Marc Andreessen: Predictions for 2012 (and beyond)
by Paul Sloan December 19, 2011 11:22 AM PST
http://news.cnet.com/8301-1023_3-57345138-93/marc-andreessen-predictions-for-2012-and-beyond/
Marc Andreessen's view of the world boils down to software.
From where he stands, as the guy who co-founded Netscape Communications and now co-runs the powerful Silicon Valley venture firm Andreessen Horowitz, no industry is safe from software. Or, as Andreessen put it in a much-discussed piece he wrote for The Wall Street Journal, "Software is eating the world."
Software has chewed up music and publishing. It's eaten away at Madison Avenue. It's swallowed up retail outlets like Tower Records. The list goes on.
No area is safe--and that's why Andreessen sees so much opportunity.
Fueling his optimism: ubiquitous broadband, cloud computing, and, above all, the smartphone revolution. In the 1990s, the Internet led to crazy predictions that simply weren't yet possible. Now they are.
I caught up with Andreessen to talk about 2012 and software's onward march.
Q: Let's start with smartphones.
Andreessen: I think 2012 is the year when consumers all around the world start saying no to feature phones and start saying yes to smartphones. Feature phones are going to vanish out of the developed world and over the course of five years they'll vanish out of the developing world.
Q: That's a big deal because?
Andreessen: That's a big deal because that's the key enabling technology for software eats the world broadly. Because that's what puts the computer--literally puts a computer in everybody's hand.
Q: In a way that the PC industry couldn't?
Andreessen: Most of the people in the world still don't have a personal computer, whereas in three to five years, most people in the world will have a smartphone.... If you've got a smartphone, then I can build a business in any domain or category and serve you as a customer no matter where you are in the world in just gigantic numbers--in terms of billions of people.
Q: Does that mainly help existing players, or also open opportunities for new businesses?
Andreessen: Both. If you're an Amazon or a Facebook or a Google or even a startup, the fact that you can potentially address 2 billion smartphones in the developed world or 6 billion in three or five years, in the entire world, it's just a huge expansive market.
But it also opens up new kinds of businesses. The big thing that happened in 2011 was sort of the rise of the verticals, and e-commerce was the hotbed of that. We saw the rise of a whole category of e-commerce category killers in verticals that 5 or 10 years ago couldn't support high growth companies because the markets weren't big enough.
Q: What e-commerce players are you thinking of?
Andreessen: We just did an investment in Fab, which is just growing by leaps and bounds, and there's Airbnb [Andreessen-Horowitz is an investor]. That company is growing vertically. Its software eats real estate, software eats home furnishings. Another very exciting company, which we're not invested in, is called Warby Parker, an e-tailer for eyeglasses. So it's software eats Lens Crafters.
It's just on and on and on across different verticals because of the number of consumers who a) have PCs, b) are on the Internet, and now c) have smartphones. I expect vertical specialization to continue and there to be killer Silicon Valley style software companies in all kinds of verticals and categories in 2012 and 2013 that weren't viable three or five years ago.
Q: Just e-commerce?
Andreessen: E-commerce was the hotbed of vertical personalization of 2011, and big fat vertical expansion goes into other categories other than e-commerce in 2012. It could be content. It could be new kinds of service providers.
Q: We've seen some already.
Andreessen: One I really like that we're not involved in is Uber. Uber is software eats taxis. It's almost entirely a smartphone-based application bringing town cars to you.... It's a killer experience. You watch the car on the map on your phone as it makes its way to you.
That's smartphone specific, and there's going to be all kind of things like that. Task services like Zaarly and Taskrabbit are delivering a sort of distributed mobile workforce available on demand through your smartphone.
These are slicing and dicing different aspects of the economy into vertical slices or category slices and making them available via smartphones hooked to these really powerful networks with cloud computing on the back-end. We're just seeing a pattern of companies doing this over and over.
Q: So who should be scared in 2012?
Andreessen: I think 2012 is the year that retail--retail stores--really starts to feel the pressure. And I don't say that because I don't like retail stores. I loved going to Borders. I thought it was a great consumer experience. And I was a huge fan of Tower Records.
But the economic pressure is huge as e-commerce gets more and more viable and as these category killers emerge in the superverticals. If I own mall real estate or retail stores in cities, or if I own chains like electronics chains, I'd be concerned.... I think electronics and clothes are going to be a real pressure point. Home furnishing is going to come under pressure. It's going to get harder and harder to justify the retail store model.
The model has this fundamental problem where every store has to have its own inventory and every store is also a warehouse. The economic deadweight of that entire inventory in each store--that's what took down Borders.
Retail runs at very thin margins. So if e-commerce takes a 5 percent or 10 percent or 15 percent bite out of your category, then it becomes harder to stay in business as a retailer. So I think 2012 is the year that that really kicks in.
Q: Doesn't this bode well for the e-commerce incumbents?
Andreessen: For sure, Amazon is going to do really well and anybody with major e-commerce is going to do real well. But the new companies in e-commerce verticals are providing a very differentiating customer experience that is much more like shopping as entertainment.
Fab has more interesting products and merchandising and presents them in a more interesting way with much deeper social interaction. At Fab, something like 25 percent of the purchases over Black Friday weekend were a result of Facebook referrals. There's a whole fun element to shopping and whole entertainment element and whole excitement element that the first generation of e-tailers were not very good at.
Q: Like Amazon?
Andreessen: I like to say that the first generation of e-tailers was really good for nerds. Amazon for me is--I love it--it's like the biggest warehouse superstore of all time. It's just awesome, and I love wandering up and down the aisles and it's like, 'wow, look at that.' If I do enough searches I can discover anything.
The new generation of e-tailers are much more appealing to normal people--people who like to go the mall, have fun with their friends and try on clothes and compare clothes, and go home and brag to their roommate what they got on sale, and all the rest of it. A lot of new startups are not only very viable but also growing very fast because they provide a very different experience.
Aren't there opportunities for startups to help?
Andreessen: Yeah, there's going to be a big opportunity for software assistance for the incumbents at getting better in the new world.
As an example, at eBay [where Andreessen is on the board], we bought a company called Milo, and there' a competitor called Shopkick. These guys expose local inventory on retail store shelves and make it available as part of the e-commerce experience. That's the kind of software that's going to be incredibly useful to retail chains as they seek to compete online because it unlocks the local inventory.
The other category is represented by Groupon and Foursquare [both also Andreessen-Horowitz investments] and a whole new generation of these local e-commerce platforms, which is bringing online the gigantic number of businesses in the world that aren't on the Internet today at all. Whether it's a restaurant or hairdresser or day care center or yoga center or lawn care firms and on and on, there are so many that just aren't online in any meaningful way today, even 15 years into the Web.
Advertising on Google doesn't do them any good because it doesn't matter if people come to their Web site, it's not how they get business. So there's going to be a whole set of new companies, like Groupon and Foursquare, that are going to unlock these local businesses that aren't even online today.
Q: If nothing else, Groupon has done a great job of getting local businesses online.
Andreessen: I've always felt that the criticism of Groupon has been unwarranted. People have really underappreciated what Groupon has done, which is they've created a way for small businesses that aren't online to spend money online and be able to dial up customers on demand. That's a really big deal.
I think Foursquare is a revolution in the local experience of cities and connecting to small businesses around you, through information and, increasingly, coupons and offers. Again, it's customer acquisitions. There are going to be more of these kinds of things--and a whole bunch of new ideas in 2012.
Q: And this all circles back to smartphones.
Andreessen: Foursquare was impossible before smartphones. There was no way to implement it. Then, there's the other side of this. There's the user app for Foursquare, but there's also going to be the merchant app for all these things.
Local merchants, like local restaurant owners, are going to have a smartphone app they can use to dial up customers on demand. Whether that's from Groupon or Foursquare--any of these companies can do that. A lot of small business owners are going to start running their businesses from their smartphones.
Saturday, December 31, 2011
Innovation Strategy
Innovation Strategy: Pick a Fight where the giant is motivated to flee rather than fight, Clayton Christenson http://gartner.mediasite.com/mediasite/play/9cfe6bba5c7941e09bee95eb63f769421d?t=1320659595
Average Is Over. What's Your Extra?
HBR Blog Network
BILL TAYLOR
William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself, published January 4, 2011. Follow him at twitter.com/practicallyrad.
Average Is Over. What's Your Extra?
9:05 AM Monday December 19, 2011 | Comments (22)
I approach a book by New York Times columnist Thomas Friedman with a mixture of wariness and anticipation. Wariness because Friedman's books tend to go on for many pages longer than they need to, and many of those pages contain his trademark blend of Davos Man self-congratulation and cheesy metaphors. Yet I still have a sense of anticipation because in every one of Friedman's books there are a handful of insights that are so clear, so sharp, so flat-out right that they frame how you look at the world going forward.
That Used to Be Us, Friedman's newest book (written with Johns Hopkins professor Michael Mandelbaum) has at least one such observation — a principle so clearly true, and so crisply expressed, that it should become a mantra of sorts for leaders everywhere who want to build something great and do something important. Chapter Seven of the book is called "Average Is Over," and it's a rallying cry that captures what it takes to stand out from the crowd in a world that keeps getting more crowded.
"In a hyper-connected world where so many talented non-Americans and smart machines that can do above-average work are now easily available to virtually every employer, what was 'average' work ten years ago is below average today, and will be further below average ten years from now," Friedman and Mandelbaum write. "As a result, everyone needs to raise his or her game just to stay in place, let alone get ahead." In an environment where "average is over," they go on, everybody has to find their "extra" — their unique talent, skill, contribution, or commitment that separates them from the pack and lets them do something special.
Friedman and Mandelbaum are policy wonks, so they explore the notion that "average is over" mainly as it applies to countries and societies, and how we educate kids, train workers, and make public investments. But their insight applies just as powerfully to companies and their leaders. The business world is overflowing with products and services and designs and marketing campaigns that are adequate. The real challenge — and the huge opportunity — is to turn something adequate into something amazing. It's just not good enough to be pretty good at everything. The most successful companies, products, and brands have figured out how to become the most of something. That is, to find and embrace their "extra."
Most organizations don't stand for anything special, of course. In her new book, Tough Cookies, the remarkable Kathy Cloninger, who led a multi-year transformation of the Girl Scouts of the USA, described how hard it is to take a mainstream organization and turn it into something with a distinctive and compelling point of view. If most organizations were honest with themselves, she argues, their mission statements would read, "Acme Widgets: We're no worse than anybody else."
I don't care what field you're in or what kind of company you work for, what qualified as average performance ten years ago is below-average today, and what is average today isn't nearly good enough to create long-term success and outsized value. You can't do something big if you're content with doing things the same way as everyone else. In a world of hyper-competition and limited attention, the only way to stand out from the crowd is to stand for something special.
Photo: © Iwan Baan and MBEACH1, LLLP
A case in point: a truly stunning parking garage in Miami Beach, Florida. The seven-story structure, at 1111 Lincoln Road, serves about as prosaic a function as can be imagined — it's a place to park cars. But when Robert Wennett bought the homely space back in 2005, he decided to turn something adequate into something amazing. As a New York Times report explained, "Parking garages, the grim afterthought of American design, call to mind many words. (Rats. Beer cans. Unidentifiable smells.) Breathtaking is not usually among them."
But this parking garage truly is breathtaking, so much so that it has become an in-demand venue for charity events, wine tastings, even high-priced weddings! Indeed, the top two floors were designed to both hold cars and host events, and they rent for as much as $15,000 per night. "This is not a parking garage," Robert Wennett told the Times. "It's really a civic space."
Talk about positive word of mouth. I first heard about 1111 Lincoln Road when I attended the American Express Luxury Summit in Park City, Utah. That's right — executives from some of the world's most exclusive brands were discussing the beauty and originality of a parking garage thousands of miles away. If that's not moving from adequate to amazing, I'm not sure what is. And it's a great example of an entrepreneur who built an enterprise around something "extra."
Recently, at a conference of marketers and brand specialists, I learned about a fast-growing company called Kulula Airlines, sort of the Southwest of South Africa. Like its role model in the United States, it has low fares, point-to-point routes, and a humorous staff. But its "extra" — what makes everyone stop and take notice — is the exterior of the airplanes themselves. Kulula treats them as flying pieces of art, which it decorates with all sorts of fun, colorful, sometimes downright-hilarious imagery. I have never seen airplanes like these, and I defy anyone who sees one of these planes on an airport tarmac not to stop, gaze in amazement, and want to learn more about the airline behind the planes.
Friedman and Mandelbaum have nailed it. There's no excuse to settle for "good enough" anymore. Average is over. What's your extra?
BILL TAYLOR
William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself, published January 4, 2011. Follow him at twitter.com/practicallyrad.
Average Is Over. What's Your Extra?
9:05 AM Monday December 19, 2011 | Comments (22)
I approach a book by New York Times columnist Thomas Friedman with a mixture of wariness and anticipation. Wariness because Friedman's books tend to go on for many pages longer than they need to, and many of those pages contain his trademark blend of Davos Man self-congratulation and cheesy metaphors. Yet I still have a sense of anticipation because in every one of Friedman's books there are a handful of insights that are so clear, so sharp, so flat-out right that they frame how you look at the world going forward.
That Used to Be Us, Friedman's newest book (written with Johns Hopkins professor Michael Mandelbaum) has at least one such observation — a principle so clearly true, and so crisply expressed, that it should become a mantra of sorts for leaders everywhere who want to build something great and do something important. Chapter Seven of the book is called "Average Is Over," and it's a rallying cry that captures what it takes to stand out from the crowd in a world that keeps getting more crowded.
"In a hyper-connected world where so many talented non-Americans and smart machines that can do above-average work are now easily available to virtually every employer, what was 'average' work ten years ago is below average today, and will be further below average ten years from now," Friedman and Mandelbaum write. "As a result, everyone needs to raise his or her game just to stay in place, let alone get ahead." In an environment where "average is over," they go on, everybody has to find their "extra" — their unique talent, skill, contribution, or commitment that separates them from the pack and lets them do something special.
Friedman and Mandelbaum are policy wonks, so they explore the notion that "average is over" mainly as it applies to countries and societies, and how we educate kids, train workers, and make public investments. But their insight applies just as powerfully to companies and their leaders. The business world is overflowing with products and services and designs and marketing campaigns that are adequate. The real challenge — and the huge opportunity — is to turn something adequate into something amazing. It's just not good enough to be pretty good at everything. The most successful companies, products, and brands have figured out how to become the most of something. That is, to find and embrace their "extra."
Most organizations don't stand for anything special, of course. In her new book, Tough Cookies, the remarkable Kathy Cloninger, who led a multi-year transformation of the Girl Scouts of the USA, described how hard it is to take a mainstream organization and turn it into something with a distinctive and compelling point of view. If most organizations were honest with themselves, she argues, their mission statements would read, "Acme Widgets: We're no worse than anybody else."
I don't care what field you're in or what kind of company you work for, what qualified as average performance ten years ago is below-average today, and what is average today isn't nearly good enough to create long-term success and outsized value. You can't do something big if you're content with doing things the same way as everyone else. In a world of hyper-competition and limited attention, the only way to stand out from the crowd is to stand for something special.
Photo: © Iwan Baan and MBEACH1, LLLP
A case in point: a truly stunning parking garage in Miami Beach, Florida. The seven-story structure, at 1111 Lincoln Road, serves about as prosaic a function as can be imagined — it's a place to park cars. But when Robert Wennett bought the homely space back in 2005, he decided to turn something adequate into something amazing. As a New York Times report explained, "Parking garages, the grim afterthought of American design, call to mind many words. (Rats. Beer cans. Unidentifiable smells.) Breathtaking is not usually among them."
But this parking garage truly is breathtaking, so much so that it has become an in-demand venue for charity events, wine tastings, even high-priced weddings! Indeed, the top two floors were designed to both hold cars and host events, and they rent for as much as $15,000 per night. "This is not a parking garage," Robert Wennett told the Times. "It's really a civic space."
Talk about positive word of mouth. I first heard about 1111 Lincoln Road when I attended the American Express Luxury Summit in Park City, Utah. That's right — executives from some of the world's most exclusive brands were discussing the beauty and originality of a parking garage thousands of miles away. If that's not moving from adequate to amazing, I'm not sure what is. And it's a great example of an entrepreneur who built an enterprise around something "extra."
Recently, at a conference of marketers and brand specialists, I learned about a fast-growing company called Kulula Airlines, sort of the Southwest of South Africa. Like its role model in the United States, it has low fares, point-to-point routes, and a humorous staff. But its "extra" — what makes everyone stop and take notice — is the exterior of the airplanes themselves. Kulula treats them as flying pieces of art, which it decorates with all sorts of fun, colorful, sometimes downright-hilarious imagery. I have never seen airplanes like these, and I defy anyone who sees one of these planes on an airport tarmac not to stop, gaze in amazement, and want to learn more about the airline behind the planes.
Friedman and Mandelbaum have nailed it. There's no excuse to settle for "good enough" anymore. Average is over. What's your extra?
Why big companies can’t change
Why big companies can’t change
There’s a very good TED Talk by Simon Sinek about how great leaders inspire companies by asking why? I think it also goes a long way toward explaining why big companies don’t handle change well. It’s not that they can’t ask why?, it’s that the answer doesn’t make sense at their scale, though it should.
The Dow 30 Industrials that make up that all-important stock average began in 1896 as the Dow 12 and of those original 12 only General Electric survives on the list today. None of the other 11 are on today’s list even under different names, though some of the companies do survive. Many of those former industry titans, though — companies like American Tobacco and U.S. Leather — no longer exist at all. In some ways that’s surprising since big industrial companies take decades to build and we continue to need most of the stuff they make, so what was the problem?
Times change and big companies don’t like to change with the times.
At the polar opposite position from big industrial companies sit startups, nearly every one of which begins with an effortless expression of why? Big companies ask What? then How? but almost never Why? according to Sinek, who I think has it absolutely right. But good startups are motivated from birth by Why?
Nearly every good startup begins with why? and that why? is traditionally quite simple — because the founders want one for themselves. A hardware device or software application doesn’t exist and they’d really like one, so they invent it. For startups why is easy. If it isn’t easy then you probably don’t have a good startup.
If as a founder your answer to why? is “to get rich” you are in the wrong job.
Applied to a more mature company, looking at Apple we can see the why of the iPod and iTunes was “to take your entire music collection with you wherever you go.”
That sort of thinking isn’t common in big companies. Some of this is due to scale, some due to arrogance, and some to simply losing their way. But no matter how big a company grows, asking why? is still vital for continued success. They just don’t know it.
Back in 1986 I helped write the business plan for Illustrator, Adobe Systems’ first consumer product. The Why? for Illustrator was “because (Adobe founder) John Warnock wants a drawing program,” which is traditional startup. As I recall the business plan had the new consumer division with a net-net positive cash position of $87,000 after five years. Millions invested creating an entire new business for a new set of customers through a completely new distribution channel for a lousy $87,000?
Most companies would never have done it.
Yet if you look at Adobe’s market cap of $13 billion today probably $12 billion of that is based on consumer and professional software that began with Illustrator.
That $87,000 grew to $13 billion over 25 years.
Adobe had an OEM cash cow business selling printer controller designs and software in 1986 but that could only grow so big. And thanks primarily to Microsoft cloning Adobe’s PostScript, that OEM business would eventually decline and almost go away. PostScript is a small part of Adobe today.
This sounds to me like the position faced by many large, successful companies with mature product lines facing obvious challenges down the road. Such companies (I’m sure you can name a bunch if you think about it) see the problem approaching but are paralyzed by the need to envision $10 billion replacement markets. They can’t do what Adobe did in 1986 because there is no obvious Why? and $87,000 after five years wouldn’t even get before the board, no matter how important it really is to the company’s survival.
Adobe was lucky to have a curious founder still at the helm. It was lucky to be making enough money to risk a few million on an alternate future, too.
But 2011 is nothing like 1986. Looking five years ahead for business justification isn’t done any more. Heck, five quarters is a long time in business today. But then the average CEO tenure is also, what, four years?
And that’s why big successful companies roll over and die.
There’s a very good TED Talk by Simon Sinek about how great leaders inspire companies by asking why? I think it also goes a long way toward explaining why big companies don’t handle change well. It’s not that they can’t ask why?, it’s that the answer doesn’t make sense at their scale, though it should.
The Dow 30 Industrials that make up that all-important stock average began in 1896 as the Dow 12 and of those original 12 only General Electric survives on the list today. None of the other 11 are on today’s list even under different names, though some of the companies do survive. Many of those former industry titans, though — companies like American Tobacco and U.S. Leather — no longer exist at all. In some ways that’s surprising since big industrial companies take decades to build and we continue to need most of the stuff they make, so what was the problem?
Times change and big companies don’t like to change with the times.
At the polar opposite position from big industrial companies sit startups, nearly every one of which begins with an effortless expression of why? Big companies ask What? then How? but almost never Why? according to Sinek, who I think has it absolutely right. But good startups are motivated from birth by Why?
Nearly every good startup begins with why? and that why? is traditionally quite simple — because the founders want one for themselves. A hardware device or software application doesn’t exist and they’d really like one, so they invent it. For startups why is easy. If it isn’t easy then you probably don’t have a good startup.
If as a founder your answer to why? is “to get rich” you are in the wrong job.
Applied to a more mature company, looking at Apple we can see the why of the iPod and iTunes was “to take your entire music collection with you wherever you go.”
That sort of thinking isn’t common in big companies. Some of this is due to scale, some due to arrogance, and some to simply losing their way. But no matter how big a company grows, asking why? is still vital for continued success. They just don’t know it.
Back in 1986 I helped write the business plan for Illustrator, Adobe Systems’ first consumer product. The Why? for Illustrator was “because (Adobe founder) John Warnock wants a drawing program,” which is traditional startup. As I recall the business plan had the new consumer division with a net-net positive cash position of $87,000 after five years. Millions invested creating an entire new business for a new set of customers through a completely new distribution channel for a lousy $87,000?
Most companies would never have done it.
Yet if you look at Adobe’s market cap of $13 billion today probably $12 billion of that is based on consumer and professional software that began with Illustrator.
That $87,000 grew to $13 billion over 25 years.
Adobe had an OEM cash cow business selling printer controller designs and software in 1986 but that could only grow so big. And thanks primarily to Microsoft cloning Adobe’s PostScript, that OEM business would eventually decline and almost go away. PostScript is a small part of Adobe today.
This sounds to me like the position faced by many large, successful companies with mature product lines facing obvious challenges down the road. Such companies (I’m sure you can name a bunch if you think about it) see the problem approaching but are paralyzed by the need to envision $10 billion replacement markets. They can’t do what Adobe did in 1986 because there is no obvious Why? and $87,000 after five years wouldn’t even get before the board, no matter how important it really is to the company’s survival.
Adobe was lucky to have a curious founder still at the helm. It was lucky to be making enough money to risk a few million on an alternate future, too.
But 2011 is nothing like 1986. Looking five years ahead for business justification isn’t done any more. Heck, five quarters is a long time in business today. But then the average CEO tenure is also, what, four years?
And that’s why big successful companies roll over and die.
Innovation principles by the head of Apple Marketing
Innovation principles by Markkula
The genesis of these thoughts on marketing from Mike Markkula are detailed on page 78 of Walter Isaacson's intriguing biography of Steve Jobs. In their clarity, simplicity, and actionability, they are stunning. As a marketer, I take three lessons from them.
First, they are about people. Markets are made up of individuals. When striving to bring something new and cool to life, we're much better off imagining the life of a single customer than we are trying to disaggregate and disambiguate mountains of anonymized market data. A holistic understanding of the customer experience you wish to enable is a great way to start creating mind-blowing products. As a way of being, empathy is to product developers what The Force is to Jedi Knights.
Second, they are focused on the market. Surely great marketing is always about the market? Not always, and not so often: in my experience, many marketers worry more about communicating with each other internally than they do with real people in the marketplace. They spend more time reading reports created by others than they do learning from the market directly. They don't use products created by competitors, nor do they try to experience their channels in the way that an end user would. They may or may not love their product segment -- I mean, can you imagine Steve Jobs hawking anything other than stuff he believed in? Significantly, none of Markkula's dictums explicitly mention the internal functions or structure of the enterprise. Granted, it could be argued that "Focus" is about both the internal choices an organization makes about what not to do, as well as on all the market-facing features, line extensions, and complementary offerings it chooses not to invest in.
Third, they focus on the big picture and on the smallest details. Yes, you need to understand where the market is going and how culture, politics, and macro economic trends may influence your future state in three to five years. But you also must appreciate the nuances of texture, smell, form, sound, proportions, and color. The realm of the visceral is always there, our minds and hearts want things to feel good and true. Everything matters, and marketers (or designers, or businesspeople, or engineers -- it's all the same to me) ignore this truth at their peril.
Back on planet metacool, I believe the following innovation principles are at work in Markkula's document:
Principle 1: Experience the world instead of talking about experiencing the world
Principle 3: Always ask: "How do we want people to feel after they experience this?"
Principle 9: Killing good ideas is a good idea
Principle 20: Be remarkable
The genesis of these thoughts on marketing from Mike Markkula are detailed on page 78 of Walter Isaacson's intriguing biography of Steve Jobs. In their clarity, simplicity, and actionability, they are stunning. As a marketer, I take three lessons from them.
First, they are about people. Markets are made up of individuals. When striving to bring something new and cool to life, we're much better off imagining the life of a single customer than we are trying to disaggregate and disambiguate mountains of anonymized market data. A holistic understanding of the customer experience you wish to enable is a great way to start creating mind-blowing products. As a way of being, empathy is to product developers what The Force is to Jedi Knights.
Second, they are focused on the market. Surely great marketing is always about the market? Not always, and not so often: in my experience, many marketers worry more about communicating with each other internally than they do with real people in the marketplace. They spend more time reading reports created by others than they do learning from the market directly. They don't use products created by competitors, nor do they try to experience their channels in the way that an end user would. They may or may not love their product segment -- I mean, can you imagine Steve Jobs hawking anything other than stuff he believed in? Significantly, none of Markkula's dictums explicitly mention the internal functions or structure of the enterprise. Granted, it could be argued that "Focus" is about both the internal choices an organization makes about what not to do, as well as on all the market-facing features, line extensions, and complementary offerings it chooses not to invest in.
Third, they focus on the big picture and on the smallest details. Yes, you need to understand where the market is going and how culture, politics, and macro economic trends may influence your future state in three to five years. But you also must appreciate the nuances of texture, smell, form, sound, proportions, and color. The realm of the visceral is always there, our minds and hearts want things to feel good and true. Everything matters, and marketers (or designers, or businesspeople, or engineers -- it's all the same to me) ignore this truth at their peril.
Back on planet metacool, I believe the following innovation principles are at work in Markkula's document:
Principle 1: Experience the world instead of talking about experiencing the world
Principle 3: Always ask: "How do we want people to feel after they experience this?"
Principle 9: Killing good ideas is a good idea
Principle 20: Be remarkable
Sunday, December 18, 2011
Five Common Strategy Mistakes
HBR Blog Network
JOAN MAGRETTA
Joan Magretta is a senior associate at the Institute for Strategy and Competitiveness at Harvard Business School. She is the author of What Management Is
and the forthcoming Understanding Michael Porter: The Essential Guide to Competition and Strategy.
Five Common Strategy Mistakes
1:15 PM Thursday December 8, 2011
by Joan Magretta
I just finished a two-year project looking at Michael Porter's most important insights for managers. Connecting the dots between his classic frameworks (the five forces, for example) and his latest thinking (the five tests of strategy) gave me a new understanding of the most common mistakes that can derail a company's strategy. In a previous post, I focused on the fallacy of competing to be the best. Here are five more traps I've seen managers fall into over and over again. Understanding Porter's strategy fundamentals will help you to avoid them.
Mistake #1. Confusing marketing with strategy.
Correction: A value proposition isn't the same thing as a strategy. If you're trying to describe a strategy, the value proposition is a natural place to begin — it's intuitive to think of strategy in terms of the mix of benefits aimed at meeting customers' needs. But as important as it is to have insight into customers' needs, don't confuse marketing with strategy. What the marketing-only approach misses is that a robust strategy also requires a tailored value chain, a unique configuration of activities that best delivers that kind of value. This element of strategy is not at all intuitive, but it's absolutely essential. If you perform the same activities as everyone else, in the same ways, how can you expect to achieve better performance? To establish a competitive advantage, a company must deliver its distinctive value through a distinctive value chain. It must perform different activities than rivals or perform similar activities in different ways.
Mistake #2. Confusing competitive advantage with "what you're good at."
Correction: Building on strength is a good thing, but when it comes to strategy, companies are too often inward looking and therefore likely to overestimate their strengths. You might perceive customer service as a strong area. So that becomes the "strength" on which you attempt to build a strategy. But a real strength for strategy purposes has to be something the company can do better than any of its rivals. And "better" because you are choosing to meet different needs and performing different activities than they perform, because you've chosen a different configuration for your value chain than they have.
Mistake #3: Pursuing size above all else, because if you're the biggest, you'll be more profitable.
Correction: There is at least a grain of truth in this thinking, which is precisely what makes it so dangerous. But before you assume that bigger is always better, it is critical to run the numbers for your business. Too often the goal is chosen because it sounds good, whether or not the economics of the business support the logic. In industry after industry, Porter notes that economies of scale are exhausted at a relatively small share of industry sales. There is no systematic evidence that indicates that industry leaders are the most profitable or successful firms. To cite one notorious example, General Motors was the world's largest car company for a period of decades, a fact that didn't prevent its descent into bankruptcy. To the extent that size mattered at all, it might be more accurate to say that GM was too big to succeed. Meanwhile, BMW, small by industry standards, has a history of superior returns. Over the past decade (2000-2009), its average return on invested capital was 50 percent higher than the industry average. Companies only have to be "big enough," which rarely means they have to dominate. Often "big enough" is just 10 percent of the market.
Mistake #4. Thinking that "growth" or "reaching $1 billion in revenue" is a strategy.
Correction: Don't confuse strategy with actions (grow, acquire, divest, etc.) or with goals (reach X billion in sales, Y share of market). Porter's definition: the set of integrated choices that define how you will achieve superior performance in the face of competition. It's not the goal (e.g., be number one or reach $1 billion in top-line revenue), nor is it a specific action (e.g., make acquisitions). It's the positioning you choose that will result in achieving the goal; the actions are the path you take to realize the positioning. Moreover, when Porter defines strategy, he is really talking about what constitutes a good strategy — one that will result in a higher ROIC than the industry average. The real problem here is that you will think you have a strategy when you don't.
Mistake #5. Focusing on high-growth markets, because that's where the money is.
Correction: Managers often mistakenly assume that a high-growth industry will be an attractive one. Wrong. Growth is no guarantee that the industry will be profitable. For example, growth might put suppliers in the driver's seat, driving up the industry's costs and limiting profitability. Or, combined with low entry barriers, growth might attract new rivals, thereby increasing competition and driving prices down. Growth alone says nothing about the power of customers or the availability of substitutes, both of which would dampen profitability. The untested assumption that a fast-growing industry is a "good" industry, Porter warns, often leads to bad strategy decisions.
These mistakes are both common and costly. Getting smarter about how competition works and what strategy is will save you from making them.
JOAN MAGRETTA
Joan Magretta is a senior associate at the Institute for Strategy and Competitiveness at Harvard Business School. She is the author of What Management Is
and the forthcoming Understanding Michael Porter: The Essential Guide to Competition and Strategy.
Five Common Strategy Mistakes
1:15 PM Thursday December 8, 2011
by Joan Magretta
I just finished a two-year project looking at Michael Porter's most important insights for managers. Connecting the dots between his classic frameworks (the five forces, for example) and his latest thinking (the five tests of strategy) gave me a new understanding of the most common mistakes that can derail a company's strategy. In a previous post, I focused on the fallacy of competing to be the best. Here are five more traps I've seen managers fall into over and over again. Understanding Porter's strategy fundamentals will help you to avoid them.
Mistake #1. Confusing marketing with strategy.
Correction: A value proposition isn't the same thing as a strategy. If you're trying to describe a strategy, the value proposition is a natural place to begin — it's intuitive to think of strategy in terms of the mix of benefits aimed at meeting customers' needs. But as important as it is to have insight into customers' needs, don't confuse marketing with strategy. What the marketing-only approach misses is that a robust strategy also requires a tailored value chain, a unique configuration of activities that best delivers that kind of value. This element of strategy is not at all intuitive, but it's absolutely essential. If you perform the same activities as everyone else, in the same ways, how can you expect to achieve better performance? To establish a competitive advantage, a company must deliver its distinctive value through a distinctive value chain. It must perform different activities than rivals or perform similar activities in different ways.
Mistake #2. Confusing competitive advantage with "what you're good at."
Correction: Building on strength is a good thing, but when it comes to strategy, companies are too often inward looking and therefore likely to overestimate their strengths. You might perceive customer service as a strong area. So that becomes the "strength" on which you attempt to build a strategy. But a real strength for strategy purposes has to be something the company can do better than any of its rivals. And "better" because you are choosing to meet different needs and performing different activities than they perform, because you've chosen a different configuration for your value chain than they have.
Mistake #3: Pursuing size above all else, because if you're the biggest, you'll be more profitable.
Correction: There is at least a grain of truth in this thinking, which is precisely what makes it so dangerous. But before you assume that bigger is always better, it is critical to run the numbers for your business. Too often the goal is chosen because it sounds good, whether or not the economics of the business support the logic. In industry after industry, Porter notes that economies of scale are exhausted at a relatively small share of industry sales. There is no systematic evidence that indicates that industry leaders are the most profitable or successful firms. To cite one notorious example, General Motors was the world's largest car company for a period of decades, a fact that didn't prevent its descent into bankruptcy. To the extent that size mattered at all, it might be more accurate to say that GM was too big to succeed. Meanwhile, BMW, small by industry standards, has a history of superior returns. Over the past decade (2000-2009), its average return on invested capital was 50 percent higher than the industry average. Companies only have to be "big enough," which rarely means they have to dominate. Often "big enough" is just 10 percent of the market.
Mistake #4. Thinking that "growth" or "reaching $1 billion in revenue" is a strategy.
Correction: Don't confuse strategy with actions (grow, acquire, divest, etc.) or with goals (reach X billion in sales, Y share of market). Porter's definition: the set of integrated choices that define how you will achieve superior performance in the face of competition. It's not the goal (e.g., be number one or reach $1 billion in top-line revenue), nor is it a specific action (e.g., make acquisitions). It's the positioning you choose that will result in achieving the goal; the actions are the path you take to realize the positioning. Moreover, when Porter defines strategy, he is really talking about what constitutes a good strategy — one that will result in a higher ROIC than the industry average. The real problem here is that you will think you have a strategy when you don't.
Mistake #5. Focusing on high-growth markets, because that's where the money is.
Correction: Managers often mistakenly assume that a high-growth industry will be an attractive one. Wrong. Growth is no guarantee that the industry will be profitable. For example, growth might put suppliers in the driver's seat, driving up the industry's costs and limiting profitability. Or, combined with low entry barriers, growth might attract new rivals, thereby increasing competition and driving prices down. Growth alone says nothing about the power of customers or the availability of substitutes, both of which would dampen profitability. The untested assumption that a fast-growing industry is a "good" industry, Porter warns, often leads to bad strategy decisions.
These mistakes are both common and costly. Getting smarter about how competition works and what strategy is will save you from making them.
Friday, December 9, 2011
To Create Something Exceptional, Do Sweat The Small Stuff
Box CEO Aaron Levie:
BY FC Expert Blogger Aaron LevieWed Dec 7, 2011
This blog is written by a member of our expert blogging community and expresses that expert's views alone.
Business schools and most jobs don’t teach you how important it is to sweat the small stuff.
In fact, we’re mostly told the opposite--don’t be a micromanager, don’t be penny wise and pound foolish, don't miss the forest for the trees. The implied wisdom is that abstract and conceptual thinking always prevails over narrow determination and single-mindedness. And yet, when we look at the greatest inventions, greatest companies, and greatest teams of our time, their success always comes down to tireless concern over every last detail.
Big, sluggish companies--you know the ones, with brands that elicit ambivalence instead of aspiration--are fat, dumb, and uncaring for a reason. Their products, from airline flights to consumer electronics devices, feel like the result of an accident or a hassle rather than the core purpose of their existence. In these instances, system thinking--with the goal of managing and improving processes, logistics, and throughput--reigns supreme in the organization, replacing a maniacal focus on delivering great products or services by attending to every last excruciating detail.
It’s certainly easy as a startup to focus on the small things, because when you’re small, every issue is big. This is why, counterintuitively, a small, nimble company with far fewer resources often delivers the most innovation and a superior user experience. By focusing on every level of detail, because survival is on the line, better products and service emerge. As organizations grow, this responsibility dissipates, founders move on, and quality suffers--it can always be someone else’s problem to worry about the small, nuanced, granular things. Those are tactical issues, and I’m strategic, right?
Yet, the best companies in the world are those that have scaled by turning those tactics and granular efforts into the reason for their success. This is why you get a near-uniformly positive experience when flying Virgin compared to often-abysmal treatment from other airlines, or why Apple unequivocally makes products that just feel better than other PC manufacturers.
Why the small stuff is so important
In management, we can easily slip into thinking about the holistic delivery of a product distinct from the perfect delivery of every subcomponent or part that makes up that service. Everyone has been in those meetings--executives feel that the small things can be left to everyone else, instead focusing on the areas of "higher value." Phrases like "this is good enough," or "customers won’t notice" should be stamped out of any management team’s or individual’s vocabulary.
Because ultimately, your product or service is consumed on that granular level that's being ignored. Whether it’s clicking on a link, signing up for a product, playing with a dial, or conversing with an attendant, these are the interfaces from which customers experience your brand. No customer cares that you have the best logistics and supply chain in the world if the final manifestation of your product is flawed.
And with the Internet amplifying how people share their love or hate for products, increasing global competition, and contracting wallets, the quality of these interactions are more important than ever before.
The small things have a disproportionate impact on customers' feelings. It’s the way Kindle knows your name when you first load it up, the consistent experience you get from Starbucks baristas, the dozens of optimizations Spotify does to make sure your music starts streaming instantly, or the richer sound and better comfort you get from Bose headphones. We're taught that quality and cost should scale proportionally, but many of the best experiences don't come with a larger price tag at all. Just a greater level of attention to the details.
The combination of an insane attention to these details and neurotic level of focus on customer experience in all areas is what sets apart the great companies from the good. Organizations that do decide to adopt this level of intensity will always have superior offerings, an instant differentiator from the indistinguishable competition.
Building a culture around sweating the small stuff
"Some people aren’t used to an environment where excellence is expected," Steve Jobs once famously and said.
Most companies have given up on caring about excellence altogether, so there aren’t too many examples that we can live by. M.G. Siegler argues that leaders need to aim for less deference to produce high-quality work. While this has been proven to work across film, fashion, and technology, it’s also a cop-out for the entire team. It should be everyone’s responsibility to push for a higher standard and level of experience.
Unsurprisingly, we're actually well-incented to make our work the very best--it's better for profits, long-term morale, and it's more gratifying--but we often don’t know why it's so critical until it's too late. The product gets shipped to poor reviews: fail. Customer unrest thanks to poor support: double fail. And amidst the infinite varying priorities and market changes, it becomes shockingly easy to undervalue quality even in a well-run organization.
In any organization, quality bars are subjective and moving targets, making them hard to identify and address, let alone maintain. But when they’re not defined or upheld, most organizations will regress to the mean, which we can assume is the average output. But leading organizations are built by exploiting the fringe--the fringe in quality, in performance, in experience, in cost, and so on.
To sweat the small stuff means to be uncompromising about anything that affects the quality of a product or experience for customers. It means making tradeoffs of time and effort for the efficacy of the final output. It means implementing systems, social or formal, that ensure high bars are maintained at all times and in any circumstance. It means delaying product releases, extending work hours, or losing a little extra margin to make things just right.
Asking "What would be best for our customer?" doesn’t go nearly far enough. Leading through this question gets you to average results. Instead ask, "What will blow our customers' minds?" Repeat the question "Can we do better?" until the point of migraine-induced annoyance, and see how much things change. Create a culture that forces this challenge multiple times, every step of the way, and you’ll see remarkable changes in every deliverable. Implement a we-won’t-ship line in the sand that can't be subverted for any reason if quality standards aren't met. There are other tactics to distribute the enforcement as well.
Mark Pincus, the CEO of Zynga, pushes on the notion that every employee is the CEO of something. This empowers individuals to take responsibility for their area of ownership, adding a level of accountability and fulfillment that can drive quality. In many ways this is a psychological trick to ensure success and quality in the most narrow and distinct of areas. For customer delight, Zappos became determined to build a winning culture for its company that would make employees love their jobs, and thus reflect this inspiration and happiness on their clients.
If you don't seem paranoid about perfection, you're probably not aiming high enough. Sadly--for consumers--the vast majority of companies will never put this level of focus on their products, services, or interactions. But building it into your culture, and making sure it's a collective and distributed effort, is a winning way to ensure your products are superior.
Author Aaron Levie is the CEO and co-founder of Box, which he originally created as a college business project with the goal of helping people easily access their information from any location.
BY FC Expert Blogger Aaron LevieWed Dec 7, 2011
This blog is written by a member of our expert blogging community and expresses that expert's views alone.
Business schools and most jobs don’t teach you how important it is to sweat the small stuff.
In fact, we’re mostly told the opposite--don’t be a micromanager, don’t be penny wise and pound foolish, don't miss the forest for the trees. The implied wisdom is that abstract and conceptual thinking always prevails over narrow determination and single-mindedness. And yet, when we look at the greatest inventions, greatest companies, and greatest teams of our time, their success always comes down to tireless concern over every last detail.
Big, sluggish companies--you know the ones, with brands that elicit ambivalence instead of aspiration--are fat, dumb, and uncaring for a reason. Their products, from airline flights to consumer electronics devices, feel like the result of an accident or a hassle rather than the core purpose of their existence. In these instances, system thinking--with the goal of managing and improving processes, logistics, and throughput--reigns supreme in the organization, replacing a maniacal focus on delivering great products or services by attending to every last excruciating detail.
It’s certainly easy as a startup to focus on the small things, because when you’re small, every issue is big. This is why, counterintuitively, a small, nimble company with far fewer resources often delivers the most innovation and a superior user experience. By focusing on every level of detail, because survival is on the line, better products and service emerge. As organizations grow, this responsibility dissipates, founders move on, and quality suffers--it can always be someone else’s problem to worry about the small, nuanced, granular things. Those are tactical issues, and I’m strategic, right?
Yet, the best companies in the world are those that have scaled by turning those tactics and granular efforts into the reason for their success. This is why you get a near-uniformly positive experience when flying Virgin compared to often-abysmal treatment from other airlines, or why Apple unequivocally makes products that just feel better than other PC manufacturers.
Why the small stuff is so important
In management, we can easily slip into thinking about the holistic delivery of a product distinct from the perfect delivery of every subcomponent or part that makes up that service. Everyone has been in those meetings--executives feel that the small things can be left to everyone else, instead focusing on the areas of "higher value." Phrases like "this is good enough," or "customers won’t notice" should be stamped out of any management team’s or individual’s vocabulary.
Because ultimately, your product or service is consumed on that granular level that's being ignored. Whether it’s clicking on a link, signing up for a product, playing with a dial, or conversing with an attendant, these are the interfaces from which customers experience your brand. No customer cares that you have the best logistics and supply chain in the world if the final manifestation of your product is flawed.
And with the Internet amplifying how people share their love or hate for products, increasing global competition, and contracting wallets, the quality of these interactions are more important than ever before.
The small things have a disproportionate impact on customers' feelings. It’s the way Kindle knows your name when you first load it up, the consistent experience you get from Starbucks baristas, the dozens of optimizations Spotify does to make sure your music starts streaming instantly, or the richer sound and better comfort you get from Bose headphones. We're taught that quality and cost should scale proportionally, but many of the best experiences don't come with a larger price tag at all. Just a greater level of attention to the details.
The combination of an insane attention to these details and neurotic level of focus on customer experience in all areas is what sets apart the great companies from the good. Organizations that do decide to adopt this level of intensity will always have superior offerings, an instant differentiator from the indistinguishable competition.
Building a culture around sweating the small stuff
"Some people aren’t used to an environment where excellence is expected," Steve Jobs once famously and said.
Most companies have given up on caring about excellence altogether, so there aren’t too many examples that we can live by. M.G. Siegler argues that leaders need to aim for less deference to produce high-quality work. While this has been proven to work across film, fashion, and technology, it’s also a cop-out for the entire team. It should be everyone’s responsibility to push for a higher standard and level of experience.
Unsurprisingly, we're actually well-incented to make our work the very best--it's better for profits, long-term morale, and it's more gratifying--but we often don’t know why it's so critical until it's too late. The product gets shipped to poor reviews: fail. Customer unrest thanks to poor support: double fail. And amidst the infinite varying priorities and market changes, it becomes shockingly easy to undervalue quality even in a well-run organization.
In any organization, quality bars are subjective and moving targets, making them hard to identify and address, let alone maintain. But when they’re not defined or upheld, most organizations will regress to the mean, which we can assume is the average output. But leading organizations are built by exploiting the fringe--the fringe in quality, in performance, in experience, in cost, and so on.
To sweat the small stuff means to be uncompromising about anything that affects the quality of a product or experience for customers. It means making tradeoffs of time and effort for the efficacy of the final output. It means implementing systems, social or formal, that ensure high bars are maintained at all times and in any circumstance. It means delaying product releases, extending work hours, or losing a little extra margin to make things just right.
Asking "What would be best for our customer?" doesn’t go nearly far enough. Leading through this question gets you to average results. Instead ask, "What will blow our customers' minds?" Repeat the question "Can we do better?" until the point of migraine-induced annoyance, and see how much things change. Create a culture that forces this challenge multiple times, every step of the way, and you’ll see remarkable changes in every deliverable. Implement a we-won’t-ship line in the sand that can't be subverted for any reason if quality standards aren't met. There are other tactics to distribute the enforcement as well.
Mark Pincus, the CEO of Zynga, pushes on the notion that every employee is the CEO of something. This empowers individuals to take responsibility for their area of ownership, adding a level of accountability and fulfillment that can drive quality. In many ways this is a psychological trick to ensure success and quality in the most narrow and distinct of areas. For customer delight, Zappos became determined to build a winning culture for its company that would make employees love their jobs, and thus reflect this inspiration and happiness on their clients.
If you don't seem paranoid about perfection, you're probably not aiming high enough. Sadly--for consumers--the vast majority of companies will never put this level of focus on their products, services, or interactions. But building it into your culture, and making sure it's a collective and distributed effort, is a winning way to ensure your products are superior.
Author Aaron Levie is the CEO and co-founder of Box, which he originally created as a college business project with the goal of helping people easily access their information from any location.
Sunday, December 4, 2011
Don't Let What You Know Limit What You Imagine
Don't Let What You Know Limit What You Imagine
Bill Taylor
William C. Taylor is cofounder of Fast Company magazine
3:03 PM Tuesday November 29, 2011
tOne of the most perplexing features of these troubled times is that so many capable people in so many fields look so lost and ineffective. Whether it's the stubborn inefficiencies of the health-care system, the ever-rising costs of the higher-education system, even the slow-motion collapse of the US postal system, leaders with unrivaled expertise and decades of experience can't seem to develop creative solutions to dire problems.
Why are so many smart executives so ineffective?
One answer may be that all this experience is itself a problem. In her underappreciated book, The Innovation Killer, Cynthia Barton Rabe, a former innovation strategist at Intel, explains how "what we know limits what we can imagine." Many organizations, she argues, struggle with a "paradox of expertise" in which deep knowledge of what exists in a marketplace or a product category makes it harder to consider what-if strategies that challenge long-held assumptions. "When it comes to innovation," she writes, "the same hard-won experience, best practice, and processes that are the cornerstones of an organization's success may be more like millstones that threaten to sink it."
Her answer to the paradox is to populate organizations with "zero-gravity thinkers": innovators "who are not weighed down by the expertise of a team, its politics, or 'the way things have always been done.'" In Rabe's formula, zero-gravity thinkers come from outside the corporate mainstream and work deep within the ranks of the organization. They are designers, ethnographers, anthropologists, and other creative types who get immersed in a project or a team, contribute their unique points of view, and then move on to the next change-the-game assignment. Ideal zero-gravity thinkers, she explains, have "psychological distance" from the setting in which they work, "renaissance tendencies" that draw on a range of interests and influences, and "related expertise" that allows them to find the points where blue-sky ideas intersect with real-world opportunities.
Or, to put it differently, the most effective leaders demonstrate a capacity for vuja dé. We've all experienced déjà vu — looking at an unfamiliar situation and feeling like you've seen it before. Vuja dé is the flip side of that — looking at a familiar situation (a field you've worked in for decades, products you've worked on for years) as if you've never seen it before, and, with that fresh line of sight, developing a distinctive point of view on the future. If you believe, as I do, that what you see shapes how you change, then the question for change-minded leaders becomes: How do you look at your organization and your field as if you are seeing them for the first time?
A classic example of this phenomenon, which I chronicled in my book Mavericks at Work, was the game-changing performance of Commerce Bank, one of the most colorful institutions in the history of retail banking. I first noticed Commerce back in the late '90s, when it was developing a reputation for creativity and had a stock-market value of $400 million. Ten years later, after a period of massive growth, the company sold itself to TD Bank in a stock transaction worth $8.5 billion — not a bad decade. Today, operating under the TD Bank umbrella, the outfit has more than 1,000 branches up and down the East Coast, from Maine to Florida, and a well-earned reputation as "America's most convenient bank."
During its rise to prominence, the bank introduced one unheard-of innovation after another: seven-day-a-week service, free coin-counting machines that were hugely popular with customers, "Red Fridays" in which employees wore special outfits to work. The term it used to describe its strategy was "retailtainment" — making it fun for customers to do business in an industry that was devoid of personality. "The world didn't need another bank on the corner, and then we came along," said Dennis DiFlorio, who spent nearly twenty years in leadership positions, including chairman. "We created a cult brand in a dead business."
Whenever I spent time with the bank's leadership team, they were adamant about their disdain for traditional approaches to "benchmarking" the competition as well as for traditional banks. They didn't evaluate themselves against Citigroup, Bank of America, or Wells Fargo. They looked to "power retailers" such as Starbucks, Target, and Best Buy. (Commerce did study its rivals, but only to discover "the stuff that drives customers at other banks crazy." These were called Competitor Rules and Practices — internal acronym, CRAP.)
"Every great company has reinvented the industry it's in," founder Vernon Hill told me. "So we don't copy the stupid banks. We copy the great retailers." For example, the bank decided to open its branches for 70 to 80 hours a week, including Saturday and Sunday. "It's the simplest idea in the world," Hill said. "But to this day, it's heretical in banking. The first question bankers ask me is, 'How do you staff on Sunday?' I tell them: 'Wal-Mart stays open. The malls stay open. How hard can it be?'"
Commerce was (and TD Bank remains) a unique outfit, but its blueprint for innovation was not an entirely new perspective on making change. Fascinating articles in the Daily Telegraph and the Wall Street Journal described how London's Great Ormond Street Hospital for Children, renowned for its cardiac care, struggled with poorly designed "handoffs" that resulted in errors, complications, even deaths. So Dr. Martin Elliot, head of cardiac surgery, and Dr. Allan Goldman, head of pediatric intensive care, studied high-powered professionals who were better than anyone at organizing handoffs — the pit crew of Ferrari's Formula One racing team.
The doctors and the pit crew, the Telegraph reported, "worked together at [the team's] home base in Modena, Italy, in the pits of the British Grand Prix, and in the Great Ormond Street [operating room] and intensive-care ward." Members of the pit crew were struck by how clumsy the hospital's handoff process was — not to mention the fact that it often lacked a clear leader. (In Formula One races, a so-called "lollipop man" wields an easy-to-see paddle and calls the shots.) Moreover, they noted how noisy the process was. Ferrari pit crews operate largely in silence, despite (or because of) the roar of engines around them. As a result of "one of the more unlikely collaborations in modern medicine," the Journal reported, the hospital redesigned its handoff procedures and sharply reduced medical errors.
Here's the message: You can't let what you know limit what you can imagine. As you try to do something special, exciting, important in your work, as you work hard to devise creative solutions to stubborn problems, don't just look to other organizations in your field (or to your past successes) for ideas and practices. Look to great organizations in all sorts of unrelated fields to see what works for them — and how you can apply their ideas to your problems. Who are the most unlikely organizations from which you learn? Do you have new ideas about where to look for new ideas?
Bill Taylor
William C. Taylor is cofounder of Fast Company magazine
3:03 PM Tuesday November 29, 2011
tOne of the most perplexing features of these troubled times is that so many capable people in so many fields look so lost and ineffective. Whether it's the stubborn inefficiencies of the health-care system, the ever-rising costs of the higher-education system, even the slow-motion collapse of the US postal system, leaders with unrivaled expertise and decades of experience can't seem to develop creative solutions to dire problems.
Why are so many smart executives so ineffective?
One answer may be that all this experience is itself a problem. In her underappreciated book, The Innovation Killer, Cynthia Barton Rabe, a former innovation strategist at Intel, explains how "what we know limits what we can imagine." Many organizations, she argues, struggle with a "paradox of expertise" in which deep knowledge of what exists in a marketplace or a product category makes it harder to consider what-if strategies that challenge long-held assumptions. "When it comes to innovation," she writes, "the same hard-won experience, best practice, and processes that are the cornerstones of an organization's success may be more like millstones that threaten to sink it."
Her answer to the paradox is to populate organizations with "zero-gravity thinkers": innovators "who are not weighed down by the expertise of a team, its politics, or 'the way things have always been done.'" In Rabe's formula, zero-gravity thinkers come from outside the corporate mainstream and work deep within the ranks of the organization. They are designers, ethnographers, anthropologists, and other creative types who get immersed in a project or a team, contribute their unique points of view, and then move on to the next change-the-game assignment. Ideal zero-gravity thinkers, she explains, have "psychological distance" from the setting in which they work, "renaissance tendencies" that draw on a range of interests and influences, and "related expertise" that allows them to find the points where blue-sky ideas intersect with real-world opportunities.
Or, to put it differently, the most effective leaders demonstrate a capacity for vuja dé. We've all experienced déjà vu — looking at an unfamiliar situation and feeling like you've seen it before. Vuja dé is the flip side of that — looking at a familiar situation (a field you've worked in for decades, products you've worked on for years) as if you've never seen it before, and, with that fresh line of sight, developing a distinctive point of view on the future. If you believe, as I do, that what you see shapes how you change, then the question for change-minded leaders becomes: How do you look at your organization and your field as if you are seeing them for the first time?
A classic example of this phenomenon, which I chronicled in my book Mavericks at Work, was the game-changing performance of Commerce Bank, one of the most colorful institutions in the history of retail banking. I first noticed Commerce back in the late '90s, when it was developing a reputation for creativity and had a stock-market value of $400 million. Ten years later, after a period of massive growth, the company sold itself to TD Bank in a stock transaction worth $8.5 billion — not a bad decade. Today, operating under the TD Bank umbrella, the outfit has more than 1,000 branches up and down the East Coast, from Maine to Florida, and a well-earned reputation as "America's most convenient bank."
During its rise to prominence, the bank introduced one unheard-of innovation after another: seven-day-a-week service, free coin-counting machines that were hugely popular with customers, "Red Fridays" in which employees wore special outfits to work. The term it used to describe its strategy was "retailtainment" — making it fun for customers to do business in an industry that was devoid of personality. "The world didn't need another bank on the corner, and then we came along," said Dennis DiFlorio, who spent nearly twenty years in leadership positions, including chairman. "We created a cult brand in a dead business."
Whenever I spent time with the bank's leadership team, they were adamant about their disdain for traditional approaches to "benchmarking" the competition as well as for traditional banks. They didn't evaluate themselves against Citigroup, Bank of America, or Wells Fargo. They looked to "power retailers" such as Starbucks, Target, and Best Buy. (Commerce did study its rivals, but only to discover "the stuff that drives customers at other banks crazy." These were called Competitor Rules and Practices — internal acronym, CRAP.)
"Every great company has reinvented the industry it's in," founder Vernon Hill told me. "So we don't copy the stupid banks. We copy the great retailers." For example, the bank decided to open its branches for 70 to 80 hours a week, including Saturday and Sunday. "It's the simplest idea in the world," Hill said. "But to this day, it's heretical in banking. The first question bankers ask me is, 'How do you staff on Sunday?' I tell them: 'Wal-Mart stays open. The malls stay open. How hard can it be?'"
Commerce was (and TD Bank remains) a unique outfit, but its blueprint for innovation was not an entirely new perspective on making change. Fascinating articles in the Daily Telegraph and the Wall Street Journal described how London's Great Ormond Street Hospital for Children, renowned for its cardiac care, struggled with poorly designed "handoffs" that resulted in errors, complications, even deaths. So Dr. Martin Elliot, head of cardiac surgery, and Dr. Allan Goldman, head of pediatric intensive care, studied high-powered professionals who were better than anyone at organizing handoffs — the pit crew of Ferrari's Formula One racing team.
The doctors and the pit crew, the Telegraph reported, "worked together at [the team's] home base in Modena, Italy, in the pits of the British Grand Prix, and in the Great Ormond Street [operating room] and intensive-care ward." Members of the pit crew were struck by how clumsy the hospital's handoff process was — not to mention the fact that it often lacked a clear leader. (In Formula One races, a so-called "lollipop man" wields an easy-to-see paddle and calls the shots.) Moreover, they noted how noisy the process was. Ferrari pit crews operate largely in silence, despite (or because of) the roar of engines around them. As a result of "one of the more unlikely collaborations in modern medicine," the Journal reported, the hospital redesigned its handoff procedures and sharply reduced medical errors.
Here's the message: You can't let what you know limit what you can imagine. As you try to do something special, exciting, important in your work, as you work hard to devise creative solutions to stubborn problems, don't just look to other organizations in your field (or to your past successes) for ideas and practices. Look to great organizations in all sorts of unrelated fields to see what works for them — and how you can apply their ideas to your problems. Who are the most unlikely organizations from which you learn? Do you have new ideas about where to look for new ideas?
Is M&A The New R&D? Is this hiw companies will innovate in the future?
Can only startups innovate? A brief history of acquisitions
30th November 2011 by Harrison Weber
The magic of startup life is the constant flow of new information; new ways of solving problems with solutions that surface from sleepless nights and wandering minds. Major tech companies like Microsoft and Apple were once startups themselves, small companies with innovative ideas that geared up to expand rapidly.
Microsoft and Apple grew into the powerhouses we know today and knocked IBM off its top shelf, all while constantly being challenged by small, groundbreaking companies that could maneuver much faster than a major corporation.
What happened to IBM can still happen to the likes of Microsoft, Apple and Google, which is why acquisition is their life force and part of every corporation’s recipe for success — bringing in fresh ideas before the whole company goes stale.
Google
After developing an impressive competing network, DoubleClick was bought by Google for 3.1 billion in 2007. This acquisition of DoubleClick brought Google into the display advertising market overnight.
Google Docs was created with the acquisition of Upstartle’s Writely, a web-based wordprocessor, and 2Web Technologies for XL2Web, which led to Google Spreadsheets. Google merged both products together to create a productivity suite that now competes with desktop and cloud offerings from Microsoft Office and Apple’s iWork.
After Google Video failed to gain traction online, it acquired YouTube in 2006 for $1.65 billion. At the time, there was speculation that Google had overpaid; YouTube had zero monetization strategies, and was over-run with copyright infringment. Time has shown that this may be one of the best acquisitions in recent history, with YouTube’s 40% marketshare and successful monetization as outstanding proof.
Android is another high profile innovation, acquired by Google in 2005. Google developed and brought Android to market, from what was a small Palo Alto startup that had run independently for two years.
Since 1998, Google has bought over 100 companies.
Apple
Apple’s largest acquisition was NeXT for $404 million, which brought Steve Jobs back to Apple and laid the foundations for Mac OS X. Other notable Apple acquisitions include Emagic, which led to Garageband, and FingerWorks, which aided in the development of multi touch technology in iOS.
Most notably in recent years, Apple acquired Siri in 2010, which led to a highly publicized release exclusively for the iPhone 4S. This acquisition creates a highly competitive advantage when compared to Android and Windows Phone’s similar functionality.
Microsoft
Microsoft’s first acquisition was Forethought in 1987. Forethought developed a presentation program that would eventually become Microsoft Powerpoint, a significant piece of Microsoft Office. Ten years later, Microsoft acquired Hotmail for $500 million, which was integrated as an MSN service.
Hotmail is still (surprisingly) the largest webmail provider in the world, and is recently seeing more attention from Redmond. Other acquisitions include Bungie, which developed Halo, the Xbox’s “killer app.”
Amazon
After growing rapidly in three years, Amazon purchased Bookpages, which quickly became Amazon’s online UK store. That same year, Amazon acquired Telebook to facilitate expansion into Germany. In 2004, Amazon bought Joyo.com for $72 million. At the time, it was the largest online retailer of books, music and videos in China. These strategic acquisition grew Amazon’s marketshare, while shrinking competition.
Amazon’s transition into the ebook and ereader market was likely strengthened by Mobipocket, a French company that specialized in ebooks and Shelfari, a virtual bookshelf.
Facebook
Other than Beluga, which led to Facebook messenger, most of Facebook’s acquisitions were strictly for bringing in fresh talent (e.g. Sofa). According to Chris Fralic, the Managing Partner at First Round Capital, Facebook acquired Hotpotato because “they really wanted the leadership” (as heard at yesterday’s Startup Acquisitions Meetup hosted at General Assembly).
Here’s Facebook CEO Mark Zuckerberg’s stance on acquisitions:
“We have not once bought a company for the company. We buy companies to get excellent people… In order to have a really entrepreneurial culture one of the key things is to make sure we’re recruiting the best people. One of the ways to do this is to focus on acquiring great companies with great founders.”
Yahoo!
Yahoo started as a website directory and eventually became a full fledged web portal. As of 2000, almost every product released by Yahoo had been fueled by acquisitions. Acquired companies included Net Controlls, Hyperparallel and SearchFox, which formed and built upon Yahoo Search. The acquisition of Four11 led to Yahoo Mail, which was then influenced by acquired companies Oddpost, Stata Labs and Xoopit. The company Classic Games became Yahoo! Games, and eGroups became Yahoo Groups.
Not all acquisitions end well, and Yahoo has had failures in this realm. It acquired GeoCities for $3.6 billion in 1999, and finally killed it off in 2009. Yahoo also acquired del.icio.us in 2005 for $20 million. It was sold off this year to YouTube founders Chad Hurley and Steve Chen.
AOL
AOL, like Yahoo, has a pretty bad track record. In 1998, AOL acquired Netscape for a daunting $4.2 billion. At the time, Netscape had a 90% browser marketshare, which dramatically shrank to >1% after the release of Internet Explorer.
Possibly the worst acquisition in history was the purchase of Time Warner for $164 billion. This deal eventually caused AOL’s stock price to fall $106 billion in value. What’s worse? It’s rumored that the day before AOL decided to “acquire” Time Warner, it was debating whether or not to make an offer for Ebay.
More successful AOL acquisitions include the purchase of Mapquest, which still holds marketshare dominance over Google Maps and Bing Maps. The acquisition of sites like The Huffington Post has helped AOL gain dominance in web news and blogs, although the purchase of Engadget and TechCrunch has soured both writers and readers.
M&A is the new R&D
At yesterday’s Startup Acquisitions Meetup, Gill Beyda, Founder & Managing Partner at Genacast Ventures, said “M&A (mergers and acquisitions) is the new R&D (research and development).” Staying fresh and relevant is imperative for success, and companies like Facebook know this. Acquisitions can be a great thing for the companies involved, and they often give small companies the opportunity to expand at a global scale. Other times, internal conflicts leave new companies stagnating in corporate culture.
To the credit of the major companies listed above, strategy, hard work and talent led them to success. Microsoft’s emergence as a dominant OS and software provider, Apple’s iPad and iPhone sales and Amazon’s eCommerce monopoly are all testaments to good leadership. Disruption and innovation? Leave that to the startups.
30th November 2011 by Harrison Weber
The magic of startup life is the constant flow of new information; new ways of solving problems with solutions that surface from sleepless nights and wandering minds. Major tech companies like Microsoft and Apple were once startups themselves, small companies with innovative ideas that geared up to expand rapidly.
Microsoft and Apple grew into the powerhouses we know today and knocked IBM off its top shelf, all while constantly being challenged by small, groundbreaking companies that could maneuver much faster than a major corporation.
What happened to IBM can still happen to the likes of Microsoft, Apple and Google, which is why acquisition is their life force and part of every corporation’s recipe for success — bringing in fresh ideas before the whole company goes stale.
After developing an impressive competing network, DoubleClick was bought by Google for 3.1 billion in 2007. This acquisition of DoubleClick brought Google into the display advertising market overnight.
Google Docs was created with the acquisition of Upstartle’s Writely, a web-based wordprocessor, and 2Web Technologies for XL2Web, which led to Google Spreadsheets. Google merged both products together to create a productivity suite that now competes with desktop and cloud offerings from Microsoft Office and Apple’s iWork.
After Google Video failed to gain traction online, it acquired YouTube in 2006 for $1.65 billion. At the time, there was speculation that Google had overpaid; YouTube had zero monetization strategies, and was over-run with copyright infringment. Time has shown that this may be one of the best acquisitions in recent history, with YouTube’s 40% marketshare and successful monetization as outstanding proof.
Android is another high profile innovation, acquired by Google in 2005. Google developed and brought Android to market, from what was a small Palo Alto startup that had run independently for two years.
Since 1998, Google has bought over 100 companies.
Apple
Apple’s largest acquisition was NeXT for $404 million, which brought Steve Jobs back to Apple and laid the foundations for Mac OS X. Other notable Apple acquisitions include Emagic, which led to Garageband, and FingerWorks, which aided in the development of multi touch technology in iOS.
Most notably in recent years, Apple acquired Siri in 2010, which led to a highly publicized release exclusively for the iPhone 4S. This acquisition creates a highly competitive advantage when compared to Android and Windows Phone’s similar functionality.
Microsoft
Microsoft’s first acquisition was Forethought in 1987. Forethought developed a presentation program that would eventually become Microsoft Powerpoint, a significant piece of Microsoft Office. Ten years later, Microsoft acquired Hotmail for $500 million, which was integrated as an MSN service.
Hotmail is still (surprisingly) the largest webmail provider in the world, and is recently seeing more attention from Redmond. Other acquisitions include Bungie, which developed Halo, the Xbox’s “killer app.”
Amazon
After growing rapidly in three years, Amazon purchased Bookpages, which quickly became Amazon’s online UK store. That same year, Amazon acquired Telebook to facilitate expansion into Germany. In 2004, Amazon bought Joyo.com for $72 million. At the time, it was the largest online retailer of books, music and videos in China. These strategic acquisition grew Amazon’s marketshare, while shrinking competition.
Amazon’s transition into the ebook and ereader market was likely strengthened by Mobipocket, a French company that specialized in ebooks and Shelfari, a virtual bookshelf.
Other than Beluga, which led to Facebook messenger, most of Facebook’s acquisitions were strictly for bringing in fresh talent (e.g. Sofa). According to Chris Fralic, the Managing Partner at First Round Capital, Facebook acquired Hotpotato because “they really wanted the leadership” (as heard at yesterday’s Startup Acquisitions Meetup hosted at General Assembly).
Here’s Facebook CEO Mark Zuckerberg’s stance on acquisitions:
“We have not once bought a company for the company. We buy companies to get excellent people… In order to have a really entrepreneurial culture one of the key things is to make sure we’re recruiting the best people. One of the ways to do this is to focus on acquiring great companies with great founders.”
Yahoo!
Yahoo started as a website directory and eventually became a full fledged web portal. As of 2000, almost every product released by Yahoo had been fueled by acquisitions. Acquired companies included Net Controlls, Hyperparallel and SearchFox, which formed and built upon Yahoo Search. The acquisition of Four11 led to Yahoo Mail, which was then influenced by acquired companies Oddpost, Stata Labs and Xoopit. The company Classic Games became Yahoo! Games, and eGroups became Yahoo Groups.
Not all acquisitions end well, and Yahoo has had failures in this realm. It acquired GeoCities for $3.6 billion in 1999, and finally killed it off in 2009. Yahoo also acquired del.icio.us in 2005 for $20 million. It was sold off this year to YouTube founders Chad Hurley and Steve Chen.
AOL
AOL, like Yahoo, has a pretty bad track record. In 1998, AOL acquired Netscape for a daunting $4.2 billion. At the time, Netscape had a 90% browser marketshare, which dramatically shrank to >1% after the release of Internet Explorer.
Possibly the worst acquisition in history was the purchase of Time Warner for $164 billion. This deal eventually caused AOL’s stock price to fall $106 billion in value. What’s worse? It’s rumored that the day before AOL decided to “acquire” Time Warner, it was debating whether or not to make an offer for Ebay.
More successful AOL acquisitions include the purchase of Mapquest, which still holds marketshare dominance over Google Maps and Bing Maps. The acquisition of sites like The Huffington Post has helped AOL gain dominance in web news and blogs, although the purchase of Engadget and TechCrunch has soured both writers and readers.
M&A is the new R&D
At yesterday’s Startup Acquisitions Meetup, Gill Beyda, Founder & Managing Partner at Genacast Ventures, said “M&A (mergers and acquisitions) is the new R&D (research and development).” Staying fresh and relevant is imperative for success, and companies like Facebook know this. Acquisitions can be a great thing for the companies involved, and they often give small companies the opportunity to expand at a global scale. Other times, internal conflicts leave new companies stagnating in corporate culture.
To the credit of the major companies listed above, strategy, hard work and talent led them to success. Microsoft’s emergence as a dominant OS and software provider, Apple’s iPad and iPhone sales and Amazon’s eCommerce monopoly are all testaments to good leadership. Disruption and innovation? Leave that to the startups.
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