Is Microsoft going the way of the Apple?


Last Thursday, Microsoft announced that they would be dissolving their current structure and reorganizing. They currently have eight different product divisions, and plan to restructure with four new ones that will be organized around broader functional themes. The main reason for this is to allow for eliminating redundancy and waste, as well as to encourage their nearly 100,000 employees to work more closely with collaborative efforts to build future products. This will make Microsoft look more like its rivals (such as Apple and Google) as an organization – though on a much larger scale – and help it become more competitive in the product areas where it has been losing ground in recent years.

The organizational model used by Microsoft is one that was popularized by Apple (of course), and it focuses on software, hardware, and services rather than individual products or product groups as they had in the past. For example, one executive will be in charge of operating systems now, rather than separate teams developing products like Windows, phones, tablets, and Xbox. In the past, this sparked many rivalries between divisions, and project managers even went to great lengths to avoid dependency on other groups for software, so as to not be “at the mercy of someone else’s development schedule.” This resulted in things like software being developed for one product that had similar functions and features as another existing product. While this should lead to greater efficiencies in product development and can allow better integration among products, it does not address some of the more pressing challenges affecting Microsoft’s current and future revenue stream; for example, as personal computer sales continue to decrease, how does Microsoft plan to adapt its product line?

In my company, we have also begun to realign our departments and personnel around functional groups and are moving away from compartmentalizing each product group within its own line. Is it just coincidence that Microsoft has started doing the same? It certainly is, as Microsoft is the juggernaut of the tech industry and Invivo is a very small subsidiary of a sub-business unit of a division of Philips. In any case, one of the biggest moves came at the end of last week, when it was announced that our already small marketing department would be losing a few members, and everyone else was reorganizing into functional groups where everyone would cover the full product line as it fell under their area of responsibility. As some of our other departments and developers have also realigned similarly, I hope that it will do for us what Microsoft hopes it does for them – increase efficiency and effectiveness.

In light of the above, is your company more like old Microsoft or new Microsoft? If like “old”, do you find that project managers often butt heads with other departments on which they have dependence for aspects of their products or projects? If like “new” do you find that aligning by function rather than products yields better results?


Will anyone miss the car dealer?

Have I got a deal for you!
Have I got a deal for you!

Tred, a new start up company in Seattle, is turning the concept of car buying on its head by bringing the test drive to you. Why is that significant? Because now, a person can engage in every (productive) aspect of purchasing a car without having to set foot in the dreaded new car dealership.

Prior to the advent of the internet, unless you happened to find a review in an auto magazine, you couldn’t find out anything about a car without stepping into the dealer showroom. By the late 1990s, you could look up information about cars online. Saturn pioneered selling direct to the customer online shortly after. Ebay connected millions of car sellers and buyers. And now, many car dealerships offer online sales and have dedicated internet sales managers. So as long as you don’t care to test drive a car before plunking down your money, you had the ability to do so (indeed, an internet search yielded studies that showed up to 28% of cars are purchased without test drives, and even more people test drive only the car they buy but not the competing products). But most of us are not comfortable with spending a large chunk of our savings without sampling the product.

Enter Tred. In addition to researching, getting pricing, and purchasing a car online, with Tred you can have competing cars delivered to your home for a test drive for just $19. What does that money get you? A ride with a Tred representative (not a dealership employee), a packet of information about the car itself (including dealership forms), no haggle pricing, and best of all – no dealership salesperson. You might think that this would result in fewer sales without someone manipulating the customer’s decisions or pressuring the customer to “seal the deal.” But Tred is counting on their service to actually improve the take rate on vehicles that have been test driven. According to a Gallup poll from last December referenced in the article, “… car sales people ranked below members of congress in trustworthiness…” Therefore, the company is willing to bet that if they can remove as much contact with the dealership as possible from the process, they will increase sales for the dealership and improve the car-buying experience for the customer.

Tred’s financial backers also believe this to be the case. Some of their current investors even know a thing or two about selling cars, including Rick Wagoner, former CEO of General Motors; and Fraser McCombs Capital (their largest investor), whose equity pool includes capital from the owner of eight car dealerships in the San Antonio area. A principal from Fraser McCombs is quoted in the article saying that “A customer asking for a car to be brought to their house is in my opinion converted from a shopper to a buyer.”

What do you think about Tred’s new test drive service? Have you had any particularly bad experiences that have made you want to stay as far from a car dealership as possible?

Airfare A La Carte: Has the airline ticket become a loss leader?


As airlines continually try to boost their revenue in this down economy, Southwest Airlines has announced that they plan to raise certain fees for baggage (third bags and overweight ones) and “early-bird” check-in. This is significant because Southwest has always billed itself as the airline without hidden or additional fees – yet now even they see the benefits from charging for add-ons on top of airfare (their AirTran subsidiary is also raising its existing fees for baggage and other items).

More surprising, however, is that they also are planning a “no-show” fee for passengers who fail to cancel a ticket prior to flight time – a first-of-its-kind fee in the industry. This is from an airline where flight costs were fully reusable, with no change or cancellation fees. They say that this will only apply to the lowest fare classes and is only meant to encourage passengers to release space that can then be resold.

Southwest certainly is not the first to charge ancillary fees – most major airlines started doing so in 2008, when American started charging $15 for the first bag checked. Over time, fees jumped higher and broader, to offer things like lounge access, extra legroom, priority security lines and earlier boarding – perks and services previously only available to frequent fliers or via membership. And, lest we think these fees are ridiculous, there are airlines out there that have built their model on selling the extras. Spirit Airlines charged for bags, beverages, and food well before 2008, and currently offers 8 pages of extras on their website; Ryan Air (a European budget airline) not only charges for literally everything, they have removed seatback pockets and window shades and covered headrests and tray tables with advertisements. They have even “joked” that they would charge for the bathroom if they could find a way.

It seems likely that the cost of airfare may soon become just the minimum cost of entry, with airlines barely breaking even (or losing money) on the ticket price itself just to sell all of the upgrades and extras. The true cost of traveling by air may become more like buying a car: sure, you can just pay the base price for a seat, but don’t you want the extra legroom and the rustproofing? A number of articles even discuss airlines installing premium and/or extra-legroom seats in the front to increase revenue, while squeezing smaller seats and reducing seat pitch in regular economy in the back. However, while the airlines have enjoyed the added revenue (indeed, it has kept some of them in business), they have lost big in customer satisfaction. Proponents of the fees claim that it allows travelers more choice in customizing their experience; it also keeps the base ticket price affordable than the ‘true cost’ of a flight.

As a leisure or occasional traveler, how do all the additional fees affect your choices? Do you prefer the choices of the “a la carte” approach, or would you rather pay a higher all-inclusive fare? For the frequent fliers out there, how do you feel about regular fliers being able to purchase the perks that were once only available to the elite?


Southwest Raises Fees, Adds ‘No-Show’ Penalty:

Add-On Airline Fees: Good or Bad?

Spirit Airlines defends $100 carry-on bag fee,0,5442837.story

Like American, More Airlines Add Fees

Airlines shrink seats

When will *this* bubble burst?

As student debt recently surpassed the $1 trillion mark, the delinquency rate on student loans has also exceeded that of any other type of consumer loan – including credit cards and car loans. Even worse, chances are that many will default, even though there are now more options for debt relief than ever. Private loans offer choices that include forebearance, deferment, and reductions in monthly payments; federal loans offer some additional options for the employed, unemployed, students, and military. Unfortunately, for those who decide to default anyway, the consequences can be severe. The government can garnish wages, as well as Social Security disability and retirement income. The loans are unaffected by bankruptcy, and charges for collection can reach 20%. Lenders even get first dibs on any lottery winnings. And, just like any other loan, defaulting can damage credit scores, affecting the borrower’s ability to get future loans.


So, how did it get so bad? After all, student loans are just loans, right? Well, not really. Unlike other types of loans, there’s no collateral involved (an education can’t be repossessed) and loans aren’t given out based on creditworthiness or ability to repay. Beyond that, tuition has skyrocketed to a level at which the higher projected earnings of having a degree are all but wiped out by the burden of the debt incurred, to the point that many debate the value of having a college degree. What money schools do have often times is not given to those who need it the most – for example, it is sometimes used to lure higher-paying students rather than low-income ones. In fact, financial aid is like a legal form of price discrimination – a method of lowering the price of admission to what someone is willing to pay, so that everyone pays different amounts for the same education.

Several ideas have been proposed to help the “industry” (which involves mainly schools and the federal government) revamp their operations. Most obvious is to bring down the cost of higher education to a reasonable level, which can be done partly by online learning and automation (eg. recorded or online lectures for intro classes). Also, make the schools somehow feel the burden of loan default, which may encourage them to offer more aid as grants rather than loans – or to come up with better ways of financing education. Disclosure might also prevent some from overleveraging their finances if, for example, they knew what the projected payback from their degree is, or if they were better informed on how much of their aid package was actually from loans. Finally, come up with better terms for the overburdened, such as income-based payments and writing off additional debt after a specific repayment period.

It seems strange to think of higher education in business terms, but ultimately most of us are in it for some form of financial gain. What are your thoughts on student loans and the high level of delinquency? Is the value of higher education (financially) worth the cost anymore? How can institutions adjust their operations to reduce the risk of default?