There is a long history of companies that got too full of themselves and took what should have been a massive success and turned it into a massive failure. Two that come to mind are Netscape and Transmeta. Palm and Google may shortly be joining those ranks and I think it is important to capture this lesson so that others don't continue to make the same mistakes. I've brought up Google previously; this week I'll focus on Palm.
You Don't Pull on Superman's Cape
When you are a small company, there is one good reason to challenge a large company in public -- and some dire consequences you should be aware of. In challenging a larger company, you can get a lot of free press, particularly when the large company, be it Intel, Microsoft or, in this most recent instance, Apple, is known for being somewhat overcontrolling.
The risk is that if you are too believable, you are faced with a competitor that has substantially more resources than you have focused like a laser on putting you out of business. With Transmeta, it was in deep stealth mode and the curiosity it had surrounded itself with, including the rumor that its technology had come from aliens (I'm not kidding), almost assured it would have the attention of the world when it came to market. It got that attention but it announced it was months away from finalizing the product. By the time it got there, Intel had developed a response, and even the one customer it did initially have was no longer there. It scared Intel half to death and Intel stepped on it like a bug.
Netscape owned the browser market and Microsoft was caught napping, having largely missed the Internet revolution and focused their resources on MSN and the soon-to-be-obsolete AOL model. Netscape started showing up in stories where its founder Mark Andreessen was showcased as the next Bill Gates and Netscape was seen as the heir to an all-but-dead Microsoft. The problem is that Microsoft was far from dead and Netscape wasn't yet in a position to go to all-out war with the company.
Microsoft stepped on Netscape like a bug. While Microsoft continues to suffer through the antitrust backlash of its actions, Netscape is gone. It should have focused on its own knitting more and on calling out Microsoft less.
The lesson in both cases is that you don't call out a major player unless you are actually prepared to go to war, and announcing that you've won a battle before you've truly engaged is probably one of the stupidest things a company can do.
Palm came out at CES and stole the show with an amazing phone that clearly caught Apple napping. Up until that point, Apple had been faced with a number of lame competitors that couldn't seem to get what Apple had done with the iPhone in terms of combining the hardware, OS, and services into a solution. They simply continued to throw hardware at the market. It really looked like most of Apple's competitors were simply unable to comprehend the elegance and comprehensive nature of Apple's solution.
Palm not only got what Apple was doing, it understood where Apple's blind spots were, largely due to its Apple employee pedigree. However, it also knew that Apple took the iPhone from a completely unusable product to a working phone in about six months, suggesting that it had about six months from the time Apple saw it as a threat to steal the momentum from Apple.
This situation suggests a strategy where Palm doesn't come out and announce the phone until it is about ready to ship and blindside Apple, leaving the giant little time to respond. Unfortunately, that is not what Palm did. It seemed to go out of its way to rub Apple's face in its own mistakes. The end result is that Apple has had six months to develop a response to Palm. While it appears to be running a little late, Palm is having major issues as well.
Calling the Summer Battle
Palm has effectively convinced Apple to address its shortcomings. Instead of facing a large but unprepared competitor and catching it off balance, it now faces a prepared Apple ready to do battle. Apple may not have Steve Jobs, which works to Palm's benefit, but it remains larger, entrenched and better funded. The lesson here: Don't pull on the bigger company's cape until you are ready to go to battle and can hit hard and fast. Warning a larger and better-funded competitor is not wise. It seems likely that just like Transmeta and Netscape, Palm appears to be about to learn that lesson.
I've seen credible reports that Apple has three new phones (and a refresh of the old one) in the works. A Palm Pre killer with a keyboard, a Nano phone with limited capability and no data plan, and a large iPod (tablet) that can be turned into a phone. All will not likely show up at once and there are indications that the large iPod my slip to 2010. That's against the one Palm Pre with no Application Store and few developers. Doesn't look good.
The one lesson Palm should have learned from Apple is the need for surprise.