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- Wharton Prof Responds: Our Disagreement is Design v. Marketing
Last night, I wrote a rebuttal to Wharton Professor Peter Fader's analysis of Apple's iPhone and name change. I focused in my last post on the logic of Apple's name-change. Tonight, I want to really dissect the iPhone, and way...Last night, I wrote a rebuttal to Wharton Professor Peter Fader's analysis of Apple's iPhone and name change. I focused in my last post on the logic of Apple's name-change. Tonight, I want to really dissect the iPhone, and way Fader's views missed the mark. To summarize, Fader believes Apple miscalculated by skipping a physical keyboard and Outlook integration in their device. I shouted the other side of that argument, and Fader responded to my response:
Pete Fader here! I have no problem with the negative reactions. The iPhone will be a nifty device and a very successful (and profitable) niche item, but Apple blew a great opportunity to make a more serious dent in the cellphone market. They are selling their customers (and therefore their shareholders) short by refusing to add certain features and not making their platform more open to other kinds of software. They will never obtain even a small fraction of the penetration that they have obtained with the iPod. Oh well.
I'm so glad you decided to continue the conversation here, Pete, because I think what you're saying reflects a classic marketing v. design approach to product development. It's a philosophical disagreement, and I would love to start a real dialogue about the strategic role of design in business. By all means, folks. Read on!
Technorati Tags: apple, iphone
The strategic side of design is something I'm hugely passionate about. It underlies my day job, and this is a conversation that everyone needs to have.
Let's examine the under-pinnings of Fader's analysis: It's clear from the existing smart phone market that Outlook integration and thumb-sized keyboards are critical to the success of the products currently in the market, particularly the Palm Treo and RIM BlackBerry lines.
There are tons on strategies that can be followed to be a new entrant into this market. Here's my take on it:
Value Play
This one is pretty simple -- copy what exists, but figure out how to do it more cheaply. This is often the tack of developing markets, because cheap labor is a critical, abundant resource that companies in the U.S., Japan and Europe don't possess. It's also a wholly unstable strategy. If you can go low, someone else can go lower and so on until your profits really suffer or people look at you the same way they do the toys for sale at 7-11. There's also the value-design play, which is similar but involves going commodity while also looking and feeling good. It's also slightly more sustainable -- see Target of the early '90s. Samsung does this a lot. Kia, also.Strategic Design
So what game is Apple playing, you might be asking yourself? A strategic design play, naturally. Design isn't just about styling -- it's about creating something great that meets the real needs of people. Look at OXO/Good Grips. If you're not familiar with the company, here's the elevator pitch. A guy notices that his wife's arthritis makes it difficult for her to use current vegetable peelers. He asked a designer friend to create a peeler with a nice big handle that would be easy to use for people with hand disabilities. As it turned out, that product also was easier to use for the rest of the population, too. From there, OXO has launched an empire based purely on universal design -- focus on extreme users to generate new opportunities for the rest of us. They're going to own that market for decades.Competitive Response
This is one that classically occurs to marketers. Take the industry-standard feature set and add an innovative feature or form on top to set it apart from the current players. This is essentially what Microsoft attempted with Zune. It wasn't successful on their part, but their thinking was -- "Hey, let's take an iPod, put an identical-looking but differently-functioning hardware interface on it and add in the ability to share songs over WiFi!" This is also a really unsustainable model, even when successful. It means that any competitor who matches your new benchmark and adds something else on top of it has the chance to knock you off your game.Marketers tend to live (and die) by this strategy. And it definitely has its benefits. It pays attention to what already exists and works to meet the explicit demands of the market. Clayton Christensen wrote about it quite eloquently in "The Innovator's Dilemma." A great marketing organization will pay attention to the demands of its existing customers -- they'd be fools not to. The last thing you want to do is alienate them by ignoring what they want. Christensen covered this as it played out in the computer market with regard to smaller and smaller hard drives. Essentially, each time a new drive size came out, the major computer makers would ignore it, because their storage demands were less than what their customers needed. As it turned out, those technologies became critical to the development of new computer products that utterly devastated what came before: Mainframes got assaulted by minicomputers were assaulted by personal computers got attacked by laptops. This is how IBM fell, then rose again in the 1980s.
How do companies get so vulnerable to these dumb products that aren't even as capable as the stuff that's already on the market? (The technical term is a "disruptive technology.") Very simply -- they pay attention to what their customers and shareholders care about. And because that's who they cater to, they miss the unclaimed opportunities for new customers. Why does this sound familiar? Let's bring back Prof. Fader's most recent quote:
Pete Fader here! I have no problem with the negative reactions. The iPhone will be a nifty device and a very successful (and profitable) niche item, but Apple blew a great opportunity to make a more serious dent in the cellphone market. They are selling their customers (and therefore their shareholders) short by refusing to add certain features and not making their platform more open to other kinds of software. They will never obtain even a small fraction of the penetration that they have obtained with the iPod. Oh well.
Almost a decade after the publication of "The Innovator's Dilemma," the marketing universe still hasn't learned to diagnose a disruptive product when it shows up! If Apple listened to their customers, we'd have a boring phone that looks like an iPod, click-wheel and all -- that's how most envisioned the iPhone. Of course the iPhone looks all wrong to many customers and investors in the smart phone market -- it's attempting to reach new customers and investors who aren't interested in what's already out in the world! And because a lot of really revolutionary products do things people have never seen before, customers can't ask for them by name -- great companies have to figure out what hasn't been done and what people need that they don't know they need.
Where's the growth in the smart phone market? Not by trying to get people to trade in their BlackBerry tomorrow, let me tell you. It's in convincing the millions of people with fairly commodity cell phones and an iPod that what they really want to do is trade in both for an iPhone. It's an unclaimed market space, and its overhead is nearly unstoppable. Apple's tool for getting there is around a revolutionary interface and not just an iPod but THE BEST iPOD IN THE WORLD built in so people actually understand how to use all the features already found in smart phones everywhere.
It's what Apple is counting on. And if they're wrong -- they certainly might be, especially about the small virtual keyboard, which no one has tried out, particularly -- they can get it right next time. They can learn over time and roll out a really amazing product line to make the iPhone resemble the iPod line. Rome wasn't built in a day, and neither was Apple's death grip on the MP3 market. They face a tremendous adoption problem -- they're wisely going super high-end to cater to early adopters. They can learn from those early adopters to make the product better, smaller, cheaper and more customized. That's when everyone else will want one -- including the people staunchly defending their Treos and BlackBerrys right now.
That's my story, and I'm sticking to it. Pete, I would love to hear your response -- this really is about creating a dialogue, and I don't want to be a one-man band.
Pete Mortensen
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