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The iWatch – is this the next disruptive innovation from Apple?

February 20, 2013 Leave a comment

Apple has developed a reputation for creating new markets that didn’t exist previously. The iPod was not the first mp3 player but it created a mass market. The iPhone launched the SmartPhone era – showing BlackBerry the potential of an Internet enabled phone, in a way that has almost killed BlackBerry’s manufacturer, RIM. The iPad was the next innovation – but since then nothing at all except rumours. The rumours include an Apple TV that would shake up the television industry, and an Apple watch – the iWatch. The AppleTV was said to be the next big innovation – and was briefly mentioned in Steve Job’s biography, where apparently Apple had something that would really shake up the TV industry. Nevertheless, the rumours relating to this have died down – and the iWatch is the latest rumour target.

One idea on the iWatch

My first thoughts on seeing images of the rumoured iWatch were why?

Why would anybody want something like this on their wrist when there were so many beautiful products from Citizen, Seiko, and higher-upmarket, Rolex & Patek Phillipe, among many others. It didn’t even have the look of the Swatch watch.

I also couldn’t see it as a replacement for a SmartPhone – as it’s too small to do all the current functions expected of phones that seem to be getting bigger, not smaller. So I personally dismissed the iWatch as just rumour, or a sign that Apple had lost its mojo, if it turned out to be true.

Nevertheless, the rumours have become pervasive – and so I’m sure that they are either a smokescreen or reflect something real.

I started to think about it.  The watch market can be divided up into a number of sectors. One sector views watches as a form of jewellery – and this is the market Rolex, Patek Phillipe follow. To an extent it is also the market that Citizen and Seiko chase too – although their watches also emphasise functionality, with the Seiko Solar and the Citizen Ecodrive watches that don’t need batteries or winding. Further downmarket, Swatch tries to be a fashion item. However all have a basic raison d’être – to tell the time. I couldn’t see an Apple watch easily replacing the jewellery element (or at least not initially). I doubt it will be a solar product – and so (again initially) it won’t replace Seiko or Citizen. It could compete with Swatch, but from previous Apple history would be much more expensive and so bring little to the pie.

The next question is who wears watches today – and that gave the clue to why I think the iWatch is real. Most watch-wearers are Generation X or older.  Millennials / Digital Natives don’t wear watches. They use their SmartPhones to tell the time. That’s the clue – and the target. A SmartWatch – especially if it could interact with existing devices – makes a lot of sense, as it could provide a more compact device to supplement their iPhone, iPod and iPad or even replace them for around the house, workplace or college dorm. I think that contrarians that say such a device won’t work are falling for the mistake I think I made, by not thinking about how people tell the time today. The potential problems revolve around the other expected features. Will it also be a phone? A music player? A portable sat-nav device? How would these work ergonomically?

Assuming that the iWatch is real and not a smokescreen for something else, the argument that it won’t be attractive fails when you see some of the suggested design concepts. Some are very attractive and wearable as both a fashion item and even as jewellery. The potential objections to functionality are also less if the iWatch were to interact with other devices.  The problem here is that there may be an expectation that the interaction is with another Apple device – which would mean that the iWatch would not be a stand-alone product. This limits its potential considerably. What about linking to Android phones – that have overtaken the iPhone in overall market share – or a Windows computer? If this were to be allowed then I think the iWatch would be another Apple success story.

If this is the case, then it does something else. The onset of quartz watches in the 1980s was highly disruptive to the Swiss watch industry. Initially the Swiss industry dismissed such timepieces as cheap and nasty, but in classical disruptive innovation style, they soon overtook mechanical watches to become the dominant format. The rise of quartz watches caused serious damage to Switzerland’s watch industry – until it recognised the threat, and created products such as the Swatch. An Apple iWatch that succeeds promises to be equally disruptive – and overtime, most of us may end up wearing such products.

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.

Business Plans & the Year of the Dragon

January 23, 2012 1 comment

Water Dragon tiles

2012 is the Chinese year of the water dragon. One guide on what to expect for this year states that water dragons are equipped to step back and re-evaluate situations. They make smart decisions, but only if they do adequate research. Typically dragons are innovative, enterprising and flexible.

These skills are all essential for business planning and the start of the year is always a good time to consider plans for the rest of the year.

Business planning is an often-overlooked part of running a business – especially with small businesses. The cri-de-coeur “We are too busy to waste time on planning” may sound sensible, especially when recession beckons and every sale is required. However this is also a plan – in the sense that “failure to plan is planning to fail”.

My thoughts on business planning were aroused following a meeting with Jane Khedair of Business Plan Services. BPS has a network of advisors throughout the UK and English-Speaking world, who are trained at helping small businesses produce sensible business plans that should help guide them through the predicted rocky times ahead.

Business planning is a bit like going on a journey. You have a starting point, and a desired end-point with a range of routes to take you from the start to the finish. The key first stage in a business plan, of course, is to know exactly where you currently are – and that is where AWARE fits in. Our aim is to help clients understand their markets, competitors and general industry – looking at customers, suppliers, partners, competitors and the overall business environment.

The next stage is knowing where you want to end up – your objectives. That gives a target on which to work – developing approaches that should allow these objectives to be fulfilled. These become your strategies.

Setting objectives and strategies are a bit like route planning. There are multiple ways of travelling between London and Shanghai, China – and selecting  one will depend on the circumstances. Is speed essential, or is cost the key factor? In this example, the objective of travelling to China from a starting point at London should also include expected arrival time, for example.

You may also want to visualise the journey and even think about what you’ll do once you’ve arrived. Business objectives should also be quantifiable, with a target and deadline for when this should be achieved. In addition, it’s always a good idea to think about what the next steps should be once the target has been reached.

The travel options become the strategies. If the aim is to get to China within a day then going by plane may be the only strategy. Conversely if the aim is to see multiple locations on the way, then travelling overland would probably be a better strategy.

Photo by Colleen Curnutte, taken in Shanghai, China.

Welcome to Shanghai

The problem however is knowing when you’ve arrived, and your progress – so you also need to monitor these. In the London-Shanghai example, this may be as simple as noticing miles travelled, and spotting a “Welcome to Shanghai, China” sign on arrival. Effective business plans also set in place signposts so that progress can be monitored. It’s also important to have a contingency in place for if things go wrong – an accident on route, that would cause major delays.

Planning the right route for a journey is essential if you are to get to your destination on time and at a reasonable cost. Business planning should do the same. The difference is that there are no dragons chasing you on a journey, but there are in business – and failing to think about how to beat them may mean that they will win out against you.

Wishing you a great year of the water dragon, 2012. 萬事如意

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