Tag Archives: innovation

Innovating the boring stuff

We often applaud the new “Internet-originated” companies for doing stuff no one has ever done before. You know, giving us the new new thing, or the next shiny (or colorful) object or Web site.

But interestingly, lately I’ve found that it is as often the stuff that has always existed – the boring stuff such as customer support and dialogue – which these companies do better than others too.

The comparison between the tools and the support I get for the management of this Web site (and the related company I set up) from the “new” Internet-centric companies and the “incumbents” (such as telcos-turned-to-ISP:s, banks etc) isn’t really even a comparison.

Further, generally, thanks to facebook and so many other services, I automatically expect, for example, real-time email notifications, threaded messaging with proper HTML support. And definitively all kind of “engineering code” cleaned out of the messages I get.  It is amazing how often I am not getting anything even close from the incumbents – but something that would fit right into Windows 95 launch.

And don’t get me started on my experiences of starting to use e-invoicing in Finland, a classic example of a noble goal that is hard to execute well on top of the existing legacy systems.

And on a more positive note, I am still smiling of my experience of buying tickets to a Greek League basketball game via Viva Greece (a web company founded in 2000, so not that newcomer) which included e-commerce, payments and a multi-lingual chat (first in Greek characters, translated by Google Translate) with a dude called Dimitris (no, not this one)

Greek chat

So again, the magic is in the software.

Then why don’t the incumbents use the same software? Because the software is useless unless there’s a service design behind that really thinks the whole flow through – including all the things that can go wrong – from the consumer point of view. And that, despite being a buzzword for so many years, is still often very much missing.

Of course, those who build from the scratch will have an edge compared to those having to live with the constraints of their legacy systems, organizations and “acceptable cost base within the business model”. And they will not have the trust, the brand, the relationship, the history, the massive sponsorship deal and the local understanding and the blaah-blaah.

But the incumbents should remember that each day we use the Interwebs we become a little bit more spoiled.

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Nike and a new catchphrase

Fast Company magazine put recently out its 2013 list of Most Innovative Companies. I take all these type of lists with some healthy skepticism, assuming – until proven otherwise – that there’s about as much shady background lobbying going on than in the Olympic Committee.

(Ed. note: Speaking of which, I doubt that even any Corporate PR department anywhere would dare to top the audacity of the IOC proposal to eliminate wrestling from the Olympics. Cauliflower ears or not, any sports fan with respect to the sports history and the meaning behind the phrases like “Citius, Altius, Fortius”, “Just Do It” or “Impossible is Nothing” simply couldn’t believe their ears this morning)

False positive or not, I read these type of lists with great interest, both for entertainment value and getting ideas how to be populistic, if needed.

I didn’t find it surprising that none of the usual mobile or computing companies made Top 10. Not Google (#11), Not Apple (#13) nor Samsung (#17). Nor did, as Fast Company commented themselves, Facebook and Twitter. ‘Mobile’ and ‘Social’ seem no longer be catchphrases used in the context of innovation.

Amazon made #2. Interestingly, less so because of their digital efforts, but for speeding up the same-day delivery.

#1? Another physical world company. Nike.

For anyone close to sports, the pick itself was not that surprising. What was surprising, however, was how come Fast Company missed the opportunity to coin a catchphrase describing how apparel and footwear companies are using digital features to transform product categories.

Phrases like ‘brick-and-mortar’, ‘cloud’ and ‘big data’ took everyone by the storm. We need something similar.

Being a non-native English speaker, I feel unsure of proposing anything, so I just screenshot the six most used materials of Nike (source: Nike Web site), in case that would be of help.

Nike Top 6 materials

The first instinct was to go for rubber-and-cotton company, but at least the Finnish translation is prone to some unwanted extensions of the meaning (or do I just have odd friends?). Cotton-and-polyester company would kind of work, and definitively cover Adidas too, as they “own” the 1970’s style warmup jackets, but it doesn’t properly cover footwear. Leather sounds a little old fashioned, and impractical, as the material for housing any digital gear.

This was more complicated than I thought. But I trust there’s an answer somewhere.

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Product guy – dream living other people’s lives

shutterstock_95792512 dreaming 600pxDoes Product Guy need to be of the target audience? Can a bald guy sell shampoo? Does the baby food product manager need to wear a bib at breakfast? But on the other hand, should golf companies only hire lousy golfers as product managers to ensure they really know how their hacker customers feel after pulling two identical hooks to the wrong fairway?

Tough ones. No wonder that in the post-Steve Jobs era, there is no clear-cut answer to this eternal question that was perhaps the most asked one, when I collected input for this Product Guy series.

What matters is the passion for the product and the people who use it. That passion can come from within one’s own life, but interestingly, it can equally arise from having the imagination and the curiosity about other people’s lives (note: If this feels too creepy or outer space now, take a breather and read something tangible, like Facebook Graph API documentation)

So when the life is too short to develop a new skill – like a consistent golf swing – Product Guy should focus on trying to understand how it feels for those who have it.

The ultimate stage of dreaming to live other people’s lives is what happened to Jesse Eisenberg. He went to see basketball in London Olympics and was introduced in the TV broadcast as Mark Zuckerberg. And he probably can’t code at all.

For the record, I am so rooting for Ashton Kutcher to be able to pull off the same.

*****

Happened in the previous episodes of Product Guy series:

Stay tuned for the next episode: Product guy – understand your levers

 

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Product guy – make one scoreboard

Setting up the product performance scoreboard is one of the most critical tasks of the product guy. But perfecting the granularity level of the information is hard.

Think it is this way. Dow Jones and NASDAQ tell if the stock market is about to fall off any cliff, but using them for stockpicking is risky. ‘42’as the meaning of life has value, but just comedy value. So let’s bake in more parameters, right?

Be careful what you wish for.

During my years at Nokia I saw product performance charts that convinced me that the idea of Balanced Scorecard combined with the infinite capability of Microsoft Excel to add rows and columns can be a lethal combination for human nerve.

Instead of searching for the perfect index or the basket of metrics, the product guy should recognize that the scoreboard needs to be used for at least four different purposes – focus of attention, feedback loop, sense of urgency and rewards – each one of them having different drivers from each other.

Focus of attention

Based on a highly proprietary focus group research, I believe there’s a high correlation between program and project managers and people who love air traffic controller movies.

Air traffic control picture_500px

Those dashboards, those PowerPoints or Excels with a lot of graphs and numbers covering every conceivable dimension of the execution tell them whether the gap between their dream and reality is closing or not. The emotional kicks those people get of staying ‘on top of things’ are hard for the normally wired people to understand, as evidenced by the lousy IMDB scores for the two great flight controller movies – Ground Control (only 5.6) and Pushing Tin (only 5.9).

Now, facing such complexity, the natural reaction is to try to dumb the metrics down, or to craft a super-index. Doing so would be about as useful as removing the altitude parameter from the tool set of the air traffic controllers. Or combining all approaching American Airlines flights under one AA code. Surely, Kiefer Sutherland or John Cusack would have no problem, but any lesser talent would be in trouble.

The highly quantitative approach with a lot of relative numbers can also cause losing sight of the big picture. For example, I worked with feature phones that usually ship in huge volumes. So, for example, in the dashboard of a product family shipping 50 Million units, the yearly product return rate moving from 4% to 5% may look like a blip. But in absolute terms that would mean 500,000 more visits per year to the customer care center. That’s the equivalent of 2,5 days of average total passenger flow through Heathrow Airport.

The dashboards serve best when they are used for understanding where to focus the attention, or what questions to ask. And such data should be kept in the hands of people who know how to interpret them, or at least always supplemented with an expert interpretation.

I saw first hand at Nokia that not much good happens when, for example, sales guys, in need for the product schedule, data tap into the intranet wiki of the product development team, upload some data points and start making their own extrapolations out of the bug curves. Even the highly multitalented Bruce Willis in Die Hard 2 didn’t get involved with air traffic controlling, but let Fred Thompson to figure out how to “stack, pack and rack” all the planes safely home.

 Feedback loop

Now, qualitative feedback i.e. written comments – be it via the scoreboard mechanisms or from the friends of the Board members – is another potential source of information overload. Again, it would be a mistake to try to bottleneck and reduce the volume of such valuable input. The more the better.

But in consumer-facing businesses, the amount can be overwhelming, beyond even Kiefer’s or John’s processing capability.

For qualitative feedback, the product guy should focus on building the most efficient “routers” that somehow split the feedback and route it to the right experts. If there’s a comment about “still camera noise levels not being quite right”, the router needs to be intelligent enough to send the feedback to the camera guys based on the word ‘camera’ (instead of sending to the audio guys based on the word ‘noise’).

Surprisingly often, the free form comments contain anecdotal weak signals about a problem (or opportunity) that only shows up on the dashboard when the crisis (or the unplanned success) is in the pants already. Routing data to the right person fast enough can prevent ugly from turning to bad or make good great.

But right routing doesn’t guarantee right action. Which brings us, again, to human behavior.

Sense of urgency

During my Nokia years, the product quality “lessons learnt” studies often revealed that somebody somewhere had detected the problem and the information was even routed to the right place. But nothing happened.

Hindsight is of course dangerous. These days only product managers and the referees of FIFA-governed football games seem not to have the luxury of video replay. A lot of product information comes in all the time and things can be missed.

Through experience people will get better with the information triage. If they have the right attitude. If they don’t….well….there is no easy solution to ignorance. But the product guy can impact behaviors that result in the ignorance blossoming.

First, stop measuring against yourself. “We met the plan. Hence we succeeded” is a train of thought that doesn’t account how often the plan sucks, or the measurement is too massaged from the get-go. Sales guys have a worldwide reputation for being experts in low-balling and sandbagging, but it is only because the product development community is lousy with their PR work. Further, in getting things done, following the plan isn’t the goal. That’s not to say plans wouldn’t be important. They are but they also partially exist as change management tools so that you know that you change for the better and can execute it in a synchronized manner.

Second, find ways to get around the ‘burden of proof’ problem to separate an anomaly from an epidemy.  Do you have to prove that generally rappers don’t make long-lasting box office hit actors? Or do I have to prove that Mark Wahlberg wasn’t a fluke? Or is it inevitable that we end up arguing whether he was much of a rapper so start with? A tough one. But this level of intellectual, quality dialogue about the product feedback is needed.

Rewards

It is impossible to start a discussion about performance and rewards without ending up to the links to Dan Pink’s talks and articles on why Carrots & Sticks don’t work, and how the Autonomy, Mastery & Purpose is the new religion. So let me save the effort and link to some of the most read and viewed material – here, here and here.

Don’t get me wrong. I am definitively not saying “So what?”. I very much believe Mr. Pink is onto something.

I can’t say I have a lot of evidence on my claim. The compensation schemes at Nokia – as often in massive companies – were set very top-down. So there was not a big sandbox to experiment in. But still I saw enough. I became convinced that the more clever & complex (meaning Ph.D. in Definitions required) or the more bold & binary (“If X happens, you get Y (as in yelling) and Z (as in zilch)”) the incentivisation scheme is, the more likely it will fail miserably, stifle creativity and create an attention-diverting headache to manage, stealing focus from what really matter – the product, the consumer and the team.

At the same time, the thinking of not linking performance and rewards at all is a little bit of utopia. Equality is a good starting point because, whether people admit it or not, there’s a socialist streak in every compassionate human being. It just may not reach the level of accepting the pay level of the most un-deserving member of the team. It may just be to the level of protecting that nice guy from being booted, which in realistic terms would be the way to free salary budget for others. And every knowledge worker surely is socialist enough to agree that not all the profit from the great wisdom unleashed should go to the capitalist class.

So a hard problem to solve….

Hence, the scoreboard design must take into account that its data ends up most likely being used for rewards purposes. Hopefully just not through some arbitrary, difficult-to-predict formula, but rather as a data point, or a piece of evidence, people can use to describe what consistutes ‘fair’.

The simple scoreboard that sucks the least

I wrote earlier how I think the combination of three metrics – Net sales, gross margin, Net Promoter Score (NPS) is the closest thing I’ve found to a working scoreboard.

Those metrics are from perfect and can easily be executed wrongly as any other scoreboard (ref: my post about the NPS stimulus problem), but around those metrics I believe it is doable to create a holistic system that works and is cost efficient.

Think NPS as the overall thermometer. If that is in red color, it is proper to declare a higher DEFCON class even if every other single metric is in green. Because something is not quite right. The program manager’s dashboard combined with the written NPS comments from the feedback used in the Dr. House way is then the way to figure out what the root of unhappiness is and how to improve.

In closing, in perpetuity

Unlike in sports, the buzzer of the product scoreboard should never sound full time. It’s a perpetual scoreboard that also becomes better – more accurate, more understandable and less latent – all the time.

That’s because the product guy plays a game that never ends. As the late management thinker, and the only official guru of the product guy series, Peter. F Drucker said, “The purpose of the company is to acquire customers. And keep them”.

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Happened in the previous episodes of Product Guy series:

Stay tuned for the next episode: Product guy – find your inner hipster

 

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Product guy – know your theories

Aristotle shutterstock_112275572 500px wide

Every product looks like a winner at the time of its inception. It’d better. What would be the point otherwise? Unfortunately, between the go-decision and the delivery date, things tend to change. Even if the plan would hold – and that’s a big if – the world around the product will surely change. That is not all bad news because conquering the uncertainty and delivering the better future is a part of the thrill. It’d be so boring to have the perfect crystal ball (well, not really, but let’s move on).

“Is that a fact? Or an opinion?”

By definition, the uncertainty also means that there are, strictly speaking, no facts about the future. Only opinions. And probabilities. Yet product decisions have to be made.

An easy way out is to declare opinions as facts. The product guy can declare, as the urban legend goes about one Nokia exec: “Yes, for me this is an opinion. But for you, dear team, this is a fact. So just go do”.

That kind of works. Sometimes. But for most people because of luck, not skill.

A better way is to do the hard work and think your way through. But not factually, because that is not really possible because there are no facts, remember.  The product guy must think conceptually, and for that some simple theories can provide the framework.

Theories are useful because surprisingly often you don’t need to know the exact number. You just need to know whether your parameter is more or less than something that the competitors are likely to have or what consumers would expect. Or whether your product will provide more of the same, or something different. In other words, a good theory can give answers that math can’t.

Knowing which side of the gravity you are, or which ballpark you plan to play at, will often be enough, because at the end, everything in the market place is relative and contextual. In absolute terms, the E.T. looks like a cheaply manufactured plastic toy (a direct quote from my 12-year old goddaughter this Christmas). But what really matters is that in 1982, when the movie came out, it looked as real (or more real) than the movie aliens that had passed the audience test before. And, more importantly, the E.T. wasn’t the umpteenth science-fiction story about inter-galactic heroes in colorful tights, but a new kind of heartwarming story about a lonely boy who finds a new friend (Ed. note: This is a long post, so fully okay to have a small break here in case you get emotional)

Old skool theories rule

Now, I don’t want to take away anything from the How-to and 7-steps (upgraded to 10 with the emergence of the internets) type of books (especially if I end up writing one of those one day) but for product work it is a good idea to keep the theory base simple. The review meeting tends to be long enough, even without the one-hour theory class up front.

Old theories have not only the odd chance of people knowing them already (meaning, saving time), but also tend to have survived the test of time. For example, the insightful wisdoms of great Greek philosophers like Aristotle and Socrates have remained relevant for millenniums. The simple persuasion principles of ethos, pathos and logos have aided great speakers from William Wallace and Bill Clinton to Herb Brooks.

Great theories also, unlike for example Police Academy movies, get better over time, including the time after death. Once, one particular Nokia EVP declared in one strategy sharing: “There is only one management guru I believe in, and he is Peter Drucker……and he is dead.” To this day it is unsure whether he trusted him because he is dead, and hence can’t change his mind, or because Drucker’s theories outlive the guy himself. I believe the latter. That may not be just luck. Peter.F Drucker (1909-2005) honed his theories over 60 years from the time of pre-WWII to post-war to industrial revolution and all the way to the information revolution, teaching his last class in 2002 at the age of 92.

Also keeping it simple worked for Rocky Balboa. He did beat Ivan Drago at Russian turf, with the good old training technique of carrying logs and doing sit-ups at the barn. And an inspirational playlist.

Last, Aristotle was again ahead of this time when he believed logos (logic, reason) is most often the foundation. Again, that’s not to say all three wouldn’t be important. It is just that the people who occupy the Corporate Board Room tend to have an alpha dog personality. They do want to see the product guy display passion – eye of the tiger and burning heart – but at the end, they need the product guy to provide foremost the logos. That’s because they themselves are happy to provide the pathos and ethos when the time for the product launch or the hero article in Fortune comes.

Choosing your theories

You need to decide yourself what is your playbook. What matters as much is that you, the product guy, have done your homework on the theories you choose. You may not need to be lecturing them into your nineties, but you need to know them well enough to be able to apply them in your own thinking and in your own argumentation logic.

In my years at Nokia, I learned to use four core theories:

  • 4P’s – Product, Price, Place, Promotion. This split of marketing mix – actually not invented by Philip Kotler, the author of Marketing Management, but by a guy called Jerome McCarthy in the 60’s – is as classic as it gets, and one of the (rare) things that I actually remembered from the Business School. True to the nature of marketing, there are so many variations (7P, 4C) that it can get confusing. Hence, I use this theory mostly as a checklist to remember to direct my attention holistically. For anyone with a geeky streak, it’s so easy to get carried away with the Product P and think that all the other P’s fall into place afterwards somehow. They usually don’t. And by the time you notice that you may have locked some of the product parameters – such as design or component list (i.e. Bill of Material) – making the sales and marketing job the equivalent of trying to cast Leslie Nielsen into a serious role.
  • Technology adoption cycle. This simple social behavior model puts some bones on why the product guy’s excitement over some thing is often met with a blank stare from the sales guy. I have found out that theory holds well in the mobile and consumer electronics in general. There’s an evolution of the theory called “chasm theory” by Geoffrey Moore. I have found that useful too, though with the caveat that it is easy to mistake the differences in context with the differences in need between the segments (see e.g. my post about QWERTY users and their need for smartphone).
  • Disruptive innovation theory. All good will come to an end at some point, or at least carrying it too long can result in this “yeah…I am supposed to be wowed but I am not “ feeling that can be borderline embarrassing, like watching Bud Fox/Charlie Sheen cameo in “Wall Street: Money Never Sleeps”. I’ve found Clayton Christensen’s disruptive innovation theories to be really helpful in understanding the dynamics as industries mature and collide, resulting in multiple ways to “get the job done”. Compared with the previous theories, the disruption theory is much newer and much more complicated to apply. Hence, like in the case of Nokia Nseries being steamrolled over by Apple, I’ve been able to use this theory mainly in the Flash Forward or the C.S.I. way (i.e. to reconstruct what is about to happen or decipher what did just happen) than in the Armageddon way (i.e. to prevent it from happening).
  • The DVD minibox of Band of Brothers. This is my choice, but you may interchange it to any story about respect and humility, provided by your favorite religion, book, movie or TV-series. Further, as an anti-gun, anti-war type of guy, I definitively do not want compare the horrors of war with the cozy life of modern corporate world. Yet I feel the importance of personal reflection about one’s own role in any challenging endeavor comes across well in the quote from Major Dick Winters:

Winters quoted a passage from a letter he received from Sergeant Mike Ranney, “I cherish the memories of a question my grandson asked me the other day when he said, ‘Grandpa, were you a hero in the war?’ Grandpa said ‘No… but I served in a company of heroes.'”

*****

Happened in the previous episodes of Product Guy series

Stay tuned for the next episode: Product guy – make one scoreboard (scheduled when ready)

 

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Copy-Paste on the shoulders of giants

Only truly ingenious people invent new stuff. Say Hi to them from me if yout meet them, but the odds are you and me, the mortals, innovate most often by combining existing ideas in a novel way. So, in practice, we copy & paste a lot (Ed.note! if you are a student, do remember to footnote, or the comparison algorithms will catch you).

In the first PC:s and Macs, the copy and paste was so groundbreaking and implemented so well that a new world of productivity opened up for those mastering its use. But keeping it simple became over time more difficult. The more sophisticated operating systems and application suites developed, the more complex making the whole pattern predictable and familiar for users got.

Soon we were on the stage that when you copied something from one program to another, it got functionally copied alright, but with formatting that made absolutely no sense to either the origin or the target document. Eventually one couldn’t survive without the Format Painter functionality – something lawyers and consultants desperately try to keep as their trade secret of productivity.

As I moved away from the Microsoft PC and Office -only world, I thought I’d escape this hell, but not. My muscle memory still struggles badly to adapt using Apple Key or Control, depending on which computer I use. And even in my Mac, I write often with Microsoft Office and/or gmail with Google Chrome browser, resulting in total random formatting behavior.

I think personal productivity design (in the lack of a better word) will be a very determining factor which computing camp (or ecosystem, if you prefer that word) wins.

We’ve seen that movie before. iPhone was miles ahead in this functionality against Symbian, the principles of which were designed at the time when social media (the mother of all copy & pasting) was barely heard of. It was not that one thing that did Symbian in, but it was among those countless little ‘how’ things that resulted in the supposedly ‘lesser spec’  iPhone winning the engagement of the users.

In the on-going war of computing, getting copy & paste right will matter even more when people think whether they dare to buy a computer, a tablet and a phone from competing camps. Think it this way. You never see the OS really, Dropbox will take of your files and eventually more or less the same apps will be available to all combinations. But when even copy & pasting is done in the cloud, the rewards for those doing it well will be enormous.

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Jolla – the Finnish homebrew

Like many mobile gadget enthusiasts, I did watch the Jolla Sailfish OS webcast (note!  I am still suffering from the conference-itis that I got during the Nokia years so I didn’t even attempt to get near the Cable Factory venue).

The presentation had a quite inward-looking and homemade feel to it, and I am not sure how well it got the job done, outside the fanbois. Note that I am so much rooting for Jolla to succeed that this is the nicest I can put it. So please don’t troll me that I don’t get that it’s a movement, not a product or a OS. I do.

But still I guess we can agree that it definitively was not the kind of step-by-step-rehearsed dog & pony propaganda show we’ve all been spoiled with lately. Not sure if it fares well even in comparison with time. I tried to remember the first product intro I ever attended. My calendar trail doesn’t go that far, but I guessed it must have been some Nokia mobile phone launch in CeBIT 1997.  Even though back then Nokia was just an up-and-coming company, the rules of Marketing 101 were in full use. Even if the power of the presentations revolved around the different ways Anssi Vanjoki could use superlatives.

But what was to be expected? The Planet Earth, especially the Asia corner of it, has a lot of mobile phone companies, and most of them are really small. It is already a marketing achievement in itself for a company of Jolla’s size and market share and to cleverly use the Rocky Balboa & Ivan Drago drama around Nokia strategy to cut through to be even mentioned.

Further, I’ve seen very close how massive efforts the stevejobsian & stephenelopian grade of product intros are. Humongous. Just humongous.  So Jolla investing their scarce resources to flying cameras, smoke machines or bringing Jessica Alba’s sister to the stage would have been worrying.

Jolla is coming from the right angle. Like I wrote in my state-of-the-mobile-phone-market megapost, Android can be dethroned by taking their openness game even further. But Jolla has chosen a big mountain to climb (for quite a matter-of-fact analysis, read Richard Windsor’s post). So it will require a mind-bogglingly great implementation even to get to the start line.

And some luck too. Especially in China where the Android success is intertwined with the economic agenda of having a mass market open platform for Chinese innovation.

But what’s the worst that can happen? Time spent with another failed OS. A lot of people have survived that (see e.g. this, this and this). So I can see why talented people are trying. And I wish them all the best.

Ed.Note! Despite having worked closely and proudly with Maemo, I have no involvement with Jolla whatsoever. I am not an investor, advisor, advocate or employee. I am just a fan who’ll do his share by promising to buy the product, if it’s as great and polished as e.g. N9 was, even if I didn’t really need another smartphone.

Picture credit. Flickr user hansenit. Under Creative Commons.

 

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Wrong side of the cool

omg, I seem to be always on the wrong side of the cool. For all the years when it was the thing to be a Mac user, I put stickers (FC Liverpool, Maemo, various product programs) to my black, matty IBM/Lenovo Thinkpad desperately trying to make it look one notch more creative.

This summer I then bought a shiny MacBook Pro. And now all the trendy people post on facebook with their Microsoft Surface.

I probably need to talk to someone about my feelings.

 

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Netflix and the need for software innovation

Netflix started in Finland last week, with a nicely orchestrated go-to-market execution. A good number of people from my social sphere, me included, immediately signed up. Especially, the signing bonus of free 2012 for Spotify users was appreciated.

Finns do feel some level pride that Finland is at the front of non-US geographical expansion. With 5 Million or so people, we are not used to be at the top of the list. The tech and mobile savvyness of Finns was a much quoted rationale, but the attractiveness of the market equally has to do with the appreciation of American pop culture. There’s a disposable-income-available generation of folks that experienced Arnold Schwarzenegger and Eddie Murphy without any dubbing from the get-go, and then moved on to the more street credible genres. So we’re a subtitles nation. And while Finnish music and movies do matter for the people, they’re not Korean pop or Bollywood type of obsession.

I also believe that a lot of people have their home theaters computer video ready and are familiar with online video, even if there’s been not that many commercial services. Unlike many people believe, U.S. laws like DMCA are not applicable in Finnish courts (similarly as people don’t yell “Objection, your honor!” nor are they assigned to weeks of jury duties), but the core legal principle is the concept of fair use (as stipulated also by European Union)

To my slight disappointment, Netflix catalogue wasn’t super impressive on day one. Yet I believe Netflix, Viaplay, operator services and other entrants coming later such as HBO, will find an audience.

However, at the same time, the competition with the traditional media companies is on quite conventional basis. So standing out will not be easy. Surely, the convenience of Netflix-type of on-demand service and back catalogue is indisputable, especially when trying it out requires no investment to set-top boxes.  Which are expensive, have scroll-and-select user interfaces that are as old skool as QWERTY phones and often work really badly if there are local peculiarities in the broadcasting standards or protocols.

But none of that is really market-changing disruption. The job-to-be done is ensuring the consumers have always something to watch which is why traditional pay TV offers so many parallel channels showing re-runs.

Further, Netflix enabling the use of any device adds value, but, apart from having more remote controls, again I am not sure that will totally re-arrange the competitive landscape. Television is still an immersive experience.

Now, if Netflix was to outbid NBC and Yleisradio for the distribution rights of Olympics (I doubt they have the money…or crazy enough of CEO and Board to bless it), then it’d be a different ball game. But even in that case, the rule book is the traditional media industry rulebook i.e. it is all about geographical distribution rights, release windows and exclusivity.

As I wrote in my media mega-post, the true disruption would really happen if the Internet based (over-the-top) entrants start creating content combined with software innovation. In others words, they’d create programs and user interface capabilities on the Internet and computing platform in a way that is impossible for the old guard (traditional companies and their slow-moving proprietary set-top box providers) to copy. That would be disruptive.

That day is not here today. And apart from multiple streams of sports I do not know what that compelling content experience is. But one day someone will invent it.

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Mega-post: The hard-to-break gravity of Apple and Android duopoly

THE QUESTION is if the smartphone, as we know it, is at the end of its innovation cycle. It’s an uncomfortable question, but a hard one to avoid. The new shiny things don’t shine as bright as they used to. Also, the market leaders, Apple and Android, are not helping with the perception that they are just cranking out the same old stuff with different sweet names.

So, many industry veterans, like myself, are wondering whether is it time to start hanging the memorabilia – like various lanyards I’ve collected from various congresses – to the wall. And is now the right time to start re-tooling the personal skill set, because knowing about mobile device construction is about as fashionable as knowing how to launch and drive space shuttles, when everyone else is spacejumping. In this megapost, I explain my view.

THE SHORT ANSWER: The party is not over yet, but the industry dynamics are such that the current duopoly is very hard to break. Windows Phone has, in theory, what it takes to break through but its highly proprietary model cripples its ability to compete with Android. So, in practice, its best shot is to beat Apple in its own game. That’s a mountain-size of a task, so it’s no wonder there’s some skepticism out there. Hence, it may well be that if the status quo is shaken, the new ideas will come from new entrants embracing fully & improving further the open innovation model that currently explains much of the Android traction.

That’s the conclusion I’ve drawn, having been few months off the industry hamster wheel. Now, my prediction is neither that novel nor controversial. It is close to the position many acclaimed industry analysts have taken, and correlates with the consensus forecast of the Wall Street.

For how I got to my conclusion, you actually have to read the rest of this very long megapost 🙂

THE LONG ANSWER: It is true that winning and losing always includes an important element of leadership and execution. But not everything can be explained by the hero qualities of the winners and the deficiencies of the losers. There is always the element of strategy – and especially in the technology businesses – the element of innovation strategy.

The theoretical view: I personally have found the theories of Clayton Christensen highly useful to the smartphone market. Obviously his research and books are a fundamental part of the industry vocabulary, but additionally I have had the benefit of following the work of one the leading experts Horace Dediu already when he was at Nokia and also beyond. His asymco blog is such a treasury of information of knowledge that it would be a waste of bits for me to replicate it here.

Instead I post here a link to the Sept 28th, 2012 podcast by Horace and James Allworth (a Fellow at the Forum for Growth and Innovation at Harvard Business School) that gives you a solid foundation in about 70 minutes. Next I’ll just summarize the key points, in my own words, in order to drive the logic forward:

  • There are two fundamental ways to make a product –an integrated model and a modular model. In the former, the company retains the control of all parts of the system design that matter for the consumers whereas in the latter the architecture is “modularized” i.e. different companies specialize on the different parts of the system, focusing to make each component better, or at least cheaper.
  • Integrated model tends to rule when the products are not “good enough” vis-à-vis the consumer expectations. The total control and the ability to push the envelope across the system design enable the company to solve the hard problems. Apple is a prime example of a company operating this way.
  • Now, when the product is good enough, any company operating with the integration-based model faces the risk of overserving, or overshooting. People will no longer be ready to pay extra for the new improvements, and the market position can be disrupted from the below. This is usually also when the ASP:s (Average Selling Prices) start dropping
  • PC industry looked to follow the pattern of succumbing to the modularity. In fact, it was locked to the stage of “no-profit Windows OEM: s and the rich Microsoft” stage for so long that people thought it was the end game. But it wasn’t. The consumer pull for the computing mobility changed everything. Suddenly, people didn’t like to put the non-branded, ugly, bulk manufactured chassis of the computer on the table of their third place, the Starbucks café. So, suddenly, the proprietary design innovation and the related hardware-software-miniaturization skill set Apple had been quietly cultivating became a proprietary slow-to-copy innovation.
  • There’s inherent gravity towards modularity, but user interface innovation keeps on re-setting the cycle because getting it right requires touching so many places of the system design. That’s a task more suitable for those operating with the integrated model.
  • iPhone is already giving signals of people thinking it is good enough. As Horace highlights, the sales mix between iPhone4S and iPhone 5 is a proxy whether the new (hardware) innovation provides enough of meaningful value. This makes sense. It’s an analogous situation I saw up and close with N95 and N96 – the numbers would just tell that the slider camera phone had reached its innovation apex. Adding more features or megapixels wouldn’t matter because the user sore point was the slow input mechanisms and the screen size. So consequently, the category of cameraphones needed to be re-engineered to touch and touch&qwerty smartphones.

Mobile peculiarities: Competitive people have a tendency to view the world via playoff brackets, so it is natural to expect a clear winner – a clear superiority of either the integrated or the block-building modular model. Maybe one day it will be so, but right now, the elimination battle doesn’t seem to happen. Instead, the both extremes are getting stronger, and everyone who is in the in-between land needs to think hard.

I’ve identified at least two reasons why smartphone market behaves slightly differently than some previous markets.

  • User interface adoption is not linear. It is tempting to take the extreme view and extrapolate a direct line from the ITU-T pad via touch screen and via voice assist (Siri at your service, sir) all the way to the wearable computing. If it would be so, those operating with the integrated model would have an edge for the foreseeable future. It could so happen, but I am not so sure. User interface decisions are not just rational spec decisions (e.g. 8 MPX>3.2MPX, duh) but also a conscious decision about the personal habits and the personal image portrayed. For example, it’s been clear for many years that the future is undoubtedly about touch screens. Yet so many people have pushed the inevitable switch, because they don’t want to look like idiots. Think it this way. The learning curve for PC mouse could be done safely at home, the mobile user interface you end up learning in front of your friends and colleagues. As a result, the market is always somewhat segmented against the technology adoption cycle, even though in the view of the 3-5-year view segments tend to come and go.
  • Making mobile software is really hard. As the proof, the fatality rate of new operating systems is really high – so many people try but few actually get to finish. And as one coder once put it: “Moore’s law ain’t gonna rescue your sloppy code”. So if you, metaphorically, think system design modularity as a puzzle, the software piece is that ugly piece that your dog or infant daughter has chewed the corner of. It may get the job done, but it might not look pretty. The software challenge also explains why we see more software companies (Kindle, Surface etc.) moving to the integrated model with their own hardware, as opposed to hardware and manufacturing companies (Foxconn, BYD etc) adding software to their stack.

Ecosystem view: Now, some people try to outline the roadmap to the industry end game via the number of ecosystems. It is a good way to simplify the complex world for PR messages, but I’ve found it to be not sufficient enough for deeper strategic thinking.

Productization model view: In my opinion, more important than the number of ecosystems is understanding what are the most optimal productization positions in the spectrum between integration and modularity. So drawing from the frameworks above, there are two “pure” positions– the ultimate Integrator (“Absolute Best”) and the ultimate Block Builder (“Best Value”).

The ultimate integrator is the one pushing the envelope of the industry innovation on the level of the whole product. It attacks the hard problems that span across multiple system modules in a way only it can, because of its total system control. Consequently, it tends to have a high cost structure and so many constraints, but it also an opportunity to get rewarded for not just skinning but really solving the problems people have. The downside is that from the industry social graph viewpoint this type of company is high maintenance because of its high degree of proprietary solutions to the problems. These companies are like friends that make every dinner planning a nightmare because of their dietary convictions. And later they suddenly decide that the restaurant you have selected was not cool enough, and off to the replan we go again. You put up with this friend, because you love her/him and the spark she/he brings to your life. At the same time, you know that you just can’t cope with too many people like that. Obviously, Apple occupies this position in the market place today. The interesting question is, hence, how many that proprietary companies will the market place sustain.

The ultimate block builder is making things better piece by piece. The high level of modularity and the loose coupling of elements in the system design are critical so that the investment of improvement can be isolated to the system element in question, and the rest of the blocks taken ‘as is’ from the community. Being handsomely rewarded by the consumers is possible because of the community efficiency and the sharp-hence-marketable consumer problem solving. From the industry social graph point of view, these communities are hard to govern. The more structure there is, the slower the apparatus innovates and the end result can still be a mess. Or an IPR lawsuit. On the other hand, when things are done the Nike way (“Just Do It”), like things tend to be done in the technology-led businesses, you end up either with a mess or a royal mess. Android is the closest to this model. The interesting question here is not how many players the model sustains (because it is many) but who’s the Current King of the Hill and and who is the Supernanny. Currently, they are Samsung and Google, respectively, but the casting is dynamic by nature. I do agree with what ex-WP program Manager Charlie Kindel wrote already in January in his insightful blog i.e. “Google has already lost control of Android and has zero chance of regaining control. He is probably right.

Practically, most of the medicine Google has at its disposal for fixing Android are counterproductive to what has made Android a success in the first place. So the question really is whether Android can be outandroid-ed, from the within or from the outside.

Innovation moves the needle. It surely is the innovation that moves the relative positions of the companies aiming for the perfect positions. But to which direction? And how? I think the aspect of the mobile industry innovation that hasn’t been enough debated is that it really matters whether the innovation is open or proprietary. It also matters how strong the pull is for the innovation and whether it comes directly from the consumers.

The fascinating part to me is that deciding to make an innovation open or proprietary is a clear strategic decision. It’s not a personality, leadership or execution trait – it’s calculated strategy thinking at its purest. Further, it really doesn’t matter whether it’s an explicit yes/no case within the strategy framework, or whether it is an automatic response derived from the chosen business model, it still is a position prepared by some MBA folks in the strategy department, decided/blessed/driven by some executive and (hopefully) approved by some company board. In real life, the decision can also be caused by a technical constraint that some engineer put accidentally in place by not thinking the system interfaces properly and not getting the proper guidance from the product management folks. Any which way, the open vs proprietary decisions tend to have long-lasting consequences.

Let me try to open up what I just said with an example. This is totally hypothetical and populist but please accept that in the name of landing the point. I am talking Facebook and mobile. In my 17 years of following the mobile industry, the mobile social media explosion is the second biggest whirlwind of innovation ever to come around (mobile voice call still #1, SMS tied #2, browser #3). Facebook could have chosen totally to disrupt the mobile industry by making the mobile Facebook very proprietary to the devices of their choosing. Had they done so, surely the outcry would have been tremendous, but the consumer pull they had was so huge – by any metric – that, the collateral damage to the industry relations aside, they probably could have pulled it off. They didn’t go proprietary. They chose almost the polar opposite, very open. In fact, they made making the Facebook client so easy to everyone that the technology choices almost backfired. Now, this decision probably wasn’t even that hotly debated inside Facebook. Further, it may not have been even recognized as a strategic decision as the company drive towards maximizing the user base needed the support of every platform out there. But yet it was a clear strategic choice that set up the company to a certain direction that looked totally obviously right back then, and probably slightly less obvious today as people are less bullish about Facebook’s advertising revenue prospects.

Implications:  Okay, enough of theory stuff. Next I’ll walk through what this means in my view to the prospects of various industry players:

  • If what is said above is true, Microsoft is not in an optimal place. Its block diagram and related plan comes across as such a Frankenstein, So much of its phone side innovation is highly proprietary, almost like a proprietary extension of the proprietary Windows computing system. They really have done some excellent work with the user interface, but one can have that only if one is ready to take the rest of the blocks too. As a result, for example, consumers end up using Zune PC software, chip vendors doing a special baseport and game devs using DirectX graphic engine, none of being the obvious choices otherwise. To complicate things further, its software-licensing based business model assumes a vibrant productization community. As a result, I tend to think that they can only be successful if they can overtake Apple – being so proprietary they are not well configured to compete with Android. I have so many friends working on Windows Phones that I sincerely wish them well, but it still is a confusing model.
  • Interestingly, Android actually may be more exposed to face heated competition than Apple. The reason I say this is because I am not sure whether Android is successful because they have been uniquely good or because others have been uniquely bad. There was some competition for the “block builder” positioning from Symbian, but Symbian suffered technically (like Microsoft now) from bringing in such a large number of non-optimal technical choices. In other words, even if the business framework was deemed open enough, the technical choices were quite proprietary. Various Linux distros had all the “right” technical building blocks but, during the rise of Android, they all for whatever mystical reasons self-exploded. Don’t get me wrong in any way dissing Google’s execution. Or Samsung’s. Michael Jordan won a ton of games by just staring at the opponent and then executing fundamentals well while watching the opposition to blow themselves apart. A win is a win is a win.
  • Intriguingly, up to now, Android blocks have been used to construct quite classic smartphones to cover maximum number of price points. That tends to be a scale game and not so surprisingly, has played to Samsung’s advantage. When it comes to blocks they are the closest to Legoland this industry has. In addition to whether Samsung remains as the king of the hill, the interesting question is whether the Android portfolio will actually end up being successfully segmented to smaller niches, all of which can be profitable due to the lower cost structure enabled by Android openness. The stuff that Amazon is doing is well in to that direction. You read about the rumors of luxury Vertu phones going Android (no idea if true or not but certainly logical). And if you put your scanners out, you run into a bunch of companies embracing & extending Android, some even with the help of governments. But there are also smaller new entrants. One example is Adaia, set up by some Nokia alumni, and building a rugged premium Android smartphone.
  • Even more intriguing is the Linux question. Android benefits tremendously of using Linux as the base, but could there be a “more pure” instance of the block building model by throwing some of the Google middleware out and replacing that with other community-driven software for an even more capable and open alternative. And I don’t mean semi-pro consumer modding now, but a new productization block diagram for the  industry players. I really don’t know. It’s not like I am hearing the Linux Savior story for the first time, but breaking through in the consumer space is hard, for whatever reason. It, however, obvious that there are people who believe in the opportunity, and that sentiment might partially explain the excitement around companies like Jolla Mobile.

Makes sense, no?

 

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