Saturday, 13 September 2014

Apple, potatoes, onions... Ideas.

Last weeks release of Apple's new products and their bold, albeit expected, move into yet another product category got me thinking about the innovation strategies used by these tech giants. Let me say it right from the get-go, I am NOT an Apple product addict. I live in the simple world of mid-tier android products because they suit my needs and my wallet. Few people would accuse me of being a tech-junkie, and those who do are probably thinking of someone else or compensating for some other thing that I make them insecure about. As I do.

Back to the story. Ideation.

Samsung brought out a the Galaxy S5, water and dust proof (yawn), along with a rubber-looking watch which now can partner with the aforementioned phone where in the past it was only linkable with the under-marketed Samsung phablet, the Galaxy Note. They got it a bit wrong did they not? There is no doubt that Samsung is a cool brand and that Android has a solid following. They proceeded to put Samsung in a dust proof phone, a gym watch and a larger phone that almost looks like a phone but is a tablet but is a phone but is a tablet.

Apple comes along and does their thing, releasing what would look like a very similar product set at first glance, but leaving the global audience with a raised eyebrow and murmur of, "Hmmm, that could be cool."
Once more, I feel nothing for either brand but in the spirit of good business I will choose to learn my lessons from Apple's success in this specific case. 

The following are some general good ideas that I think set Apple apart. 

1. They approached wearable tech from the right direction.

Instead of taking an iPhone, shrinking it and slapping an overpriced, pearl-white watch strap on it, they designed a great looking watch and then redesigned the list of features that went along with this all-too-well-known accessory. The Apple watch looks like something that you would wear as a watch-wearer. They had every opportunity to make a hipster-douche-wrist-bangle that many brand faithfuls would purchase, not knowing what it could have been. 

What am I saying? Well, when Samsung launched a watch, it was a watch only Samsung users would wear. Users with a history of Samsung and Android purchases who wanted more Samsung-swag on their wrists. With Apple, I will not be surprised if there are new users that enter the Apple universe through the door of the Apple watch, simply because it is also a beautiful watch. A very beautiful watch, which boasts a host of other cool features that you will discover while you wear it as... a beautiful watch. 

The lesson? Humility maybe? Hard to imagine, mostly because the whole Apple upper-classity makes it feel like an oxymoron. But yes, the humility characteristic makes ambition intelligent and innovation accessible to wider audience. 

The widget that my business is selling is selling because it is a widget and because of the utility of the widget and the marketing success of my widget brand. If I want to expand into a new category, like shoes, my target market is now a person who greatly appreciates the utility offered by shoes. They already have synapses in their brains for this utility. I would have to completely re-educate them if I asked them to get used the strap that I put on my widget, claiming that now you can wear my widget on your feet. Would it not be better to forget about the success of my widget in its original category and rather consider that my new target market needs a great new shoe, made by the company who makes that other great widget. And oh look, here are some overlapping features!

2. ApplePay is a seed that will bear much fruit

This is an absolutely brilliant move. I feel like the consumer will only realise what hit them when mobile financial services, not just payments, start forcing the traditional banking system to adapt or die. 

The parallel between data usage, cash spending and phone credit is way too strong, which makes it obvious why mobile payments, e-wallets and credit-via-phone purchases have been introduced from all angles. Apple took it to the level of economic agglomeration with the big names in global payments (AmEx, Visa, etc.) and have now set the scene for a total revolution. 

ApplePay sits under the guise of a clever feature to the layman, but once the infrastructure is in place then it will erupt like a dormant volcano and change the landscape of mobile payments. I think there will be other players in the market too when this time comes, but they will most likely be seen as companies that have hitched on the what Apple started. 

So the lesson is here: if we really want to innovate, we look further than one move ahead. Apple may have only put the baby-steps of a global payments infrastructure in place for now, but in years to come they could be announcing AppleBank or AppleCurrency. If you did not know any better better at the moment, you would just call it an app. 

Question to ask yourself, what are the next three of four levels up in your business? How do you make the next change great, and at the same time sow the seeds for what are still only dreams? 

3. Grow the onion to survive, grow the potato to thrive.

Okay this one is going to require a bit of an explanation. 

I hail from Namibia and I have family who are farmers. I grew up on the farm but sadly I now only go and visit once every year or two. A few years ago our family did something unheard of in the region and changed from dealing mostly in sheep and cattle to planting crops. It started out with lucern and then went on to mielies (corn) before we found our calling with onions and potatoes. A potato is a damned tough and expensive vegetable to grow whereas onions are a little easier. 

On my last visit, I asked my cousin which he preferred to have growing on the land. Without much hesitation he said, "Potatoes."

His reason was that an onion will never take the place of a potato on a plate of food, so potatoes will always be easier to sell and more in demand. Onions are very much a complimentary vegetable in most dishes, where potatoes have a way bigger role to play in the food spectrum.

So how the hell does this relate to Apple? 

When Samsung came out with their watch it was heavily marketed as a healthy lifestyle asset. This is great, if the healthy life-style thing appeals to you. To me and many others, this is an onion on the plate. I do not have a problem with it, but I cannot help but get a feeling that for many consumers the feature is as decorative as the onion rings next to my chips and steak. It is nice, but it is it not really a big part of my meal expectations or necessities.

Taking the metaphor deliciously further, I would think that Apple had to come up with the potato. This is where I think ApplePay and the cast iron look came from for the Apple Watch. 

As mentioned before, these two differences set the product aside and draws the interest of a wider audience. The group of people that wear watches and especially the group that makes payments is much larger than the one that subscribes to a fitness lifestyle. The Apple Watch does have the health feature, so it is not like you feel that you are missing out on the onion rings. Apple's true ingenuity here was the inclusivity factor, brought about by careful feature selection. 

Think about it, they could have had main features centered on video and camera. Again though, this would only be a coolness factor and not something that would open the playing field to a product space with a potentially necessary demand. A great wrist camera, sure! But that is a complete want whereas making a payment is a need. Now, we do not all need to have Apple Watches to make payments, but what Apple recognised is that the need to make payments is universal and that they have the opportunity to get in on the action and spearhead the future. 

Question to ask: Are my ideas for innovation onions or potatoes? Look at your current clientele and consider what their life is like. Consider them before you consider your product. Making your widget in ten different sizes might not be as innovative as making it possible for your widget to fit inside a car. The former might be a just be a decorative step with shallow utility but the latter could take your widget to a whole new audience. 

Boston Consulting Group considers Apple the most innovative company in the world for a few years running. Their list is mostly based on popular opinion of other company CEO's. Forbes magazine has more technical criteria and the top position there belongs to SalesForce, another software monster! Truth is that there are many companies that get it right on several occasions, and despite the jest of my article, Samsung is one of them! 

All in all, good questions will lead to good answers. This is the basis of good decisions.

Sunday, 7 September 2014

Effective resource planning: a how-to guide

Setting up the problem

As mentioned in previous posts, I have developed a love for internet radio. It is a quick-fix cure for someone like me when the stimulus craving kicks in, especially when I have an anxious desire to multitask and do something else at the same time. Which happens. 

There is a particular show that I listen to regularly where a caller raised a very interesting point the other day. A young man dialled in and told the host that he is working his way through a college education which is very expensive because it is the best in the region. His field of study was accounting. The host told him that he was wasting his money as he could study accounting at many other universities for a lower fee and that it wouldn't make a difference to the eventual outcome, which is becoming an accountant.

Boom. Does he even know about the can he just opened? We are not just talking about university degrees now. Everything is coming into play. What are you paying for when you purchase a widget? What utility does the prestige price of the widget have and does it have a valid and measurable ROI? What other hidden costs are there in a price that make the widget completely arbitrary and bring the utility into focus?

Breaking down the problem

Okay, let's walk before we run here. Stay with the university degree story. I want to study accounting and I have several options. Out of my options there are several different prestige categories. Assume I am eligible to study at any university of my choice and that I can afford any of them, but want to make sure I still get the most value for the money that I spend. 

I rank my choices in terms of cost to get one list, prestige to get another, and outcome to get a final list. Outcome can again have two sub lists. The first would be the salary that I would get after obtaining the degree and the second would be the opportunity that I would be afforded with my particular degree. This is because some folks would probably sacrifice money for the opportunity to reach another goal.

You can see a system emerging with a very unique mid-section which needs to be taken into account, the ROI of prestige. The input would be the cost of the degree and the output would be the salary and opportunity. What needs to be considered is if paying more for prestige changes the output. 

To decide on this you would have to take a sample of accounting graduates from each university and see whether or not the salaries prove the theory right, and if so, how long until you break even with your initial investment. Would it really be worth it if the difference in median salaries was so small that it took you twenty years to break even? You can become even more clever here and see whether an expensive/prestigious education is more valuable at high school or university level, or whether it is a combination that yields the best outcome. For measuring opportunity it could be slightly tougher as this would be Boolean problem, measured by candidates who reached their goal and who did not, given their different choice of university.

After this a second question would have to be considered which challenges the assumption of eligibility and the candidates themselves. Do more prestigious institutions draw more ambitious candidates, perhaps with tougher entrance requirements? Would the students own hutzpah be the explanation for the higher salary and not the institution? Again you would have to take a sample of top performers at a few prestigious schools and some at less prestigious schools and see if the outcomes show a difference to determine causality. 

At this confusing stage, I personally feel challenged and, if I am honest, a bit duped. As consumers, when we make a purchase decision with the resources we have, how much do we over or under pay for the utility of the widget? More so, do I regularly consider my own value when I make a purchase to determine the value of the widget? Which one counts more or do the two factors energise each other to a logistic-equation-type of saturation point?

A problem of waste

Ultimately, this is probably a matter of waste reduction. A good way to look at waste reduction is to start at the end and then work your way backwards through the pipeline so you can identify your inputs within your parameters. 

What do you want? Pick a salary, a goal, a company you want to work for, a place you want to live, a function you want your widget to perform, a price you want the widget to sell at, etc.

Now when you look at the options you eliminate those that are not able to provide this outcome. Keep moving backwards step by step until you reach your short list of candidates that are able to get you to your predetermined outcome. At this stage the focus shifts towards your resources.

Rank the candidates by cost and rank by effort. In our previous example, we would consider a student with lower ambition/grades to be high on the effort list. Whip out the maths and find the optimal value for minimising cost and effort and you have your winner! Successfully you have eliminated wasting time on effort and money on cost. It goes without saying that if effort is all the same, then least cost wins, vice versa. 

An interesting parallel

Before I conclude, isn't it cool how the word parallel has a pair of parallel lines in it? There's should be a word for when this happens.

Malcolm Gladwell writes in one of his books (I think that it's Outliers?) that Nobel Prize winners are not always the most clever out of their group of peers in terms of IQ measurements, but that they were clever enough for the outcome of a certain Nobel-prize-worthy discovery, given the inputs of hard work and opportunity. Essentially, and rather humorously, a waste here would be extra IQ points, since they weren't necessary for the outcome. At least they don't cost anything!

To answer the question of school's, here is a great article that gives excellent insight into this specific problem. Take note, however, that for the spending of finite resources there is always an opportunity cost or trade off that has to be taken into account for a complete answer to the questions.