I am intrigued by Brad Feld’s three machine concept of how a business should be run. Its simplicity is tantalizing, to be sure. The more I thought about it, the more I’d like to posit an alternative.
As I’ve understood it to be laid out, the concept has three components (not just a clever name): a Customer portion, a Product portion and a Company portion. While it’s easy to guess what the first two do, the third, the Company’s role, is to run everything else that goes into the function of a firm as well as to oversee the other two. I’m thinking that this layout is good for a snapshot in time of a business, but over time it could become a bit of a hazard to the continued growth of the company.
Call me a bit grizzled in terms of corporate structures, but after being in a few of them and having to work with or compete against others in various roles, a common setup you’ll see in firms is that they’ll have a product group – and that could be made of engineers, product designers, programmers or a combination of those, and then you’ll have a sales group filled with usual marketing and sales suspects. Much like Mr. Feld’s plan, there’s someone that runs each of those with either a D, P, or C in the title. The common situation that develops is that these sorts of structures create ‘silos.’ Maybe it’s because of creepy land-grab politics or the trappings of too lean an organization but your silo leader tends only to focus on their own areas and are not excited about reaching beyond it. Over time, I figure that the Three Machines will yield similar silos that operate for their own interests just like any other corporation in the US with a sales department and an engineering/product department.
What will this situation look like? Well on one hand, you’ll have sales devolving into customer relationship/cost model tactics and you’ll have the product group developing products they *think* the market will need – without much input beyond the company’s walls. This is basically the corporate dystopian world of the Innovator’s Dilemma.
What I’d think would be a better system would be to have a Customer/Application group and a Market research/Development group. They would essentially break down to into the classic short-term (~1 year) and long-term (>1-5 year), respectively. Then, much like Mr. Feld’s model, you’d have a corporate group that determines the objectives and intensity that each would receive over time.
The goal of the split would be to, in the short term, have a group that can focus on your current customer’s needs and desires utilizing your current products (Customer/Application group). That focus will manifest itself in tweaking the current product, pricing or marketing from customer feedback and quarterly market forces.
The Market research/Development group would then be a product development partnership driven by longer-term movements in the market. The group will develop new products for where the market will be heading in the long term. These new products would be ready when current products move from “Stars” to “Cows.” This would make sure the company both has attention on its current customers as well as to position itself with new products in the future.
The Company group works to ensure that the firm is appropriately focused on either the near term or the long term as necessary and to make sure the firm will remain financially healthy in the meantime. Its other goal is to choose when to introduce the new products and de-emphasize the older. Being that the company group is distinct (and maintains that distinction) from the other two groups, it should have a more impartial view that would lead to a better strategic decision making.
Taking Mr. Feld’s lead, I think I’ll revisit this a bit. Maybe I’ll make some MacPaint graphs to show off my design skills. And finally, if you, Mr. Feld, do read this, just know that I’m riffing on your thoughts…and I obviously read your posts as a fan!
Hyundai has recently launched it’s new Genesis line of cars. They are to be vehicles of quality far beyond what you’d expect from the conventional Sonata and more inline with higher-end European imports. If the brand name sounds familiar, that’s because Hyundai has been trying and failing at selling a car into the luxury market called Hyundai Genesis for some time now.
Why have they had such a hard time of it under the Hyundai name? It’s a question of how far you can stretch the qualities of a brand before its limits are reached. Since it’s arrival in the US, the Hyundai automobile has developed a reputation for a reliable, cost-effective product. Increasingly, it’s been known to be of perhaps higher quality than equally-priced vehicles in their markets. I’d assume that the Sonata is to be put against the Ford Fusion, but really it could easily compete with it’s larger, more robust sibling, the Taurus. That’s how to create value. Hyundai is a master at it. The problem is that the luxury automobile market is not connected by a gradient of quality from standard car offerings. It’s a tribe unto its own. Just as a company like Cadillac has issues reaching down to the middle market, a brand like Hyundai has just as difficult a time reaching up.
A luxury car owner wants to be portrayed as set apart from the commoners, and that’s part of the reason for the difference in price. Quality is almost secondary to the inherent billboard that states the owner of a BMW or a Lincoln has the financial means to purchase one. The Genesis may always have had the qualities like a Lincoln but the name doesn’t garner that same economic pedestal that the latter’s badge indicates. In short, no Cadillac buyer is going to pass up a Cadillac showroom to mingle with the masses at a Hyundai dealership. Hyundai just could not get the right shopper to look at the car with the current brand.
After maybe a decade of trying, Hyundai finally succumbed to the process of building a new brand that could be distinct and one that could be positioned in the right space with the target customer. This is no surprise, as Honda (Acura), Toyota (Lexus) and Nissan (Infinity) have all done the same thing.
This is opposed to Volkswagen who never figured it out with the Phaeton.
Someone I met recently received a call from an Apple recruiter. My friend is quite well known as a high performer in their field (to protect the innocent, I’ll leave things comfortably vague) and certainly no stranger to the calls of unsolicited recruitment. On this occasion, it was for a position that certainly would have high impact on the firm and as a matter of course, would require this person to work at the new mother ship. Relocation would be included. Compensation was discussed at the early stage as the costs of the San Francisco area were of concern for someone not quite sure of the city lifestyle. My friend also implied that any move won’t be a horizontal move – either in title or by wage. Apple said they would get back to my friend, although not without inferring Apple was a ‘Big Deal’. Nothing happened for a while and my friend had found that another, less experienced person got the same call they did, albeit about a week after my friend’s call.
Why am I doing my best to ‘turn a phrase’ on a story like this? Easy. It’s because it’s endemic of what we could expect from the new Apple going forward. That expectation isn’t steadfast resolve to keep the company head-and-shoulders above the competition in every aspect, it’s something else. Something inherently more average than what we’ve seen in the past.
Obviously there must be more than a certain, highly qualitative tale of missed employment opportunity. The point of the story is to call out the wholesale difference in how the firm is operating now versus when Steve was at the helm. In short, we’re now seeing Apple turning into a firm that’s no longer going to lead the markets, it’s striving to be merely cost-competitive. The difference between a manager with vision and one with a financial calculator.
So that’s a bold statement, to be sure, but let’s look at a few details that give the idea some credence – or at least a pause for consideration. To illustrate, I’ll compare activities now to the perceived methodology during the Steve era.
My first example is the iWatch… or Watch. There’s no doubt the company was working on this project well before Steve died. They didn’t release one even when an army of Android competitors started belching out versions. After Steve passed, Apple put out the Watch. They did it ham-fistedly, they released sketches, pictures of early concepts and slipped specifications. The company even seemed to have a false-start launch.
When the Watch did come out, Apple followed the Steve playbook and built all the presentations and materials in a manner that aped the Steve way – except for one thing: the company had no killer genius app, function or even emotion to attach to it. It was merely a me-too product that appeared as a plug to fill a product line gap. I’ll bet Steve knew that, and that’s why he never released it. The difference between Jobs and Cook may be that Steve knew when to not listen to analysts and say “no” to investors for the good of the company. The watch still has never reached the penetration it was expected to.
Another example is the firm’s seeming inability to further innovate on the iPhone platform. The user interface has not been updated by any noticeable degree, aside from styling the icons in forever. It took a near customer revolt to get a phablet-style iPhone out and perhaps the two most damning aspects come from the iPhone’s case. Number one was the bending debacle. While I initially thought it was hyperbole, I was recently witness to it actually happening to a series one phone in a wholly unchallenging circumstance. The second is the warning with the new black plastic case iPhone7
Why are these damning things? Because they could easily be blatant attempts at cost-cutting at the cost of product quality. The bending could be an engineering overlook certainly, but it could also just as easily indicate the firm is not devoting enough resources to design or are actively looking to take cost out. Perhaps from reducing machining time or using cheaper materials.
Speaking of cheaper materials, the new phone comes with a plastic case version. Obviously, plastic is far cheaper to make than aluminum, especially when you’re using a materials that noticeably takes on wear marks. Ask yourself: would this move happen with Steve’s dedication to customer experience?
Speaking of innovation, one can’t overlook the buying spree the firm has been on since Steve has left. You can read a lot of business books and articles that point to acquisition as a large company’s best bet to stay relevant in a changing market. In fact, HP even has a venture capital arm, and so does Microsoft. Speaking of purchases, the scatter-shot buying pattern is also concerning as it could easily come off as straw grasping. If Apple is buying so many companies does that mean that the once great innovator is idea-dead on the inside?
While sales of the products are still ridiculously high, the year-over-year numbers have seen pronounced drops – double digit drops Both drops are laid at the feet of two product lines that have seen the greatest market innovation in competitors instead of in Apple products. Those would be the iPhone and the Mac area.
Now the company is talking about repatriating a large sum of capital. On the surface, that may seem normal, but for a firm that put up so much stink about doing so previously, it seems okay with swallowing the huge tax penalty. Apple must really need that cash if they’re willing to part with over a third of the value.
So when you look back at the story that started this post off, you can see that perhaps the desire for margin, (out of the bottom end of the balance sheet) may manifest in selecting not the best person for the job at any cost (as Steve used to do) but to focus on cost before performance in the short term. Doesn’t sound like a company that throws the hammer anymore, but the one that’s receiving it.
There’s been a lot of sentiment that’s pointing to an upcoming recession. The pundits count the rather sharp down ticks in a number of markets as proof. There’s a lot that can be pointed to as the impetus for these movements. China’s over-production is one, the under performance of the Chinese market could be another. There’s the explosion of oil on the market that’s either helping or hurting. There is too much easy credit to be had in the US or too little easy credit available in the US. The Middle East is blowing up and then there’s always what whatever is going on (or not going on) in Europe. Playing games of permutations and combinations with these can get you any culprit you’d like.
My thinking is that all of these recession problems are not from whatever sort of immediate geo/financial/political issue we’re seeing currently but it’s more from simply how one uses the term “…pre-recession levels”.
For example, if you use the term as meaning “…pre-2007 levels” your graph of the global price of industrial metals from the St. Louis Fed looks like this:
But if you were concerned instead with not just the last 10 years but the last 20 years, your graph would look like this:
The difference from considering ten years to 20 or more years makes a big difference in how things look, huh?
What’s the problem with using this term as meaning from 2005-ish on? The problem is for nearly everyone using it, the graph looks like a typical recession/correction graph and gives perhaps false hope that the bubble of 2003-7 could be attainable again, and quickly at that. If one has a look at many of the easily available indicators including this minerals index, they show a similar rather swift uptick starting around 2003 to a level that’s at least twice the amount of the last ten years. I’m no economist, but I’m thinking the speed at which that jump took place and the distance it covered would indicate that the period between 2005 and 2007 – and by extension, the first part of 2015 – would be an unsustainable high, but certainly not a new normal.
If this is true (and only time will tell) then what we’re probably going to see is a return to the relative band of production and pricing seen prior to 2003. That would make this drop not a recession, but a correction to the band that things were moving in prior to 2003. We would return to not a ‘new normal’ but after the excess is driven out of the markets, we would fall back to the old normal that we had been in all the way back to the disco era.
The culprits for this jump section are probably the coming online of China as an industrial power and ridiculous credit availability in the US. One could be argued as a sort of false demand as it was created mostly by the Chinese government synthetically stimulating the market and more importantly, convincing the rest of the world into believing that this focus of stimulation would go on forever (a new normal). China doesn’t need to continue building that area of their economy and therefore we have reached the end of “forever”.
If things must have to return to pre-2003 levels. The world will have to right-size not just have to wait out a recession.
I’m going to start off by saying that below is essentially a theorem – note not ‘theory’ – meaning it’s not proven beyond my own qualitative observations, but I’m thinking that Apple management may be struggling under the new regime. It’s also important to note the sort of trouble isn’t the sort that shows exponential stock drops any time soon. The aspects I’m thinking of could be seen in the latest new products, especially the ones released after Steve passed on.
Sure, there’s seemingly no issues with the march of improvements to the iPad, iPhone and laptops. Afterall, each are in a seemingly mature market, thus incremental improvements are par for the course.. In my mind, the trouble is with the new devices like the Watch and Apple TV. All reports point to the devices being of good quality and adequate performance in the face of their peers. But that’s the rub.
Apple products, as we have become accustomed to, are relied upon to somehow be a step above its competitors. Most claim the way the firm achieves this is usually through their ‘design’. Being a bit more specific, the difference comes from a more considered understanding of how these products will fit into someone’s life where they make experiences better – not by adding complexity but doing the opposite – distilling the functionality to what is only needed. Then Apple hones that experience until there’s no glitches or rough edges. For instance, the iPod took out all the complexity of MP3 players and made it gloriously simple to use. Instead of operating something that seemed like a PDA (or Newton) with hoards of setting and menus, it was as simple as using a Walkman again. The phone did the same thing. It took the vast capabilities of a smart phone and distilled it until Apple delivered a package for massive complexity that made it as easy as a swipe to operate.
Looking at the Watch or the new TV, this considered simplification doesn’t seem to be present. True, they have exterior styling that makes them attractive, but what of the utility? And it’s certain they’ll both sell extraordinarily well. The real question is will these products somehow transform each market they are in? Probably not, no.
Unlike the iPhone that had an experience that was head and shoulders above the competition, these items struggle to find any sort of function or feature that’s truly places them at the head of the pack. Apple doesn’t seem to be helping, either. Where with the iPod and iPhone, Apple saw the paradigm shift and built features around that. The company seems to be heaping on functionality (eerily like Samsung) on these items in hopes someone will see into them the paradigm shift the company can’t seem to find..
Framed positively or negatively, we can all agree that Steve was an idealistic and stubborn force to be reckoned with . Nobody (either from the inside or the outside) was going to pressure him to do anything. He could stand up to the demands and the shouting for new products and take whatever time was necessary to make sure they got it right. Even more so, a government-grade shroud of stealth cloaked products until they are perfectly ready.
The amazing lack of this perfection-seeking can be easily seen by comparing the launch of the Watch versus the iPad. With the Apple tablet, there were no advanced prototypes to be ogled and there wasn’t any official specifications released beforehand, either. Instead, it was just rumored to be and after Steve went on stage, it was essentially available to the public. Conversely, there were press conferences, sneak peaks, hints and and partial launches of the Watch where viewers were held to a safe distance. There was talk of ‘finalizing’ and eventually 6 months or so after the ‘launch’ you could finally start reading actual performance reviews and maybe get one of the few trickled into stores. Within about a year of the Watch being out, it’s still somehow news when Best Buy finally started carrying them.
How could this happen? My thinking is that both of these new items were brought out not because they were finally ready with a honed, distinct market advantage for each, but management may have finally cracked under the pressure of shareholders and pundits screaming for Apple to match strides with their competition, as if they knew better than Apple to judge what it needed to launch. Or perhaps even more scary is this may be the manifestation of a firm that’s now just trying to keep up with the Jones’ rather than leading the neighborhood. If either are true then Apple may just have that bit of a problem.
Smart watches are all the rage right now. Every self-respecting consumer electronics company needs to have one. Apple’s been feeling that pressure for quite some time, certainly from pundits and fans and probably even from shareholders. The problem is that there hasn’t really been a compelling reason for owning one beyond health apps and perhaps just looking cool (if you can look cool with a giant light-square on your wrist). Apple knows this, but they also know that they shouldn’t release something without having the killer application that makes a consumer feel as if they can’t live without it. Sure, they’d see fanboy buys and some holidays purchases, but there’d be no sustain for it. So, what can Apple do? Release a product without a market or not release a product that makes them look deficient in comparison to rivals? They chose the latter.
One could infer from the sorts of hiring done by Apple recently that perhaps they don’t have a clear direction at Cupertino for this product. This also dovetails with the lack of intellectual property filed on its behalf. I would think the game plan was to wait it out until the watch’s true necessity presented itself and rally the troops then, much like they did with the mp3 player, tablet and mobile phones. Unfortunately, other firms haven’t been waiting, they’re launching and hoping the platform will summon the devices’ utility.
When pebble came out, they knew there’s a diaspora of possibilities for such a device and elected to launch with a simple, open device. Samsung is known for throwing everything at the market and then iterating on the ones that get a little traction. Asus may have actually made a smart phone stylish. Strangely enough, in perhaps Google’s only hardware win, their watch shows a sort of approachable genius that comes from attentive human-centered design. Into this market, Apple drops off their watch.
Apple’s products have always been about giving a refined solution, so the idea of belching out technology and hoping a random coder will find the device’s purpose goes against the fabric of the company. Apple is supposed to have the answers, and polished ones, at that. They don’t have to fumble about the market for help. Maybe that was because Steve had the answers – but more probably, he knew to take the heat until the time and the device was ready.
Steve is gone now and Apple launches a watch. It has iOS on it and one of the big sell points is health tracking. It has a skeuomorphic dial on the side and vaguely looks like every other smart watch on the market from about a year ago. I’m sure there’ll be a robust spec sheet and easy compatibility with an iPhone and the applications on it, but it just feels… pushed.
Lately, there’s been a few articles suggesting shoppers wait for the next iteration of the Apple Watch. Some cite the inevitable issues with launching a new product, like software bugs. The question that needs to be asked is are these legitimate thoughts about the growing pains of a first manufacturing run, or a polite way of saying the Apple Watch (and to be fair smart watches in general) just hasn’t created a compelling product vision that makes having one indispensable as other Apple products?
What is Modern Design? How do you recognize it? Most people would say it’s a style that’s clean of detail and somehow functionally formed. Maybe some would say expensive, or cold.
It wasn’t designed to be that way. The simplified, pure shapes must have looked like aliens had left them behind when they came out, and the left-field material selections and manufacturing processes didn’t help either. At the time, most people were deciding to buy either that ‘new’ Stickley stuff or go William Morris Bungalow. Comparatively, items by LeCorbusier and Gropious were outrageously Metropolis-futuristic.
Curiously, modern furniture wasn’t designed to elicit this response – its core principles were much more Utopian. If designers could somehow harness this mass-production phenomenon, perhaps they could elevate the underprivileged so as to live a life just as others do. If they could only reduce costs, the designers felt they could make these conveniences and necessities that much more approachable for everyone. Of course, this vision would come at a cost. They’d have to peel out a lot of the extra details, as those processes added cost. They’d also have to source newer, cheaper materials. Perhaps modern companies like these who pump out thousands of bicycles could also pump out furniture just as fast if it were made with the same tube? Prices would then surely be approachable.
Flashing forward through the ages, the concept of Modern, and its aim of elevating the masses was usurped by the fact that only the rich, it seemed, adopted the new looks. They wanted to be ‘modern’ and were the only ones willing to pay for it. Besides, the more cost-effective designs just didn’t resonate with the populace. Modern was re-labeled as the style of the rich. Sadly, only after IKEA made it big did Modern fulfill its pledged goal.
The aftermath is the current definition of Modern. Products with hefty, nearly unapproachable price tags peddled by the designer elite essentially for the elite style connoisseur. It means ‘clean’, ‘detail free’, form-following-function and more pointedly, a wealth of good taste. But just as technology paved the way for this thinking, technology once again is changing our perceptions.
The last decade has ushered in the direct connection between machines that make things and the drafting/modeling programs that design them. No more are we handcuffed by a human element in one aspect or another. Things can be designed and handed right off to the machines that make them – no human hands involved.
Suddenly, the very ornamentation that we loved and that we had to give up with Modernism is far more easy and cost effective to have than it ever was. It’s also more customizable than we could possibly imagine. The end effect is that designers and artisans no longer have to hone economy of line and shape. In fact, the programs and machines can make anything of nearly any possible detail.
As humans, we’ve essentially solved what’s the perfect dimensions for a chair. We’ve solved the structural requirements for a bookshelf and now we can ask a computer to solve both for us. The even more amazing thing is that whatever we draw, we can have made, and quickly. A talented and skilled craftsman does not have to be found. In fact, we don’t even have to actually draw things, we can have a computer do that for us, as well.
All this will come together to once again recast the definition of Modern. The modern that the next several decades will know is one that means extreme ornamentation. It will mean extreme complexity, mass personalization. It will also mean that if one has simple, form following function items, they must certainly not be well-off.