its glory days). What I do have to wonder is whether, no matter what they do at this point, they have a hope.

Technology moves fast. What was science fiction yesterday is today's innovative darling and tomorrow's everyday product. The transition from today to tomorrow is one of business and competition. That is, once the innovator has done his or her work, many companies will jump on the bandwagon and start producing competitive products and services. Some of these will be great and others will suck, but in its totality there is a steady progression of improvements.

This is usually the stage where venture capital comes in, by placing bets on products and teams who they believe can come to dominate the new product category. They know most will not survive - that is the nature of the beast. For the most part, markets tend to initially embrace diversity and then punish it. All that competition tends to cause especially uneven quality and incompatibility among competitors' designs. This is rarely sustainable in the long run. Eventually consumers and enterprises make their final choices and stick with them. Then the shakeout begins.

Smart-phones are like that. Today we have Apple, Nokia, RIM, Palm, Google, Microsoft and more vying to be one of the survivors in the smart-phone software and applications space. We have seen the same thing many times before: VCR formats, PC operating systems, office productivity suites, PC manufacturers, CRM, online auction-houses, social networks, and so very much more. Palm is not well-positioned right now relative to its competitors, and we know from history that quality is often not a meaningful indicator of success. Market momentum can count for much more.

I have my own interest in this particular smart-phone battle since I have made a business bet on Google's Android system being one of the survivors. A bet is necessary to play in this game, and while I can do all the due diligence I please there can be no certainty that I have made a good bet. All I can do is wish Palm luck with their new product and fighting spirit. But make no mistake, the market momentum is not moving their way despite this week's positive exposure so their battle is an uphill one. That hill is steep.