Despite repeated reprimands from the National Adverting Review Board, Oracle continues to run ads making questionable claims that its Sun hardware outperforms the competition. This isn't surprising--perception often trumps reality in advertising, after all--but will Oracle ever be able to back up its claims?
By Rob Enderle
Oracle has made yet another questionable marketing claim against IBM. This makes me wonder why, after getting its hand slapped repeatedly, Oracle continues to do this. The answer is actually simple: The company doesn’t really have a choice.
Oracle CEO Larry Ellison served on Apple’s board of directors and learned at Steve Jobs’ knee a lesson I’ve pointed out for years: Perception trumps reality. Jobs and IBM’s Gerstner, who clearly also understood this, changed the perception that Apple and IBM were, respectively, failing long before reality supported their conclusion.
In both cases, beneath Jobs’ and Gerstner’s statements was actual improvement that would eventually prove them to be true. Oracle’s problem is that it needs to rebuild Sun to make this work, and Mark Hurd, who’s running the Sun unit, is a cutter and not a builder. In effect, Oracle has an expert on extreme diets trying to help an already-thin company.
It’s likely that Ellison, who’s spending tons of money on sailing races and Hawaiian Islands, doesn’t want to spend the money needed to bring Sun back. I have to wonder if it isn’t the Oracle customers who are being fooled but, rather, Ellison himself.
Perception Trumps Reality, Until the Buyer Catches On
We live in a world of questionable claims. You’d think we’d be more skeptical, but we tend to want to believe what someone tells us, particularly if it represents a reality we wish for. That’s how so many scams work: You want to win a million dollars, a car, or meet the man or woman of your dreams, and you’re inclined to believe a call or email that tells you your dream has been fulfilled.
The Nigerian 419 scam, which has been extensively analyzed, apparently works best when the targets are folks with lots of money who really should know better but don’t look closely at things that they want to be true. One of my favorite books, True Enough: Living in a Post Fact Society, speaks to how easily we are fooled by political and religious leaders who know how to spin the story we want to believe. If there’s one book everyone should read today, this is it.
This has a lasting effect, though, often leading people to conclude that advertising and lying are identical. While they can be, they shouldn’t be. If buyers figure it out—and eventually they do—then they don’t trust you. You can lead with a perception that’s far better than reality, but you’d better make it real. Otherwise, the buyer eventually stops listening.
Oracle’s Past Ad Claims Coming Back to Bite It
Oracle advertising has been presenting Sun in an overly positive light for some time now—and has been getting regularly slapped for it. The National Adverting Review Board (NARB) of the Better Business Bureaus told Oracle to recant in April, July and November of last year. Four months later, Oracle has complied with the NARB, albeit partially.
But Oracle started down the path again this week, comparing Sun hardware against a technology spec from IBM that’s around five years old and, surprise, finding that Sun hardware outperforms it. As before, IBM isn’t amused. Oracle will undoubtedly get slapped by NARB again but it will keep doing this.
Sometimes, when a company does this repeatedly, it’s not fooling customers as much as it’s fooling itself. While I worked in IBM Storage in the early 1990s, the internal competitive analysis folks found that they got better personnel reviews, and more funding, if they wrote reports stating that IBM hardware was better than the competition, even though it increasingly wasn’t. Over time, IBM went from a market share of 90 percent to selling off its storage unit as a largely failed endeavor. What was once one of IBM’s largest and most successful plants is now mostly gone after being sold to Hitachi.
I think something similar is happening in Oracle. It put Hurd, a cutter who almost single-handedly destroyed Hewlett-Packard, in charge of Sun. The outcome was always going to be catastrophic for that unit. But from Hurd on down, if Ellison sees how bad things are actually going, then these executives’ bonuses, salaries and continued employment will be at risk. They all may have created the perception that Sun is actually competitive, then, to fool Ellison—likely arguing that actual sales number are low because customers are too stupid to see Sun’s clear advantage, when it isn’t the customers who are stupid at all but, rather, the guy actually being fooled.
This likely explains why the problems aren’t being fixed, either. Senior management likely isn’t aware of how bad things are or even the source of all the problems. That said, Oracle’s recent financial results, even with creative positioning, should be providing a pretty big clue if Ellison wasn’t distracted by his other personal projects.
Fool Customers Twice, Shame on Them; Fool Them Again, They Walk Away
I doubt many of you are fooled by what Oracle is trying to do with its screwy claims, largely because I’ve read the recent IBM financial report that says Oracle is bleeding customers, but the company’s actions point to how easily we can be fooled by facts that we want to be true.
Whether it’s found money from a Nigerian Prince or a favorable report from one of the firm’s own units, a wise manager looks harder at positive numbers than negative ones. That manager knows he or she is more likely to be fooled by something that’s too good to be true.
The lesson here isn’t to avoid Oracle. Based on IBM’s results, most customers seem to already be doing that. It’s to avoid tricking yourself into ignoring problems until they are too big, or too far gone, to fix.
The other thing that occurs to me is that Hurd may be Ellison’s Nigerian Prince. The next time Ellison hears Someday My Prince Will Come, will he recognize the personal connection and realize that for him, and for Oracle, the arrival of that prince was a bad thing?
Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.