Many products, especially technology products, are marketed as revolutionary or game-changing. Most people know better than to trust marketers at face value on claims like these.
Disruptions to the market could be defined as those who alter the balance of an industry between supplies, consumers, existing and new competitors and alternatives – Porter’s five forces. These changes alter the industry’s profitability, growth rates and expectations for future growth.
Examples of true disruptions include when streaming TV and movies over the Internet (Netflix, Hulu) became a viable alternative to in-store rentals (RIP, Blockbuster) or when computer components enabled smaller companies (Dell) to compete at lower costs than industry leaders (IBM, HP).
Market leadership is not powerful enough to stop market disruptions
In the majority of cases, the new technology was available to industry leaders who chose to disregard it as a fad or inferior to their existing technology. There were clear signals of the market disruption, which leaders chose to ignore.
Sony ignored the digital music revolution, allowing Apple to dominate the market with the iPod and iTunes. Sony had everything to win: the company invented portable music with the Walkman a few decades ago. Sony owns movie and music publishers and distributors. Sony produces consumer electronics, computers, and mobile phones. The company’s mission is to innovate around content to deliver new experiences. And yet, Sony chose not to participate in the disruption. Continue reading “Embracing Market Disruptions – the End of TV as We Know It”
How much can we learn from Steve on Innovation, Marketing and Business Strategy?
A few days ago I stumbled on this video where Guy Kawasaki shared 12 lessons he learned from Steve Jobs. Guy worked with Steve in the early days of the Mac. This presentation was delivered a few hours after Steve passed away. It is been viewed almost a half a million times, but it is 47 minutes long. I thought I should share a summary from my notes:
Experts” are clueless – There are many people who will claim to be gurus and experts. Don’t trust them. They are more often mistaken.
Customers cannot tell you want they need –” Back in 1984 they would have asked for a faster, cheaper Apple II (not a Mac). The day you hear Apple is using focus groups to create future products, that’s the day to short the Apple stock”. For more, here is a post on Steve Job’s Genius Ability to Innovate.
The biggest challenges beget the best work – If you are going to change the world, you need to work on challenges no one else has solved before.
Design matters. “Design is the product.” Especially for Apple, but true for more and more industries today. Another post on the importance of design.
Use big graphics and big font in your presentations. Jobs was a master presenter. His slides make bold statements and don’t compete for attention with what he is saying.
Jump curves, not better sameness – What Guy means is that Steve was not interested in incremental improvements, but on disruptions that completely change the game, Guy uses the example of the change from ice factories to having ice available in your refrigerator.
It either works or does not work – “Don’t worship religions and fads. We did not care if it was ‘open’ or ‘closed’ only that it worked.”
Hire A players exclusively . A players hire A players. B players hire C players. As Jim Collins wrote: the most important thing is people – ‘who is on the bus’.
Real CEOs can demo. Meaning executives need to be users of the products they sell, they need to be competent and demonstrate their passion.
Entrepreneurs ship, not slip. Steve pushed his team to deliver on time. He did not wait for a perfect product (the first iPhone had many limitations) but it was developed in record time. Then there is time for continuous improvement.
Somethings need to be believed to be seen. “If you wait for proof it will never happen.” This is so true
If you want to watch the entire video, you will find it here.
It is a cycle we see too often: companies grow successful; an industry matures adopting many common practices, some good and some bad. Then these companies get complacent and fall asleep at the wheel. They stop innovating and often try to take advantage of consumers because of their position. And by doing so, they and create an opportunity for new entrants to disrupt the market.
It is easy to point at history and study how companies that were market leaders fell in this trap: Blockbuster, Motorola, Circuit City and Radio Shack are good examples. It is a lot harder to predict which markets or companies will be disrupted. But it is much more interesting to observe when it is actually happening in front of us.
It is so easy for Product Marketers to be caught in the product launch cycle. It is not uncommon for product marketers to be known as “the team that launches stuff”. Even more dangerous is the mentality to forget a product one it has launched to focus on the next launch.
One of my mentors used to say that this behavior is akin to the Apollo XI taking off and having everyone in the Houston Command Center go back to the lab, as the rocket is pushing upwards and has not even left orbit. Can you imagine the astronauts? “Houston? Hello? ….Houston? ….anybody there?”. Well, that’s exactly how your product feels.
This launch-as-the-finish-line mentality is very dangerous and very prevalent in many technology companies. I saw his behavior at Microsoft, with one of the most public signs being Steven Sinofsky leaving the company on November 12th , just a few days after launching Windows 8 on Oct 25. Launch a product, claim success move to the next big thing.
Instead, we should think about launches more like modules that are being added to the space station. A product launch joins the other products in your portfolio and ultimately in the ecosystem, hopefully to help the life of your astronauts, the customers.
Astronauts cannot survive only with the latest module; they need the entire space station to survive. Similarly, your customers need the whole product – a complete solution made by multiple products, services, partner offerings, etc. Don’t lose that focus.
But here is a nugget for you to think about: every product launch increases the gap between you and your customers. What gap am I talking about? Remember how you felt when the iPhone 5 was announced? Your iPhone 4 was no longer current, you felt left behind.
I remember clearly how after we launched Visual Studio 2005, the focus moved almost immediately to Visual Studio 2008. This while most customers were on Visual Studio 2003 and millions of developers were happy with VB6. And while the team was thinking about Exchange 2013, most companies around the world were sending and receiving emails using Exchange 2003 – a 10 year gap.
It’s not the fault of product marketing that a gap exists, we want to push innovation forward which inevitably creates a gap. Just as marketers are sometimes too far ahead of customers, they tend to fall behind. A couple years ago when we moved back to Austin we were at our doctor’s office when the lady at the front asked if we could call our doctor in Redmond to get our files faxed. My daughter asked “Dad, what is a fax?”. That’s a generational gap.
As you are thinking about your next product launch, consider working beyond the launch to understand what the market will look like 12 months later. What will your customers be using? What will be their technology adoption reality? What up-sell or upgrade opportunities can you see? What about customers using older versions of competing products – are those good candidates for a targeted campaign? How will you increase customers’ satisfaction and profitability for your entire customer base?
My six recommendations to ease the gap between you and your latest product launch:
Avoid thinking of product launches as the culmination of your work, they are only a milestone
Think about product portfolios and ecosystems (whole product), that’s what customers care about
Take care of your astronauts and provide them with a safe landing with guidance, migration tools, education and support
Understand the technology adoption behavior of your customers: from early adopters to laggards
Be mindful of the gap and the reality of your customers adoption page and their urgency (or lack thereof) to upgrade
Provide bridges that make it easier for customers to upgrade to the latest version
Like I said in my last post, I am not a fan of Apple products. I have a Windows Phone, I love my Zune, and a month after I joined Rackspace I retuned my MacBook Pro to the IT department to get a Dell Windows 7 laptop. I have worked with Apple products for many years, I sold many Macs when I was in the digital imaging business in the early 90s and here are iPods, an iPhone and an iPad in our household.
Yet, as a marketer and a business man it would be foolish not to recognize the unique ability in Steve Jobs to transform industries: personal computers, music, cell phones, animated movies and publishing. Steve also had his share of failures : The Apple Lisa, hiring John Sculley, NeXT, Apple TV (so far), Ping FM, and others.
You have probable read a dozen ‘Leadership lessons from Steve Jobs’ articles, but I have a slightly different perspective that I want to share. These are the three reasons Steve had an incredible ability innovate, according to the Adaptive Marketer:
1. Steve clearly understood customer needs
Apple is famous for not doing traditional customer research . A few days ago Guy Kawasaki came to Rackspace and told a group of us at Rackspace “the day you see Apple doing a focus group is the day you must short your stock”. It is easy to come to the conclusion that Steve ignored customers creating customers on his own.
It is true Apple does not do customer focus groups, there is no feedback section on the website and after 5 years there is only one iPhone form factor despite customers who have asked for a physical keyboard, larger screens or a smaller, lower-cost version.
But there is a difference between not accepting direct customer feedback and not understanding customer needs. Steve was frustrated with the user experience in the first iTunes-enabled phone, the ROKR. Steve understood customer’s frustration with smart phones in general. He understood customer needs, and used his technology and user experience genius to create products that served those needs.
In fact, Steve Jobs’ first press quote, published in the July 1976 issue of Interface magazine read “If we can rap about their needs, feelings and motivations, we can respond appropriately by giving them what they want.” referring to his customers for the Apple I, hobbyists.
2. He understood it success is not a result of having the best technology, but in offering the best user experience.
This ability is especially important in the technology industry where most product managers, marketers and executives are fixated on the virtues of the latest technologies that we often miss or misunderstand customer needs. Steve was a geek at heart, but he also deeply understood the importance of customer experience.
Probably as important, he understood the power of simplicity. If you look at his product launch keynotes (and if you are a marketer you must), the message was concrete and simple to understand.
In 2005 when he launched the iPhone, he did not have slides with a hundred features, technologies and capabilities. Instead, the iPhone was presented as a phone, a music player and a browser: three concepts that everyone understood. He did not talk about how many megapixels in the camera, how many megahertz in the processor, or the details behind multi touch technology. It was simply a phone, a music player and a browser.
In terms of technology, there was nothing revolutionary in the iPhone. The Windows Mobile phones available in 2005 could do everything an iPhone could do. But Windows Mobile was not simple. The best technology does not always win. Otherwise we would all be using Amiga computers.
3. Steve was relentless in making his dreams a reality.
In a previous post, I summarized Marcus Buckingham’s perspective on leadership: Great leaders are restless for change, impatient for progress and deeply dissatisfied with the status quo. The possibility of a better future burns them and propels them. Great leaders see the future so vividly they have no choice but to do everything in their power to make this future real.
Steve really was an example of this. When the iPhone was announced, there was no market for $599 phones. There were only a handful of phones that were so expensive. If you worked at Motorola, for example, and proposed launching a $599 phone, the response would be that market research showed there were not enough buyers willing to pay so much for a phone, especially a phone that did nothing new.
“Apple iPhone will fail….The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. In terms of its impact on the industry, the iPhone is less relevant.” – said Mathew Lynn, from Blomberg in2007
Yet, Steve said Apple would sell 10 million phones in the first 18 months. And he did.
There was no market for iPads, either. Tablets had been available for years. Microsoft issued me a Toshiba tablet when I joined in 2004, which was interesting but I used mostly as a normal PC. When the iPad was launched people were confused about the use case. Why would anyone need one? Seemed like a cool toy for people with a couple hundred bucks laying around.
As my friend John Smolucha points out in a recent blog post: “Even more impressive, nearly 75% of Apple’s revenues come from just two products: the iPhone (53%) and the iPad (20%). The first iPhones began shipping in June 2007 and the iPad only became available a year ago, on April 3, 2010. I don’t know about you, but I’m not aware of any other company that generates nearly 75% of its revenue from products that didn’t exist five years ago, while doing it during a global economic downturn.”
Steve believed in his dreams beyond what rationality, beyond market research, beyond corporate practices and policies. He had a vision and worked tirelessly to make it a reality. Yes, he was a micromanager, but only because he was a perfectionist and did not accept any deviations from his dreams.
Today most people would regard Steve Jobs as the inventor of the iPhone. I want to share the story of the iPhone that I believe is true, even though I don’t have any proof. It is based on storied I heard and observations. None of this is confidential information I gained while I worked at Motorola in 2004.
How Motorola invented the iPhone
Back in 2004 the RAZR was the best selling phone in history. Apple was starting to dominate the music industry with the iPod and was getting ready to launch the iPod nano. Apple was happy, things were looking good.
Motorola had a team in Libertyville working on customer trends, lifestyle, and technology trends. At the time, a few Motorola phones had music capabilities, and the company saw an opportunity to converge the iPod and the RAZR.
The story is that Ed Zander, Motorola’s president at the time, had a meeting with Steve Jobs to share this idea. Apparently, Steve was not very interested in the idea. Then Ed said something that changed Steve’s point of view (and probably the world):
“When you leave the house, you always bring the three things: keys, wallet and your cell phone. That’s it. Your iPod is not in this list.”
At that point, Steve understood Motorola’s idea and agreed to build a product. The Motorola ROKR E1 was launched on September 7th, 2005. It was the first phone to work with Apple’s iTunes, a truly revolutionary concept. Yet it was fatally flawed.
There were a few key problems with the ROKR: it could only store 100 downloaded songs at any given time, probably a limitation imposed by Apple to avoid direct competition with the iPod. There was no USB interface, which made the process of getting music into the phone incredibly slow. Apple did not seem to be particularly excited about the ROKR, Ed Zander complained to Apple about lack of support and undercutting it with the Nano.
However, the biggest flaw was usability. Like most cell phones in 2005, the user interface was not intuitive. Here is where you can see the genius of Steve Jobs at work: Steve understood without great user experience the idea of a music phone was going to fail.
Most likely, Steve became frustrated about the lack of UX focus at Motorola, and thought he would execute on the same idea on how own. Development on the iPhone started that same year, in 2005. . It was a monumental task. Building a cell phone operating system from scratch is not an easy task, even for Apple. The iPhone shipped June 2007. The rest, is history.
The iPhone was not perfect when it launched. At the time, it was a closed system that did not allow any third party apps. Apple asked developers who wanted to innovate to basically create a browser app optimized for the Safari mobile browser. After a few months, Steve saw the opportunity in an ecosystem and opened the iPhone to 3rd party apps. Today, the breadth of iPhone apps is one of the strongest selling points, and the focus of the “There is an App for that” ads.
Before Apple fanatics show outside my home with pitch forks and torches, I am not trying to take credit away from Steve. People who know me know I am not a fan of Apple products (I love my Windows Phone and yes, I have a Zune and it is great), but it would be foolish not to recognize Steve as an incredible innovator.
As I reflect on my career I have been thinking about how the marketing profession has changed over the last few years: the internet, mobile devices, social media and now tablets are just examples of drastic changes in the world we live that are changing the marketing profession.
In a way, the challenges marketers face today with social media (“I guess I need a Facebook page but I don’t know what to do with it”) are very similar with the challenges marketers had 10 years ago with the internet (“I guess I need a web page but I don’t know what to do with it”). The way people interact, research information and buy products has changed.
Consumers are evolving faster than corporations. The gap is a threat for existing businesses and an opportunity for entrepreneurs.
A great case study is Blockbuster. The company recently went into bankruptcy and was de-listed from NASDAQ. What I find really interesting is that the rise and fall off Blockbuster happened over a span of only a few years. The chart below shows the stock price for the last 10 years. It is reasonable to assume the business failed because of an inability to adapt to the new world, a new world that created an opportunity that was captured by Redbox and Netflix.
It is easier to be a historian than to be a prophet, of course. I imagine there were conversations in the Blockbuster conference rooms talking about market dynamics and threats – but it is hard to change the status quo. It is really hard to fundamentally change a business when it is generating billions in revenue
Today marketers at large face a similar dilemma. The marketing tools that worked 50 years ago don’t work anymore. Marketing no longer can be only about creating messages and buying media to broadcast those messages. Today’s marketer must think about how to empower and amplify customers to be advocates. CMOs know they need to balance their investments by shifting dollars and focus to digital and social, but the path is unclear. Marketers know mobile is another disruptive change – few know what to do with it.
As Christopher Stutzman from Forrester puts it, “To Avoid Extinction, Marketers Must Replace The Bad Habits Of Traditional Marketing With The Habits Of Adaptive Marketing”. In short, marketers must become adaptive.
I considered choosing a name for the blog that was centered on Social Media, but then I realized that social media is only one of the discontinuities that is impacting marketers. I already had a blog on Mobility. I have blogged about the web too. If I call my blog something about social media, I would have to change the blog in a few years. Or months.
Peter Drucker published The Age of Discontinuity back in 1968 (before I was born!). he wrote “Businessmen will have to learn to build and manage an innovative organization. They will have to learn to build and manage a human group that is capable of anticipating the new, capable of converting its vision into technology, products and process, and willing and able to accept the new.”
I just read this blog post which starts with a very bold statement “SaaS adoption will move beyond the “Tipping Point” in 2009”. . Countless analysts’ reports have prophesized about the explosive growth of applications delivered under a SaaS model for some time now. The reality is that adoption of software via this on-demand model has been quite limited (outside of CRM, thanks to Salesforce.com).
Sometimes it seems like the IT industry is looking for the next big acronym that will revolutionize the way we look at technology. In reality, customers and IT departments are much more cautious than what most vendors and analysts would like them to.
While not exactly the same, there are very few differences between SaaS and the ASP model that was the vogue in the late 90’s. Where is the money? The Forrester slide in the aforementioned blog shows 24% of companies are “interested in SaaS’. There is a difference between being “interested” and signing a check.
First, I think it is important to understand SaaS is a delivery model that can be broken down into multiple components: hosted offering (off premise), monthly billing based on use, small or non-existent upfront cost and quick deployment. This in contrast with the “traditional” software deployment licensed as a perpetual license, deployed on-premise by the IT department and variable deployment times.
Most SaaS offerings are available to purchase online via a credit card with self provisioning. To enable these self-provisioning and instant-on capabilities, SaaS offerings are usually templetized with limited options. Integration with other systems is not as flexible as with a traditional on-premise solution. I say mostly because there is a wide range of vendors with different models. To support many customers from each server, SaaS vendors usually require multi-tenancy.
In my humble opinion, the SaaS model is not nearly as important as the evolution in the market towards managed services. What is the difference? Managed services are also hosted off-premise by a vendor that also provides software deployment, management and maintenance. In other words, a managed services vendor takes the pain from IT hosting and managing a discrete piece of infrastructure. If you look at Salesforce.com in terms of implementation costs and resources it probably looks more like a managed service than a true SaaS model.
Let’s look at email as an ideal candidate to move off on-premise IT. Most It departments see e-mail as a business critical service from It but also as a solution that is pretty standard in terms of the ability for It to add value. Microsoft Exchange Server has a very large and growing market share (70-80%) and is used everywhere from small companies (licensed as part of Microsoft Small Business Server for organizations with 5 users or more) to the largest enterprises.
There are two markets for off-premise Exchange services: Hosted Exchange (SaaS) and Managed Exchange.
Given the advantages of hosted Exchange in terms of cost, availability and security most in the industry (myself included) expected droves of small and medium businesses to go to Hosted Exchange. Microsoft had hundreds of Hosted Exchange partners – from companies like 4smartphone.net to USA.Net to Microsoft’s own Exchange Online offer. Yet, despite effort from Microsoft and all these partners, adoption had been very limited.
Managed Exchange is a different story. Vendors like HP, EDS and AT&T hosts millions of email inboxes for the world’s largest companies but not in a SaaS model. They manage their Exchange servers on their behalf, with a team of certified Microsoft Exchange IT experts in a datacenter. There is no multi-tenancy, each customer is likely to have a cluster of dedicated Exchange servers. There is no online self-procurement: these are multi-million services deals done in person.
What is my point? Analyzing this data, one can come to a couple conclusions:
The SaaS model is especially attractive for the SMB space.
Yet it has failed to gain the traction that the industry expected .
There are very few success stories outside of CRM. I can’t think of many successful and profitable SaaS vendors. Omniture, Salesforce.com, who else? Wordpress?
The SaaS model still has many challenges ahead:
Information security perceptions – would you trust all your information to Google Apps and Google Mail? Many CIOs I have talked to would not.
The Managed Services model, on the other hand, is very successful and gaining momentum.
Many large IT organizations are offloading core low-value IT services like email to managed services vendors.
In other words, while SaaS is not being adopted as fast as everyone though, Managed Services have reached critical mass and are already a significant business.
Mid 2015 Update
Today I found this old post. How much changes in six years. My first thought was that maybe I should delete the post. Then I thought I should just add this comment to acknowledge my prediction was wrong. SaaS has hit a tipping point and is the future of software – for the most part.
Then I saw the date and read the post and realized maybe I was not so wrong, that many of the challenges have been solved in the past 6 years. The SaaS model itself has matured, and in some cases a hybrid between SaaS and managed services has emerged as the winning combination. The signs that SaaS had hit a tipping point were clear as early as 2010. At the end of that year I joined a SaaS company. But I have to recognize back in 2009 I was wrong in being so skeptical of the speed at which SaaS would mature. Which is OK I guess, ad my track record with predictions has been pretty good so far.
When the iPhone was first announced, I remember exchanging many emails with industry colleagues -as many people did – speculating about the possibilities of Apple hitting the 10 million target that Steve Jobs set during the announcement.
Many emails were based on market research: how many people were buying phones at over $500 at the time, how big was the market for smartphones, etc. I was skeptical given the complexity of the software stack that powers a phone. Most of us had to eat our words.
How did Steve pull it off?
There are many answers: articles and surely books are being written about it. I found a key piece today while reading a new book “Do you matter? how great design will make people love your company“. In this book, the authors explain how apple and other leading companies are design-driven and how most other companies are metrics-driven.
As a marketer , many times I have had to justify my plans with market research: opportunity analysis, market sizing, CAGR (compound annual growth rate) numbers, etc. Most companies financial discipline require this type of financial justification based on hard data and require some kind of proof that an investment will yield results based on research, focus groups, etc.
Not at Apple. The key to design-driven companies is that they place significant value in customer experience. The company is aligned behind it. The problem with customer experience is that it is emotional, therefore not measurable. Steve Jobs has a knack for great design (in the broad sense of the word, meaning how to create products people love) and is able to pull it off because he runs the company and the board of director trusts his investments will pay off most of the time. Or at least he has a success ratio that allows the company to experiment.
If Steve had to justify the iPhone based on hard numbers, or if anyone at Motorola had envisioned the iPhone, they would have more than likely been shut down by senior managers because market research, hard data and market trends do not support the idea of a $600 first-generation smartphone selling 10 million units in the first 18 months.
Interestingly enough, Motorola actually came up with the idea of the iPhone: they went to Apple and had to convince Jobs it was a good idea based on the fact you don’t leave your house without three things: car keys, cell phone and wallet. Everything esle is secondary. But I digress.
If this is a topic you are interested in, I highly recommend the book. It is written by Robert Brunner and Stweart Emery. I am half-way though but it is well worth it already.