Order It Online, and Voila!

Change is coming to how goods are delivered. Fundamentally changing supply chains. Aivars Lode avantce

http://live.wsj.com/video/order-it-online-and-voila/4F956189-A85C-48EB-96E2-5F8B7CF9FFAB.html#!4F956189-A85C-48EB-96E2-5F8B7CF9FFAB

A doomsday analysis sees Apple, fat on margins, overtaken by a pack of hungrier rivals

Simplicity to enable a revolution check out the comparison between the blackberry and the I phone. Aivars Lode avantce

A doomsday analysis sees Apple, fat on margins, overtaken by a pack of hungrier rivals

Apple losing the upgrade race. Click to enlarge.

FORTUNE -- Apple (AAPL) investors aren't going to like it, but it behooves them to consider "Can a Leopard Change its Spots," Paul Sagawa's critical analysis of the company's competitive position vis a vis Google (GOOG), Microsoft (MSFT) and Amazon (AMZN).

Sagawa, a former analyst at Stanford Bernstein, now covers technology, media and telecom for Sector & Sovereign Research in Stamford, CT.

Posted Nov. 19, the first trading day after Apple's share price hit a nine-month low, his doomsday view is a bracing tour of the mindset of the traders who knocked $187 billion off the company's market value in eight weeks.

"Apple is at a crossroads," Sagawa begins. "After dominating the first decade of the millennium, the revolution that Apple started is shifting against it. The iPhone, with its single annual update and super premium price, has been run down from behind by a pack of rivals with segmented product ranges, 6 month product cycles and aggressive price points. Android phones now outsell Apple 5 to 1, and the iPad is on the same path, exacerbated by rivals willing to subsidize device sales in pursuit of e-commerce and advertising. At the same time, the nexus of the user experience is shifting off of the device and into the cloud, greatly disadvantaging Apple vs. its web-savvy rivals."

The headings of the paragraphs that follow will give you a sense of where he's headed:

• Apple caused a paradigm shift and reaped a windfall, but now faces strategic challenges that will require changing the company DNA.
• Android smartphones outsell iPhone 5 to 1 worldwide, while aggressive subsidies on new Android tablets threaten the iPad hegemony.
• Apple is accelerating its refresh cycles and broadening its product line, but can only slow its market share losses while accelerating margin erosion.
• Platforms are integrating cloud services as critical elements of the user experience, but Apple is far behind in the skills and infrastructure necessary.
• The slowly emerging opportunity for mobile platforms in the enterprise is huge, but Apple is poorly positioned to exploit it.
• Apple's "Thermonuclear War" is a costly, and ineffective distraction – broad cross-licensing agreements are inevitable and beneficial to shareholders.
• Apple must adapt or risk repeating its mistakes from the MacIntosh (sic) era.

"If any company can rise to this challenge," the full report concludes, "it could be Apple, which rose from the dead some 15 years ago. It seems to have recognized its vulnerability and it has management talent, business momentum, and its prodigious cash hoard to help it succeed. Given its assets and opportunities, there is a reasonable case that Apple, after its recent tumble, is more than worth the risk longer term. Unfortunately, Apple's investors are a skittish sort and a message of comprehensive transformation might not be well received. Still, if Jeff Bezos can convince the equity market to wait patiently for Amazon‟s profits, perhaps Tim Cook can do the same for Apple."

You can read Sagawa's 1,000-word introduction on his blog. To get the full report, you have to contact SSR.

Find the Next Disruptor Before it Finds You

The head line says it all. Aivars Lode avantce

Find the Next Disruptor Before it Finds You

by HBR IdeaCast  |   5:20 PM December 6, 2012

SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business Review. I'm Sarah Green. I'm talking today with Max Wessel, a Fellow at the Forum for Growth and Innovation, and a Senior Researcher at Harvard Business School. He is the author, with Clay Christensen, of the HBR article Surviving Disruption. He also blogs regularly for HBR.org. So Max, tell us what the problem you're really trying to solve with this piece is?

MAX WESSEL: Sure. Surviving Disruption actually came from a hypothetical. I was walking down the street talking with a friend-- a colleague at Harvard-- about, in fact, the future of retail. And we're both heavy technologists. And we tend to embrace any new buying format, any mobile purchasing, as soon as anything is available in app form on our phones. We were quick to adopt e-commerce in the era of the web browser.

And we were walking down the street and talking about the significance of disruption, when I kind of posed the question, well, what do you think is going to happen when Amazon puts all of these mom and pop stores, or local chains, out of business? Because I can't imagine looking down the side of the road and seeing no storefronts.

And that was really the first time the two of us had taken the perspective of the incumbent's view. There are things that the incumbent companies in the world-- the Barnes Nobles of the world, the Tower Records-- could do to satisfy jobs in our lives that require physical presence. And as much as I tried to imagine the world without a need for physical presence and physical interaction, I couldn't.

I always picture myself walking into a store, whether it be for an impulse purchase, or just to try one thing out or another. So Clay and I set out thinking on what it is that big companies could do-- these sorts of assets, and these legacy businesses that are incredibly valuable, and in fact generate huge customer value-- what they could do to really preserve as much of their core business as possible in the face of technological destruction.

SARAH GREEN: So it's interesting to think about the difficulty with which you were trying to conjure up that vision of a street with no stores on it. Because it seems like part of the challenge for these legacy businesses is trying to imagine what for them is the unimaginable. It seems like by the time it's obvious what the threat is, and you can imagine it, it may already be too late.

So how do you first start to monitor the companies, or the trends, that might spell big trouble for your business? Because sometimes they're not even coming from your same industry. It could be a trend in a different industry that ends up migrating over to your industry and totally disrupting you.

I'm thinking, for instance, of the example you use in the piece of cellphone cameras. And how that ended up totally disrupting the digital camera market. So how do you be on the hunt, have your finger on the pulse, for those kinds of trends where you couldn't really imagine it?

MAX WESSEL: So let me reposition that. And I'm going to talk a little bit about jobs to be done. As you're familiar with, inside the piece and throughout kind of our lexicon, we talk about jobs to be done and their significance. And really what those are, which is what the fundamental job is that a customer is trying to accomplish in their life every time they purchase a product-- a good or service.

And so for the retailers who can't imagine a world without retail, that is a broad generalization that lacks the focus on exactly what a customer's trying to accomplish. For Kodak and Canon and Nikon, the companies who were producing cameras who couldn't foresee this paradigm shift, really if they had understood that the fundamental job of capturing a moment was one in which they were competing for. And then there was another job to be done that required the big SLR camera, that was really about the artistry of image generation, or some such thing. Because they hadn't bifurcated and understood that granular difference in what they did for their customers, they couldn't see this impending threat of cell phone cameras.

But if you started from this foundation of what is it that I do for customers? Well, for customers I actually just help them capture a moment in an instant. The quicker I can get to that moment, the less friction there is, the better. I mean first of all we started with half a megapixel camera in flip phones, the Motorola Razr, the original Motorola Razr. And it's very, very-- well we'll say it's lacking at best, it's sensor technology in its camera.

But the fact of the matter is that phone was out all the time. People had it, people carried it in their pocket no matter where they went. It was fundamentally different than the use of a big point and shoot camera. And that allowed cellphone cameras to be so pervasive that they could capture any moment. They could complete that job to be done. So if Canon had recognized, from the very beginning, that it wasn't about the quality of their sensor necessarily, and the quality of their colors, but completing that job to be done required this universal pervasiveness, this proliferation of lenses. Then maybe they would have seen the impending threat more quickly.

With that in mind if I were an incumbent, the first thing that I would do, is make sure to engage in kind of these deep jobs-based segmentation studies of my customer population. To really, truly understand what people are trying to accomplish. And then this set of competitors that compete in that space.

SARAH GREEN: OK, so once you actually have done that deep dive and are starting to understand the job that your customers are really hiring you to do, or a segment of them, what do you actually start to do about it? How do you start to turn the Titanic around before it hits that iceberg?

MAX WESSEL: Well, you know, it's very funny. You take turn the Titanic, I consider the recommendation in the prescriptions of Surviving Disruption as business judo. There are certain things in the world for which cellphone cameras are better positioned then point and shoots, and better positioned then SLRs. And there are jobs as you go about and you do your job space segmentation, and you are thoughtful and honest with yourself about the benefits, the core strengths of your disruptor's extendable core, if you're honest about that, then you'll say these jobs I can't compete with. But there will also be a set of jobs for which you are uniquely positioned, because your product has still advantaged.

So this is the creating great art. the SLR, the Nikon's kind of reinvention around very, very, very high quality cameras, and in fact making those cameras even better for a knew population of customers. I don't know if you're familiar but now there's a mirror-less SLR camera. So we have Nikon and Cannon investing in making professional quality cameras, and these very high dollar value systems, less expensive so they can appeal to a broader consumer population. And so that creating great art is something that a cell phone camera just is not positioned to do, because it has to be small. It has to fit in my pocket. It should get thinner, and thinner, and thinner. And because of that, it's never going to have a telescopic zoom. It's not going to be something I take on Safari.

So as Canon and Nikon recognize that, and they recognize their inherent advantages, they can move out of the way of their disruptor, and kind of embrace their strength. And if they embrace their strength, they can get out ahead of the game. They can jump out in front of Olympus. And that's part of it, understanding what you're going to lose and recognizing where you can win.

SARAH GREEN: So you used a phrase there that I'd like to go back to a little bit. The extendable core. To the uninitiated, that could sound like something maybe out of Star Trek, or Harry Potter, or something. The Extendable Core, what is that exactly? What do you mean by that?

MAX WESSEL: Yes, good point. Using business jargon without defining business jargon. The extendable core is a concept that we introduce in Surviving Disruption that a colleague of ours, Michael Raynor, hinted at in his latest book The Innovator's Manifesto. But really what it is, what differentiates disruption from price competition. All disruption is built around either a technology change or business model innovation that provides an advantage as a company scales.

For example, let's take the realm of online retail, where we talk about this loosely in the piece, and there's a lot known about it. So hopefully some listeners can identify with. But an online retailer has in extendable core that's built around the absence of physical space to appeal to an incremental customer, Amazon doesn't need to build a new store. It doesn't need to increase its working capital. It's working capital demands don't increase by adding a new distribution outlet, because everything's warehoused kind of centrally in a metropolitan area. It doesn't have to pay for additional shelf space to put an image of a new book online. It doesn't need to pay for additional fixed cost infrastructure when it dives into home furnishings, for example.

And so that digital storefront provides an extendable core. Where Amazon started in books, it could slowly move up market and get better and better and better, without adopting the same infrastructure costs as it's up market competition. This differs from for instance, a hotel chain. A hotel chains like Best Western competes and has a cost advantage with the hotel chain like Four Seasons. But there's no extendable core there. Best Western still has to pay for physical space. It still leases a building, or buys property, develops its hotel, pays for furnishings, et cetera.

And if it wanted to compete with the Four Seasons, it would have to adopt the same cost structure. It would have to hire a well-trained concierge. It would have to bring in a four star chef to run a restaurant. It would have to invest in major infrastructure-- your costs in terms of getting better beds, and better sheets, and all of the things that the Four Seasons does that allows them to position themselves as a high end hotel.

So without an extendable core, we see price competition not disruption. So the Best Western isn't disrupting the Four Seasons. A company like Airbnb on the other hand is. Where their advantage is in aggregating a lot of independent listers of free space. And so as Airbnb goes around and signs up better bed and breakfast, and people with nicer homes, it can breach ever closer to the Four Seasons in terms of quality, without adopting the same cost structure.

SARAH GREEN: So a question about that. Because that to me seems, in the case of the Airbnb and Best Western, that to me seems like a place where it could just be price competition. Because you're giving up something, namely privacy, in the ability to come and go as you please and not have to be polite to other people, for the convenience. And really the cost of staying some place much cheaper. So if you were in this case Best Western trying to use your article to maintain some advantage, to maintain business, what would you do?

MAX WESSEL: So if I were Best Western watching the disruption of Airbnb, I would recognize that there are certain number of things that Airbnb can't provide its customers. So it can reach ever further up market. But the way it does it is with a nonstandard product. Because it's a platform connecting people renting space with potential renters. You have a huge nonstandard amount of inventory. So there's no guarantee to the business traveler that there will be wi-fi. There's no guarantee that there will be clean sheets, or a clean bed, et cetera. There's no office fax. There's no smart technology integration there. So you don't see people aware that your flight was delayed, and you're getting in late.

So if I were Best Western, I would figure out, of the jobs to be done that I complete for my customers, who amongst those customers need something that's a standard experience. I would figure out how to tack on those little incremental things that appeal for the person who's looking for an office away from home-- a home office away from home. There's something there, there's an opportunity there that would allow Best Western to kind of fortify its position from the oncoming disruption.

SARAH GREEN: So this approach of focusing on the job to be done, and looking for ways you can extend your core to maintain advantage, this all seems to make sense. So why then does so many companies get it wrong? Why do so many companies see the train coming, and can't get out of the way?

MAX WESSEL: Well, it's easier said than done to admit that somebody is positioned better for your customer then you are, for two reasons. One, because I think we all suffer from a bias of perspective. We're ingrained to see the world such that our companies are-- the be all, and end all of customer value creation. And that's true. It's just an inherent bias associated with all the jargon that we eat, we submit ourselves to in advertising, et cetera. So we've refocused-- a lot of us refocus around our company instead of the customer. So that's one flaw.

The other flaw is, frankly, we have real fixed cost infrastructure that needs to be maintained. And the threat of losing 20 to 30% of your customers over the course of 10 years, that's a threat that most of us aren't ready to accept, or a proposition that most of us aren't ready to accept. The problem with not accepting that proposition in the face of disruption, is that it doesn't really matter.

It didn't matter for Borders that they weren't willing to admit Amazon's unique value proposition for their own customers. Because Amazon was going to come in and steal those customers whether or not they were ready to admit it. The faster we can kind of come to that realization, and the faster we can change our core business strategy, the better. And frankly the faster we come to that realization, the faster we begin disrupting ourselves as well, which is still a key part of this entire prescription that we come forward with.

SARAH GREEN: Well Max, thanks so much for chatting with us today.

MAX WESSEL: Absolutely. Thanks for having me.

SARAH GREEN: That was Max Wessel. The article is Surviving Disruption. For more, visit hbr.org.

Three Examples of New Process Strategy

The world is changing with the internet finally taking hold. Aivars Lode avantce

HBR Blog Network

Three Examples of New Process Strategy

by Brad Power  |   1:00 PM December 6, 2012

There are three fundamental ways that companies can improve their processes in the coming decade: (1) expand the scope of work managed by a company to include customers, suppliers, and partners; (2) target the increasing amount of knowledge work; and (3) reduce cycle times to durations previously considered impossible (as I discussed in my last post).

So how do you do this? As science fiction writer William Gibson said, "The future is already here — it's just not very evenly distributed." This is to say that you don't have to wait until the end of the decade for some breakthrough technology to emerge; it's already here, albeit in bits and pieces.

I'm collectively referring to these process improvement approaches as "Process Strategy 2.0". They stand on the shoulders of the methods of "Process Strategy 1.0": Lean, Six Sigma, and Business Reengineering. Let's explore what Process Strategy 2.0 is all about:

1. To streamline customer experiences in end-to-end processes, Process Strategy 2.0 will require aligned goals and supporting systems to manage work between partners.

The first major trend I see is the shift to global, virtual, cross-organizational teams of specialized entities that are knitted together to serve customers.

In a previous post I described how Forbes changed its article-writing process to include a huge stable of outside authors publishing autonomously and improved the reader experience by allowing them to leave comments.

To keep such a multiparty system from degenerating into chaos, virtual process teams must have aligned goals and support systems. Both Forbes and its external contributors (freelance journalists, authors, academics, and topic experts) want to maximize readership, so Forbes publishes the page view statistics for each piece and created an incentive payment program based on the audience contributors attract. Forbes had to provide tools to enable external contributors to easily publish text, photos, and video — and interact with readers and "call out" comments they want to highlight.

2. To manage the rising tide of knowledge work performed by a younger generation of employees, Process Strategy 2.0 will depend heavily on social collaboration tools.

A second major trend in the world of work is that low-skilled jobs are going away due to automation, while all jobs are becoming more analytical as "big data" provides workers with more information to make decisions.

To help manage the increased complexity of knowledge work, $20 billion financial services provider Nationwide Insurance has been pioneering the use of social collaboration tools. Chris Plescia, Marketing, Collaboration and Corporate Internet Solutions BSA Leader, told me that they are moving from an information "push" environment — sending out lots of messages on things workers need to know — to a "pull" environment, where workers search for information they need, get answers to questions, or access services. One success story occurred when a front-line associate in a call center posted online she didn't like a new process. The senior leader saw the comment on their social platform and asked "why not?" People weighed in, and then they changed the process. Engagement has been very high — over 50% take some kind of action each month.

Getting a new social platform up and running in your organization isn't easy. Participation rates are much lower at most other companies than at Nationwide. Companies who just try to let it evolve, don't go after it with a plan and with dedicated resources, and don't seek to create a culture around collaboration will fail. At Nationwide the key success factors have been (1) having senior leadership lead by example; (2) setting governance and policies to ensure security of sensitive comments; and (3) using tools that make collaboration easy and fun. Their collaborative space is designed to look like an "app store", mimicking the environment that people have come to know on their mobile phones and iPads.

3. To speed operations and improvement, Process Strategy 2.0 will make greater use of quick experiments and more agile management processes.

The third major trend I see is the increasing need for speed in operations and improvement. Accelerating changes in technology, competition, regulation, and globalization demand that decisions get made faster at all levels.

Google's engineering culture is a good example of a management system geared for speed. They like to run lots of experiments with new product or feature ideas and let the market decide which ones deserve further investment. It may look like chaos from the outside, but they aren't afraid to fail fast and learn, or scale up quickly if an idea shows merit. One technique that helps early in new product or process development is to create a quick mock-up of how it would work and show it around. And innovation is built into jobs through "20% time" projects — engineers are expected to spend 20% of their time on projects that are creating and testing new ideas. The effect is powerful — this open technocracy means that workers at every level feel they can have a significant impact.

Many organizations will have trouble adopting Google's fast approaches. They rest on a cultural foundation of openness, analytical rigor, and respect for workers. Workers are expected to not only do their work, but improve their work. And it takes an ability and willingness to invest with a long time horizon.

A revolutionary force over the last 30 years, information technology will change the way organizations operate even more radically over the rest of the decade. Process Strategy 2.0 will help organizations take a fresh look at ways of including customers and suppliers to redesign work, introduce social collaboration tools to support knowledge workers, and reengineer management processes for speed.

Question: Over the rest of this decade, how do you think your organization will change its methods and tools for process improvement?