Apple buys 5G Modem Business from Intel – the other side of the story

Yep, completely unrelated but it does look like a cool place to go to.

As was reported with great fanfare by Forbes, Apple has purchased the 5G modem business from Intel. The article focuses on how this new functionality gives Apple a sort of leg up as it now has even more verticality in its supply chain. This should give the company a bit more ability to control for component prices as it now has captive capacity that it can completely earmark for itself as well as to use as a tool against Qualcomm pricing. 

There’s another story here that I think people are not picking up. There could be an alternate story that goes like this, “Intel exits from 5G modem industry.”

Why is that interesting? First, Intel usually does a pretty good job of exiting industries and product lines that look like they’re becoming commodity. Of course there’s been some bungles in the past but generally they have a good read on such things. 

The interesting aspect is what made Intel sell? The easy answer was that Apple way overpaid in Intel’s eyes. Intel could have done the calculus and came to the reasoning that the price offered by Apple would constitute a better return than what they’re anticipating in the market for the next few years. Apple could have desired the division much more than Intel as it would give them the aforementioned control that they like with suppliers. The extra cost may be worth it for them. 

Another aspect is that Intel may not have had the opportunity to control the intellectual property properly enough to ensure longevity in the market – or more to the point, control prices in the market. It’s known that at least Qualcomm, Broadcom and Xilinix have competitive products. That’s some big players who could also put pressure on prices. Best to focus on markets Intel can control rather than just participate.  

Perhaps too, that Intel may not have been the winner in the opening rounds of who wins the OEMs. All of the largest players in this case have chosen a 5G chip dance partner leaving Intel at the punch bowl. If this is the case – and all this is postulation on my part – then 5G is decided and will be coming to everything much faster than people are letting on. 

Mr. Feld’s 3 Machines – Alternate Proposal

The Man Behind the Curtain

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!

As Apple Slowly Turns into HP

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.

The Strange Strategic Predicament of the Apple Smart Watch

This is a really great linked article, read this too!

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.

Patents…eyebrows raised. The linked article goes into more detail.

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?

Television is a Social Event Device, and There’s the Rub

One of the hardest parts about bringing interactivity to the television is not so much getting it on the internet. It’s getting an idea on what exactly TV apps should do.

The graveyard for ‘interactive’ television devices is a very large place, and there’s new residents happening every day. It’s not just third party, flash-in-the-pan manufacturers, either. Some of the tombstones have some pretty big names on them. Why the ongoing tragedy?

The sorrow of it all stems from the fact that the way people interact with a television is so much different than how they interact with mobile devices. Slapping an Android computer on a TV with a revved up tablet UI is not going to work well, no matter what shape you make the box. The problem is that the TV is a fundamentally different product and experience. It’s a social event device.

What do I mean by that? In today’s world, the television is used to share experiences with more than one person. If just one person were going to consume media that would normally be on a television, they would likely do it with another device like a tablet, laptop or phone. We invite friends to watch media on TV together.

This is the big sticking point. The current batch of applications on mobile operating systems are fundamentally designed for interaction with only one person per device. Angry birds? Single user. Hootsuite? Single user. Foursquare? Single user. Their social aspect is derived through the sharing of information across networks to someone else’s device. They are not designed for sharing with others on the same device. The social aspects of sharing a television event on Facebook with the same people who are in the same room as you, seems somehow redundant. Perhaps sharing with others who aren’t in attendance would make this seem useful but that’s just a feint, isn’t it?

The awkwardness of the ‘social’ app issue could easily be distilled down to when there are many sharing one device experience, it’s no longer an ‘I’ event, it’s a ‘We’ event. For whatever the app is doing, everyone is essentially doing it and if something changes, everyone has some sort of hand in the operation (assuming you have courteous friends). Thus, either there are an army of personal accounts invading the device or there is just one person’s account. Redundancy or awkward conformity are in store.

The second aspect that’s been overlooked is that whatever account that your mobile devices are run through contains a lot of information about you, and maybe some information that’s best left within the safety of password-protection. A quick test of this is taking a stroll through your friend’s mobile phone. The experience turns out to be pretty much uncomfortably voyeuristic. The details saved and the personalization of said device is a deep, deep window into the inner workings of a device’s owner. It’ll become uncomfortable to share a lot of these profile details with others. Even relatively benign shopping lists could cause some to blush if shared with the wrong people.

We have different personas – or ‘accounts’, if you will – a public one and a private one. Truly social event devices like televisions need to be ready to handle the line we set between them. This asks an interesting question: do we then have to individually go into every aspect and assign what can be shared and what cannot, a la Google Circles or do we have second, sharable proxies that are neutered for public browsing? Will they be connected somehow?

With both of these aspects in mind, the biggest issue is that the standard apps available for tablets and phones just don’t work for the social aspects of TV viewing. There will have to be a complete set of brand new apps invented to truly capture the utility and the desire to have this capability on televisions. This is where the excitement should build for what would really turn out to be a completely new market for applications where a sort of real-time social app is born. Instead of being all ‘web 2.0’ on separate devices, groups could have that same interaction through one large device in one location. Or perhaps something even more out on the horizon.

It’s time for manufacturers and programmers to see that this change needs to happen, if they’re going to want to keep playing in this space. From user interfaces that are actually designed for the sort of environment TVs are used to the more mundane aspects of creating a sort of sharing profile that has a tuned environment that’s safe to use where others can browse.

What would Bezos do? Amazon, Wii, TV and the future

Does the tablet-Entertainment-mobile arms race force Amazon to acquire RIM? Does it also force it to buy Nintendo? These are very serious questions and while there’s been swirling rumors for the phone aspect of it, the notion of why not both is something to look at.

Why would Amazon feel the need to buy? The answer comes from how you perceive their competition to look like. Obviously, Amazon doesn’t sell phones or electronics, well they do but that’s not their real business. Their real business is the business of providing a market for commerce and from that vantage point things look different. Who competes with them in this market? Google, Apple and Microsoft.

Buying into phones, and even more so into home entertainment, is nearly a must. Amazon has put considerable investment into the online delivery of media, and not just books. They are one of the largest players in mp3 sales and they even have their own app store. With Apple and Microsoft closing the loop on media delivery and the devices to use it on, it must be scary for Amazon. What position would they be in if they end up being an app on someone else’s system? Things don’t even look that safe from the Android world, what with Google having Play, expanding YouTube and dabbling in music sales.

Much like Microsoft, the win for Amazon is not selling a phone, it’s guaranteeing the capability to solely sell content through it’s own devices as well as the opportunity to sit at the big table for at least another 5 more years on customer experience lock-in.

The purchase of RIM is tantalizing for a number of reasons. Firstly, they get a large (but crumbling) user base. Mature (perhaps too mature) technology, supply chain and branding to build on are all features that make this a great move for Amazon. These details alone makes it an easy decision over building from scratch. RIM is also looking to get its groove back and what better than to have the full capability of Amazon’s vast media offerings coursing through it’s circuits?

The phone makes sense, sure, but why Nintendo? The answer is pretty close to the same. The Wii gets them on the TV. TV is a vast market that hasn’t been executed properly…yet. Streaming Movies right from the Amazon store to your TV guarantees longevity. The customer base for the Wii is also more similar to the Amazon cloud than Sony’s Playstation, as well.

The ultimate play to maintain relevancy in this competition is to get on the TV—which means in the living room—and get mobile. Obviously, there are some other plays that would get them close to this scenario – and probably cheaper at that. First is to look at another handset maker. It would be hard to steal Nokia away from Microsoft, but HTC would be a nice buy. They’ve had some good successes and have got a nice presence on carriers and in stores, but not having the capability to close compatibility to just Amazon’s system might be less than palatable and that holds for the rest of it’s Android kin.

It gets a little more interesting with the TV play. There’s an army of set top boxes that would be ripe for purchase, TiVo has been ailing for a while, and Roku would look good as well. All Amazon needs is a device that plugs into the TV that can stream media and be capable of running apps. Even more useful is established consumer buy-in and sell-through. I am unconvinced that any of these boxes’ cheapness would offset the brand power the Wii has. Then again, with games pushing mobile, that support might be crumbling as well.

Whatever the choice is, grabbing both device platforms would put Amazon nearly on the same turf as Microsoft or Apple and bests Google because the power is in the synergy of the components. This is the same awesomeness that Apple enjoys with the iTunes-iPad-iPhone and soon to be Apple TV as well as Microsoft will enjoy with their Windows 8 phone, tablet and Xbox triumvirate.

All of a sudden, that Amazon Cloud-thing could make a lot of sense, huh?

Why it doesn’t matter if Microsoft Sells any Tablets (it’s all about Windows 8).

Microsoft launching their own tablet is big news. Lots of people talk about how this is a bad idea. The weirdness of a software company toying with selling hardware leads folks to usually bring up Zune as a rationale for why. The thought here that most are missing is that it doesn’t matter is Microsoft sells any Microsoft-branded tablets, but it does matter that Microsoft got to launch the first Windows 8 tablet.

Being first is very important. By taking the time to launch their product on the exact right hardware to show off all the features allows Microsoft to set the appropriate bar for where OEMs will need to start to make sure that Win8 becomes a viable tablet product at the onset, rather than playing a continuous game of catch-up like Android is having to do. Since the level has been set, it leaves OEMs no choice but to launch their Windows 8 tablets at the same bar or exceed it just to play in the market.

Thinking of Android tablets is a very good example. When Android tablets were first introduced, they were underpowered, over-priced and lacked a lot of the critical features that made the ipad great. A mess of short-sighted, noncompetitive products flooded the stores, and then glutted Woot. Second attempts at creating something competitive (aside from Samsung) have basically fallen flat. It is plainly obvious that most tablet OEMs have not understood where to be in terms of technology to be competitive. Microsoft could not take the chance for the same lackadaisical product work to happen with the launch of their tablet operating system. Vendors now can’t take the cheap route. They’ll have to create at least competitively spec’d products with the Surface.

The move is very sly and one that shows Microsoft learns from others’ mistakes. Coming out with the best possible spec machine forces OEMs to start competitively rather than to have the occasion to start at perhaps a less than optimum level—which is what had essentially doomed Vista (not to mention all of the Android tablets) when it was sold on under-powered machines to the masses, causing the OS to be sluggish, amongst other things.

Further, by putting out their ideal specs to the market before the OEMs , they’ll also get to set the price schedule for Win8 tablets. If pricing is done well, the Win8 tablets can price itself to be more than competitive with the ipad. For instance, if MS places the price of the Intel tablet within $100 dollars of the iPad, it will force the iPad to battle against something far more powerful (Intel-based full-version Windows), while the ARM tablet would have to price in lower, outside of competing against a more powerful and entrenched iPad. A pricing format like this would force Apple into competing with essentially a desktop-powered tablet and diving into a commodity market or watch its market share recede into the 5% niche it was in before the iPod. Not to mention, this creates the beginnings of the tiered pricing scenario seen in laptops and an entry point to essentially commodity tablet market that has gone nearly untouched.

Let’s not forget, Microsoft’s profitability is not based on one single product no matter how well this tablet sells and it may not make any difference if it never comes to market. Microsoft may even see it a shrewd move to sell it at a loss. A classic example of this is Amazon’s Kindle and even more indicative is Microsoft’s own Xbox platform. The hardware is sold for essentially a loss and it doesn’t matter as the profits come from the sales of the software. For the tablet, this may hold true as well. Proving that Win8 is a viable tablet operating system that can compete on an even footing with Apple’s is insurance in Microsoft’s viability for the future. Owning the tablet space with Win8 ensures Microsoft’s dominance in the OS world, and especially in enterprise, as a win for Win8 is a win for continuance of all of the other platforms MS has like Office, Outlook and so on. So watch out for the future, Microsoft is on the move and they may know exactly what they’re doing!

When Microsoft Connects Windows 8 to Xbox, Will that Force Apple to Buy Sony?

From what the bloggers and the critics seem to be saying, this year has a good chance for being the year Microsoft makes good in the mobile arena. The launch of the new Nokia Lumina phone, featuring Windows 8 complete with the vaunted Metro interface, is getting a lot of good press. Even if the launch goes well, while that will be great news for Microsoft, it might be scary news for a lot of others, because the next thing MS is going to do will be to seemlessly connect Windows mobile devices with their Xbox platform.

See, the next war in consumer electronics is not about one product, like phones, media devices or readers, it’s all about platform and lock-in. Apple had a nice bit of lock-in with iTunes and iPods. If people wanted to buy from the great selection on iTunes, they almost had to do so only with an Apple product. Today, the scenery has changed and the lock-in platform has gotten larger. There are mow three peices to the platform lock-in puzzle: online delivery of media, mobile devices and home entertainment. Right now there are a few players who own perhaps 1.5 of the three pieces. The first to get all three will be the winner, of course. Perhaps if you can get two and just a taste of the third, that might just be good enough, too.

Right now, microsoft has the home entertainment portion locked down. The Xbox platform is manuvering itself as the first and last bit of electronics one needs for the living room. It streams movies and TV via Hulu and Netflix, browses the web and I hear it even plays video games. While Microsoft has toyed with media players and media delivery, the partnership with Nokia my prove to be where the real key to the second peice will come from. Creating a seemless link and interoperabilty between them will be an irresistable sell point for a lot of people. Strong enough to ditch the iPhone? You bet.

If this happens, where does it leave Apple? In the next year, things will get a bit more difficult for them, to be sure. The notion of owning music is waning in comparison to renting everything you ever wanted and more from services like Spotify, has diminish the hold iTunes had not to mention other services muscling in on the video aspects. iPhone, while still being the superior device, will continue to see its share eaten away by the diasporia of Android devices nipping at its technological heels and more importantly, undercutting it’s pricing. Finally, Apple’s home enterainment play, Mac TV, still seems to be a product looking for a market.

The upside for Apple is that they’re sitting on an abusrd amount of cash. They could easily buy themselves out of it. But what to buy?

My speculation is that the play would be into the games market. The companies competing within are most ripe for a takeover, compared to other pieces of the puzzle. The choices then would be either Nintendo or Sony. While Nintendo with their Wii platform would be a good play, I think they’d get a lot more from Sony. I would bet that Mr. Cook is far more shrewd of a businessman than an ‘innovator’ and could easily see that there are actually two prizes won with the purchase of Sony. There’s the obvious: Playstation.

The less obvious is the huge inroads into the television market.  Apple has been toying and teasing that market for an awefully long time. With the experience and the equity Sony can bring to the table, they could leverage themselves into home entertainment quite easily and locking-in the Apple experience in three areas. Would this mean the Sony brand would go away? I’m not sure, but it should be interesting to watch.

Logos Should Be Designed with Meaning and Why JCPenney Should Go Back to Its Roots

It’s always amazing to me that there are certain companies who change brand marks faster than governors get voted out of office. I have absolutely no idea why this happens. A perfect case in point is JCPenney.

While writing another post about pricing, I inadvertantly stumbled across the new logo for the store. I wasn’t aware there was a new logo. There is and this is the new logo:

The really sad part about all of this is that as soon as you go to another website you’ll forget this logo and when someone says JCPenney, you’ll remember this logo:

The reason for this effect is that there is so much brand cache in the old logo that it overshadows the new one. In this regard, the company’s best interest is then to keep the old logo, especially in the light of new strategy that aims to take the store back to the times when the old logo meant something.

Considering the design of the new logo on it’s own, two things jump out at me. The first is it’s amazing ability to inspire absolutely no subconcious corporate allegory. The old logo on it’s own has no story but it had a lifetime to make it up. What does a little blue box packed into a big red box mean, really?

When they teach you how to design logos, the first thing they say is that the logo has to mean something. The meaning could be easy to see or just instill a vague emotion. The smallest things can do a lot. To do this, the designer thinks about a lot of things, like how the company would like to be positioned, what the company is known for, what it ultimately would like to stand for as well as a number of environmental and competitive factors.

Ideally, the designer takes these thoughts and works within the constraints of the competitve market to create a mark that unequivically represents the company and brand. The next step is to create a series of rules and procedures to make sure the brand is operated in the proper manner without compromizing it’s goals.

The branding is then installed and the merits of not adding to or diluting the work is given. Generally, this is done to explain that a brand’s worth is enhansed by it’s longevity of continuance. The longer the mark is in place and unharmed, the greater the value becomes, all other things remaining equal – just like the old JCPenney logo.

The other thing that strikes me is the one thing the logo does make me think of: a big box store from the `80s. I don’t know what benefits that gets JCPenney, aside from getting people excited we might find a Chess King next door.

The interesting thing is while corporate branding seems to have bought into the logo, at the store level, they plainly have not. I am not sure if it’s a workers revolt or just a glacieral and amazingly terrible ‘soft roll-out’ – which could be the subject of another blog post, all by itself. This gives me hope that the new governance may come to their senses, ditch the new logo (and hire me as a brand consultant, as well:) and get back to the one that makes us remember why we like to go to JCPenney .

What Will JCPenney’s New Sales Strategy Mean for Its Branding?

The new pricing scheme unveiled recently is brave in a number of ways. Most importantly, it seems to draw a line in the sand against department stores’ downward race towards becoming discount stores. Stopping the roller coaster of sale pricing and the continuous need for price slashing could have some interesting effects for stores of their sort.

For the past 3 decades or so department stores have let the features that separate them from big box stores atrophy. The biggest difference was in the quality of attention and service a shopper would experience. This was cut in an attempt to control costs and compete with discount stores. The next thing cut was the quality of products, further blurring the line between department and discount stores. What was the difference between JCPenney and Wal*mart if the service was similar? Then, if there was no difference between products, what would justify the increased price?

In these occasions the brand is important. It has to stand for something different and for the longest time, department stores in general – and Penneys is no exception – have lost their way. The first step back is to begin to delineate itself from discount stores by holding price.

JCPenney halting a discount sale scenario is an excellent start in holding back further losses in its brand’s perception and its bottom line. The normalization of pricing is effective in moving the chain away from a discount perception and the vicious cycle of sales. More importantly, it begins to allude to the notion higher quality goods, not to mention a boost to its brand’s esteem. Penneys needs to create a difference between it and stores like Shopko and Target if it is to continue living. By not playing their pricing game is a great start.

The lack of crazy pricing will have to be filled up with some other reason to bring shoppers to the store. The more staid manner of actual close-outs and monthly featured items probably won’t provide it much. The next step would be to bring service back – the true differentiation between department stores and big box stores, as mentioned by the new head of JCPenney.

The concept for the average shopper of what ‘better service’ really is may be quite alien now. Obviously, there’s the Nordstroms level but what would be expected from Penneys in this regard? I don’t think you’d really need to go far. Putting more sales people on the floor might be the best start. Managing customer service quality would be an easier task when stores aren’t running skeleton crews. Thinking that the person in charge now has come from Apple, could also more employee empowerment be in the cards? There’s a lot of possibilities there.

The really interesting thing is that these changes are not going to make an immediate positive change to the financials. Dropping the sales is going to hurt in the short term. There might be an up-tick for a while with the novelty of the new pricing scheme for perhaps a quarter but after that, the changes are going to be much more incremental. Increases in quality of experience are not the easiest things to quantify and may take a while for gains to be attributed to it. In a world run by quarterly results, this all might just come down to results versus how patient the Board is.

If they do hold to their plans, these changes will eventually allow for Penneys to move to higher price points, both on better quality products and the perception of value stemming from a far better shopping experience. If done well, they’ll make some nice brand differentiation too. The real question might be if JCPenneys has the stomach to take the slog back into the segment where department stores used to occupy. My hope is that this doesn’t lead to another terrible JCPenney logo.