Shadows of Doom
In the rush to complete the Series 5, features that Series 3 users loved had been omitted. The Series 3 design had its peculiarities, but once these were met, it felt personable, and became an indispensable personal tool. Psion’s earlier computers had a diamond or “Psion” key that allowed owners to flick between Agenda views instantly. That had gone. The previous Agenda software had Busy and List views that users found essential, and these were absent too. And with an entirely new platform, it would be some time before Psion’s third-party application developers caught up to fill the gap.
Even Martin Riddiford had misgivings.
Looking back now Riddiford says Psion abandoned the Series 3 platform too early.
“They were following a technology trend, leaving behind a really fantastic operating system that fizzled out and died,” he tells us. “It could still be relevant today. That’s what’s so sad.”
At least one market indicator suggests he’s right. On eBay, Series 3 machines can command a higher premium than their successors. Psion’s last 16-bit consumer PDA, the Series 3MX launched in 1998, may fetch over £100 on auction, while a 32-bit Revo can be picked up for as little as £20. The old machines are held in great affection; Healey himself says he traded in his Revo for a 3MX recently.
So much affection, that one former Psion director told us that inertia affected the business.
“That product was almost too good,” the Psion executive says now, wryly.
“I was sitting on a plane in 2001 next to a man who had a Series 3. We got talking, and I introduced myself as working for Psion. He told me: ’It’s so sad, your PDAs are beautiful machines and they work so well — and you’re not making them any more. Why is that?’. I had to tell him the problem was people like him — who wouldn’t upgrade to our later models,” he says. “That makes business much more difficult.”
Psion was confident the users would — and it was largely correct. However, as a public company, it was the City of London which provided the most skeptical critic.
Engineering vs The City
Although the press saw Psion as fighting two competitors, it was really having to counter two deeply-held ideas.
The City of London had long held the view that Britain should be a service-based economy. This reflected a particular view of the world, which found itself expressed in a deep class-based disdain for inventiveness and the production of tangible goods. A 1998 editorial in The Daily Telegraph entitled “Metal Bashers Should Shut Up Shop” summed up the post-war orthodoxy of The City. Since the war, British businesses had to contend with interest rates twice as high as their European rivals, so investing in plant was much more costly, and their exported goods much more expensive than they needed to be.
Although Potter, with his own capital, had unleashed a world-class development, design and marketing team that punched far above its weight, Psion nevertheless found itself lumped in with the “Metal Bashers”.
The other idea was more recent, but was expressed with a religious zeal. It was a view about what computer markets should look like.
After several attempts, Microsoft had begun licensing a handheld operating system to a wide range of OEMs. The products were extremely poor and failed to sell, but there were lots of them, and Psion management took the threat seriously. At a product level, Psion responded by trying to make the Series 5 appear less idiosyncratic, and conform more to a “corporate standard”. There was no corporate standard for handheld computing, of course, and if such a thing could be argued to exist, then Psion had already defined it.
Microsoft had a powerful weapon at its side: a way of looking at the way computer markets work that had become a simple, religious battle cry. Microsoft threatened to knock Psion out of the market using the brute force of this new view of the world: the “horizontal economic model”.
According to the argument, the OEM products built with Windows CE may have been inferior, but the horizontal model that drove prices down in the PC world would be turned onto the handheld world, too. As a result, Psion would become a boutique manufacturer of superior products that few people wanted — because Microsoft’s many OEMs produced handhelds that did the job, well enough, for most people at a lower cost. In this simplified view of the world, cost always beat quality — and there could be no exceptions.
Ever since digital technology had “liberated” capital at the turn of the 1980s, leaving it free to roam around the world looking for higher returns, Wall Street and the City of London had championed this view, lauding component suppliers for horizontal industries — at the expense of vertically integrated computer companies such as Psion or Apple. The City saw the horizontal model as more effective at squeezing costs out of the system, lowering prices — and therefore inflation — and giving a higher return on capital. Great vertically integrated computer companies such as Tandem and DEC had been hit hard by the rise of the PC, with illustrious names going under.
The truth was much more complicated than this simplified view of the world suggested. In many cases, these companies had failed to leverage their IPR assets as the market had changed: and in most cases they failed to meet the demand for “open systems” in time — the PC world represented by Microsoft and Intel had little or nothing to do with it. And today, we can see there are thriving exceptions.
But this “model” became a religious mania; the City and the experts blessed Microsoft, even though it often had poor competitive products to offer — or nothing at all. Psion, it was predicted, would have to “go horizontal” and license its crown jewels.
A free pass for Palm
On the other hand, Psion’s other principle competitor seemed to be exempt from this Holy War. Palm pitched itself not as a rival handheld computer, but a low-priced, pen-based PC companion: a peripheral.
The product “did nothing”, in the opinion of Psion’s senior management, who after all were designing their technology to be useful to people in 10 years’ time. Palm had approached Psion hoping to be acquired — and Psion had rebuffed the offer. Charles Davies concluded that the Palm Pilot was merely “a software application boxed in hardware”. It was a consumer electronics appliance.
It had consumer appliance numbers attached to it, however: the Palm PDA had become the fastest-selling technology item of all time in the US in 1997. And in the summer and autumn of 1996, there were few Psion users in the UK who didn’t admire the brisk proposition offered by the new Palm Pilot.
In Palm’s world, the technology in the handheld didn’t really matter: it merely had to perform certain simple operations quickly and well, and was essentially subserviant to the “real” computer, which was the PC.
“You’re basically saying the data lives on the computer, you can sync the device with the computer, you can take it out and fiddle around with it,” is how Riddiford describes the Palm proposition.
Reflecting now, Healey says Palm taught Psion what it was really like to create a mass market user interface. Although the data input capabilities of the Palm PDA were extremely limited, the Palm allowed users to “fiddle” with an ease unsurpassed before or since: it was well-loved, and a deserved success.
Palm also benefitted from the “horizontal” mania. To Palm, all those years Psion had spent investing in making its handheld computing platform so very reliable had been wasted, ran the argument, because if you lost your data, you only lost your “fiddles”. And if the devices were cheap (and getting ever cheaper) — well, then you’d simply buy another one. The US had far higher PC penetration than Europe — and Palm validated this market. What higher endorsement of the PC can there be, other than a successful “PC companion”?
That’s not how Psion saw it. To Psion, Palm was an ill-prepared computer company that was pretending it wasn’t a computer company at all. The “Zen” of Palm was an enormous deception.
Ten years on, Psion’s original verdict on Palm may still be proved correct. Palm belatedly embraced phones, added (inferior) keyboards, and through its own mismanagement failed to update its technology base.
No British Sony
Psion couldn’t help noticing a giant hole in the logic. The “horizontal” orthodoxy didn’t really extend to consumer electronics companies. A giant like Sony is a vast collection of vertically interated divisions — often fighting each other viciously — but no one ever calls for Sony to cut its R&D or “go horizontal”.
Psion Group executives can be excused for feeling beleaguered. By the logic of the critics, backed by PC-centric pundits who’d caught the horizontal mania, Psion simply couldn’t win.
When Psion compared its computers to the Microsoft-backed competitors, it was told its product superiority didn’t matter — because horizontal economics would win the day. At the same time, while Palm was feted as a “consumer electronics” success story, the same grace wasn’t extended to Psion.
A confident Psion would have met both threats head on. Psion could have argued, in response to the Microsoft threat, that handheld computers are essentially personal, and in such an unforgivingly judgemental environment, a poor tool is a poor tool — and unsellable at any price.
A confident Psion would also have blown the smoke away from Palm’s proposition by responding that the upstart was really a computer in a peripheral’s clothing. And if “PC companion” was to ever be a viable market, it was one in which it would itself rapidly find itself a target, to be driven out of existence by larger and better-resourced players.
A confident Psion might also have remembered its engineering expertise, which was packing high functionality into a very low cost device, and marketing it well — and gone on the offensive, launching a slew of consumer electronics products.
In the end, Psion attempted to do all three: but its confidence began to ebb away. Potter, who had started Psion with £70,000 of his own capital — and watched it grow entirely due to its inventiveness and courage — now faced a City which didn’t want to hear any such bold response. Potter began by addressing the “Microsoft” threat first.
The confusion blew Psion’s consumer electronics planning off course.