How to Fail Before You Even Get Started

I wrote a post for Jeff Lash over at Ask A Good Product Manager in response to a question he received from one of his MANY readers.  The question was:

How can I determine the need and saleability of a “new to the world” product?

Make sure you go read the comments at Jeff’s site because they add some real depth to the answer and respond to at least one facet of the question I should have considered.

Fizz Cup

With that said, here’s the answer:

This is a question every product manager will likely face at some time in his or her career and it is one of the more complex challenges due to the multi-faceted answer it requires.

But let’s start at the most basic assumption: you know who your initial customers are and you’ve determined what problem your product solves for them. You do know this, right? Somewhere among your PRDs, MRDs, spreadsheets and extensive collection of feature defining Keynote decks is a single document with one short paragraph that describes:

 [This group of customers] will use [my product] to solve [this problem] in [this context].

You have this right? Don’t feel bad if you don’t. But if you haven’t started actual production / development of your product, don’t go any further until you have this nailed to the wall of your boardroom with the signatures of all internal parties.

[Note, I’m not going to go into the details of what it takes to generate this target customer / product profile but if you want a good primer on this go read Innosight’s write-up of their “JOBS™” methodology. Christensen didn’t invent this concept of ensuring your product aligns with a real job a customer needs to do — it’s Marketing 201 (a.k.a. market segmentation by need states) — but his team does a nice job of framing a successful approach for avoiding the all too common dilemma I’m about to describe. I would also point you to my friends over at K&A as well but none of their relevant materials are posted up on the site.  I’ll just say you won’t truly succeed until you learn the full meaning of the word ethnography.]

In my experience, especially when dealing with engineering-minded entrepreneurs developing “new to the world” products, there is a tendency to enthusiastically focus on developing the new product without stepping back to ask, “Who will want to buy this and why?” Some people call this the Mt. Everest Syndrome — we build because we can and because it is a very cool and extremely technical challenge. There’s nothing wrong with doing it this way, but the problem is that once you’ve reached the “summit” of developing this amazing, mind blowing new widget you suddenly look up and realize, “Wait a second, now what do I do?”

The natural response is to begin chasing after potential customers because you want to get paid for your work. But if you don’t have a clear conceptual model of the person and behaviors you’re targeting, then this will be a very frustrating endeavor because at every turn you will hear a different response from a different type of customer. The Director of IT at one of the still surviving major financial institutions will tell you that your solution would be perfect to audit their expenditures of TARP funds if it had an ITIL compliant server back end that could interface with their Exchange setup. At the same time, the “typical consumer” will tell you that your GUI is too complex and ask why you can’t just dumb it down so that little Kylie can embed photos of her pet fish in her newsletter and easily send them out to the local family mailing list? And of course, the 3l33t programming types will just shake their heads and say, “Dude, where’s my command line interface so that I can link up to my headless virtual servers to manage my growing collection of torrents?!?!”

So, which one of those customer types or “personas” did you want to use for your pricing, sales growth, and marketing outreach planning purposes?

Skriiiiiitch! [mimicking the sound of a needle being yanked across an old LP].

Remember when I said there was nothing wrong with building the product first and then trying to figure out how to market and sell it? Please reach into your ears and yank out this piece of nonsense because in most cases it is absolutely wrong advice. What I haven’t said — and experience teaches — is that there is a strong possibility that you’re going to show your widget to every potential customer out there and people will shrug and say, “So what?”

Those two words should be among the most used words in a good product manager’s lexicon. “So what?” is the defining question for determining whether you have identified a solution that delivers a unique and valuable answer to a real job that an identified segment of customers want to accomplish and for which they would be willing to pay real money.

Unless you work for Microsoft Research or Los Alamos National Laboratory or some other well funded research tank, every single product idea you pursue needs to be latched onto a well-defined customer persona. That customer group is who you will target for your roll-out of the new product when it is actually released.

This is why a proper new product development effort would begin with identifying a problem or “job” that a target group of people need solved and determining:

  1. Who are these target customers? (think demographics)
  2. What existing solutions do they use and/or what work-arounds do they leverage against said existing solutions?
  3. Where and when do they use these solutions; or, better yet, where and when would they like to use these solutions?
  4. Why aren’t existing solutions solving their problem?
  5. What are the key attributes a successful solution needs to provide? (this should be a very short list of probably no more than 3 attributes)
  6. What value do these potential customers place upon such a solution?

See, here’s the thing; once you’ve identified the target customer and have some understanding of the value they place upon an optimal solution then you have completed 80% of the work required to answer your original question: how do I determine the need / saleability of a new to the industry product?

You should now know:

1. Your hypothesized initial target customer persona — when applied against the right demographic data this should enable you to identify a market sizing, which is a critical component for defining your growth model.

2. The value they place on the ideal solution — when combined with an understanding of the competitive landscape and your fixed plus projected variable production costs, this will help you determine pricing.

You still have to do the other 20%, but at this point it’s more a process of filling in the blanks than it is inventing something from whole cloth.

I know, you’re sitting there staring at the screen and thinking, “OK great, Alain, if you’re so smart, how do I accomplish that last 20 percent?”

Well, I’m glad you asked because that was my next point. When I worked in business development it was not unusual for someone from marketing or sales to send me a hurried email asking about a particular solution space and what our potential TAM was if we decided to expand in that direction. I always was quick to ask, “Are you looking to understand our Total Available Market or the Total Addressable Market?” Usually if I was talking face to face with the requestor I got a blank stare in response to that question.

Here’s the thing — if you want determine the potential opportunity for your product, you first need to know the size of the market you are considering entering / creating and what share of it you intend to own. That is the distinction between Available and Addressable. And this isn’t an easy effort. In the book, Marketing Metrics: 50+ Metrics Every Executive Should Master, the authors elaborate:

    Market definition is never a trivial exercise: If a firm defines its market too broadly, it may dilute its focus. If it does so too narrowly, it will miss opportunities and allow threats to emerge unseen. To avoid these pitfalls, as a first step in calculating market share, managers are advised to define the served market in terms of unit sales or revenues for a specific list of competitors, products, sales channels, geographic areas, customers, and time periods….

Data parameters must be carefully defined: Although market share is likely the single most important marketing metric, there is no generally acknowledged best method for calculating it. This is unfortunate, as different methods may yield not only different computations of market share at a given moment, but also widely divergent trends over time. The reasons for these disparities include variations in the lenses through share is viewed (units vs. dollars), where in the channel the measurements are taken (shipments from manufacturers versus consumer purchases), market definition (scope of the competitive universe), and measurement error. In the situation analysis that underlies strategic decisions, managers must be able to understand and explain these variations.

So in defining your market the steps to follow include:

1. Define the boundaries of the target market and determine / estimate the number of consumers / business entities who would be buyers of any solutions that are or could become available. In this case we are considering a “new to the industry” product so, while an existing solution may not exist, there likely are substitutes available that customers are using. Back in the 1950’s before there was a handheld mobile phone, everyone who needed to communicate by voice used landline phones or two-way radios. Therefore, if you were Motorola developing your analog handheld mobile cellular telephone — of which the DynaTAC was the first US public commercial prototype in 1974 — you would have defined your Total Available Market as the entire population of people who seek to communicate by direct voice transmission.

Because Motorola was a large successful company at the time, they likely projected against a global TAM. Of course, a true visionary might have said that the market was broader than just voice communication and included wireless and image communication as well and therefore broadened the TAM to include users of snail mail, telegraph, teletype, television, and messenger services.

But where do you get the data to put an actual number to that projection? Well most industries have a trade association that annually reports the manufacturing numbers or revenue for each defined product space. For PC and software worldwide and regional numbers I always relied on data from International Data Corporation (IDC), Gartner, and Jupiter Research.

Here’s an example of how Macromedia defined their TAM methodology which pretty much mirrors the approach I used to take for Macrovision. What’s interesting about their example is that they also leverage point of sale (POS) data from NPD. Nielsen, the company I work for now, provides this type of data for manufacturers and retailers in the Fast Moving Consumer Goods space. Using this level of data sophistication dramatically improves the accuracy of product growth projections, although access to this data is a costly option on the order of tens to hundreds of thousands of dollars.

If you’re focused exclusively on the consumer space then census data is your friend and a good starting point. Typically you can search out additional descriptions by analysts that spring up in corporate quarterly reports, investor presentations and online repositories including blogs authored by sector experts.

2. Describe the competitive landscape including the type and size of competitors and the nature of their rivalry, threat of entry, threat of substitute solutions, bargaining power of customers, and finally bargaining power of suppliers. The astute among you quickly identified this as a five forces analysis as defined by one Michael Porter of Harvard Business School fame. I’m not going to dive into detail here other than to say, if you haven’t done so, go read his seminal article describing this model and how to effectively use it in defining a competitive market space. A critical component is building an expanded SWOT (Strength, Weakness, Opportunity, Threat) analysis for each primary competitor since it provides a useful characterization of their capabilities and product directions. You need to avoid becoming simplistic in building this analysis and you should clearly identify where your knowledge is factual vs. hypothesized.

3. Break the market into segments and estimate their size. Market segmentation here should really focus back on the jobs a customer is looking to accomplish when they use this solution. For instance, mobile phone users differ significantly between corporate users who are looking to stay in touch with the office and their professional network as they travel across the country and the globe as compared to heavy socially mobile consumers who want the latest games, ringtones, and to be able to share photos and texts with their wide group of close friends who probably live within the same metropolitan area.

Each group has a defined set of requirements that you should ferret out and determine how valuable the opportunity is in pursuing them. Part of your consideration should include attitudes and speed of adoption. It is not always fair to assume that the best market is the 18-34 year old market in spite of what many on Madison Avenue believe. Age and socioeconomic status may not even be the appropriate characteristics for measuring the markets you are trying to define.

Let that sink in for a minute.

Your market segmentation is not necessarily based on age, income, or gender. It should be focused on people who highly identify with the problem your solution solves — whomever they might be and their likelihood for early versus later adoption.

4. Estimate market share of competitors in each defined segment. This is fairly straightforward — like I said, filling in blanks — but you should carefully consider who the competitors and how tightly they hold to your target customer base. Since this is a “new to the industry” solution you need to keep your definition broad until you have narrowed down the precise requirements. With your requirements in place you can effectively identify who plays in your identified target segment for initial launch.

So now what? Well, with all of this data in place, you need to create a market growth projection. There are a number of ways to go about this and in reality all of them are filled with guesswork, estimations, hypotheses, and at least a little gut based decision making. But no VC or CEO is going to accept that you’ve built this model based on your gut so you need some type of analytical model to back up your assertions.

Let me introduce you to the Bass Diffusion Model of adoption. If you’re familiar with the Crossing the Chasm series then this graph should feel comfortable. If you’re not familiar with it then you really should just go read the book or at least a summary of it. Unless your product is completely lacking in analogous solutions that are already or historically have existed in the market place — it does occasionally happen — you should be able to use the Bass Model as a means of projecting your sales or unit growth over the next 1, 3, 10, or 20 years. The formula may appear daunting at first glance but the two key variables you need to worry about are the coefficient of innovation and the coefficient of imitation. As the folks over at smbZen BizJournal state:

The “coefficient of innovation” is the probability that an innovator will adopt the product and, in its calculation, includes the impact of awareness building efforts. The “coefficient of imitation” simply represents the probability that your friends will adopt the service if you did.

“But,” you say, “what if there is nothing analogous that I can project against?” Well, you need to be creative and figure out an appropriate analogy because this is to some extent how you will describe the solution to your target investors as well as your target customer. If it’s completely new to the world then they will be looking for an appropriate analogy and you should be the one to provide it to them. [Note: David Locke in the comments to the original article makes the excellent point that hopefully in this case you’re looking at a technology play where you’ve developed an interesting and unique capability that now needs a market sponsor to help you exploit it and build a market for it. Go read David’s comment for deeper understanding.]

In the consumer packaged goods world, brand managers typically will supplement this data with test market research that includes both panel and real world, hand’s on test product feedback research. My employer, The Nielsen Company, has a strong lock on the former with our BASES studies methodology that leverages a very deep database of historical product introductions and actual sales performance as measured against advertising and promotional spending. We help clients like P&G build concept boards that describe the product in significant detail including imagery, branding, messaging, product SKUs, benefits, and pricing. These boards are then put in front of a few thousand consumers who fit the target customers’ characteristics and feedback is solicited through online surveys and webcasts.

Depending on how the product performs, clients may decide to put actual prototypes of the product in the hands of the sample consumers and test out their experiences with the solution. All of the data gathered from this experience enables a more realistic projection for how the product will perform at launch time.

But if you’re not a P&G you can still go out and do some of this similar effort in alpha testing of screen shots and product descriptions either through online surveys or in-person focus groups. This in part is why Google takes their “Beta” approach to many of their solutions that evolve out of Google Labs.

Finally, it is possible that you can’t go out and do any of the research I have outlined. It is entirely possible that you have developed something like Twitter — a technology that was originally created because someone thought it would be a cool idea and it slowly evolves through constant iterations and significant stumbles into a true utility that consumers love and use ravenously. But unless you are already independently wealthy or have an understanding sponsor, or are willing to spend all of your free time outside of that you spend doing your day job, this is a very difficult path to pursue. Further, there’s no evidence at this point that Twitter is actually going to produce real revenue in the long run, so you may want to focus on developing a solution that pays the bills from day one.

How Social Media Really Works

I went to email this to a friend of mine and realized that there was probably a better means of putting this thought out to him through Facebook.  Except Facebook is either down (earlier today they told me my account was inaccessible because they were doing update work on the servers) or is no longer accessible behind the work firewall.

WHATEVER – though there is probably something to be learned from that experience.  I’ll let you draw your own conclusions.  What happens when the services we depend upon are not accessible to us?  Those who are active tweeters who have experienced the fail whale on many occasions know exactly that of which I speak.

Fail Whale

With that said, here’s the main thrust of this post.  Hat tip to John Gruber for bringing Matt’s rant to my attention.

Maybe you’ve already seen Matt Haughey’s [founder of MetaFilter] rant on “How Social Media Really Works” on his personal website.  If not, it’s worth a read.

Make sure you read through the entire set of comments.  Basically his argument breaks down to: I research products by asking the people I trust and their opinion is really what matters most to me.  In the end, I want to buy the best products available so my suggestion to the marketers out there is build an excellent product and the voice of the masses will discover your excellence.  Gaming the system will gain you nothing if your product sucks.

In my mind there is strong value to his argument.  As the Cluetrain Manifesto once upon a time declared, markets are conversations.  Any attempt to game those conversations will eventually come back to bite the author / sponsoring company in the ass.  If you become a part of the conversation and realize that in today’s market, your brand is largely no longer controlled by you, then you have an opportunity to first hear, then learn from, and if you’re really good, educate your community.

A brand manager’s responsibility in this new era is to foster and cultivate their community by developing products and experiences that offer answers to the jobs their customers have that need to be done.  It means do an awful lot more listening and a lot less talking.

Decommoditizing a Commodity

Where did I go? What happened to the flurry of posts?  Well what can I say, I took the Summer off to spend time with my family, change jobs, and rediscover my priorities in life.  Today I am in a much healthier position than I was over the last 5 years while I was working, pursuing my MBA, and then moved on to consulting. 

I literally took time to smell and cultivate the roses in my backyard and clearly see the benefits of taking a 3 month sabbatical about every 10 years.

So with that said, here’s a fun little piece I wrote in response to a request from Jeff Lash who runs the Ask a Good Product Manager web site.  It’s always fun to flex the innovation fingers a little and think through the hard questions.  This will likely spawn about a half dozen other posts in the coming weeks on how to attack or defend a market with products and how to harness innovation in order to accomplish that endeavor.

So here’s the question: 

What do product managers do for commodity products like toothpaste, pens, pencils, staplers, coffee mugs etc. where customer needs have not changed for ages. How do you differentiate in an overcrowded market? 

Ah, the age old question, how do you survive in a market with slim to zero margins because consumers see no difference between your brand and that provided by competitors A, B, through Y and Z?  The simplistic answer is to use the cheapest raw materials possible, offshore your manufacturing, go for scale in distribution, build tight relationships with your channels, and roll up your competition until you own the market.  That used to deliver some success but in the world of Wal-Mart, Costco, private labels, and gads, a bazillion on-line stores, even that is not enough.  Why?  Because year after year, for any product that is the same as what you sold them last year, Wal-Mart will say, “Here’s the price you gave me last year. Here’s what I can get a competitor’s product for. Here’s what I can get a private-label version for. I want to see a better value that I can bring to my shopper this year. Or else I’m going to use that shelf space differently.”  

So what do you do?  Innovate!  And by that I don’t mean go brainstorm what the next new pencil or pen or stapler ought to look like.  What I mean is you need to reconsider the market you compete in and more closely examine the consumers you are serving.  Let’s walk through one of the examples you outlined and consider how one might differentiate within that market.   

Pencils

We’re talking about a writing implement that has been around for over 400 years, the basic form and construction of which hasn’t changed since originally designed back in the 1700s.  This should be the ultimate manufactured commodity product!  When we think of a pencil inevitably most of us think of the good old standard wooden yellow no. 2 lead pencil with a red (or maybe green) eraser held on top by a compressed aluminum or brass ferrule. 

What’s the benefit of the standard pencil?  Some people use pencils because they’re cheap and easy to replace if lost.  A former boss of mine, a professor, would use pretty much nothing but a no. 2 pencil and by observation I would say that’s because he’s an old creature of habit who wants an erasable writing implement but who also loses them or leaves them behind everywhere he goes.  Parents and teachers give children pencils because the impermanence of their marks makes them good for correcting mistakes as well as cleaning up stray scribbles on desks, clothes, and walls. Artists and architects prefer pencils for their ability to sharpen the point in the manner they like and the various textures this facilitates creating on paper. Obviously the lasting power of the wooden pencil is its ability to satisfy these needs and many others.   

 To put some numbers to that point, consider that in this era of modern technology where the pen followed by the typewriter followed by the word processor supposedly replaced the pencil, approximately 2.4 billion pencils of all types are still sold annually in the United States.  The average cheapo private label yellow no. 2 pencil based on a quick check at the neighborhood Staples sells for 99 cents a dozen.  In other words, the cheapest wooden pencil available sells for less than a dime a piece.  And a pencil is a pencil, right?  So how do you ensure consumers buy your brand at a premium price?  

The intuitive product manager might think, let’s consider what’s wrong with the no. 2 pencil: 

  1. You have to keep sharpening it

  2. You must have ready access to a sharpener

  3. The pencil shortens with every turn of the sharpener

  4. It’s a waste of natural resources because you never use the entire pencil (see #3)

  5. The wood shavings are messy

  6. The shape and diameter make it hard for young and aged hands to grasp leading to writer’s fatigue

  7. You keep paying for the container (the wood) when all you really need is the lead

  8. It doesn’t offer multiple lead diameters from very fine (.03 mm) to very fat (5.6 mm)

  9. You have to carry multiple pencils for various weights of lead

  10. The lead point is constantly exposed so the lead marks up whatever it rubs on or else it breaks easily

Given all of these problems the product manager might automatically determine that clearly there is a market for a mechanical pencil and they should start manufacturing those. Perhaps, but doing so requires completely new capabilities from the design to the manufacturing stage and if all you make is wood pencils, a shift like that represents significant capital investments to either build or acquire such specialization.  And yet given the continued demand for wooden pencils, there are interesting ways to differentiate within the confines of the original product definition alone – consider special hardwoods, eco-friendly renewable forests, recycled woods, and specialty leads.   

It’s important to frame this thought in the triangle of consumer values – sometimes called the Value Mix.  Consumers evaluate the benefits they gain from a product across three variables as described below.

Marketing Value Mix

This is an important framework to consider since with a commodity product, the functional requirements (wood, graphite, eraser, shape, size) are fairly universally met across available competitive offerings and therefore manufacturers are forced to compete on either economic (a race to the bottom for lowest price) or psychological (appealing to a consumer’s particular desires for esteem or recognition).  Ignoring price, this leaves us with a psychological approach that might be supported by adjustments to the functional attributes. Let’s think about the three groups of consumers discussed above and consider how a pencil manufacturer might effectively target each one of them in a manner that would drive a price premium and brand differentiator. 

Teachers

Educators who work in K-12 are a perfect segment for targeting given that pencils and school seem to go together like peanut butter and jam.  Consider that in primary education (Grades K-4) and secondary education (Grades 5-12) respectively, women comprise 89% and 63% of the teachers.  If women are a primary target, then perhaps aligning your pencil with a cause that they are passionate about makes sense.  For example, selling a pencil that is pink or covered with painted pink ribbons and marketed with a campaign that states a percentage of the revenues for these pencils are contributed to supporting breast cancer research, might be appealing to this group.  Dixon Ticonderoga sells just such a pencil and they retail at $4.29 a dozen.  That’s a 430% increase just by painting a pencil a different color and aligning your product with a cause. 

Children

Young children are going through the process of learning to write and doing so requires significant development of the fine motor skills in their hands.  Teachers and parents look for ways to help the child improve those skills and one approach is to increase the diameter of the pencil, thereby making it easier to grasp during the earlier stages of the learning experience.  One way to accomplish this is with one of those rubber triangular sleeves that covers ¼ of the pencil.  But an approach that plays to the pencil manufacturer’s existing capabilities is to simply increase the diameter of the wood encasing the pencil and the stick of graphite inside accordingly.  Take it one step further and market the pencils as “My First Pencil” and suddenly you have a product that retails for $5.29 a dozen.  Now considering that this pencil is 13/32” in diameter versus the typical ¼” diameter pencil, there is an increase in material costs but only by a factor of 2 while your retail price has jumped by a factor of 5.3!  That means you’re still making ~300% more in profits on a simple wooden pencil. 

And if you’ve already made a name for yourself with the teachers of these children, it’s highly possible your brand will be included in the list of recommended supplies to purchase that the teacher gives out at the beginning of the school year.  This is important because the 4 weeks preceding and 4 weeks following the start of school is when 25% of the annual school and office supply purchases occur. 

Designers/Architects

When you think of this consumer group you realize that functionality is critical to them since the pencil is a key tool of trade and therefore an important part of their work product.  But you also realize that their work is all about aesthetics so image has a strong impact as well in what they choose.  Two possible approaches here that both play on the same psychological dimension should be considered.  Take a typical pencil, die the wood black, paint it a glossy black, add raised dots to create a grip, get rid of the eraser, and suddenly you have a sleek black arrow that looks elegant on the desk or in the hands of the user.  This pencil reflects their style and sense of design.  And it also sells for $24 a dozen as the Faber Castell “Black”.  Even if the materials (graphite, wood, dye, paint) are 400% more expensive, you’ve realized a 2000% increase in profits where the pencil goes from less than a dime a piece to $2.00 a piece.

And if you think that is something, try creating “The Perfect Pencil” which is the combination of a fine cedar pencil with SV-bonded anti-break lead in B grade and sporting a soft non-smudging eraser with an aluminum extender (for when the pencil shortens) with built-in sharpener with a high-quality sharpening blade and a sprung pocket clip.  The price on this bad boy?  Between $75 and $250 for the pencil gift set (depending on where you buy it) which includes the extender and three pencils.  And then you can purchase pencil refills at 5 for $50.  That’s $10 a pencil.  Making it a 10,000% increase just connected to the prestige of a niche focused product.  Now granted you won’t find many who are willing to pony up that kind of cash for the Porsche of pencils, but that’s what segmentation is all about. 

Hopefully that helps you consider that there are always a variety of options available to the product manager even if they’re dealing with a commodity product.  Dixon Ticonderoga and Faber Castell, as the two largest pencil manufacturers have taken a targeted segmentation approach to their market that allows them to spread widely across their market and then benefit from deep opportunities where they are found. 

One of the key things I didn’t cover in this answer was that your marketing campaign will have to support the positioning chosen which in the CPG world means you’ll have to spend promotion dollars or else provide for a larger trade spend budget.  In some cases, like the specialized designer pencils, your better bet is to find the right avenues, potentially online, to work the small community of pencil connoisseurs and introduce your new product to them.  By support, I mean you have to nail the single advertising message that will connect your new product with your brand and the aspiration or interest of the target consumer.  That my friends, is no small feat and something to approached very carefully.

You Can’t Innovate Like Apple

Note: Experience tells me I must start with the disclaimer that I admire Apple but I am not a Macaholic or a Windows Geek.  I don’t care who has the better OS except to the extent that it provides examples for successful or poor innovation.

Apple!  Apple!  Magazines can’t possibly be wrong so Apple is clearly the Most Admired, the Most Innovative, and the Master at Design.

Let me tell you, when what you teach and develop every day has the title Innovation attached to it, you reach a point where you tire of hearing about Apple.  Because everyone believes the equation Apple=Innovation is a fundamental truth akin to the Second Law of Thermodynamics, Boyle’s Law, or Moore’s Law.  But ask these same people if they understand exactly how Apple comes up with their ideas and what approach they use to develop such blockbuster products and whether it is a fluky phenomenon or based on a repeatable set of governing principles and you mostly get a dumbfounded stare.  This is what frustrates me because people worship what they don’t understand.

I’ve been meaning to write this post for some time but finally sat down and put pixel to screen after coming across a description of Michael Lopp’s (a Senior Engineering Manager at Apple) discussion of how Apple does design during the panel he did at SXSW Interactive with John Gruber (yes for you Apple heads, that Daring Fireball guy) on March 8th titled Blood, Sweat, and Fear: Great Design Hurts.  I know, you’re saying, It’s been 13 days Alain, how slow can you be?  Well, I was waiting for someone to post an actual recording of the seminar but neither video nor audio seems to exist at this point.  If someone reads this and happens to have such a recording please, please, share!

What will follow then is a collection of insights that various attendees created from their notes of attending and then my own personal discussion of what this portends for people who aspire to be like Apple.  My intention is to attempt to synthesize what various attendees have written into a single representation of what Lopp and Gruber actually said.

Sketchnote of Blood, Sweat and Fear

Helen Walters at BusinessWeek summarized Lopp’s panel with five key points:

Apple thinks good design is a present.  Lopp starts off this section by discussing of all things, the story of the obsessive design of the new Mentos Box.  You know Mentos right?  The really odd packaging (paper rolls like Spree candy) promoted by some of the most bizarre ads on TV? It’s the candy that nobody I know eats, they just use it to create cola geysers.  Have you looked recently at the new packaging Mentos comes in?  Why did they change the packaging from a roll to a box?  I’ll do a post on this later but if you want to read about it here’s an article from 2003 discussing the rationale for the change.  Lopp says the new box is a clean example of obsessive design because the cardboard top locks open and then closes with a click – there’s an actual latch on the box and it actually works.  It’s not just a square box but one that serves a function and works.  I went out and bought a box just so I could examine it more closely and it’s an ingenious design of subtle simplicity that works so well even shaking it upside down does not pop the box open.

According to John Gruber, the build-up of anticipation leading to the opening of that present is an important (if not the most important) aspect of the enjoyment people derive from Apple’s products.  The world divides into two camps:

  1. Those who open their presents before Christmas morning
  2. Those who wait – they set their presents under the tree and like a child agonize over the enormous anticipation of what will be in the box when they open it on Christmas morning

Apple designs for #2.  No other company is so heavily fetishized in the online unboxing photo documentation phenomenon.  But few companies put as much attention to detail as Apple does to the fit and finish of the box let alone the out of box experience.  How many companies do you know that make packaging p*rn? And you can capture that Christmas morning experience more than once a year with every stop you make at the local Apple store.  Apple wraps great ideas inside great ideas and the whole experience is linked as the present concept traces from the bottom up: Apple’s OS X operating system is the present waiting inside its sleek, beautiful hardware; its hardware is the present artfully unveiled from inside the gorgeous box; the box is the present waiting for your sticky little hands inside its museum-like Apple Stores; and the bow tying it all together? Steve Jobs’s dramatic keynote speeches, where the Christmas morning fervor is fanned on a grand stage by one of the business world’s most capable hype men.

Pixel perfect mockups are critical.  This is hard work and an enormous amount of time but is necessary to give the complete feeling for the entire product. For those who aren’t familiar with the term this means the designers for a piece of software at Apple create an exact image down to the very pixel (the smallest point of light on your monitor – it is the basic unit of composition on a computer or television display) for every single interface screen and feature.  There is no Ipsum Lorem used as filler for content either.  At least one of the Senior Managers refuses to look at any mock-ups that contain such Greek filler.  Doing this removes ALL ambiguity – everyone knows and can see what the final product will look like and critique it accordingly.  It also means you won’t get changes by the designer or engineer after the review as they are filling in the content – something I have seen happen time and time again.  Ultimately it means no one can feign surprise when they see the real thing later on.

10 to 3 to 1.  Take the above concept and pile on top of it the requirement that Apple designers expect to design 10 different mockups of any new feature that is considered.  And these are not just crappy mockups, these all represent different but really good implementations that are faithful to the product specifications.  Then narrow these down to 3 based on specific criteria that the team spends months further developing until they finally narrow down to 1 final concept that truly represents their best work for production. This approach is intended to offer enormous latitude for creativity that breaks past restrictions.  But it also means they inherently plan to throw away 90% of the work they do.  I don’t know many organizations for whom this would be an acceptable ratio.  This is a major reason why I say you can’t innovate like Apple.

Paired design meetings.  Every week the teams of engineers and designers get together for two meetings.

  1. Brainstorm meeting – leave your hang-ups at the door and go crazy in developing various approaches to solving particular problems or enhancing existing designs.  Free thinking with absolutely no rules.
  2. Production meeting – The absolute opposite of the brainstorm where the aim is to put structure around the crazy ideas and define the how to, why, and when.

These two meetings continue throughout the development of any application and if you know the stories of Steve Jobs discarding finished concepts at the very last minute you will understand why the team operates in this manner.  It’s part of their corporate DNA of grueling perfection.  But the balance does shift away from free thinking and more toward a production mindset as the application progresses even while they keep the door open for creative thought at the latest stages.

Pony meetings.  These meetings are scheduled every two weeks with the internal clients (AKA God himself and his minions) to educate the decision makers on the design directions being explored and influence their perception of what the final product should be.

They’re called “Pony” meetings because they correspond to Lopp’s description of the experience of Senior Managers dispensing their wisdom and wants to the development team when discussing the early specifications for the product.  “I want WYSIWIG…I want it to support major browsers…I want it to reflect the spirit of our company.”  [What???] In other words, I want a pony.  Who doesn’t want a pony?  A pony is gorgeous!  The issue that anyone who has sat through these types of experiences can tell you [we do it all the time in our senior management interviews as we develop a strategic vision for new product development] is that these people are describing what THEY think THEY want.  Lopp cops to reality in explaining that since they are signing the checks you cannot simply ignore these senior managers, but you do have to manage their expectations and help align their vision with the team’s.

The meetings achieve this purpose and give a sense of control to senior management so that they have visibility into the process and can influence the direction.  Again, the purpose of this is to save the team from pursuing a line of direction that ultimately gets tossed because one of the decision makers wasn’t bought in.

Now, if you want to get the quick summary of what we just discussed, I highly recommend reading Mike Rohde’s SXSW Interactive 2008 Sketchnotes.  He took highly illustrated notes of the Lopp/Gruber panel.  Content for this write-up also came from: Scott Fiddelke, Dylan at The Email Wars, Jared Christensen, David at BFG, and Tom Kershaw.

What else does Apple do differently?  If you read the various interviews that Steve Jobs and Jon Ive have given over the last few years you’ll find a few specific trends.

1. Apple does not do market research

This is straight from the man’s mouth: We do no market researchThey scoff at the notion of target markets and they don’t conduct focus groups.  Why?  Because everything Apple designs is based on Steve and team’s perception of what THEY think is cool.  He elaborates further:

It’s not about pop culture, and it’s not about fooling people, and it’s not about convincing people that they want something they don’t. We figure out what we want. And I think we’re pretty good at having the right discipline to think through whether a lot of other people are going to want it, too. That’s what we get paid to do.  So you can’t go out and ask people, you know, what’s the next big [thing.] There’s a great quote by Henry Ford, right? He said, ‘If I’d have asked my customers what they wanted, they would have told me “A faster horse.” ‘

Said another way, Steve hires really smart people and he lets them loose on a leash since he overlooks it all with an extremely demanding eye.  If you’re seeing visions of the “Great Eye” from J.R.R. Tolkein’s books then you probably wouldn’t be too far off.  Here’s the way their simple process works:

  1. Start with a gut sense of an opportunity and the conversations start rolling…
  2. What do we hate? (Our cellphones)
  3. What do we have the technology to make? (A cellphone with a Mac inside)
  4. What would we like to own?(An iPhone, what else?)

But Jobs also explained that in this specific conversation, there were big debates across the organization on whether or not they could and should do it.  Ultimately, he looked around and said, Let’s do it. 

I think it’s clear they also benefit with the inauspicious leak out to the market – and by that I mean I think this overly tight-lipped organization occasionally leaks early ideas out to the market to see what kind of response they might generate.  Again, what other company benefits from having thousands of adoring designers who come up with beautifully photoshoped concepts of what they think the next great product should look like?

2. Apple has a very small team that designs their major products 

Look at Jonathan Ive and his team of a dozen to twenty designers who are the brains behind the genius products that Apple has delivered to the market since the iMac back in 1998.  New product development is not farmed out across the organization but instead is creatively driven by this select group.  Here’s how one journalist described them:

“Apple is a cult, and Apple’s design team is an even more intense version of a cult,” notes Riley. Actually, it’s not a big cult — just a dozen people or so. But they operate at an extremely high level, both individually and as a group. Ive has said that many Apple products were dreamed up while eating pizza in the small kitchen at the team’s design studio.

It’s a team that has worked in idyllic comfort for many years. Some designers were at the company long before Ive arrived in 1992. They rarely attend industry events or awards ceremonies. It’s as though they don’t require outside recognition because there isn’t any higher authority on design excellence than each other, and because sharing too much information only risks helping others close the gap. And they personally reflect the design sensibilities of Apple’s products — casually chic, elitist and with a definite Euro bent. The team, made up of thirty- and fortysomethings, has a definite international flair. Members include not only the British Ive but also New Zealander Danny Coster, Italian Daniele De Iuliis, and German Rico Zörkendörfer. “Its good old-fashioned camaraderie — everyone with the same aim, no egos involved,” says British fashion designer Paul Smith, a friend since the late 1990s when Ive sent him a new iMac. “They have lots of dinners together, take lots of field trips. And they’ve turned these gray frumpy objects called computers into desirable pieces of sculpture you’d want even if you didn’t use them.”

Most of Ive’s team live in San Francisco, and rumor has it that the starting salary for the group is around $200,000, some 50% above the industry average. They work together in a large open studio with little personal space but great privacy. Many Apple employees aren’t allowed in, for fear they’d catch a glimpse of some upcoming product. A massive sound system pumps up the music. Ive invests his design dollars in state-of-the-art prototyping equipment, not large numbers of people. And his design process revolves around intense iteration — making and remaking models to visualize new concepts. “One of the hallmarks of the team I think is this sense of looking to be wrong,” said Ive at Radical Craft. “It’s the inquisitiveness, the sense of exploration. It’s about being excited to be wrong because then you’ve discovered something new.”

Ive’s team at Apple isn’t the usual design ghetto of creativity that exists inside most corporations. They work closely and intensely with engineers, marketers, and even outside manufacturing contractors in Asia who actually build the products. Rather than being simple stylists, they’re leading innovators in the use of new materials and production processes. The design group was able to figure out how to put a layer of clear plastic over the white or black core of an iPod, giving it a tremendous depth of texture, and still be able to build each unit in just seconds. “Apple innovates in big ways and small ways, and if they don’t get it right, they innovate again,” says frog design founder Hartmut Esslinger, who designed many of the original Apple computers for Jobs. “It is the only tech company that does this.”

Jobs himself has delegated away many of his day-to-day operational responsibilities to enable him to focus half of his week on the high and very low level development efforts for specific products. 

3. Apple owns their entire system

They are completely independent of reliance on anyone else to provide inputs to the design and development of their products.  They own the OS, they own the software, and they own the hardware.  No other consumer electronics organization can easily do what Apple does because they own all of the technology and control the intimate interactions that ultimately become the total user experience.  There is no other way to ensure such a seamless experience – a single executive calls the final shots for every single component.

Jobs says this question of control is critical to Apple’s success:

I’ve always wanted to own and control the primary technology in everything we do. Take audio. For years, the primary technology was the [marking mechanism] inside a CD or a DVD player. But we became convinced that software was going to be the primary technology, and we’re a pretty good software company.

So we developed iTunes [Apple’s music jukebox software that later morphed into the iTunes Music Store]. We’re a good hardware company, too, but we’re really good at software. So that led us to believe that we had a chance to reinvent the music business, and we did.

4. Apple focuses on a very select group of products

 Apple acts like a small boutique and develops beautiful artistic products in a manner that makes it very difficult to scale out to broad and extensive product lines.  Part of this is due to the level of attention to detail provided by their small teams of designers and engineers.  To think that a multi-billion dollar company only has 30 major products is astounding because their neighbors at that level of revenues have thousands of products in hundreds of different SKUs.  As Jobs explains, this is the focus that enables them to bring such an extensive level of attention to excellence.  But it is also an inherently risky enterprise because they are limited in what new product areas they can invest in if one fails.

“Apple is a $30 billion company, yet we’ve got less than 30 major products. I don’t know if that’s ever been done before. Certainly the great consumer electronics companies of the past had thousands of products. We tend to focus much more. People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully.

I’m actually as proud of many of the things we haven’t done as the things we have done. The clearest example was when we were pressured for years to do a PDA, and I realized one day that 90% of the people who use a PDA only take information out of it on the road. They don’t put information into it. Pretty soon cellphones are going to do that, so the PDA market’s going to get reduced to a fraction of its current size, and it won’t really be sustainable. So we decided not to get into it. If we had gotten into it, we wouldn’t have had the resources to do the iPod. We probably wouldn’t have seen it coming.”

5. Apple has a maniacal focus on perfection

They say that Steve Jobs had the marble for the floor at the New York Apple store shipped to California first so he could examine the veins.  He also complained about the chamfer radius on the plastic case of an early prototype of the Macintosh.  You had better believe, given the 10 to 3 to 1 approach for design, that every shadow, every pixel is scrutinized.  It’s in their DNA.  They are willing to spend the money to make sure everything is perfect because that is their mission.  Just as an example, when Jonathan Ive and team developed the original iMac they wanted to give the colored plastic shell on the back a crystalline look:

To understand how to make a plastic shell look exciting rather than cheap, Ive and others visited a candy factory to study the finer points of jelly bean making. They spent months with Asian partners, devising the sophisticated process capable of cranking out millions of iMacs a year. The team even pushed for the internal electronics to be redesigned, to make sure they looked good through the thick shell. It was a big risk for Jobs, Ive, and Apple. Says one rival: “I would have had to prove that transparency would increase our sales, and there’s no way to prove that.” He figures Apple spends as much as $65 per PC casing, vs. an industry average of maybe $20.

So is it possible for you to innovate like Apple?

Now, given all of this, what is a company to do if they want to innovate like Apple?  First, forget about it unless you are willing to invest significantly and heavily to establish a culture of innovation like Apple has.  Because it’s not just about copying Apple’s approach and procedures.  The vast majority of executives who say, I want to be just like Apple, have no idea what it really takes to achieve that level of success.  What they’re saying is they want to be adored by their customers, they want to launch sexy products that cause the press to fall all over themselves, and they want to experience incredible financial growth.  But they generally want to do it on the cheap.

To succeed at innovation as Apple has you need the following:

You need a leader who prioritizes new product innovation.The CEO needs to be someone who looks out on the horizon and consistently sets a vision of innovation for the organization that he/she is willing to completely support with people, funds, and time.  Further, that leader needs to be fluent in the language of your customer and the markets you compete in.  If the CEO cannot be this person then they need to be willing to invest that role into a senior executive and give them the authority and latitude to effectively oversee the new product development process.

Jobs explains it this way:

You need a very product-oriented culture, even in a technology company. Lots of companies have tons of great engineers and smart people. But ultimately, there needs to be some gravitational force that pulls it all together. Otherwise, you can get great pieces of technology all floating around the universe. But it doesn’t add up to much. That’s what was missing at Apple for a while [during the 11 year period between 1985 and 1997 while he was gone]. There were bits and pieces of interesting things floating around, but not that gravitational pull.

People always ask me why did Apple really fail for those years, and it’s easy to blame it on certain people or personalities. Certainly, there was some of that. But there’s a far more insightful way to think about it. Apple had a monopoly on the graphical user interface for almost 10 years. That’s a long time. And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly.

But after that, the product people aren’t the ones that drive the company forward anymore. It’s the marketing guys or the ones who expand the business into Latin America or whatever. Because what’s the point of focusing on making the product even better when the only company you can take business from is yourself?

So a different group of people start to move up. And who usually ends up running the show? The sales guy. John Akers at IBM (IBM ) is the consummate example. Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they’re no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn’t.

You need to focus.  A cohesive vision needs to be established that describes the storyline for your products and services.  That storyline needs to decisively state what is in bounds and what is out of bounds over an 18 month to 3 year period.  Everyone who matters to the development process needs to be in lockstep with this vision which means you need to have open lines of communication that are regularly and consistently managed.  This storyline or strategic vision needs to be revised according to market changes and the evolution of your new product pipeline.  It helps that Apple tends to approach their products with a systemic frame of mind, looking to develop the “total solution” rather than just loosely joined components.

Again, here is how Jobs describes their approach:

And it comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.

He continues the thought by describing that they focus on two things and the first one is to create the best products available whether its PCs, or phones, or music players or online media stores:

We don’t get a chance to do that many things, and every one should be really excellent. Because this is our life. Life is brief, and then you die, you know? So this is what we’ve chosen to do with our life. We could be sitting in a monastery somewhere in Japan. We could be out sailing. Some of the [executive team] could be playing golf. They could be running other companies. And we’ve all chosen to do this with our lives. So it better be damn good. It better be worth it. And we think it is.

Obviously, the other focus is to make a profit since that is what supports the continued efforts to design the next great product.  And when every one of the major products is a moonshot, they have to work to ensure it meets exacting standards to do everything they can to ensure success.

You need to know your customer and your market.  Steve Jobs and team can get away with not doing market research, identifying target markets, or going out and talking with customers because of the markets they play in and the cult-like customers who adore them.  Most technology companies believe they can get away with this and most technology companies get it wrong.  Quick, identify 10 different pieces of technology that truly understood and met your needs and don’t bug you due to a major flaw that you either have to live with or compensate for in some fashion.  Could you come up with more than five?  I didn’t think so.  We’re drowning in a sea of technological crap because every product that is released to the market is a result of multiple compromises based on decisions made by the brand manager, the R&D product manager, the marketing manager, the sales manager and everyone else who has skin in the game as they prepare the offering to meet what THEY think the target customer’s needs are.

The reason Jobs and Jonathan Ive get it right is because they design sexy products with elegant and simple interfaces for themselves and count on their hip gaggle of early adopters to see it the same way.  Once the snowball starts rolling, it’s all momentum from there.  Apple doesn’t sell functional products, they sell fashionable pieces of functional art.   That present you’re unwrapping is all about emotional connection.  And Steve Jobs knows his marketplace better than anyone else.

Because you’re not Apple and you are likely not selling a similar set of products, you must do research to understand the customer.  And while I’m sure Steve says he doesn’t do research, it’s pretty clear that his team goes out to thoroughly study behaviors and interests of those they think will be their early adopters.  Call it talking to friends and family, but honestly you know that these guys live by immersing themselves in the hip culture of music, video, and computing.

The point is not to go ask your customers what they want.  If you ask that question in the formative stages then you’re doing it wrong.  The point is to go immerse yourself in their environment and ask lots of why questions until you have thoroughly explored the ins and outs of their decision making, needs, wants, and problems.  You should be able to break their need or opportunity down into a few simple statements of truth.

As Alan Cooper says, how can you help an end user achieve their goal if you don’t know what it is?  You have to build a persona or consumer model that accurately describes the objectives of your consumer and the problems they face with the existing solutions.   The real benefit, as I saw in my years working at InstallShield and Macrovision, is that unless you put a face and expectations on that consumer, then disagreements on features or product positioning or design come down to who can pull the greatest political will rather than who has the cleanest interpretation of the consumer’s need.

You need the right people and to reward them accordingly.  The designers at Apple are paid 50% more than their counterparts at other organizations.  Now these guys aren’t working at Apple simply because they’re paid more.  They stay at Apple because of the amazing things they get to do there.  Rewards are about salary and benefits, but they are also about recognition and being able to do satisfying work that challenges the mind and allows the creative muscles to stretch.  Part of this also comes down to ensuring your teams are passionate about innovation and dedicated to the focus of the organization.  As Jobs says, he looks for people who are crazy about Apple.  So you need to look closely at who you are hiring and whether you have the right people in the organization in the first place.

It’s not much, but I’ve only begun to carve out what it takes for you to succeed at developing “perfect” products like Apple does.  And honestly, their products are far from perfect.  But that’s a post for another day.

8 Year Old Twins Saving the World One Wedgie at a Time

I was sitting at the gas station filling my tank at our local Speedway last night when a brief news segment on the gas pump TV caught my eye.*  It was a story about 8 year old Ohio twin brothers, Justin and Jared Serovich who developed the Rip Away 1000 – otherwise known as wedgie-proof underwear.  I burst out laughing at the ingenuity as I watched one brother grab on to his twin’s waist band and all of sudden he was holding his brother’s boxer shorts.  As Justin explained, When the person tries to grab you like the bully or the person tries to give you a wedgie they just rip away.  His brother Jared was happy to explain their secret, We took some old pairs of underwear and cut the bottom and side seams and put in Velcro.

wedgie-proof-underwear.JPG

One would think that the back story would be that the boys kept getting picked on at the playground and became determined to find a way to save their tender derrieres with a simple solution.  However, apparently, the boys’ Mom caught them in the basement one day giving each other the wedgie treatment and she scolded them.  Then as any parent might do when faced with the inexplicable shenanigans of young boys,  she suggested that someone should invent wedgie-proof underwear.

Inspiration!  The boys were looking for a concept to develop for the Central Ohio 2007 Invention Convention which encourages young people to come up with creative solutions to everyday problems and they had found their idea.  In fact it took them all the way to 2nd place in the competion and invitations to be on Fox Morning News, MSNBC, CNN, and even The Ellen DeGeneres Show.  I’m surprised that Dave Letterman never invited them on to his show for the Young Inventors segment but I guess it might be too low-brow for his show’s theme.  Though how that is possible given his “Will it float” series I’m not exactly sure. 

One might ask what will happen next when the kid is standing there commando and the bully is running around with their underwear.  This is the point according to Justin, where teacher intervention would be called for.  Still, in my mind, the fact that they could pull your underwear off would likely correlate with more wedgies rather than fewer given the way I recall the 8 year old mind works.  But at least they wouldn’t be painful so I guess one would classify the invention as protective rather than preventative.

It turns out this isn’t a new story, it was all over YouTube and Digg back in November 2007 but somehow I missed it.  Still, in celebration of their genius, I’ve decided to dedicate my Thursday posts, when they happen, to novel inventions by young innovators.  Who knows, these boys might go on to be anything from fashion designers to nanotechnologists with their creative minds.

 *The thought that I would say, I was watching the news on my gas pump TV this evening, just seems so outlandish but Madison avenue is always looking for new ways to reach the consumer where they are idle and have time to fill.  Perhaps personalized advertising as envisioned in the Tom Cruise movie, Minority Report, was not that far off after all.

What a brave new world we have entered.

Bringing Symbols of Prosperity to the Masses

What is the value of owning a car?  What benefits do 4 wheels and a roof offer to the driver?  As someone who lives in Chicago and commutes every day – on a morning like this when it is 15 degrees Fahrenheit outside, the immediate answer is safe, efficient, dry and especially warm transportation.  Safety comes first in my mind because when it comes right down to it, a car is the box on wheels that protects the cargo – you and your family – when an accident happens.

Would you believe though that owning a car rather than say a motorcycle could improve your social standing and increase your marriage prospects?  In America where we worship our cars it would seem odd to consider that car ownership bestows that kind of value but why else do young men lust after a high powered 1968 Nightshade Green GTO hardtop or a sleek BMW convertible or a massive jacked-up Ford F-150 truck with large knobby tires?  To be cool and impress the girls, of course.  Cars are all about status.  One just had to stroll the aisles of the Chicago Auto Show which wrapped up 10 days ago to see what the auto manufacturers were selling: power, prestige, thrills, excitement with the appropriate amounts of safety and convenience peppered in as well.  For some young men, their car defines them – it symbolizes their freedom, their power, their virility, their style.

GTO

In an earlier post I examined Dr. Paul Polak’s focus of designing for the other 90 percent of the world.  By the other 90 percent he of course means focusing innovation efforts on helping improve the lives of those who scratch to survive each day by improving their access to food and water, energy, education, healthcare, revenue generating activities, and affordable transportation.

Tata Motors has focused on delivering that last benefit – transportation – to the masses in India and perhaps to the world.  On January 15th, the largest auto manufacturer in India unveiled their rumored $2500 car (or 100,000 rupees), the Nano.  It may not have been unveiled at the Detroit Auto Show but it instantly became the talk of that show.  Tata drew a line in the sand and declared that they were prepared to pursue the very low end of the market, the consumers who today cannot afford an automobile but instead make do with a motor scooter or if they are lucky a 3 wheel rickshaw.

3 Wheel Rickshaw

The Chairman, Ratan N. Tata described his personal inspiration for the car:

I observed families riding on two-wheelers – the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby. It led me to wonder whether one could conceive of a safe, affordable, all-weather form of transport for such a family. Tata Motors’ engineers and designers gave their all for about four years to realise this goal. Today, we indeed have a People’s Car, which is affordable and yet built to meet safety requirements and emission norms, to be fuel efficient and low on emissions. We are happy to present the People’s Car to India and we hope it brings the joy, pride and utility of owning a car to many families who need personal mobility.

Family on scooter

He doesn’t go into the full details though of what it means to own a four wheel rather than a 2 or 3 wheel vehicle in the Indian villages.  Of all things, owning a 4 wheel vehicle increases the marriage prospects and perception of success of the man/family who owns it.  An excellent Forbes article describes the work of the project manager who oversaw the development of the Nano, Girish Wagh, and what he learned in his earlier efforts to develop a truck that would compete with the 3 wheeled motorized rickshaws that many farmers use.  By doing something no one had ever done at Tata – talk to customers! – he finally found the key insight.  As the article explains:

In 2000, Ravi Kant, Managing Director of Tata Motors, needed someone to take on a risky project–to extend the truck line beyond the sturdy Tata mainstays. Kant wanted one cheap enough to compete with three-wheeled, motorized rickshaws and even considered building a small, three-wheeled truck.

Before starting the project, Wagh did something no one at Tata Motors ever had: He talked to customers. The three-wheeler men inevitably insisted on a cheap, dependable truck that could go from village to market carrying, say, 200 chickens, a ton of onions or potatoes, or 2,000 eggs. One night, as sunset approached, Wagh stuck with one rickshaw driver. “I kept asking the question. Why? Why? Why do you want a four-wheeler?” Wagh remembered. Finally, he got the real answer. It turned out it wasn’t really a problem of chickens or eggs. “If I had a four-wheeler, I would have better marriage prospects in my village,” the young man said. Drivers of three-wheelers are looked down upon in India. Wagh realized that four wheels had emotional, not just practical, appeal.

When Tata Motors brought out the bare-bones Ace truck in May 2005 for just $5,100, it had a monster hit: The company sold 100,000 in 20 months. To try to keep up with demand, it offers the truck only in white to save the time it takes to change colors in the factory paint shop. Tata is building a new factory that will be able to turn out 250,000 a year starting this month.

So when Tata Motors needed someone to take charge of the company’s most ambitious plan yet–to build the world’s cheapest car ever–Ravi Kant, who by then had become the company’s managing director, again turned to Wagh. Wagh remembers what he learned marketing the little truck. “People want to move from two-wheelers to four-wheelers,” he says. “Today they can’t afford it.”

Drivers of 3 wheelers are looked down upon in India which means that people want to move from 2 or 3 wheel to 4 wheel vehicles and today they can’t afford it.  Two wheeled scooters and motorcycles sell for $675 to $1600 and the per capita annual income is ~$800.  So this begins to make it feasible for millions of people in India and other developing countries to own a car.

Tata Silver Family

Now I’m not going to go into the contentious side of this question because there really are significant concerns with adding more cars to the already crowded streets in India or any country for that matter.  Increased petrol dependency, increased consumption of a dwindling resource, and let’s not forget about air quality and the ozone layer.  All kinds of people are coming out of the woodwork to say what a bad precedent this is likely to create.  Because every car manufacturer out there is studying this little car very closely.  It wouldn’t pass emissions tests today in the United States or Europe.  And it isn’t exactly a safe vehicle but when compared to the alternative (four on a scooter) or an open rickshaw it actually performs quite well in the safety category.  But it does bring inexpensive, reliable, and comfortable transportation within the reach of millions of people who otherwise would literally be left out in the rain.  Is it the right answer?  Hard to say, but it is a brilliant example of one company’s focus on improving the prospects and lives of very low income people in a developing country.

And let’s not forget, that this is the same company that was announced by Ford Motors as the leading bidder for the Jaguar and Land Rover brands and production facilities.  So in one month, a big little company in India jumped out on the world stage and put the luxury and the economy car manufacturers on notice that they are planning to make a VERY big splash in the world automotive pond.

Imagine It! – Creating Value From Nothing

Could you create value from nothing?  Do you think it takes a creative, entrepreneurial spirit in order to accomplish such a monumental task?

I promised yesterday I would share a case study I worked on recently, the Tata Motors $2500 car to be specific.  But snow blowing the remains of the still-going snowstorm this morning from my driveway sent my creative thoughts whirring around like so many snowflakes and got me thinking about an incredible documentary that was just released on Friday.  It’s called Imagine It! and it focuses on a collaboration that Richard Tavener from Infinite Loop Media did with Stanford University – and ultimately universities across the globe – in challenging students to be innovative with a common everyday object.

As Tina Seelig, Executive Director of the Stanford Technology Ventures Program explained, “We’re giving people an everyday object and then telling them to create value.”  Which according to the dictionary there are 18 different definitions of the term.  She continues,  “Students can do it by how much money you make, the amount of social value you create, the amount of entertainment value, how creative you are.  There are unlimited categories.

I mention this documentary because it’s an amazing example of encouraging young people to recognize and expose their own internal creative genie.  Creativity on one level is all about solving problems and this is a fantastic approach to help students tackle innovation in a fun and engaging manner.

The challenge: Take a pack of Post-it Notes and create something of value from them.  But as always there are constraints.  Participants have 6 days in which to create their value and then must report on it in 3 minutes either in a video or 3 slide presentation.  There are some great examples of creativity and problem solving that come out of it.

What I really love is all of the experts they interview throughout the movie – which can be watched in 5 minute segments online or downloaded in one single loop.  Some of the great moments included:

Geoffrey Moore (who wrote the seminal Crossing the Chasm business series on growing your tech business and more recently released a brilliant book, Dealing with Darwin, about matching innovation efforts with your organization’s role in its market ecosystem).  I love how Moore jumps right to the problem solving aspect of innovation:
Go to the problem and then imagine a world where that problem has been removed.  And then say well how many steps from this world to that world.

Guy Kawasaki (the original technical evangelist for Apple and now Managing Director of Garage Technology Ventures).  Guy is, well, Guy and he dives right into the analogy of how the constraints this effort puts on the participants is just like real life innovation that those of us who practice it struggle with every day:
It’s sort of a good preparation for later life.  Which is, you never have infinite resources and you’re given this constraint and it is constraining, it’s Post-it pads.  And when you’re out in the real world, you will also have constraints, you will not have infinite capital, you won’t have infinite employees, you won’t have infinite time.  And then doing his best Forrest Gump, Guy continues, Life is like a Post-it pad.

But my two favorite moments in the film are two specific comments that really nail the genius of this effort.

Randy Komisar, Partner Kleiner Perkins, Caufield and Byers:  It wouldn’t be Silicon Valley if there wasn’t a quote from some partner at Kleiner Perkins – the VC firm that birthed so many great internet businesses.  Randy discusses the challenge of getting past the blank slate and a discussion he had with  George Lucas about the creative effort.
It’s hard to look inside to get started.  That’s where people often get stuck.  It’s often easier to find something to rub up against.  It’s very difficult to make that first brush stroke on a white canvas.  But throw some dots up there, and then when you look at the canvas it’s very easy to put that first stroke on.  So find something to oppose, find something to merge with, find something to dance with.  And in the process you have creativity.

To the innovators out there, I would say, find a REAL consumer problem first.  When I was working at InstallShield with Viresh Bhatia, the co-founder of the company, we often discussed the same questions, especially as we looked at the mass of crazy projects we saw sprouting across the web during the dot-com phase.  The projects, the business ventures that succeeded in surviving, were always the ones that had found a single customer or customer group first and then developed a solution for them.  If you’re an entrepreneur, then it’s not good enough to come up with the most amazing technology ever if you can’t find any use for it in the real world.  The VC’s might support you for a while, but eventually you’re either solving problems or you’re out of money.

Debra Dunn, Advisor to Social Ventures.
[This project] taps into in some ways the rawest level of their creativity.  Because what you’re giving them is apparently, nothing.  And so you’re really asking them to create value from virtually nothing.  That’s sort of the essence of entrepreneurship.  No question about it, the thrill of any creative innovation effort is looking up after all the sweat and toil and realizing you have come up with something amazing and perhaps new to the world.  You have given birth to something that never existed before you set out down the path of creating it.  And if done right, it is destined to offer beauty and/or happiness when it is encountered.

The one last reason I absolutely love this idea is because I can see us using it in future solution generation sessions to help spark the group.  We use Post-it’s all of the time to encourage the people we gather for these sessions to help them develop an idea.  They’re wonderfully constraining because they force you to be economical in your description and pare the idea down to its very essence.  And then, you can stick them up on the wall to cluster in groups of similar or very different ideas to find amazing relationships that evolve into a single or even many brilliant solutions to the problem we are exploring.

On a personal note, I have to mention that my wife Julianna, who is often my muse when it comes to developing new ideas and thinking through a problem, came up with a brilliant business idea for Post-it notes that her brother-in-law Roger went on to implement as a full blown cottage business.  This was 12 years ago when she had noticed one day in church how Roger had all kinds of inspirational quotes on scraps of paper or scribbled in the margins of his scriptures.  She looked at them and said, You know Roger, I bet you could put those on Post-it notes and then you wouldn’t have to worry about them falling out of your scriptures.  In fact, I bet you could actually make sets of those and people would be interested in buying them.  Roger went on to make a pretty tidy penny off of that insight.  Talk about creating value from nothing!

Rubber Bands

Finally, the effort is not over with the completion of the documentary.  The challenge is intended to be an annual tournament – the Stanford Innovation Tournament Video Contest – and it kicked off on Friday with reveal of this year’s secret item: rubber bands!  Students are encouraged to participate in groups and submit their entries online.

Kuczmarski, Google, and Innovation

Early in December last year, Tom Kuczmarski, the Senior Partner of our firm was invited to come share his perspective on Innovation as well as discuss his latest book “Apples Are Square” with the bright and curious minds at Google.  Below is a video of the engaging conversation that ensued. 

Great questions from the audience included:

Can you routinize and processize innovation or does it have to be original every time?

We would say that innovation is only TRULY successful if you have incorporated it into your culture and it becomes a standard part of your product development efforts.  When I worked in software I often looked around at small and large successful tech companies and wondered what made the difference between those that were small one or two hit wonders that stall at $30-40 Million in revenues and those that just dominate a market (think Flickr or VMware or Microsoft or Google)?  There are several parts to that answer but there is no question that generally success is tied to an iterative, customer centric process. 

Being at Kellogg, how do your students respond to your discussions of innovation?  Are they excited about it, engaged and what kinds of examples do you use, what types of companies do you point to?

Since part of my regular work is to develop many of the cases Tom uses in his Kellogg and corporate presentations and we at the firm use for our client work I’ve been thinking it might be a useful approach to start fleshing these out in the weblog.  Look for a discussion of Tata Motors tomorrow.

And my favorite was, How do you make sure that what you innovate to is actually going to be demanded by the market ultimately?

See the answer to the first question.  I love how Tom phrases his answer, and no, unlike Hillary and Barack, we did not seed that question into the crowd.  The dimension of innovation that people and companies – especially high tech organizations – often forget about is that while we have to focus on the creative side of innovation, we also have to focus on how do we convert that into a successful business venture or new service or new product that ultimately will serve new customers and will be profitable to the business.  You have to be customer centric and you have to be willing to let go of your preconceived notions of what your target customers really want.  Either that or you have to accept that it may actually be a very different customer who finds an even greater value to your product or service while using it in a very different fashion than you originally envisioned. 

If you want Tom’s full answer to the last question then you need to sit and watch the video – the reaction from Google was very enthusiastic both during and after the presentation.

Designing for the World’s Poor

The Q Drum

Recently BusinessWeek released their annual issue focused on the Most Innovative Companies which celebrates the 50 most innovative companies in the World.

Now wait, before you click on that link, think about what innovation means to you, consider what you might perceive to be a true product or service innovation.  OK, now what companies deliver that kind of innovation?  Who do you think are the hottest innovators out there?  I don’t even have to be Carnac the Magnificent with the envelope to my head in order to tell you exactly what company and product first came to mind.

What is it?

Wait for it…the Apple iPod.

Ok, so maybe I was wrong on my first guess, but I guarantee with 88.5% certainty if you’re younger than 50 that if it wasn’t the iPod then it was Google.

How do I know this?  Because those are the top 2 companies according to BusinessWeek’s survey (whose results were determined by asking senior management at the 1,500 largest global corporations based on market capitalization, an online panel of BusinessWeek readers, and subscribers to the Knowledge@Wharton email newsletter).  But I could have told you that without even asking such an august group because every time I ask potential K&A job candidates or clients to name an innovative product, I have to start off with the disclaimer that I do not want to hear the knee jerk answer of Apple.  The marketing slogan for Apple may have once upon a time been “Think Different” but these days, everyone seems to think like Apple.

But what does this have to do with the price of tomatoes and the title of this post, Alain?  And it’s a good thing you asked because I was just coming to that point.

What exactly is innovation?  Look, everyone has an answer to that question.  And all of them essentially say that it is about delivering something new at a minimum and those who really think about it expand this to developing a culture or attitude focused on delivering the products and services that dynamically anticipate the future and precisely solve the problems faced by the target end user.  The overused sports analogy is a quote from the Great One himself, Wayne Gretzky, when he said, “I skate to where the puck is going to be, not where it has been.”

Well, in my mind, BusinessWeek’s list certainly identifies companies that a statistically valid group of bright individuals believe represent innovation.  But of course every single company they identified is in the Fortune 500 – I haven’t verified that fact but let’s at least say that I would be surprised if there was a company on the list you don’t know because every one of them is a constant part of current business conversation and all are regular subjects of Wall Street Journal articles.  What am I saying?  Well, you go ask Senior Managers at the top companies in the World who they think are the most innovative companies and of course they’re going to identify their peers – the companies they either wish they worked for or find themselves regularly frustrated with because they are a competitor.

But what if you went and asked the world’s poorest – who do you think they would identify?  Ah, yes you say, now Alain is finally getting to the point.  Yes, I do sometimes take a winding path before getting to the crux of my thoughts – remember it’s the journey not the destination that makes life so enjoyable.

Well, the NY Times has a fantastic article discussing Design that Solves Problems for the World’s Poor.  The focus is on Dr. Paul Polak, the founder and CEO of International Development Enterprises and an exhibit being held by the Cooper-Hewitt National Design Museum in New York City that honors the inventors dedicated to serving “the other 90 percent.”  That 90 percent number has reference to Dr. Polak’s statment that the world’s cleverest designers spend their energy catering to the world’s richest 10 percent creating items like wine labels, couture, and Maseratis.  Dr. Polak calls for a revolution to reverse that silly ratio.

So it would seem, this would mean that true innovation is something that significantly improves the quality of people’s lives.  Or as Jebediah Springfield (Simpsons reference here) said, “A noble spirit embiggens the smallest man.”

The prime example and one that is so simple yet so elegant it should simply be the picture next to the Webster’s Dictionary entry for innovation, is the 20-gallon rolling drum for transporting water.  That’s the picture you see at the top of this post.  As the article says, millions of women and girls spend many hours doing each year — fetching water. Balancing heavy jerry cans on the head may lead to elegant posture, but it is backbreaking work and sometimes causes crippling injuries. The Q-Drum, a circular jerry can, holds 20 gallons, and it rolls smoothly enough for a child to tow it on a rope.

How amazing is that?  How simple is that?  The article and the attached video go on to discuss other efforts that designers are taking in order to help the impoverished improve their quality of life and make a profit while doing so.

To me, these are the real heroes, the real innovators and the ones who deserve celebrating. 

Lincoln Park Tree

Lincoln Park Tree
I walk by this tree most mornings as I head into the office and can see it from my office windows. The light as the sun rises over the Lincoln Park High School building hit it just right today. These are the fleeting moments of Spring in Chicago.

This however serves as a perfect metaphor for what we often present to our customers with the products we sell. The tree like the voices of the sea nymph Seirenes of Greek mythology encourages you to come in for closer examination, but the “No Parking” sign says “Get lost!” We encourage our customers with tantalizing features and advertising but their first encounter with our product or perhaps with the support service essentially says, “Get lost!” I liken it to the Eve Syndrome in honor of Bill Cosby’s old bit on the differences between men and women. In it he speaks of Adam being little more than an ape who is encouraged and discouraged by Eve as she says, “Come ‘ere, come ‘ere, come ‘ere” and as he comes lumbering over to get close to her, she immediately exclaims with a shooing motion of disgust, “Get away! Get away! Get away!” because in reality, Adam is little more than an ape who wants to paw her. Think of your average pimply junior high boy spiking on testosterone and you’ll have the perfect picture of who Adam is as Bill Cosby describes him.

We want our customers to be like that pimply boy, so eager to be with our product that they’ll do almost anything to make it theirs.  But Eve’s coy behavior is exactly what we do to our customers when we present the perfect product in description and then fail to deliver on the actual feature. Or we deliver the perfect product and the out of box experience is horrendous – think of Apple’s caricatures of how much trouble it is to get a Windows PC up and running versus their plug it in and go. Or better yet, we set up terrible automated phone trees that send our customers into oblivion when they attempt to call and speak with a live person. If you don’t want to destroy your margins offering support to customers either make your product so brain dead simple a 5 year old can use it or else recognize that service is a fantastic way to create loyal customers.