Tag Archives: Amazon

Wrap up from the Institute of Design’s Strategy Conference

Well,

I have some time this morning to write a quick summary of the Institute of Design’s Strategy conference which happened last week at the Chicago Museum of Contemporary Art. This was one of the best conferences I’ve attended. Most of the speakers were excellent, the crowds were packed and there was definitely a sense of optimism in the air, quite unlike the prevailing sentiments you can find gracing any of our newspapers today.

Having an amazing seat at the third row didn’t hurt either – changes it from watching to engaging.

Some quick summaries of the presentations I thought were most interesting with my key takeaways.

Bill Buxton – Bill is a principle researcher at Microsoft. One of his points was that the success of design rests on where it’s situated within a company. When design is hidden under layers of management, it rarely has a chance to shine. As a case in point, Bill highlighted the timeline of Apple’s success, noting that Jonathan Ive was employed by Apple several years before it’s first big product hit, the iMac. It took Steve Jobs taking over the company to bring design up to a level where it could affect change. Oh, one more point which Bill made – never call the people who buy your products a consumer. When companies look at people through the lens of “consumption”, they will rarely be able to partner with them to create the kind of innovations which drive company growth, even during recessions.

Scott Cook – Interesting story on the founding and continued success of Intuit. I liked his quote ” Seeing what everyone else has seen and thinking what no one else thought”. I had a chance to speak with Scott at the reception and there were a lot of details missing from the story, it was nevertheless interesting to speak to him. There was a point made by Scott that I never quite got an answer for – he mentioned that executives in companies are layers away from what customers are saying and thus can rarely spot the breakthrough innovations. He gave an anecdotal story that even at HP, Dave Packard turned away many of the ideas that later came to be successful. Not sure how to validate a comment like that but it that’s true, what can executives do to be closer to the needs of their customers. Does the modern day executive need to pull a Henry Vth, disguising themselves to be closer to their guest.

Matt Mason – Co-Founder of Wedia and author of the The Pirate’s Dilemma, gave one of the conference’s best presentations about youth culture, piracy and what companies can do to combat it. He had many points to make but the ones that I thought were particularly interesting were companies use openness to combat obscurity such as Nike selling tricked out versions of Air Force One after Bathing Ape released pirated copies of Air Force One with their own crazy artwork. The next point he made was to sell what can’t be be pirated, either convenience or experience. As an example, he cited the popularity of iTunes which has sold billions of dollars of music when the music is available for free on the net, albeit for a lot more work.

These were just some of the highlights from the conference and speakers who I thought were particularly interesting. On a side note, I ended up taking these notes on my trusty but aging Blackberry Pearl and emailing them to myself and buying more than 3 books while listening to the speakers (damn you Amazon 1-click purchasing).

A friend and I are working on a next-gen product for the wireless presentation space and I found this behavior striking whereby interactions with the audience happen not just through verbal feedback but through the blogging of speeches, visits to the speaker’s websites and purchases of books etc, all while still listening to them speak. We’ll need to see how we can incorporate some of these capabilities within our product.

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Apple’s business model

Saw this article today about Gartner, a Boston based advisory firm (and competitor to AMR Research where I used to work) announced that the iPhone is ready for business applications. As my friend Ash had written about earlier, one has to wonder about the future of Apple’s business model.

Apple is the darling of many and people love the products they make. But public consumer product companies, for anyone who has looked at their revenues and earnings are notoriously volatile. Consumer products take a lot of resources to develop and there is no guarantee that they will be successful in the market. This results in revenues that look like a roller coaster which is makes it hard for management to make long term decisions about the company, such as what investments to make, how much to invest in R&D, how much to hire etc.

Any management company worth its salt will quickly try offset the volatility of their earnings by finding additional sources of revenues besides products. Most companies do this by including a service or subscription based revenue. Apple tried to do this without a subscription model by introducing the iTunes platform. This platform ostensibly would allow them to offset the valleys of product revenues through more predictable revenues from individual song and music purchases.

However, this morning’s Financial Times reported

“Apple, which is thought to make relatively little money from the iTunes store compared with its hardware sales, is also understood to be examining a subscription model”

This is interesting news and provides some insight into the crisis that Apple is facing.  As the purveyor of consumer goods which are priced at a premium, Apple is susceptible to the vagaries of the broader economy as a whole. Combine that existing risk with the risk from getting most of their revenues from product launches and suddenly, their outlook is not that strong.

It makes complete sense for Apple to start looking to get more predictable cash flows from a iTunes subscription model, as opposed to a pay-per-purchase model. Observant users will note that the model proposed by Apple in the FT article is not that different from Amazon’s Kindle business model – where the product and subscription are bundled in together at a single price.