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The impact of disruptive innovation – on PCs and on Retail

January 17, 2013 11 comments

Two recent items highlight the impact of disruptive innovations on industries. The first is a presentation from the Business Insider called the The Death of PC. The second is an article looking at Amazon and mentioning its March 2012 purchase of Kiva Systems.

Since 2009, the PC market has hardly grown. In the same period, Smartphone & Tablet sales boomed. Many tasks that used to be done on PCs are now done on these newer devices: email, web-searching, social media, and more. This has had a massive impact on the traditional PC market and its suppliers such as Intel and Microsoft. Whereas Apple’s and Samsung’s share prices have grown substantially, Dell & HP have been static or fallen. The introduction of both Smartphones and Tablets illustrate how disruptive these technologies are to the traditional PC industry – although as the The Death of PC presentation shows, things are actually more complicated. This is typical for a disruptive innovation – especially in the earlier stages.

Disruptive innovations do not always kill the products and industries they replace. What they do is change them radically. Smartphones haven’t killed the camera industry. They have, however transformed it so that DSLR and higher-end / special function cameras are now the main products sold. The cheap mass-market snapshot camera has gone – who needs one, when a Smartphone does everything that they could do, and much more. Disruptive innovations also mean that companies that fail to adapt quickly enough disappear. Kodak’s filing for Chapter 11 bankruptcy is an example of this. Kodak and photography were synonymous – but the company failed to anticipate how digital camera usage would change the way people process photographs.

In the case of the PC market, so far it’s only the home PC that’s dying. The PC in the workplace is doing fine – and that’s because the type of task it is used for is different. It’s hard to work on a spreadsheet, or a complex graphic or even a long report using a Tablet and almost impossible on a Smartphone. These aren’t tasks that the home computer was used for. So Tablets haven’t changed the work PC – only the home PC market. However expectations have changed – and this has led to newer devices and cloud computing which promises to be as disruptive for the traditional hard-disk based PC and so the PC as we knew it last century is gone or going. It’s not yet dead – just changed.

Amazon’s purchase of Kiva Systems in another example of a disruptive innovation. Amazon itself has shown how disruptive e-commerce is to traditional retailing. The high-street and even the out-of-town retail outlets struggle to compete with Amazon on price. However they can still compete on service: if you want something on the same day, then such outlets beat Amazon, even if the price is higher. Further, Amazon’s warehouse distribution system could be copied and many of the larger retailers now offer online options. Currently both use human labour to select and package products for delivery – and this represents a significant proportion of retail costs. The Kiva Systems purchase promises to change all this. Kiva Systems manufactures robots and the software used to control them. The robots are designed for use in warehouses for accessing goods. They remove the need for a human being to go to the relevant shelf and remove a product for sending to a customer – instead a machine does this. Eventually such systems are likely to completely automate the distribution process – meaning that Amazon’s labour costs will fall dramatically.

Any retailer that still depends on human labour in their warehouses or retailing is likely to find it even harder competing with Amazon’s prices. Such retailers should start thinking now on how they could compete. Options include looking at ways of improving service or focusing on narrow niches requiring in-person expertise. Waiting and hoping that some shining knight on a white charger will come and rescue them is not an option. There will be no shining knight because, however much retailers may wish it was, true life is not a fairy story.

[After writing this post, Michel Bernaiche, Program Development Director of AurowaWDC and current Chairman of the SCIP board, pointed out this news story to me – highlighting how robots are impacting not just retailing but many other business areas – from hospitals & surgery to legal research. CBS News Video on Impact of Robotics in Industry]

Why six-sigma, just-in-time and lean manufacturing are dangerous!

December 10, 2012 17 comments

Six sigma is a great idea: make sure that your product or service is as close to perfect as possible with almost zero (3.4 in a million) faults. So is just-in-time (JIT) and lean manufacturing. All involve tight control on business processes and require businesses to focus on efficiency. You can’t have a JIT manufacturing process without being highly efficient in controlling all aspects of your supply chain.

The problem is that when circumstances change it can be difficult to adapt the processes quickly enough. When the change is disruptive then it’s likely to lead to business failure. Casey Haksins and Peter Sims describe this in a Harvard Business Review blog post: The Most Efficient Die Early.

The authors correctly point out that business must also expect the unexpected and plan to absorb it and cope with it. The problem is that pursuing greater and greater efficiency goes against this need for flexibility to change. Instead there needs to be a balance. Look for efficiency but not at the cost of losing flexibility. Success requires both.

Google Carousel – a roundabout of images but not for all searches

September 28, 2012 Leave a comment

Every Wednesday, Daniel Russell, a researcher working with Google, posts a search question on his search & research blog. The search question for 26 September 2012 related to differences between the coastlines on the East and West coasts of the USA. Attempting to answer the question I typed in [Atlantic islands] into Google. Unlike the usual list I’d expected, I got this:

Google Carousel for Atlantic Islands

(Click for full size image)

The images at the top of my search were a surprise. Clicking on the arrows gave me further images – totalling 55 island pictures. I tried a few other searches [Pacific Islands], [Indian Ocean Islands], etc. and found similar results. Yet most searches such as [Scottish Islands] gave me the normal type of listing.

Search for Scottish Islands

(Click for full size image)

Intrigued, I contacted a couple of colleagues – Karen Blakeman of RBA Information Services and Marydee Ojala, Editor of Online magazine (and the Online Insider blog). Both Karen and Marydee are also members of the Association of Independent Information Professionals and like so many AIIP members, are expert searchers. (All three of us are presenting at the forthcoming Internet Librarian Conference  in London and led the London Websearch Academy in 2011).

Marydee admitted to being bemused but guessed it was connected to Google’s Knowledge Graph initiative – the new service that puts details on a search topic to the right of the search results – as with this example search for [Albert Einstein].

Albert Einstein Search

(Click for full size image)

Knowledge Graph was launched by Google in May 2012 and aims to give instant answers to many encyclopedia type search queries. However this didn’t explain what I’d found. Marydee looked a bit further and found that the TechCrunch blog had discovered this earlier in September.

I mentioned that I’d found it because of Dan Russell’s blog and Marydee asked him about the new feature. Dan responded that the “carousel” of images is triggered whenever Google knows about a collection or group of connected items such as “Atlantic Islands”. The group is then summarised and made available at the top of the results list – allowing searchers to quickly recognise the collection and the other group members.

So that’s it then! It’s a new feature giving a “carousel” of images. If you search for [knowledge graph carousel] you get the above Techcrunch link and also Google’s own search blog on the topic . (There’s a lesson here – always check Google’s own blog posts if you spot what looks like odd Google behaviour). A search for [Knowledge graph] gives Google’s own description of the feature, including a YouTube video explaining it.

Dan Russell’s reply however said more:

What it triggers on is a bit more problematic.  Answer:  only collections we know about, which can be a bit odd.  [moons of Saturn] but not [U.S. presidents].  [famous jazz composers] works, but not [cities in UAE]

This seems to explain why not all searches show the carousel. [Atlantic Islands] does. So does [Pacific Islands] but [Islands] doesn’t. [Greek Islands] is mentioned as an example in the YouTube video – but the less touristy [Scottish Islands] fails to show the carousel. It’s not just islands that give oddly inconsistent results. [Famous Jazz composers] results in the carousel appearing but [famous composers] gives a normal display. [20th century composers] works as does [19th century composers]. Bizarrely [18th century composers] doesn’t work and nor does [20th century artists] or [19th century artists]. Yet [impressionist artists] and [surrealist artists] do work. The results definitely seem surreal!

The TechCrunch blog tested the feature looking at rides at the Cedar Point theme park in Northern Ohio. I decided to ride the carousel on Disney parks. Again the results were odd – but a pattern seemed to emerge. [Disneyland rides], [Epcot rides], [Magic Kingdom Rides] all worked but [Disneyworld rides] didn’t. I then tried [Disney Paris Rides]. That works. So does [Disney California Rides]. However [Disney Florida Rides], [Disney Tokyo Rides] and [Disney Hong Kong Rides] all failed to work.

It seems as if there are two factors playing out here. The first is whether Google knows enough about the topic to create a set of common images. My guess is that Disney Hong Kong and Tokyo fail on that count – and possibly this explains why 18th century composers also fails. That can’t however explain the difference between Disney California and Paris, compared to Disney Florida. That brings in the second factor: the number of items in the collection. There are several Disney World theme parks for Disney Florida – Epcot, Magic Kingdom and more. I suspect that there are too many rides to be displayed in a meaningful manner. The aim of the Carousel is to encourage exploration – and a never-ending list tends to do the opposite: like a carousel that goes to fast, there is a risk that people may fall off.

Great service leads to growth & profits – for Bettys, it’s a piece of cake!

July 9, 2012 1 comment

I recently visited a friend in Leeds – a major city in the North of England. On the Sunday, a group of us travelled the short distance from Leeds to Harrogate, a few miles away. Harrogate is a spa town – you can walk past the “Royal Pump Room” museum  and still smell the sulphur from the spring below. This is just one of several mineral wells containing iron, sulphur and other chemicals that made the town an attraction in the Victorian and earlier Georgian eras.

As well as the spa, Harrogate also features the first Bettys Tea room.

Bettys Tea Room

Bettys was founded in 1919 and has since grown to include a number of other tea rooms across Yorkshire. The family run company now also includes  Taylors of Harrogate, the tea and coffee merchants with brands including the best-selling Yorkshire Tea.

Our visit to Harrogate included a visit to Bettys for morning tea and cakes. We were amazed at the level of service provided.

One friend asked about the orange juice on the menu. “Was it freshly squeezed?” Instead of just acknowledging that it was, we were told that it had been – but not that day, but on the Friday, as it was squeezed off-site and not at weekends. We asked about the ingredients of one of the cream cakes – was it made with butter or margarine and was it suitable for vegetarians? The waitress wasn’t sure – so said she would check in the ingredient listings. It turned out that it was made using butter and was fully vegetarian.  It tasted superb.

I watched our waitress (on the bill it said her name was Jade) – and others. They smiled, they conversed, were friendly, helpful, and their body language showed a real care and attention to each customer.  They knew their products – and if they weren’t sure they didn’t lie or guess, but went to check. The service was impeccable.

It turns out that the superb service is no accident. I asked whether there was any training provided – and was told that each waitress had one-to-one training before starting, and they were expected to learn the menu and were tested. They had an induction phase where they were watched and it took some time before they could graduate to become a full waitress. This training showed – it wasn’t just in product knowledge but also in the whole interaction with the customer, that made our visit such a pleasure. Bettys even has a dedicated website devoted to working for the company at www.workingforus.co.uk.

The results of this focus on excellence show in Bettys financial results. The company consistently makes a profit – and turnover and net worth has grown impressively over the last 5 years. This is despite one of the worst downturns for decades – showing that Bettys has come up with a strategy that seems recession proof. Although profits have not shown the same growth, they’ve remained stable – perhaps reflecting the value offered by the company, compared to competitors. (We paid more for our sub-standard tea on the self-service motorway café journeying up to Leeds).

Bettys shows how important service is for a business, and how appropriate training can lead to top-quality results, and evident staff satisfaction. (In 2007 Bettys was listed in “the 100 best companies to work for” compiled by The Sunday Times). This focus on quality, in the product as well as the product knowledge, attention to detail and customer focus can translate to the bottom-line result – and lead to turnover growth and profits.
Queue outside Bettys, Harrogate
The queues outside, waiting to get into the Tea room is evidence that Bettys is doing something right. The results – financial and reputational are too. It may look like a piece of cake to achieve this – but the numbers of companies that fail to provide adequate service shows that it isn’t. Maybe they should make a visit to Harrogate part of their own staff training!

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