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? (link) It's easy to answer that for successful devices:
--BlackBerry