Monday, July 27, 2015

BlackBerry and the smartphone industry

Once seen as one of the main “inventors” of the smartphone industry boom, BlackBerry Ltd. (RIM) now sits as a small, lesser-known player in a world surrounded with mobile technology. Multiple changes in leadership and on the board were tricky for the company who openly opposed many of the “new” technologies that were springing up in the mobile business, not thinking that they would be successful or last long.

In 2007, after the release of the first iPhone and Apple’s newly configured relationship with AT&T, Verizon had approached RIM/BlackBerry to make an “iPhone killer.” The end result was the BlackBerry Storm, which had been thrown together almost haphazardly, was months late, and was not successful. Customers complained about the awkward touchscreen and how slow and buggy it was. Despite the failure of the device and Verizon’s eventual move to team with Google’s Android operating system (including a massive marketing campaign aimed to still support BlackBerry products), BlackBerry was still seen as expanding and successful. But the success of the Android devices, instead of killing the iPhone, ended up taking market share away from other companies like Palm, Microsoft, and eventually RIM.

Now that the smartphone industry had really taken off, RIM struggled to keep up. They invested in hardware upgrades, despite knowing that there was growing interest in software applications. And they immediately failed to follow Principle #1 as written by Clayton M. Christensen in The Innovator’s Dilemma (1) regarding a company’s dependency on customers by saying:
“The problem wasn’t that we stopped listening to customers,” said one former RIM insider. “We believed we knew better what customers needed long term than they did. Consumers would say, ‘I want a faster browser.’ We might say, ‘You might think you want a faster browser, but you don’t want to pay overage on your bill.’ ‘Well, I want a super big very responsive touchscreen.’ ‘Well, you might think you want that, but you don’t want your phone to die at 2 p.m.’ “We would say, ‘We know better, and they’ll eventually figure it out.’ “ (2)
RIM also had the added bonus of attempting to satisfy two largely different customer bases at the same time—which resulted in neither being satisfied. When they introduced the idea of adding such features as a camera and game and music applications, they had received huge backlash from corporate customers who did not want them. Despite adding these features anyway, customers complained about the clumsiness and appearance of the apps—and Apple and Android continued to dominate the market.

After hiring an outside company to build a new OS from the ground-up, RIM began its push for the BlackBerry 10, and they were already behind. The original design called for a full touchscreen, but that was met with some distaste from leaders in the company who continued to see the [somewhat] success of the BlackBerry 7, which included a keyboard. The two CEOs (an uncommon business practice) clashed: one believed the market was pushing towards all-touchscreens; the other believed that hoping customers would embrace yet another touchscreen was too risky. This resulted in not just one, but two phones to be released—the Q10, with a keyboard, and the Z10, an all-touchscreen version to be release first. In January 2012 the phones were released, but market observers agreed that the products were two years too late (and six years after the launch of the iPhone).

RIM realized their missteps a bit too late, much like the other companies (especially HP and the Kittyhawk venture) mentioned by Christensen in The Innovator’s Dilemma. The Z10’s release was met with generally positive reviews. But they had mass-produced the all touchscreen version of the 10 and, in a world of touchscreens, they found themselves with a large volume of unsold phones just a few months after the initial release. Having put the device out so late in the game, the market had already shifted yet again to faster, cheaper devices. RIM had failed to cater to its customer base that did want keyboards by putting out a device that was substandard in every other way.

Smartphone and mobile technology could be seen as a short-term disruptive technology that turned into a sustainable technology. But companies like RIM whom were previously successful with devices that were now outdated, struggled to keep up with the demand of mobile technology despite once being a frontrunner in the industry. Instead of adapting to the changes with their business plan that already worked, RIM pushed the boundaries in a clumsy manner that ultimately left both their customers and them dissatisfied.

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(1) Christensen, Clayton, M. Introduction to, and Chapter 7 of The Innovator's Dilemma. 1997. 
(2) Silcoff, Sean, Jacquie McNish, and Steve Ladurantaye. Inside the fall of BlackBerry: How the smartphone inventor failed to adapt. The Globe and Mail. 27 Sept 2013. http://www.theglobeandmail.com/report-on-business/the-inside-story-of-why-blackberry-is-failing/article14563602/?page=all

Blue and Red Oceans as a New Lens



After reading “Blue Ocean Strategy”, I have started looking at companies across different industries through the lens of blue or red oceans. As Kim and Mauborgne said, the idea of blue oceans has always been here, but recognizing this as a strategy has not always existed.

The key elements of this strategic mindset are counterintuitive:  blue oceans are often nearby, and technology innovation in itself is not what sets them apart. It makes me wonder what blue ocean potential exists within many industries, but is untapped?

Do all companies fall in the red or blue category? If I understand the concepts correctly, it is possible for a company to begin in one camp then shift to the other, if it develops a new market space for itself with a new product or service.

If a brand has power to influence people’s perception that it is a pioneer and unique, it could be seen as a blue ocean, even if it was not truly the original one in its class. If consumers can recognize what the brand has to offer that makes it unique, that can only increase the blue ocean’s power. If consumers can say, “This is the only brand that makes a product like this; I haven’t found anything else as good,” etc.

Coke and Pepsi fit the description of red oceans, in that they are always competing against each other and striving to out-do the other. In this industry, the competition is relevant. If that is the case, then it is possible to experience great profits in a red ocean, even though the market space is shared.

I am also wondering if all industries have real blue ocean potential. Taking it a step further, do all individual companies have the potential to identify and develop a blue ocean? Or do certain industries naturally have more potential? Looking at the variety of examples in this article alone, it is safe to say that any industry is fair game.

I think the blue/red ocean concepts could also apply to marketing and advertising practices that separate firms offer to clients. Red oceans would be the types of advertising tools and messages that are commonplace, while blue oceans are the unique approaches that really stand out.



Google Maps the Course to a New Blue Ocean

In the Huffington Post article, “Google Just Took Another Small Step Toward Replacing Your Brain” we can see how Google is beginning to create a new blue ocean, by taking technology that is already available that can be joined together to create a new valuable experience for customers, something that they likely didn’t even know they wanted up to this point. Google has created a “Your Timeline” integration with their popular Google Maps feature that allows you to search a specific day from the past and provided you have had your GPS enabled, it will be able to tell you where you traveled on that day as well as link to any photos you took that day. While Google and Apple have battled heavily for superiority in a red ocean for their maps feature, this new unexpected feature may tip the scales in favor of Google going forward. It is value pioneering as an incumbent in an attractive industry, and changing what was previously used as a navigation feature and turning it into a place to view your memories, almost like a journal where the recording is done for you in real time.

While it is hard to say at this point in time how they will begin to monetize this initiative, as it is a free offering, they are creating a cost savings to consumers in terms of time. Currently, for someone to utilize this functionality, they would have to go on several different apps to determine their path for a day in the past. They might search through past emails or calendar to determine their route, their photo app to view their memories from the day, and facebook, opentable, and yelp to determine the stops they made on their route. Google has taken a reconstructionist view of the maps market, by taking all of that existing technology to develop a new integrated memory experience for users. 

By entering into a new uncontested space, Google will likely further solidify itself as indispensable to many people in their daily life. As is noted in the article, while similar features have existed in Apple before, they have not been nearly as functional. The reason Apple was likely unsuccessful is because of the second element in the failure framework introduced in “The Innovator’s Dilemma”, in that the technology progressed faster than market demand. Google is hitting upon the technology at the right point when its maps and photo features were prepared to offer a solid standalone Timeline product, not just an offhand added feature to the maps app. We will have to wait and see what the adoption rate of the feature is, but to essentially be able to search the catalog of your life is a prospect that is certainly intriguing to this user.  



The Innovator’s Dilemma (Christensen, 1997)


Blue Ocean Strategy (Kim and Mauborgne, Harvard Business Review, Oct ’04)

Unmanned Aircraft’s Disruptive Impact on the USAF



     Unmanned aircraft have been described as a disruptive technology to manned aircraft and that has been the case in USAF.  The USAF has been resisting the adoption of unmanned aircraft into many of the core missions.  This has the potential to create a strategic disadvantage as adversaries adopt low cost technically sufficient unmanned platforms to perform missions.  Traditionally, the USAF has approach to modernization has been to improve sustaining technology vs pursuing disruptive technology.   Defense contractors that offered unmanned aircraft in the early 2000’s had trouble gaining traction with the USAF and the only unmanned aircraft available when the war on terror kicked off after September 11 were technology demonstrators.  These were quickly ramped up, but mostly due to customer (in this case combatant commanders) demand and direction from the DoD.  There have been continuing efforts to downplay the importance and capability of unmanned aircraft over manned aircraft.  In the case of the USAF, Principle #4 An Organization’s Capabilities Define Its Disabilities, identified in The Innovator’s Dilemma is a major reason why this occurred and continues to occur.  The book identifies that despite assigning the right people to the task, an organizations process and values make it difficult for them to succeed in successfully cultivating disruptive technologies.  The USAF was created as an independent service primarily by pilots and has long been run by pilots who have a love of flying.  Unmanned aircraft threaten both the culture and the passion of many USAF leaders and make it very difficult to replace manned aircraft with unmanned aircraft. 
     The Innovator’s Dilemma highlights the risk of not responding to disruptive technology.  As low cost disruptive technology increases performance, it takes more investment to improve sustaining technologies advantage while the cost of the disruptive technology may decline as production scales.  It will only be a matter of time before unmanned aircraft can perform all the missions that manned aircraft can perform at an acceptable level.  When this occurs, peers/adversaries will be able to employ this destructive technology in greater numbers and gain a strategic advantage.  To compete, the USAF needs to change its culture to accept unmanned aircraft or it will lose the dominant position it has maintained since the early 1970s in air warfare.

Ted Anderson, tbanders



Gene therapy: A 20 year Blue Ocean Rollout


This treatment of the emerging gene therapy market as a blue ocean market expansion isn’t focused as much on the cost/value dichotomy as it is on the environmental determinism prevalent in pharmaceutical companies over the last 20-25 years. 

First, what is antisense technology?  Antisense therapy uses RNA sequencing to identify the messenger RNA responsible for activating or deactivating proteins in vivo.  By interrupting this mechanism, a disease (genetic or infectious) related protein can be prohibited from expressing, or encouraged to express (if the interrupted mechanism was the disease cause.)1

Stan Crooke, the pioneer of antisense technology has been advancing this field since the late 1980s.  When he first began researching and publishing on this topic in the late ‘80s, there was little faith in the industry that this type of treatment would be possible to isolate and treat.  (Forbes has a brief overview of the successes and failures of Stan’s company, Isis Pharmaceuticals, over the last several decades.2)

Over the past two decades, Isis Pharmaceuticals has proven that not only is this treatment viable, but that it also opens up treatment possibilities for entire new classes of diseases and genetic disorders.  This is pretty much the definition of a blue ocean market:  An existing, very competitive market, pharmaceuticals, isn’t so much disrupted by new technology, but has had an entire new treatment field opened up within it. 

The interesting blue ocean twist in this case is due to the incredibly lengthy process that all genetic and pharmaceutical research and development must go through.  When you compare Isis Pharmaceuticals to an internet blue ocean technology, like Slack, the progress seems downright glacial.  In two years, Slack’s product has grown into a nearly $3 billion valuation!3  Isis, on the other hand, has taken twenty years to reach a $9 billion valuation.4 

Isis Pharmaceuticals valuation and reach in the ‘new’ (new as in recently proven, with drugs in the field) antisense field isn’t simply due to the few drugs they’ve brought to market.  The real strength of Isis in this new field is their sequencing technology.  By developing and perfecting faster RNA sequencers, Isis has been able to identify dozens of potential antisense disease candidates.  This technology has greatly reduced the dollar, and more importantly, time costs of identifying potential antisense candidates.  By shortening this portion of the new drug pipeline, and by focusing on the emerging field of antisense treatments, Isis has opened up, and proven, an entirely new market for pharmaceutical treatments.





Blue Ocean Strategy and Cirque



The article, “Blue Ocean Strategy,” by W. Chan Kim and Renee Mauborgne, was a very interesting read which discussed shifting focus away from the competition and toward creating an altogether new market, where your competition was rendered irrelevant. Their example using Cirque du Soleil really illustrated this idea of a blue ocean for me. After doing a bit more research, I came across blueocenastrategy.com, which went into more depth about Cirque du Soleil and its enormous success creating its own blue ocean. They state that what is most interesting about this example is that Cirque made leaps and bounds in a declining industry that was projected to stay in downward sloping market. They made enormous progress in little time, and were able to come out at the top as the leader in this new circus industry.

Additionally, another reason why Cirque was so successful was that they did not take customers from their competition (Ringling Brothers or Barnum and Bailey). They appealed to an entirely new population of people and they created a market entirely different from the traditional circus. The “new” audience included several corporate clients that were willing to pay the extra cost associated with a company that “reinvent the circus.”

Lastly, I think Cirque du Soleil was successful in creating this new market because they took a chance on the unknown, and launched itself into an untapped market that benefited them greatly. They used a systematic approach and took their competitors out of the equation entirely. 

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Blue Ocean Strategy, http://www.blueoceanstrategy.com/, accessed July 26, 2015.

Redefining Industries by Uncovering New Needs

The article “Blue Ocean Strategy” describes two terms that define how a company approaches strategy – red oceans and blue oceans. Red oceans represent known market space and blue oceans represent unknown market space. By understanding these types of characteristics, we can begin to see how organizations can strategically discover, identify, or define new markets.

Blue oceans frequently spring from red oceans. They often use existing technologies and wield them in a way that makes them usefulness in new ways to consumers. The article uses the example of Cirque du Soleil, who redefined the circus experience. Circuses (red oceans) had been around forever, but the market demands were changing and the industry was not doing well. While other circuses focused on securing new and better talent, which was a costly strategy, Cirque refocused to deliver a new experience to its audience. Its new show had elements of the circus, but also touched on a new artistic element that audiences had seemingly been missing. Cirque du Soleil achieved success by finding a way to redefine an existing service so that it would be seemingly new and more exciting than before. It uncovered a need the audience did not even know it had.

Looking back to the article “Your Strategy Needs a Strategy,” we can see that visionary strategists might fit nicely into the blue ocean approach. Visionaries “know that future and to predict the path to realizing it” (Reeves, Love, & Tillmanns). Like visionaries, blue oceans work to create demand and to change the boundaries of an existing industry (Kim & Mauborgne).

My fiancĂ© works in the technology startup industry. Their job is to create a product that fills a need people might not even know they had. The article shares that blue oceans are not about technology innovation. This point supports the idea that technology is not just about the functionality of a product, but more importantly, it is about the need it fills. Even more so than ever, the technology and skill needed to create a product often already exists – it is finding a way to wield technology and skill to deliver something new.


I recently read the book Zero to One by Peter Thiel. In interviews, Thiel says that he always asks candidates, “What important truth do few people agree with you on?” A good answer to this question can be helpful in discovering new markets. This is one approach to finding a blue ocean – asking the right questions. Figuring out what people really want and need vs. what would be a fleeting service is the great challenge in many of our jobs. Long-term demand is difficult to gauge, but the blue oceans take this risk by sharing demand with other markets and forging forward by creating their own.

Fitbit and a Blue Ocean

In the H.B.R. article titled Blue Ocean Strategy (W.Chan Kim and Renee Mauborgne) discuss red oceans versus blue oceans.  They state that over time spaces can become commoditized due to heavy competition driving down profits and growth for those competing in those spaces.  Fitbit is an example of a company that although arguably did not create a blue ocean (Nike did), it forced one of its largest competitors to exit the space.  A study by Moor Insight Strategy found that fitness wearables would generate 160M devices by 2017.  The study found that “the winners and losers will be driven by companies that are able to establish themselves as true experts in health and fitness and become trusted advisors in helping the users reach personal health and fitness goals”.  Essentially building value around fitness data collection which is in essence what these devices do.

Before Fitbit’s IPO was the hottest thing, there was Nike+.  As the leader in sports shoes and powerhouse marketing brand Nike was well positioned with its Nike+ platform.  Arguably, Nike had all the right resources and technology to launch a successful wearable wrist-based portable fitness tracker.  In my opinion, the Fitbit Flex should have never existed had Nike executed properly.  Going back as far as 2008, one can find a startup called Fitbit at TechCrunch trying to enter the blue ocean of wearable fitness trackers.  In 2011, Fitbit launches Fitbit Ultra, a simple first attempt at a personal tracker that included an altimeter, stopwatch and a digital display.  Nike+ had introduced their fitness tracker in 2006 by using kits to integrate with apple IPod.  Nike continued to expand its Nike+ line by developing an “iPod transmitter” and Nike shoes with built-in transmitters.  On January 2012, Nike released its Fuel band wrist wearable fitness tracker for US customers only at Nikestore.com.  Then a month later at select Nike stores.  Although first to market there were several issues with the Fuel band, it had a difficult time tracking activities that involved lower body movement such as a spinning class, weight lifting, and yoga.  The Fuel band was water resistant but not waterproof therefore could not be used in activities such as swimming and etc.  In April 2014, it was reported that Nike had decided to discontinue the Fuel band and focus on software applications.  Cnet reported that 80% of Nike’s hardware wearable team was fired.

Fitbit continued to innovate with the Fitbit One and Fitbit Zip, in May 2013 Fitbit released the Fitbit Flex a wrist based fitness tracker.  The Fitbit learned and improved in several categories where the Fuel band struggled.  It was more water resistant and had a longer battery life and tracking lower body movement such as floor climbing.  The Fitbit also cost less than the Nike Fuel band.  Lastly, Fitbit tapped into our need for instant gratification and reward by introducing the concept of badges in 2011, to reward users based on reaching specific goals.

In summary, Fitbit avoided competing in an overcrowded industry.  They recognized the growing wearable industry and decided to enter it.  One can argue that although a blue ocean strategy is seldom about technology innovation, Fitbit is a technology company.  However one can also argue that the technology already existed, Nike had all the components to outperform Jawbone, Fitbit and the other entrants into the fitness tracker space.  Fitbit simply created linked the technology to what customers value most.  For example Fitbit allowed sleep tracking, a feature which the fuel band never contained.  Fitbit pursued differentiation and low cost simultaneously.  According Electronics360.com a Fitbit Flex costs $17.36 to make and is sold for $99.95 where a Nike Fuel band cost $25.74 to manufacture and was sold for $149.99.

 

References:

Teardown of Fuel band manufacturing costs:


Fitbit Manufacturing costs:


Moor insight and strategy article:


Nike lays off hardware wearable team:

http://www.cnet.com/news/nike-fires-fuelband-engineers-will-stop-making-wearable-hardware/

 

iRobots – will household robotics get swept away?



     If we research industries of disruptive technologies, we don’t have to look far to find the 2013 McKinsey Global Institute’s report.  Here, twelve potentially economically disruptive technologies include mobile internet, automation of knowledge work, the internet of things, cloud technologies, advanced robotics, autonomous and near-autonomous vehicles, next generation genomics, energy storage, 3d printing, advanced materials, advanced oil and gas exploration and recovery, and renewable energy. [1] If we dive a more into advanced robotics we see a surge of interest over the last ten years.  One only needs to look at iRobot and its infamous Roomba, to see if this emerging field and company is considered among one of the best in the world?  Will it be one to fail due to good management in a disruptive innovation?   
     iRobot currently serves three technology solution markets - home maintenance market, defense & security and emerging video collaboration markets.  iRobot found its signature product through the Roomba.  A vacuum cleaner that removes dirt, dust, pet hair and other debris all on its own. Using robotic technology and just under $400 ($399.99),  Roomba’s claim to fame is it vacuums every section of your floor multiple times, getting under and around furniture and along wall edges, detecting dirt, avoiding stairs and navigating through loose wires to clean more of a room.  These household cleaning devices have expanded to include the Scooba (floor scrubbing), Braava (floor mopping), Mirra (pool cleaning) and the Looj (gutter cleaning.)  
     IRobot has also played a significant role in Defense & Security with SUGV, FirstLook, PackBot, and Kobra. These PackBots hunt IEDs in wartime countries like Afghanistan and Iraq and are even deployed in events like the Boston Marathon bombings manhunt and preparations for the WorldCup.  However, with Department of Defense (DOD) contracts drying up with the decline of war, limitations on this portion of the business come in waves.  The newest market for iRobot is the emerging video collaboration, there products Ava 500 and RP-VITA are targeted toward remote healthcare via mobile video technology.
     This “fast history” as it is called by our article Why Good Companies Fail to Thrive in Fast-Moving Industries continues to drive and in some case push this disruptive technology into new markets to become viable.  If we examine iRobot against the principles of disruptive innovation, we may get a glimpse into whether the diversity and improved product performance can transition this innovation into a sustainable technology. 
     The innovator’s Dilemma shows us that disruptive innovations have worse product performance (at least at the beginning) in comparison to other features new customers value about that product.  If we examine the vacuum industry, we see a rocky start for iRobot’s Roomba.  With customer complaints, high investment and maintenance cost, and less than stellar performance.  However, slowly the organization built a loyal following, even with some customers naming their iRobots and referring to them as pets or parts of the family.  Although iRobot continues to gain its market share of the vacuum industry it still owns only a small percentage of the overall market.  In 2011, it reported owning 14.6% of the market and now in 2014, a 20% share of the over $1.4 billion business. [2]
     If we test the first principal of disruptive innovation, we perceive a dependency on customers and investors for resources.  We see the clear connection of the DOD dictating spending for this investment pattern and the decrease in demand for the PackBot products.  We also see the need to diversify this disruptive technology to expand products and possible interest by customers and investors.  iRobot is banking on a shortage of skilled and specialty healthcare needs to demonstrate a need for their emerging video collaboration technology as part of their mobile robotics.
In principal two, small markets don’t solve the growth needs of large companies. iRobot has an opportunity to further develop the market of household robotics.  In many ways it is not competing with traditional vacuums rather it is competing with emerging markets of household robotics.  In their 2014 investor presentation, they estimate a capitalization on 65-85% of the robotic vacuum market worldwide.  If they are going to conquer principle two they will need an organization that can transform the current vacuum business and make current devices obsolete.  The size of their organization will need to match the size of the target market.  Otherwise, they will exhaust the market and become weaker, hence their need to emerge in other markets of growth like healthcare.  Options and alternatives will be critical to the success of small, useful robotics to do everyday tasks in innovative and new ways. 
     iRobot is just starting to have the ability to analyze markets of household robotics.  In principle three we know with emerging technologies sound market research and good planning are the cornerstones of good management.  Here is where iRobot shows its adaptability and versatility.  Transforming their product into what is needed at the time and standing the test of most recent, fast time and changing product needs.
     Principle four has us examine process and values of the organization during prioritization decisions. In recent years, iRobot laid off over 124 people and overall revenues decreased by 6% in 2012 to $436 million, even though consumer sales grew by 28%.   With Roomba’s rapid growth, iRobot has invested millions of dollars to develop its new products with their disruptive advancement: the RP-VITA, the first remote-presence robot approved for use in hospitals.[3]  It looks like iRobot is becoming successful at adapting this disruptive technology and capable of successfully addressing new problems with the mobile robotic innovations. 
     Lastly, principle five is where iRobot will need to continue to invest its marketing efforts.  Their technology supply may not equal the market demand.  Established products like the vacuum cleaner are a hard competition when the biggest advantage of the iRobot is convenience.  They still need to capitalize and position themselves to transform their functionality to reliability and find a way to be competitive in price.
     It will be interesting to watch this disruptive technology and the management of iRobot.  Will they be able to focus adequate resources on their disruptive technologies and additionally focus on the management of their diverse businesses and markets?  Will they be able to stand the test of time, transform the household device business and become a sustainable technology? Or will they be swept away? 
[1] 2013 McKinsey Global Institute Disruptive technologies:  MGI_Disruptive_technologies_Executive_summary_May2013.pdf
[2] iRobot Investor Presentation:   Jefferies 2015 Global Consumer Conference.pdf
[3] Invasion of The Machines: iRobot Hunts Bombs, Cleans Floors, Now Wants To Heal You. Forbes 5/22/2013  http://www.forbes.com/sites/briansolomon/2013/05/22/invasion-of-the-machines-irobot-hunts-bombs-cleans-floors-now-wants-to-heal-you/