Kamis, 20 Mei 2010

SO WHAT’S YOUR DIFFERENTIATION BET?

Many companies commit the mistake of equating ‘differentiation’ purely with ‘providing better quality’. There’s much more you can do with this thrilling strategy of differentiation.

Walk into the International Supermarket and Museum in Naples, New York, and you’ll learn how to pay your humblest tributes to “failed products”. About 60,000 products that failed in US supermarkets find a place in the museum. Hear out their names – Clairol’s Touch of Yogurt shampoo, Gerber Products baby food, Captain Cat Cat-Litter Deodorant, Gorilla Balls (a vitamin-rich candy), Yogurt Face and Body Powder, Gimme Cucumber hair conditioner, Soaps for Lovers, Moonshine aftershave, Buffalo Chip chocolate cookies, Batman Crazy foam, Hagar the horrible Cola, Kickapoo Joy Juice, Sudden Soda, and many more. Actually, how many of them have you heard of? None, because their ‘formulae’ – as in branding mix – failed to hit home their relative superiority to consumers. They were undifferentiated and therefore undervalued by the “quick to form a perception” consumer market. They were simply “commodities”. As Jack Trout writes in his book ‘Differentiate or Die’: “While categories are expanding thanks to the law of division, something sinister is happening. More and more of these categories are sliding into commoditisation. In other words, fewer and fewer of the brands in these categories are well differentiated. In people’s minds, they are there, but that’s about all!”

But then, what is differentiation (as opposed to selling the cheapest products – or price leadership)? Differentiation is simply ensuring that your prospective consumers are convinced that your product is superior relative to competitors. Nobel Prize winning theorists have proven that even if your products are in reality ‘not’ superior, as long as the consumers are convinced about the same, you’ve done your job and hit bull’s eye! But then again, what factor do you differentiate on? Obviously quality, right? Wrong! Or rather, not necessarily. While companies globally make the mistake of equating differentiation with ‘providing better quality’, the fact is that differentiation can be as successfully attempted on certain other key parameters. Here’s a primer with my most loved examples.

THE FIRST DIFFERENTIATOR – SERVICE
Every one who wishes to fly to London wants to be aboard the Virgin Atlantic. Not that it has more comfortable seats, not even that it has better planes and so flies faster; the reason is simple – unlike competitors, it has set itself apart as a brand that delivers superior “service”– 30,000 feet in the air. Little touches prove that – on a Virgin flight, underneath the salt and pepper shakers, modeled on mini-airplanes, you’ll find the words “Pinched from Virgin Atlantic.” The butter knife is engraved with the words “stainless steal”. And there’s always a bar in the upper class cabin so that its travellers can chat and socialise. The airline was the first to really stretch the grade of what is called service in air to the next yard. It was the first to put in seat-back televisions, and serve ice-creams while mid-flight. “We did everything we could to lighten the mood and the experience. Twenty-five years later, the airline retains that very same sense of fun and the true ability to surprise and make people smile,” says Sir Richard Branson, Chairman of Virgin Group of companies.

And if you’ve ever heard of a company named Maruti Suzuki, you’ll know very well that the world buys Maruti cars purely on the basis of the geographic expanse of Maruti’s service outlets, rather than the design of its cars. That’s differentiation for you!

THE SECOND DIFFERENTIATOR – STYLE
For the world Nokia stands out for quality; truth is, that’s not the truth! As per the most recent Gartner study (May 2010), Nokia commands 36.4% of the world’s mobile device market share, while its next closest competitor is Samsung at 20.6% and the third is LG, with 8.6% global share. In India, Nokia fares better. As per the most recent ORG survey made public, Nokia rules with 59.5%, Sony Ericsson comes second with 8.1%, while Samsung is third with 7%. Now here’s the most recent shocker of 2010 for you – according the 2010 Wireless Traditional Mobile Phone Global Evaluation Study by J.D. Power and Associates, LG was ranked number one by customers in terms of “overall wireless customer satisfaction amongst all traditional handset brands”. This is the fifth year that LG has won the crown since 2003. Nokia was #7! The secret is, Nokia knows mobile consumers love newer designs, newer models, newer rehashes of the same old ‘stuff’, and Nokia rules on that differentiation: style!

Apple, a name which you often hear being associated with innovation, or technology for that matter is again one clever differentiator. Steve Jobs is cleverer. His company didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed better! His iPod, iMac, iPhone have become bestsellers, but were never the ones which innovated technology. Jobs simply gave the products a better appearance, a better interface, a better style. In short he gave it a better overall design. That’s a style differentiator for you.

THE THIRD DIFFERENTIATOR – TECHNOLOGY
How many of you know whether Intel chips are faster or AMD? The fact is, AMD Athlon chips have even beaten Intel’s comparable chips in lab tests – and vice versa too. But right from the start, Andy Grove, the former Chairman of Intel (who wrote: Only the Paranoid Survive) realised that it didn’t matter what was true, it mattered what consumers believed. Through perceptionbuilding exercises, Grove managed to keep consumers convinced that Intel’s processors were technologically faster and superior than those of AMD. Since 1971, it has introduced 662 “unique” versions of the microprocessor; AMD has introduced just 79 versions since 1975! Intel has changed its logo four times; AMD has done it just once. Everyone wonders now it’s “Intel Inside”; how many ask if it’s “AMD Inside”? Nobody! For 2009, research firm iSuppli puts Intel’s share in the PC market at 80.6% (as opposed to AMD’s 12.1%), while IDC research puts Intel’s share at 80.5% (as opposed to AMD’s 14.4%). Even Fedex differentiated using technology rather than just service, where they were the first ones to provide customers with an online package tracking system.

AND OF COURSE – QUALITY
After the setback caused to the Toyota brand post 8.4 million recalls in the beginning of 2010, none would have given the Japanese automaker a chance in the 2010 J.D. Power and Associates’ Vehicle Dependability Study, which was released in March this year. But Toyota’s longstanding belief in quality being a differentiator paid off. The study, after measuring and analysing drivers’ experiences after three years of vehicle ownership, gave Toyota the top spot in four segments – more than any other auto brand. While the Toyota Prius topped the list of the Most Dependable Compact, Toyota Sequoia was the Most Dependable Large MUV, Toyota Tundra was the Most Dependable Large Pickup and Toyota Highlander the Most Dependable Midsize MUV. You want to learn what quality differentiation is? Ask Toyota, which manages it despite multi-million recalls.

AND IF NOTHING WORKS – BRAND RECALL
What do you do when your product cannot be differentiated on any factor? Then go for the simple and straightforward strategy of brand recall. Bombard the consumer ad nauseum with advertisements. He’ll hate you – yet, he’ll buy your product. Brand recall is too powerful. Be the Nike, which sells more not because it’s superior, but simply because it advertises much more than its counterparts like Adidas, Puma, Reebok, Converse, K-Swiss, Skechers, et al. Be the Procter & Gamble, Unilever, PepsiCo, Coca-Cola – each spend more than $2 billion each in advertising – where all you see in their ads are either celebrities or spanking humour (or both). Well, now you know why your wife hates you, yet still can’t let go of you :-)

Selasa, 18 Mei 2010

Apple, Adobe, and Openness: Let's Get Real



There's a huge debate online about who's "right" between Apple and Adobe in the dispute over allowing Flash on the iPhone. Both companies portray their actions as protection of users and developers, but in reality what they're both protecting is their profits. There's nothing wrong with doing that -- it's what companies are supposed to do. But the only truly innocent victims in this dispute are the people trapped between Adobe and Apple.


Why Apple really doesn't want Flash on iPhone

Steve Jobs outlined his case against Flash in a recent open letter. His arguments boiled down to this:

Flash is proprietary.
H.264 video is better than Flash video.
There are lots of games on iPhone, so you won't miss the Flash ones.
Flash is insecure.
Flash makes Macs crash.
Flash is slow and reduces battery life.
Flash doesn't work well with touchscreen technology.
As an independent development layer, Flash reduces Apple's ability to innovate.

I'm not going to evaluate each of those claims; others have done a good job of that already. But none of Jobs' points except the last one explains all of Apple's actions. Apple has consistently banned not just Flash but almost all independent platforms, including Java, QT, and Palm OS emulators. One of the most poignant examples I've run across recently is Runtime Revolution, which is basically Hypercard brought into the modern era. It's a nifty tool for making prototypes and interactive media products, and its creator had been heavily committed to iPhone as a development target, encouraged by Steve Jobs' public statement that a third party developer could create a Hypercard-like product for iPhone. But Runtime Revolution's CEO killed the iPhone project last week because Apple won't allow the product to run; his story is posted here (link).

The bottom line: Apple just doesn't like other platforms.

I think Apple is sincere when it says it views these platforms as a potential barrier to innovation. But I don't think that's the whole story. Independent platforms also make it easy for a successful developer to port its software to other platforms, like Android or Symbian. This cross-platform porting is something that Apple fears because it's what allowed Windows to catch up with Macintosh.

Here's a list of some major PC software products. Do you know what they all have in common?

Photoshop
Word
Myst
Excel
FileMaker
PostScript
PowerPoint
Illustrator

The answer: They were first successful on Apple systems, and only later took off in the PC world.

I was working at Apple when this process happened, and I can tell you that it was searing. Apple had invested countless hours and dollars marketing those products as prominent reasons to buy Macs, and then we saw that investment turned against us when the apps were made available on Windows.

Do you think Steve Jobs has forgotten that experience? Look how he started the open letter on Flash:

"Apple has a long relationship with Adobe. In fact, we met Adobe's founders when they were in their proverbial garage. Apple was their first big customer, adopting their Postscript language for our new Laserwriter printer. Apple invested in Adobe and owned around 20% of the company for many years. The two companies worked closely together to pioneer desktop publishing and there were many good times. Since that golden era, the companies have grown apart."

Can you hear the resentment? It reminds me of Bill Cosby quoting his dad: "I brought you into this world, and I can take you out." I think some of the key folks at Apple remember being "betrayed" by "their" developers, and they are determined never to leave themselves vulnerable to that again. I believe it's Apple's policy to keep iPhone and iPad developers as closely tied to the platform as possible, and to make it as hard as possible for them to move their products elsewhere. I think that's the core reason why Apple won't permit Flash, or any other third party platform, to run on iPhone.

If I were still working at Apple, I would probably do the same thing. That's not to say I like the policy, because it restricts customer choice and developer flexibility. But I understand the business logic behind it, and the depth of feeling Apple folks have on this issue. To Apple this isn't just about innovation, it's about business survival.

I just wish Apple had been more specific about what was allowed and not allowed on its platform. At times the rules seem very arbitrary. For example, Runtime Revolution is banned from iPhone, but a game creation environment called Game Salad says it is allowed (link). The company claims Apple privately promised that it could continue to run, but won't say what it did to get Apple's permission. Runtime Revolution thought it was following the rules too. A platform vendor is responsible for articulating exactly what developers will and will not be permitted to do, before they invest time and money. Apple was at best sloppy about delivering that information, and at worst it changed the rules in the middle of the game.


Adobe's Flash agenda

So we have Apple trying to keep developers on the farm, barefoot and pregnant. Does that make Adobe the liberator, throwing open the gates and setting developers free? Maybe, but only to the extent that it serves Adobe's own interests.

If you want to understand Adobe's agenda for Flash, you have to look back to 2006, when Adobe bought Macromedia. Just after the acquisition, Adobe CEO Bruce Chizen gave a very interesting interview in which he discussed Adobe's plans for Flash and related technologies (link):

Buying Flash "enables us to create an 'engagement platform.' Think of it as a layer or a vehicle in which anybody can present information that could be engaged with in an interactive, compelling, reliable, relatively secure way -- across all kinds of devices, all kinds of operating systems....If we execute appropriately we will be the engagement platform, or the layer, on top of anything that has an LCD display, any computing device -- everything from a refrigerator to an automobile to a video game to a computer to a mobile phone."

In other words, Flash becomes the developer platform, and the underlying OS is transformed into commodity plumbing. Adobe's focus at the time was on competing with Microsoft (the article mentions Apple only in passing and Google not at all), but when you declare war on one OS, you declare war on them all.

I don't think you can blame Apple for feeling threatened by this. (Or Google, for that matter, which has been running its own behind the scenes war against Flash by promoting HTML 5.)

I thought it was a brilliant strategy when Adobe announced it. Unfortunately, Adobe's execution hasn't matched its rhetoric. Four years ago, Chizen said Adobe would quickly merge Flash and Acrobat into a runtime environment that would own the next generation of applications. If Adobe had moved quickly, it might have made its platform into a contender, and the software market might look a lot different today. But the new platform, called Adobe Air, was very slow to come to market, and was focused on PCs rather than mobile devices. Today it has very little developer momentum.

Adobe spun its wheels in the mobile market in particular. It insisted on charging for the mobile Flash runtime for a long time, even though it knew that free runtimes are the key to adoption. And then much of the Adobe mobile team was fired in a series of layoffs starting at the end of 2008. Adobe had hired a lot of mobile industry veterans, and by firing them Adobe created the impression in the mobile industry that it was not serious about mobile. There's a very good discussion of some of Adobe's other mobile challenges here.

Fast forward a year and a half from those firings, and Apple has completely seized the initiative with mobile developers. Now Adobe is fighting a defensive battle just to keep Flash relevant.

There's an old quote attributed to Napoleon, "If you start to take Vienna, take Vienna." Adobe failed to take Vienna. Note to other tech companies: Don't declare your intention to take over the world; do it first and explain later. (By the way, this explains both Apple's strategy and Chinese foreign policy, but I digress.)

Because of this history, I find it hard to feel a lot of sympathy for the troubles that Flash is having. I also find it a bit disingenuous when Adobe says that it's fighting for a "multiplatform" world (link), when the company has said previously that it really wants a single platform, led by Adobe, that runs on top of multiple operating systems.

I'm also amused by Adobe's statements that it has always been a proponent of open standards. Adobe cofounders John Warnock and Chuck Geschke wrote:

"That, certainly, was what we learned as we launched PostScript® and PDF, two early and powerful software solutions that work across platforms. We openly published the specifications for both, thus inviting both use and competition. In the early days, PostScript attracted 72 clone makers, but we held onto our market leadership by out-innovating the pack."

Actually, Adobe held onto its leadership in part by building secret, proprietary extensions to PostScript and tying its paid products to them. In an example I saw personally, Adobe's secret APIs in PostScript enabled it to create higher-quality fonts that looked better and ran more efficiently than competitors. As a PostScript developer you were welcome to work with Adobe's low-quality font technology, but Adobe refused to allow any developer to access its proprietary high-quality APIs.

Sounds like something Apple would do, doesn't it?


The real battle

So the real situation around Flash is that Apple won't permit most other platforms on iPhone (no matter how innocuous they are) because it thinks they threaten its survival, while Adobe wants its platform on iPhone so it can set a de facto standard and make money from it. Neither company is really focused on protecting developers or users as its main goal; they are fighting over who gets to use developers to make money.

Unfortunately for developers, this situation makes it more and more likely that the mobile world will continue to be split into incompatible platforms, forcing them to rewrite their programs multiple times in order to reach the broadest group of customers. Theoretically, the mobile browser could become the grand unifier of mobile development, and as I have said before I wish it would (venture capitalist Eric Ver Ploeg makes the case for it here). Unfortunately, the development of those standards has been incredibly slow and political, and after watching that process for years, it's becoming harder and harder to convince myself that it'll ever speed up. I hope it does, but I suspect that one reason Apple's willing to support web standards is because it believes it can dramatically out-innovate them.

In the meantime, Apple and Adobe will continue to duke it out. If Adobe could get customers and developers to boycott Apple products, I guess Apple might be forced to back down. Or Adobe might convince the government to charge Apple with noncompetitive behavior. But I think neither of those is likely to happen. The most likely outcome is that Apple will hold the line against Flash, Adobe will try to run Flash on every other mobile platform, we'll get a lot more posturing from both companies -- and a lot of websites will get rich running Adobe's anti-Apple ads.