July 13, 2010

58) Dropbox

危 wēi  danger

MIT-grad Drew Houston was frustrated with how often he forgot his USB drive.  He was sure that there was a better solution, probably a Web-based file hosting service but he couldn’t find one available so he founded Dropbox with a fellow MIT-Grad to build it.  Shortly after receiving seed financing from Y-Combinator in 2007 they released a short video explaining their plans on Hacker News – the video received 1200 Diggs and Houston realised that they must be onto something.  They built the product (which is worth checking out for its wonderfully simple UI here) and officially launched at 2008′s TechCrunch50, an annual technology conference.  Initial users loved the product so the next logical step seemed to be to advertise and they launched an Adwords affiliate programme.  The results were shockingly poor – customer acquisition cost proved to be $233-388 (for a $99 product).  Perhaps the company’s VC backed competitors were overspending and the company would never be able to compete?

机 jī opportunity

The team interpreted the situation differently – they didn’t see the cost of Adwords advertising as the problem, they concluded that their challenge was that consumers don’t search for problems that they don’t know they have.  In other words the team needed to find a way to create demand, not harvest it.  The team knew that users that were referred to the product invariably loved it so they developed a system to incentivise the referral process (gifting both the referrer and the new users free memory – a 2-sided incentive).  The approach worked: user numbers from Sept 2008 to Jan 2010 have increased from 100k to 4m, and 35% of these new users joined directly from the referral programme.

How About…

  • Questioning whether your aim is to create or harvest demand?
  • Using 2-sided incentives to drive sales?

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I like the low-fi introductory video (the only information on their homepage), it reflects the team’s humility and dives straight into the benefit using an analogous situation:

February 25, 2010

40) Philips

危 wēi  danger

Philips was founded in Holland in 1891 by Gerard Philips, a maternal cousin of Karl Marx.  Over the following century Philips grew to be one of the largest electronic firms in the world, in 2007 its sales were €26.79 billion.  In 1999 Philips built a High Tech Campus at its Head Office in Eindhoven as the company’s central research and development (R&D) facility, in its peak employing 1500 people.  However, after the tech bubble burst in 2000 the associated costs were tough for the company to justify – but Philips still needed to retain a stream of intellectual property to drive future growth.

机 jī opportunity

Philips’ solution was to invite other companies and their R&D teams to lease space on the campus, building a new revenue stream for Philips and thereby helping reduce the cost of the site.  The offer of space on the high-tech site and the potential to collaborate with Philips on R&D initiatives was compelling – there are now 15 companies on campus, including IBM and NXP, employing in total 7,000 people.  The campus has become so successful that it has won funding from the Dutch government to continue its growth as an innovation hub, with no company benefitting more than Philips.

How About…

  • Partnering with companies to turn costs to revenues?
  • Co-locating with strategic partners to lower R&D costs and improve results through collaboration?

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Principle source Harvard Business Review, Dec 2009, ‘Spotlight on Innovation’

February 16, 2010

38) Apple – iPad

危 wēi  danger

Apple has built a strong reputation for launching products and services that help consumers meet their existing needs more effectively, for example storing and listening to music on the go.  Its strength has been in building ecosystems of products, services and retail offers to optimize the consumer’s experience.  Strong reputations lead to high expectations, commentators therefore view Apple’s product launches ultra-critically.  Many industry commentators have been vocal in their disappointment with the iPad because it doesn’t clearly meet any existing consumer needs – has Apple lost its judgment?

机 jī opportunity

I don’t think so.  Perhaps Apple has realized that it can’t predict and therefore drive all consumer behaviour changes.  After all, when it launched the iphone it hadn’t planned the app store as it stands today, instead its skill was in reacting to the ‘hackers’ it saw developing applications by quickly offering them a forum and tools to exercise their creativity.  The result has been the iphone is now used in ways Apple could never have dreamt of – a spirit level, a safety alarm and a credit card reader to name just a few.  Given that, perhaps Apple has learnt that its greatest competitive advantage is in harnessing the creativity of its user-base and offering them the tools to develop the Apple offers of the future – effectively crowdsourcing new opportunities.  Viewed through this lens the iPad looks like a blank canvas to me, a wonderful opportunity for Apple’s hacker community to seed new behaviours and grow new markets.  With its lightweight design, large screen, fast processing speeds and ability to run iphone app’s, perhaps the iPad is an essential component to the hacker’s toolkit.  The iPad as the new cookery book solution?  The iPad as the magazine of tomorrow?  The iPad as an interactive photo-frame?  Probably none of the above, but fortunately for Apple they have kept their options open…

How About…

  • Building modularity and flexibility into your products and services to enable consumer creativity?
  • Harnessing that creativity to help drive your future offers?

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January 21, 2010

31) Amazon Web Services

amazon web services logo

危 wēi  danger

Founded in 1994 by Jeff Bezos as a result of his ‘regret minimisation framework’ – an effort to fend off regret for not staking a claim in the Internet gold rush – Amazon has grown to be America’s largest online retailer, with nearly three times the internet sales of its runner up, Staples, Inc. Amazon’s growth has been fueled by continuous innovation of both its retail offer (including moving from books into broader categories and opening up its platform to third-party vendors) and its core technology. Its investment in the latter, mounting to billions of dollars, led it to begin exploring web services in order to help it manage peaks in demand on its website in 2002.  Amazon saw the value in this approach, adopted it internally and continued to build its competence in the area – eventually launching Amazon Web Services in 2006 with a data-storage service, called S3.  However, at the time there was significant concern from industry commentators that the launch was a strategic mistake with key resources, both time and money, likely to be diverted from the retail side of the business.

机 jī opportunity

However, the move made complete sense to Amazon, which above all else viewed itself as a technology company. It continued to develop its web services offer and has since added additional web based services, including online database, content delivery, and secure payment services – each of these services was born from investment in Amazon.com. The company has also been creative in how it has taken its new services to market, for example in December 2009 it launched a spot market to sell off excess capacity on its EC2 platform which allows enterprises, developers and hosting companies to bid for and buy capacity at prices set by demand and availability.  Although web services represented less than 3% of Amazon’s total revenue as of 2008, the bandwidth (number of bits per unit time) consumed by its Web services division has surpassed the demand from its better known retail websites as of 2007. The offer has helped continuous development of the Amazon platform and has given the company a foothold in some significant emergent markets.

How About…

  • Appraising your internal capabilities for those that might seed completely new offers?
  • Using auction-based pricing in order to price exactly at customers’ willingness to pay?

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December 21, 2009

24) Google

google_maps_logo

危 wēi  danger

Google realized early that location-based services were of real value – the ‘maps’ tab seems to have been on its search page forever.  However, in order to offer complete mapping services Google was dependent on licensing key data from two duopolists that ruled the mapping business – Tele Atlas and NavTeq.  The two companies priced their licenses under strict terms, safe in the knowledge that the barrier to building a database of turn-by-turn directions was huge.  The companies’ positions were apparently so strong that their customers, Tom-Tom and Nokia, bought them for $2.7bn and $8.1bn respectively.

机 jī opportunity

But, the barrier to entry wasn’t too high for Google to surmount.  After spending years with thousands of cars on the road building its own database the company terminated its license with Tele Atlas earlier this year.  And then Google announced on October 29th that it would offer free navigation with its Android Operating System (OS) – Tele Atlas and NavTeq’s share prices each dropped c20% on the same day.  Google’s business model doesn’t depend on electronic product sales – it depends on advertising revenue.  If widely adopted, its mapping API will create a platform for a global geo-based advertising network.  In fact, Google is so keen for its OS and API to be adopted that it even offers an ad-split to the product and service companies that build with them. ‘Free’ pricing is widely touted as a great way to speed adoption, well Google are effectively offering ‘Less than Free’ (they’re paying).

how about…

  • Questioning barriers to entry that are perceived to be insurmountable?
  • Asking if changes in technology are likely to lower them?
  • Offering products or services for ‘free’ or even ‘less than free’ to speed adoption?

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