Customer Experience Focused Company? Focus on Design

I was just reading Ben Thompson's latest member post regarding Cyanogen in India.  On a side note, if you don't subscribe to the daily update, it is worth every penny, great insights.  Anyway, he mentions how Cyanogen is focused on engineering around Android so they don't have to be reliant on Google.  Thompson then went on to say the engineering solution is not focused on the customer experience, so it will have a hard time competing in the consumer market.

This got me thinking about the different kinds of companies there are and to dominate in the consumer space, what should a company be driven by to succeed.  I'm sure I'm missing different types of companies, so feel free to let me know if I missed any, but there are a few different types of companies that come to mind:

• Engineering driven companies
• Sales driven companies
• Marketing driven companies
• Financial driven companies
• Design driven companies

I contend the design driven company is the only company that can truly have long-term success in the consumer market.  The design driven company can beat low-cost competitors and drive sustainable profits.  This is the Apple story.

Engineering Driven Companies

These companies are engineer focused.  They look at the world through all the cool stuff they can build, whether it be technology or buildings, the engineer rules the roost in this company.  The problem with the engineering focused companies is they forget the customer experience and focus on the technology.  The need to create something cool outweighs the need to solve a problem.  Samsung fell into this trap with the Galaxy's, especially 4 and 5.  

By not first looking at the customer experience and then trying to solve the customers problems, a company will create cool technology and then try to fit a customer experience around the cool technology.  This will not have sustainability in the consumer space.  The mass consumer will be confused by the technology and get frustrated with the experience.  Eventually that consumer will choose to churn and choose another product that focuses more on their experiences rather than cool technology.

Sales Driven Companies

These companies are focused on making the next sale.  They look at the world through the need to solve the next customers problem, not the customer experience.  A sales driven organization tends to try to be everything to everyone, and we all know how that story ends.  The need to sell the most and constantly focusing on acquisition drives companies to lose focus on retaining customers.  Microsoft was led by a salesperson for many years and while they had success for many of those, they were disrupted many times over.    

By focusing on selling the most of something, the customer experience becomes muddled.  To serve many masters, a company must focus on creating many different experiences at many different price points for the customer.  This creates no expertise in one area and allows for disruption to come from all angles.  Focus is the key to customer experience and the sales driven company has a hard time selling when everyone is not their customer.  When the focus is on the customer experience, a company can acquire and retain at the same time

Marketing Driven Companies

These companies are focused on making the company well known.  They look at the world through their message.  They focus their time to try and get someone to buy a product or position themselves in the minds of the consumer through advertising and social media.  The infatuation with their own creativity and messaging tends to put the focus on the company, not on the customer experience.

By focusing on branding and messaging, the customer experience becomes secondary.  The metrics of this company is awareness and likes, instead of on customer satisfaction and experience.  The marketing company believes they can convince anyone to buy and the power of the brand will hide all sins.  Customers in the long run will not be loyal to the brand if the experience is not up to par.  They may want to stay with the brand, but they will churn for the fact that being cool and hip is not satisfying their ultimate need for the best experience.

Financial Driven Companies

These companies focus on making as much money for their shareholders as possible.  They look at the world through profits and cash flows, leaving the customer as a means to an end for those metrics.  The desire to make the most money trumps the customer experience in all cases, unless there is a clear-cut ROI for that experience.  These companies get uncomfortable with words like experience, because it can't necessarily be measured or used to create a proforma.  

By focusing on profits, the customer experience tends to fall off in favor of saving expenses.  This company will question R&D and figure out ways to save money now, while sacrificing the future of the company.  Wall Street may like the short term gains of focusing on profits, but when the customer experience erodes and the customers start to churn 3-5 years down the line, it then becomes a marketing or product issue.  These may be the least sustainable businesses in the long run.

Design Driven Companies

These companies focus on the design of what they are producing.  They look at the world through solving problems.  The desire to take a customer experience and make it better trumps profits and sales.  The belief in a design driven company is that if the customer experience is better than all others, the profits and sales will follow. Design is how it works, not just how it looks.  

I used to think that Apple was a marketing company.  Of course I did, I was a marketer and Steve Jobs would get up on stage and do great keynotes and their advertising was second to none.  They had to be a marketing company.  If they were just a marketing company, then they would have already been disrupted.  The iPhone would not be a dominate player and they would be a niche product company with nice profits.  

The fact Apple is a design company has kept them from being disrupted.  Their products are designed with the customer experience at the forefront.  Being able to pay for something without having to pull out your wallet with the touch of your finger is a simple solution.  That solution is not coming from a space of engineering, it is coming from a space of design.  Apple looked at the problem and designed a solution that was easy for the customer to use and that is why people use Apple Pay, otherwise Google would have already been the owner of the space because they were first.

When a company is design focused they don't have to be first.  These companies want to truly solve customer problems, not be fast to market.  If the design company can't solve a problem, they won't enter that market.  A design company will be long-lasting and survive into the future because they care about the people paying money to use their products and services.  Those products and services are designed for the customers they serve, not to take advantage of a need of the customer, but to truly solve their problems.  That is true design.   

Microsoft Is The New Google, Google Is The Old Microsoft

Very interesting article which has great points.  History has a funny way of repeating itself, even though companies made it to the top by being different from the competitors they dethroned.  How do companies become the very thing they more than likely mocked years before?  I think the pressures of Wall Street and investors drive conservatism.  Companies have to be true to themselves and keep that spunk as they become market leaders.  Apple seems to be one of the only companies that do this, however that was Steve Jobs, will Tim Cook be able to kill the iPhone when the time comes?   

For Google the good news is it still has plenty of time to wise up. Microsoft is fighting from a long way back and Search, Adsense, Android, Google Maps and Gmail market positions aren’t going to be troubled any time soon. But it does beg the bigger question: does Google in its arrogance even realise it has a problem? After all it took Microsoft a decade…

Graphic: Android's split personality, 2014 edition

Interesting and true take.  Without that fragmentation, Android would never have the market share it currently has, however that fragmentation makes it very difficult for developers and smartphone manufacturers to thrive in the ecosystem.  

This is exactly what happened in the Windows vs MacOS past.  At the beginning of the "war" the Windows environment had a plethora of people making money.  Developers were making a fortune in software and manufacturers were making very good money in making computers.  Of course Microsoft was making the most money out of all of them.  

However, over time there becomes a race to the bottom.  In the Windows example the developers never felt the hurt as much as the manufacturers because Windows owned the enterprise.  The manufacturers however hardly make any profit.  

The interesting thing to watch in the Android vs iOS "war" will be the long term game.  The smartphone wars are very young and already all the manufacturers have gone straight to the bottom.  Since this "war" doesn't have high-end enterprise dominance, developers are not making more money on the marketshare winner, they are making more money on the profitshare winner.  

So even though the marketshare won the day in the previous "war", we are not seeing the same behavior in this war, so over time I believe the fragmentation will hurt Android.  That's why Google is going with the Android L philosophy moving forward, which I think is a necessity for long-term survival.  

The Strategic Mistake Almost Everybody Makes

Every business and business model has a finite life. Products come and go. Customer preferences change. As Rita Gunther McGrath notes, competitive advantage is increasingly a transient notion. The companies that last over long periods of time do so by creating new products, services, and business models to replace yesterday’s powerhouses.

Scott Anthony makes some great points in this piece.  I stated in a previous blog how much focus is put on "churn" percentages.  In most industries it is very important to watch churn, however to keep customers as a defensive move will always result in long-term demise.  

Your customers will churn, this is a proven fact.  At what rate and when is always the biggest question.  The key is to have customers churn to your next innovation.  Apple didn't try to prevent churn in their iPod line as a defensive move, they were always on the offense.  Creating new form factors, adding color and video.  At some point they were so much on the offense, they destroyed this business with the iPhone, but I would imagine the positive churn of Apple customers is many times greater than if they would have played defense with the iPod line.  Compare this to Microsoft which has been playing defense with Windows for many years.  They are starting to see that negative churn by only playing defense, which has put them at a distinct disadvantage in mobile.  They played defense so much, their mobile strategy is Windows.  

Portfolio theory has its naysayers, but few argue with the fundamental idea that diversification decreases risks and increases a portfolio’s potential. Do you remember the most efficient buggy whip manufacturer or the most profitable distributor of packaged ice? Of course not.

I don't fully agree with what Anthony has to say here.  Where I disagree is with the size of the portfolio of the business.  Diversification is good if it remains within the core competency of the business.  Too many times businesses diversify into areas where they have little expertise just to increase the portfolio, which causes a loss of focus on the strength of the business.  The best companies diversify within the core, like Apple.  I think the proper strategy is to be the company that causes your customers to churn, this way you keep the customers loyal to your brand and you are always trying to be the next product in your industry.

Microsoft's Bad Bet

Microsoft bet the company on an operating system that had a market share under 5%.  Why would they do such a thing?  Because the bloggers told them to.  But did they listen to what they wanted to hear or did they truly believe this was finally the time to change the paradigm of Windows that had been basically the same since 1995?

When Windows Phone 7 came out with the now defunct Metro monicker, the blogs went crazy.  "Microsoft has out designed Apple," they cried.  Microsoft was riding high in the blogs and with the tech pundits, probably a first for them.  So can you blame them for being so excited?  We are finally cooler than Apple, lets run with this!  Time to change Windows.

The blog was going crazy because it was different.  It had its own voice.  The tech pundits had been waiting for something new.  Android, WebOS and Blackberry OS's had done little but copy the spirit of iOS, yet here were these tiles that had live data, so different.

But there was just one problem.  Consumers weren't jumping to the new platform.  Even though Microsoft was spending millions of dollars to advertise the new platform, customers didn't have a connection with the platform.  They had a high defection rate compared with iOS and even Android and even though they dominated the enterprise, Windows Phone had little to no penetration in this cash cow segment.  

So it shouldn't be a surprise that Microsoft is now backpedalling on its Metro bet.  The next version of Windows is going to launch into the old desktop of Windows 7 by default, which relegates Metro as no more than the dashboards section of OSX.  So Microsoft will have to figure out their next steps.  Are they going to fork the OS's and create a true tablet OS (like they did with RT) or are they going to try and make their all in one solution with Windows 7 being the default?  I would say they need to brush off RT and make the phone and tablet more compatible, similar to iOS,    

Big Data Demands Big Context

When we entered the age of big data, many of us assumed we had left the age of big risk. We didn’t have to guess anymore. We didn’t have to go out on a limb. We’d follow the numbers, the “truths.”

But time and time again we’re finding that it’s not that simple. No matter how good the research is, big data is nothing without big context.

The promise of big data is a complicated one.  When I hear most non-statistical people talk about big data, they believe it will answer all the questions they have about their business.  Big data is just making sense out of larger data sets that may not be historically the data everyone has focused on in the past.  

Once you break down what big data is and what it isn't, the question then becomes how to use it.  Context is extremely important.  Not just in the form of survey or research, but in the form of humans that have been working in the business.  The human intuition and psychology of consumers is just as important as ever.  Just as before there was big data, organizations combined data with business acumen to make the best decisions.  Nothing has changed with big data.  There has to be business acumen to combine with the big data finding to build the best product and have the best marketing strategies.

This article looks at Microsoft and Windows 8 to put this into context.  

Microsoft’s engineers discovered that people were doing less of the time-consuming writing and creating that had once been the norm. Increasingly, users were socializing for short bursts.

The research also showed that people loved having “touch” functionality and were avidly consuming small pieces of live information.

Consequently, Microsoft decided that Windows 8 should feature navigation that enabled multitasking and quick interactions, and that it should also have touch and live tiles.

People love touch.  I love to touch on my iPad and iPhone all the time.  However, those devices are more intimate than a computer.  They don't have the bulk of a computer and they can sit on my lap or I can hold them up.  

It turns out touching a screen on a computer is very hard over time.  While little touches here and there will work, overall it is literally a pain to touch on a computer.  After time your arm will become tired and a trackpad can solve many of the problems.  While I believe at some point there will be a touch interface that makes sense in a computer, to have the whole interface built around touch does not make too much sense.  

But what people say and what they do are two very different animals.

This is so important to understand when doing any research.  It goes back to the famous Henry Ford quote of "If I would have asked my customers what they wanted, they would have asked for a faster horse."  

Context is important, but so is psychology.  Customers don't think beyond using the devises or tools they have when answering questions.  They want a computer to solve a problem that another device should solve, but thats just because they don't know about the other device.

Also, doing research on what a customer would do if they were given a choice of the following is very deceptive.  I never believe what a customer says they will do, I always rely on what they do in combination of what they say.  When you combine the two, you get the truth which is always somewhere in the middle.  Remember to never change an entire strategy based on customer surveys of "what they will do if" questions.

11 Ways Big Companies Undermine Innovation

In centuries past, explorers searched for the legendary city of El Dorado, where everything was made of gold. Today, at large organizations, innovation is the new El Dorado.

This is exactly why Microsoft is struggling with innovating Windows.   

Why Does Windows Have Terrible Battery Life?

My main complaint with the Surface Pro is the incredibly lackluster battery life.

This is what happens when a company is more concerned with holding onto what they have instead of innovating forward.  Sure you will make people mad, but they will come with you if you lead the way.  Microsoft at this point is not innovating on their most important product, they are trying to maintain their market share.  There is 1 competitor.  They should have learned they got to where they were because Apple stood still and Microsoft passed them up. We are in the middle of seeing Microsoft standing still while Apple passes them back up.  Very interesting how organizations can't innovate when they have a big lead.

Pricing and Apple

A lot has been made about pricing after this weeks event.  I saw three different groups of controversies this week, two involving Apple and one involving Tweetbot.  I think all three are interesting case studies in pricing in the hardware and software section.   

The iPad pricing was the most controversial thing coming out of the event.  Again it stems from every industry pundit wanting Apple to price their products to maximize market share.  Apple isn't in the business of maximizing market share, they are in the business of creating the best products and having quality over quantity.  As John Gruber stated this week:

As for pricing overall, I think concerns that iPads are “too expensive” are overblown. The same was said last year, and the year before that. The tech and business press frequently compare iPads’ prices and specs to those of high-end Android-based competitors — from Samsung, Google, and Amazon — and find the iPads lacking. How many pieces were written last year arguing that the iPad Mini, with its non-retina display and $329 starting price, was incongruously overpriced compared to Nexus and Kindle Fire devices with retina-caliber pixel densities and prices under (sometimes well under) $300?

But where these comparisons go awry is when they are conflated with tablet market share numbers showing Android devices, as a whole, making significant gains. As Benedict Evans argued this week, the rise in Android tablet sales has not been driven by the high-end would-be-iPad-competitors from Amazon, Google, and Samsung, but by profoundly cheap “$75-$150 black generic Chinese Android tablets” that are seemingly used primarily for video consumption. Evans calls them “the featurephones of tablets”, and argues they compete with televisions just as much, if not more, as they do with iPads.

The iPad does not have competition in the way that the iPhone does. Tens of millions of people use high-end Android phones — largely Samsung’s — in much the same way iPhone users use theirs. There just aren’t that many people — yet? — using Kindle Fires, Galaxy Tabs, Nexuses, or Surfaces as alternatives to the iPad. Thus the massive discrepancies between the iPad’smarket share and usage share numbers.

As John argues, even the market share argument is not a fair one compared to phones or PC's.  The Android tablets eating the market share of the iPad are not customers that Apple is interested in serving.  Apple is interested in customers that interact with their devices in meaningful ways; browsing the internet, purchasing legal content, listening to music, playing games.  Apple is not interested in customers that only browse YouTube or watch bootlegged movies.  These are not customers who will continually buy high-end Apple products, purchase apps to stay in the ecosystem.  These customers will also cost much more to service.  The hidden secret behind Apple's success is their service through the Apple stores.  Imagine even more customers coming through that channel.  Apple is building a high-end experience from purchase to consumption to service.   

The iPad also hasn't shown that it needs to come down in price.  Would I like an iPad mini retina for $329?  Yes I would, more than $399.  Is that $70 going to change my buying decision?  Nope.  What I am debating is the same thing John Gruber is debating in his article, which one to buy?  Or maybe both with T-Mobiles new pricing plan for cellular versions of these iPads.  

The second big pricing move from Apple is software pricing.  Where as the hardware pricing is being criticized, the software pricing is being applauded.  Everyone is saying it's an attack on Microsoft.  Look out Google.  

I look at it as a couple of different strategies at play.  First and foremost I believe it is a retention play on the part of Apple.  So much is made of their ecosystem in iOS and now I believe it just adds to that arsenal onto the Mac as well.  If all the software is free in the Mac ecosystem, then it makes the purchase price of a Mac more palatable.  It also prevents customers from jumping ship onto the PC.  The iPad also becomes a creation device on par with a PC.  And for free!  

The second part of this strategy is innovation.  When the customer base is moving ahead with Apple, the newest innovations in software are propagated throughout the ecosystem and everyone is using and showing it off.  This also makes for a compelling reason to choose Apple first for developers.  If the Mac can have the upgrade cycle that is seen in iOS, developers will be able to move their software forward without worrying about backward compatibility.  

The last big pricing controversy is Tweetbot.  They released their popular twitter client for the iPhone this week and they created a whole new app and charged for it.  Of course the world is a worse place because of this.  Someone had to forego their coffee at that price.  

Why has the world forgot the software model just a few short years ago.  You bought a piece of software, the next year a new version would come out, you would go to the store and buy a whole new version of the software.  Oh ya, this cost $50 every year.  If you didn't perceive the version was worth the new price, you forego the years version and kept using the old version.  This is what the market should be. 

So much is made of free software these days.  The problem is this ruins the business for many independent developers because they are playing a different game than the people offering free software.  The free software providers are either trying to be purchased by Google or Facebook, or they are the Apples and Googles of the world and these companies are using the software as a "loss leader" or a strategy to sell more hardware or advertising.  

I believe more developers should take the Tweetbot approach in the App stores.  Charge for new software every year, it's only a few dollars now.  This approach is much better than the freemium model pervasive now.  It also makes developers make the product they have a passion for much better.  If Tweetbot and others continue to give out free upgrades, these products become worse over time.  Why?  There are a set number of hours in a day.  Those hours have to be spent on something that will return on the time investment.  If Tweetbot never brings in more revenue, it doesn't make sense to spend time working on it, so it becomes stagnant.  Under the Tweetbot model, it makes sense to work on Tweetbot because that innovation can produce revenue in the future, which is why they are in business.  Hopefully more software developers start charging more often for their software and we see even more innovation in return.