With a handshake, Steve Ballmer of Microsoft and Risto Siilasmaa of Nokia confirmed what many have long speculated would be the fate of the one time leader of the mobile industry. Just 3 weeks before the news of Microsoft’s acquisition of Nokia, another industry witnessed a significant milestone. Tesla, the electric car manufacturer, announced that it is now a profitable endeavor despite the odds. The fall of Nokia and the rise of Tesla demonstrate what can happen to more traditional industries in the coming years once entrepreneurs and non-traditional competitors figure new ways to combine data and design to create disruptive products and platforms.
Not just another fancy device but a smart one
The launch of the iphone and the first electric car from Tesla were both derided by industry leaders of the day. The mistake with those perspectives then, was to think that these were fancy objects of desire, are too expensive and will not be a threat anytime soon. But these were not simply objects designed for vanity. They are smart products packed with incredibly powerful software and designed not for style but aimed at changing how consumers use their phone and drive their vehicles. For the first time, entrepreneurs who understand software and design have created products that can click with this new generation of consumers. This is the knowledge generation, one that has been transformed by the internet and very comfortable with information technology. Like how electricity shaped an earlier generation, this one is eagerly waiting for new products that combine clever use of data and well-designed user experiences into devices that represent the dawn of a new age.
Seeking a strategy and a business model for breakthrough performance?
The race to creating smart and beautifully designed products is picking up pace. From wrist bands that track your fitness status to smart watches, companies with the capabilities of software and design are entering into the turf of traditional firms. Last week, Sony and Samsung entered into the foray of smart watches, supposedly to pre-empt Apple’s plans to launch a similar product. The watches looked promising in terms of capabilities and can be used with their respective smartphones. Sony’s design looked more appealing and may have a stronger chance with consumers. But while Apple is biding its time to introduce their own version of the smartwatch, big players in the watch industry are not in a rush to move into the game. Like the mobile industry during the launch of the iphone, major players like Swatch are still making huge revenues. Most probably, these smart watches will be dismissed as something fancy and not serious enough to unseat the industry leaders. But what if this trend of building smart devices are not isolated but are part of a major shift that will eventually reshape every single industry in time to come?
It is not about one element but about making it all work as one
When the late Steve Jobs was asked what the ‘i’ meant when he debuted the first i-product, the iMac in 1998, he explained that it was the marriage of the excitement of the internet and the simplicity of the Macintosh. Hence the ‘i’ stood for the internet. Few would have thought deeply about what Steve meant when he mentioned about the excitement of the internet. But that insight of combining Apple’s products with the excitement of the world wide web was the core to its rise as a resurgent power. The ipod, ipad and iphone, all beautifully designed were also supported by well-developed online eco-systems of entertainment libraries and mobile applications.
All of Apple’s competitors from Creative to Microsoft failed whenever they saw the battle from one perspective. Creative, a one-time leader in MP3 players saw the battle in terms of product features so it failed when it did not develop a competing system of good content and software. Microsoft tried different approaches, by trying to design different products to match the design sense of Apple. But ultimately it understood that to beat Apple and now Google, it had to be better at combining software and product development by reorganising itself. Just before announcing his plan to step down as CEO, Steve Ballmer oversaw the most disruptive re-organisation of the company by simplifying the corporate structure to be better at combining software with devices development. Microsoft’s move is a vindication of Steve Jobs’ vision of designing devices that can harness the power of the internet and deliver incredible experiences in a seamless way.
“The story of the next century is the transition from an industrial, resource-based economy, to a knowledge economy. An industrial economy is zero sum. If you own an oil field, I cannot go in that same oil field. But knowledge works differently. If you know something, then you can share that” – Mark Zuckerberg
With wealth made from a network used by a billion people, Mark Zuckerberg launched an audacious initiative, a foundation whose aim is to bring the internet to the rest of the world. As of now, only one third of the world’s population is connected to the internet. Of course, there are obvious benefits for Zuckerberg, because the more people are connected, the more likely they will use facebook. But just imagine if the world is fully connected, what will it mean for businesses around the world? Rather than wait for the inevitable, Asian companies must get ready and upgrade their business models to stay relevant. Here are three ways to get ready:
1) Never assume that it will never happen to you
A lot of disruption is already happening even though only a third of the world is connected. The rise of the budget airline industry would never have been possible without the internet. This is why budget carriers spend a lot more resources on creating easy-to-use websites. Many other ideas are now being conceived in the West, from building smart homes to even smart shoes. As Asia is urbanizing rapidly, our continent will probably achieve connectivity to the internet faster than other regions. Therefore never assume that it will not affect you because it will. Samsung like Nokia was already a major player in selling mobile handsets in Asia by the end of the last century. But unlike Nokia, the Chairman of Samsung was quick to see the importance of combining software and design. Although HTC was the first in rolling out an Android-powered smartphone, Samsung followed suit quickly, built a close alliance with Google and is now the world’s largest brand for Android-powered smartphones with a variety of well-designed devices. Samsung’s success is due to its willingness to embrace change fast and never assume anything. Therefore, review the current products that you have, think of how you can redesign them to make them smarter and more connected. Identify technology partners like Google and see how you can leverage on them to build smart products.
2) How do I begin without any in-house capabilities?
Welcome to the club, because many western companies such as Jawbone, the premium audio technology maker and Nike are also experimenting and building up capacity to develop products that are connected to the internet and beautifully designed. They are doing this because they know that others will come in and fulfill the need if they don’t evolve. These two companies already have strong product design credentials, so the real challenge is how to build products that are smart, connected to the internet and foster a social network kind of behavior. UP a wearable smart wrist-band by Jawbone is a good example. Though it has met with several setbacks since its launch in 2011, the company continues to raise funds, attract talents in data-mining efforts so as to become a strong player in possibly fitness monitoring devices. As these users update the data in the different wearable devices developed by Jawbone, the company will get an incisive view of the lifestyle of customers and increase stickiness due to the change in user-experience.
For Asian firms thinking of doing the same, do not aim to work on so many products at once. Aim to develop only one disruptive product and preferably it should be the least complex one. Then start building up a separate team of talent to do this. It is important that this team reports directly to the CEO and is housed separately so that they can focus on developing the product. It will normally take about 3-5 years to see any real traction in terms of revenue and rise in demand but once these products start taking off, it will result in a huge transformational shift in your industry and for your company. So the option is, either pray that no one does this or start building now and gain an edge.
3) Even if you don’t develop smart products, at least be in the right place.
After reading this, a number of you might say that your company might be too small and may not be able to muster the recourses and time to develop smart products. Don’t worry, because for every innovative product, there will also be a major shift in the eco-system of suppliers. Pay attention to that, and see how you can position your business to profit from it. For example, the rise of smartphones have resulted in a higher demand for strong glass and high-end manufacturing. Foxconn’s rise as one of the largest electronics contract manufacturer is due to the popularity of Apple’s products. In another industry, the rise of the budget airlines brought a tourism boom to new destinations. Stephen Kaufer co-founded Trip Advisor to let travelers share their travel experiences with fellow and prospective travelers. Today it is the largest travel site with over 260 million unique visitors and over 100 million reviews covering over 2.7 million travel sites. The idea of word of mouth is a simple concept but infused with data and good user-experience, it is a formula for a successful business model.
Take time then to think deeply and review your relationships with business customers and partners. One of them might be on the way of becoming the next innovator and you might want to place your bets accordingly. The era of the knowledge economy is just beginning and in about a decade’s time, there will be many who will fall paving the way for the rise of others. The advent of the internet has allowed anyone to access global markets. Today, any individual or business can use Youtube, eBay or Twitter to sell their products from wherever they are based. This opens up tremendous opportunities for Asian organizations to ride the wave of the internet and technology and create disruptive products with a unique identity.
“Some animals adapt to new surroundings. It seems a better choice than extinction.” – Mrs Levinson in Downtown Abbey
This is a very apt line by Shirley MacLaine who played the role of Mrs Levinson in her role in Downtown Abbey, a popular UK period drama about a aristocratic family dealing with the rapid changes in early 20th century. Mrs Levinsion said this to Robert, the owner of the estate, who was troubled by the rapid changes taking place around him. In a similar way, we better start adapting to this new surroundings of combining information and design to create disruptive products. If we adapt early, we will not only survive but we can thrive and profit from it.
Lawrence Chong is the CEO of Consulus, an innovation consultancy specializing in helping Asian companies transform their business models to rise up the value chain through business design, organisational development and designing new brand experiences. Consulus’ country representative in Sri Lanka is Shiraz Latiff who is also the CEO/Lead Consultant of Hummingbird International, a regional knowledge house specializing in coaching, consulting & outsourcing through global partnerships & collaborations.
This article is part of a weekly column called Shaping the World where Lawrence and Shiraz share insights and ideas about building innovative Asian Brands. It is published by one of the leading dailies in Sri Lanka, Ceylon Today.