business model

Test Then Invest

Any scientist worth their salt knows that when preparing to study a concept/phenomena you have to use the good old scientific method. What’s that you say? Essentially, it involves using empirical (e.g. observable/measurable) data and a bit of reasoning to ensure that what you think you know, is real. Oxford’s English dictionary put’s it another way; they call it “"a method or procedure that has characterized natural science since the 17th century, consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses.”


Do We Really Need an iWatch?

Apple's iWatch Will Measure More than Time, but what customer need does it solve? It helps move the needle towards a 'digital self' - is that enough?

I was a bit disappointed in Bloomberg (and Forbes for re-printing it) when they quoted Citigroup analyst Oliver Chen as saying, “This can be a $6 billion opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod—something consumers didn’t even know they needed.”

Netflix: Enabling Main Street to Watch Sunset Boulevard

In the late 1990s Reed Hastings recognized that there was a problem with the video rental business. After paying a hefty $40 rental fee, essentially twice the price of a new movie, he recognized that there was a business model waiting to be developed. Fast forward 9 years later and in 2006 Netflix was the dominant player in the online rental business with just under a million subscribers and profits over $370M.


Should startups fear big companies?

I just read a good post about how big companies have been poaching great ideas from startups. So, should emerging entrepreneurs be worried or so anything to avoid having their ideas get stolen? I say, no. I do believe that the small guys are able to recognize consumer frustrations and respond quickly while the Fortune 500 has resources but a giant hairball that makes it almost impossible to deliver. Little guys - just keep delivering and know that the right solution to a real problem will set the stage for success (assuming the rest of the business model makes sense).

Managing Innovation Through Strength

Peter Drucker wrote an article ‘Managing Oneself’ that focused on how workers need to examine themselves and focus on specific improvements that will allow them to be successful. I’ll relate Drucker’s argument on managing oneself to managing innovation. What is managing innovation? It’s achieving success through administration, control, and influence.

Step one – figure out what are your strengths. 

Most people are completely unaware of their strengths. They believe they understand their weaknesses (their boss usually complains about those) but even, then the filters that they put on make it easy to mollify the harsh into something that feels less harsh. For generations people did not need to know their strengths and weaknesses – they were born into their careers. But now that people have options in life, we need to know the fields in which we can be successful. Not good at communication? I’d suggest you stay away from psychotherapy. Not so good at motor skills? Please don’t become my surgeon. Our weaknesses limit us, but our strengths let us shine.

The key to determining your strengths and weaknesses according to Drucker is feedback analysis. Set SMART goals (as discussed in a past post), and record the metrics you would need to be successful. Did you hit your target? You’ll find out shortly, and the numbers won’t let you reconfigure the truth.

Apple II - wires!Product innovation requires a similar mapping between current state and future paths. It’s necessary to figure out what the market is looking for, and use your strengths to exceed consumer expectations. This requires market research that comes down to the consumer’s psychological level. Understanding the emotional implications of a confusing product can be complicated so you need to use human centered design research to uncover what can make your users happy.

Once you determine your products strengths, you need unrelenting focus on explaining that to the consumers. If you’re principal product strength is ease of use, every ad better make that clear. For instance, if you’re Apple computer in 1984, that means showing off how your product is simple and easy to use. IBM had more powerful computers that were complicated and ugly and Apple realized what their wheelhouse was – a beautiful box with no wires.

Don’t ignore your weaknesses. When analyzing your market consumer research, figure out what the roadblocks are to success. Did you find out that your new widget isn’t light enough (but it sure is shiny!)? Don’t waste your time reinventing your widget if your consumers really just want a gleaming widget – burnish with vigor. As Drucker said, “It takes far more energy to improve from incompetence to mediocrity than to improve from first-rate performance to excellence.” You’ll find that it’s easier to be successful as the leader in your niche, than to be a jack of all trades – and master of none.

Business Model Timeframes and Innovation Types

This analysis of business model timeframes and their relationship to types of innovation stems from an old Harvard Business review article I read a while ago (Darwin and the Demon, HBR 7/04).

As I’ve discussed in the past there are several types of innovation. Some people just can’t seem to get enough innovation and for those people I offer up 7 fantastic types. These types of innovation align with timeframes of a business models lifecycle.

1. Disruptive (Early Market): Apple anyone? The press loves this stuff because it makes waves that force other companies to react quickly and usually it takes rise from technological discontinuities. Early adopters and visionaries are the ones who are first to jump in line.

2. Application (Bowling Alley): Uses existing technology in new ways; The big brother government put GPS systems up in the skies and OnStar took applies them in the consumer space, thus helping me find the closest bakery even in foreign cities. The first pin has fallen, now the adjacent technologies and companies are ready to fall in line.

3. Product (Tornado): May stem from performance increase or cost reductions such as when ARM creates a new superfast mobile processor or Ford updates its latest Fusion line. Consumers are happy, but they sort of expected it. Imagine the marketplace being swept up by the new innovation – welcome to tornado alley.

4. Process (Early Main Street): This aligns closely with Sigma process improvements – a major example in this space is Wal-Mart’s inventory management. Consumers are happy because services and products are enjoyed more easily/cheaply. The first wave of growth has come and customers now expect systematic change over time.

5. Experiential marketing (Mature Main Street): This is really just polishing the surface to improve customer experience. A new GUI on Google’s home page or Facebook’s fancy new timeline feature. One experiential marketing innovation I truly love is in the realm of healthcare (surprise) – red coat greeters at Cleveland Clinic that don’t sit behind desks but are ready and waiting to serve visitors. Growth in the market has stalled and products no longer take center stage in the media.

6. Business model (Mature Main Street): Requires a new take on an existing value proposition such as Apple moving to retail stores or Target moving into the minute clinic space. The market is ready for major changes as leaders in the field have moved on to the next big thing.

7. Structural (End of Life): This type of innovation requires a major shift in response to global forces – I’m curious to see what UHG does in response to healthcare reform. The pipeline looks bright and I imagine great things will come soon. The fault line between what the companies has been selling and what customers demand – the path forward for companies has darkened until they reinvent a new product suite.