Archive for the ‘strategy’ Category

innovation & the corporate immune system

Thursday, January 19th, 2012

There’s an interesting article right now on CNN/Money/Fortune: The Kodak Lie. Author Larry Keeley challenges the common view of Kodak as a textbook example of former market leader (in film photography) that failed to recognize disruptive innovation (digital photography) until it was too late to recover. Instead, the story is much more complex and nuanced.

Kodak knew all about the impending disruption of digital technology. As many have noted, they own the primary patents on digital photography and built one of the world’s first digital cameras in 1975. As The Economist reported recently, a report circulated among senior executives in 1979 detailed how the market would shift permanently from film to digital by 2010. This disruption was no surprise.

In fact, Kodak invested in a range of digital media technologies over the next three decades, even as it focused on maintaining and growing its core consumer and professional film businesses. But the new digital businesses were impeded by a dynamic that I like to call the ‘corporate immune system’, in which the healthy, profitable and dominant units of the company are extremely good at maintaining focus, monopolizing annual budgets and controlling the company’s brand, messaging and channels. In the healthy body of the company, small-scale ventures with uncertain potential represent a distraction, and distractions are things to be avoided, ignored or eliminated. When the distraction also threatens to interfere with the established business as in Kodak’s case, the immune response is further amplified.

What’s worse, innovative businesses can easily fall victim to corporate portfolio management practices. When corporate leaders prioritize investments across a large portfolio of businesses, they frequently focus on metrics like revenue potential, growth rate, gross margin and NPV which tend to favor larger, established units. In order to be seen as relevant, smaller ventures are essentially coerced into juicing their forecasts and committing to over-large targets, despite high levels of market uncertainty. In this scenario the small venture is very likely to underperform its targets, hurting morale and exposing itself to the risk of restructuring or shutdown.

As Keeley points out, Kodak’s decline is a very complicated story that played out over decades. No easy analogy can explain the sequence of events that led to the company’s bankruptcy. But despite considerable foresight, an early technology advantage and tremendous financial, marketing and brand assets, Kodak failed to turn the corner from its traditional position of success to leadership in the digital era. It’s a cautionary tale for market leaders who consider themselves forward-looking and innovative.

more signs of the new revolution in personal computing

Tuesday, October 19th, 2010

Apple reported their Q4 2010 results last night, and the numbers offer an instructive view of the new revolution in personal computing. Quarterly revenue of $20.34B, and operating profit of $4.31B. From the AAPL 8-K filing, the revenue by product line looks like this (units are $M):


At $4.87B, Apple’s traditional personal computer segment of desktops and notebooks (‘portables’) continues to grow, but today represents just 24% of total revenue. New personal computing, represented by the iPhone, iPod and iPad ecosystems, is now 70% of the business. Year over year, Apple’s traditional PC business grew 22%, and new personal computing grew 99.3% for a combined growth number of 67%.

Compare these results to the most recent quarter for HP’s Personal Systems Group, the world’s leading PC company:


In HP’s Q3 (May-July), notebooks, desktops and workstations represented 98% of the $9.9B business segment, and total operating profit was $469M. Year over year growth was 17%. To be fair, HP’s Q3 is a seasonally weak quarter and the 4th quarter will likely show a jump in revenue; also, results from the Palm acquisition will show up in Q4. HP will report in mid-November and we’ll revisit the comparison at that point.

Until then, at double the revenue, 4x growth, and 9x profitability, the new revolution in personal computing appears to be going rather well.

does your business need a design intervention?

Friday, February 19th, 2010

When someone you care about gets trapped in a cycle of self-destructive behavior, perhaps from some kind of dependency, they may find it impossible to break free on their own. They need decisive action to put them on a different trajectory, so you stage a personal intervention.

A similar situation arises in business. Companies become dependent on partners, revenue streams, and business models; they optimize their structure, processes and skills to succeed in their industry’s ecosystem. It becomes harder to shift direction and take innovative risks that lead to new opportunities; their success can make them vulnerable to disruptive shifts in technology, industry structure, or customer desires. If this happens to a company you care about, you may need to stage a design intervention.

The Design Intervention

A design intervention is a short, intensive project where we work with you to envision and prototype the future of some aspect of your business, breaking free of short term constraints. This could be done for any aspect of the business, but most frequently we focus on future products and services. The goal is to identify, articulate and recommend actions that can help the company move in ambitious and profitable new directions.

Every organization has its own situation, issues and culture, and needs a personalized approach. However, these are some typical attributes of the design intervention process:

* Highly ambitious goals for the long term – what could you do to achieve an “iPhone effect” in your business in five years?
* Highly practical plans for the short term – what concrete steps can you take in the next 12 months to steer toward your ambitions?
* Considers broad trends and forces, beyond the current dynamics of your industry.
* Consults external voices & provocative thinkers.
* Assumes company strategy, structure, processes, business models and culture can change.
* Assumes skills and assets can come from anywhere e.g., through open innovation or M&A.
* Multidisciplinary approach, blending design, technology, user experience, social sciences, business strategy, brand & market savvy, ecosystem knowledge.
* Delivers tangible results: physical concept designs, paper prototypes, architectural principles, technology options, business model prototypes, partner and M&A ideas, next step investment proposals.

If this sounds intriguing for your organization, please contact us to discuss your situation.

augmenting Nokia’s reality: quick thoughts on Point & Find

Tuesday, August 25th, 2009

From the “Who asked you anyway?” department…

I hadn’t really looked at Nokia’s Point & Find concept before, even though it has been shown around at least since Ubicomp 2007 and the public beta has been running since May09. After last night’s Nokia AR talk I thought I would have a peek.


OK, it’s a beta with limited functionality, and undoubtedly there are plenty of enhancements to the system and the business plan going on behind closed doors, so take this with a large scoop of salt because I only know what’s been said in public. But if I was advising Nokia on Point & Find, I would start with this:

1. The business opportunity is in the service for building and managing the image database, and managing all of the associated meta-behaviors like hyperlinking, bookmarking, purchasing, search, customer intent discovery, collaborative recommendations and so on. By building this physical-to-digital gateway between individual users and companies and institutions, Nokia can accelerate the development of the connected world platform and profit nicely from it as well.

2. The business opportunity for this is NOT in the handset. That should actually be great news for Nokia, because their core hardware business is highly commoditized and that’s a cold reality their employees have to live every day. In the long run, selling commodity hardware is not going to be the best strategy for Nokia (yes, that includes stuff like windows-based netbooks).

3. Point & Find should go on the iPhone and Android platforms, as soon as possible. Because the opportunity is in growing profitable services, not in fighting the low margin handset wars. Because the current AR hype is a swell marketing tool, and right now mobile AR is all about iPhones and gPhones. Because if Nokia doesn’t own image-based physical hyperlinking on those phones, someone else will, and that means the strategic momentum will shift. I realize this is totally countercultural, maybe even unthinkable, but that’s why it would be such an interesting play.

4. Nokia should open up an API to its backend service, so that any developer can make services that tap into that (hypothetical?) database of millions of images of products, printed ads, books, artworks and on and on. Developer momentum advances the entire market, and solidifes the platform’s competitive position. This can be one of those big web squared opportunities, if played right.

How about you, have you tried Point & Find? If you were Nokia, what would you do?