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.

Entrpreneurs 2012 – Con-Trick or Conference: a review!

November 18, 2012 5 comments

Wow – what a line up. Bear Grylls, Caprice, Ruby Wax, Julie Meyer, Carol Vorderman…. Just look at what was promised:

And look who was promised:

(Click for larger image)

(Click for larger image)

All these as keynote speakers. The conference blurb said that

Hundreds of the world’s most successful chief executives, from the likes of Google, Paypal, Acer and Bentley will gather to debate, share ideas, network and enjoy the last day of Entrepreneurs 2012.

It sounds like an event not to be missed, with tickets priced at £120 for seats at the back to £3000 for a front row seat. The promotional material said that I’d “have the opportunity to learn from the best with hundreds of like-minded people at our unique and exciting event” and that

YOU will network with entrepreneurs and high-achievers from Leading Global Brands.
YOU will meet some of the World’s most Successful Entrepreneurs.
YOU will Enjoy & have FUN with celebrity guests and your peers
YOU will take away a most memorable experience that will propel you and your business toward continued success for 2013!”

How could any serious entrepreneur turn down an opportunity such as this. Even better, the event was then advertised on Groupon – with tickets for only £17.00. So I jumped.

The first day started with “motivational” speaker, Andy Harrington – who describes himself as the “world’s leading public speaking expert”.  He failed to motivate me. After around an hour of hoping for something better, I walked out and got myself a coffee. I returned to see if he was still going on – and it looked as though he had stopped “motivating” and moved to some content. This was actually quite good – he talked about his “System” for being a better public speaker  – covering aspects such as the importance of standing up straight, maintaining eye-contact, using different vocal tones, and being in the right mindset. Unfortunately after covering this he went back to “motivating” again – with a sales pitch for his training programme costing £1000s. Amazingly this worked on enough people that I reckon that if all pay he’ll have made over £200,000 from this 3 hour or so talk. Not bad work – and definitely entrepreneurial on his part.

Next up (I think) was Daniel Priestley – the CEO of a company called Triumphant Events.  Priestley put over some interesting and relevant content but his talk ended with a sales pitch, as did Simon Coulsen‘s who followed – talking on selling via the Internet. Strangely Coulsen seemed more genuine although this was still a sales pitch and not a talk that fulfilled any of the event promises. Certainly no real networking opportunities (except to complain with the people sitting next to me – who were also hoping for some genuine content that wasn’t delivered by a snake-oil “follow-my-system and you’ll get rich quick” salesperson). So far no real hints on running a genuinely entrepreneurial business or case studies and life stories to learn from. Just hard-sell schemes at high-prices. These speakers certainly profited from their slots – making tens of thousands of pounds in just a few hours.

Day 1 was supposed to be about How to Develop an Entrepreneurial Mindset. No – it was how to be conned into spending lots of money on training courses to turn you into a public speaker, or to systematize your entrepreneurial idea, or to sell self-help books on the Internet. I did learn a little – and got some ideas. For example, I do a lot of public speaking, leading executive workshops globally, so I got ideas on how I could earn more from this. However the entrepreneurial content was minimal.

Naively I hoped day 2 would be better – especially as the promised programme on the website for Entrepreneurs 2012 (now down) stated that the topic was Uncover New Technologies to Give your Start-up Business the Edge. This seemed right up my street so I was hopeful. I arrived in the afternoon having had to do some real work in the morning – and just missed Caprice who apparently gave a very good talk. So I was hopeful that day 1 was bad and things would look up. Unfortunately the promise was quickly dashed – as the speakers were, again, purveyors of “get rich quick” type snake-oil schemes. I’m not even sure who the speakers were as no schedule existed. (I asked. Not even the event staff – from a company called Blak Pearl – had any idea).

I haven’t a clue about day 3 – as I was unwilling to be subjected to more sales pitches – despite having paid and scheduling all 4 days in my diary. From what I was told by people I spoke with on day 4, it was more of the same, punctuated by shortish talks by Levi Roots of Reggae Reggae Sauce and Kate Hardcastle.

Day 4 however looked more promising with some panel debates on topics that looked interesting.

The published programme for day 4 of Entrepreneurs 2012 The day started well with Bruce Dickenson of Iron Maiden giving a genuinely interesting and motivational talk that didn’t include a hard sell. The panel debates followed – with several of the “keynote speakers” on the panel. (Point of information to the organisers: keynote speaker does NOT mean panel participant). We were also told to expect that the event star – Bill Clinton – would be speaking at 1.00pm, after the panel debates. At 12.30pm three of the “motivators” who had spoken on the earlier 3 days got up and were given 10 minute slots. At around 1.00pm some bozo called Marco was then given the stage.  Marco claims to be one of the top 3 platform speakers in the world. (He doesn’t say which world. Based on his performance in London, it can’t be this one). After 30 or so minutes, the twitter feed (hashtag #ents2012) looked like this.

A snapshot of a handful of the tweets sent during Marco Kozlowski’s talk at Entrpreneurs 2012

Unfortunately I had to leave at 2.00pm and so missed the remaining speakers, including ex-President Bill Clinton, who based on the twitter feed was amazing. C’est la vie. 

My feelings on the event were that:

  1. it was badly organized – with no time schedule or formal programme. Nobody seemed to know what was happening or when.
  2. there was far too little content. The event was aimed at entrepreneurs i.e. people who want to work for themselves or are already working for themselves. Yet most of the speakers were selling systems that were closer to pyramid and multi-level marketing schemes than genuine entrepreneurial support. They were supposed to be motivational and instructive. They were far from this – and some were positively de-motivational and destructive of any entrepreneurial mindset.
  3. there were almost zero networking opportunities – no break-out sessions or discussions or even real interaction with anybody. I spoke to a few people but this was because I made the effort. Most didn’t.
  4. promised speakers didn’t appear – no Ruby Wax; no Carol Vorderman, no Kevin Spacey (as named in the video) … and keynote speakers turned out not to be keynote speakers at all, but panel members.
  5. no evidence that any of the promised chief executives from Google, Paypal, etc. attended. (The one exception was Olaf Swantee from Everything Everywhere who was a panel member on day 4 – and who made several points that were worth noting).
  6. the few genuine speakers had something to say and didn’t name-drop. You could almost guarantee that a speaker that started name-dropping Richard Branson, Alan Sugar, Donald Trump or other genuine entrepreneur or leader would turn out to be another quack opportunist – especially when this was accompanied by a photograph of the entrepreneur looking extremely uncomfortable standing next to the speaker who exhibited a massive cheesy grin.

My views on this event were echoed by others – for example: CelebStorkey’s “10 reasons it went wrong”.

The lack of a programme meant that I gave the event more of a chance than I should. Was the event a con-trick to get people who want to work for themselves into pyramid schemes and similar? Possibly – certainly the management of the event seemed to encourage the speakers making “sign-up now” sales pitches. At the same time, buried among the 80% of useless hard-sell there was a small amount of material worth listening too and speakers like Brian Dickenson had something to say. Personally I will in future be vary wary about allocating so much time to any similar event without doing many more checks on the actual format.

The last day was billed as a “Leaders First Finale” where the “movers and shakers of our business world will be networking and rocking our boats” and where I’d “benefit from the incredible knowledge and experience” of these “great leaders and business champions” who we were told would “head-up the presentations and debates on the main stage”. Unfortunately this also turned out to be hyperbole. There was a buzz in the room after the panel debates, but this was quickly destroyed by Marco (described in lots of tweets as like Kermit the frog). Had I known he was going to drone on for so long I’d have left earlier and not had to suffer his spiel. As compensation for this additional waste of my time, I’ve sent Blak Pearl an invoice – with a request that the sum be paid to charity. They should pay the money – not just for me but all attendees – as it was insulting to subject so many real and budding entrepreneurs in the room to such nonsense. If they do pay, I’ll update this blog and give them the credit for the honesty and authenticity they lost in their event promotion.

Microsoft’s Surface and Disruptive Innovation!

October 27, 2012 4 comments

There is an old video with Bill Gates talking about Microsoft and Windows version 3, looking at multimedia, pen computing and an early tablet computer. Circa 1991! The technology shown in the video was forward thinking. Today we take it for granted. This was a time pre-web when only businesses had computers. Few people had computers at home and few knew about email or the Internet.

The idea of tablet computers is not new. Both Microsoft and Apple had looked at the idea years ago, but at the time the technology was not sufficiently fast, sophisticated or useful enough to grasp the majority of consumers’ interests. Techies loved such devices. (At about this time, ago, I had a boss who had a Psion Organiser.  He loved it. Everybody else wondered what he saw in it).

That’s the issue with disruptive innovations.  It’s not just the disruption that counts. It’s the timing. The Microsoft tablet was like the Psion organiser, and even the more tablet like Apple Newton device.

Apple Newton

The idea was a great idea but the timing was too early, and the product was not able to capture the consumer mind.

It’s not the first company that comes out with a disruptive innovation. It’s the first company that captures the consumer’s share of mind – their imagination.

As another technological example, the Apple iPod was not the first mp3 player. There were a few before  (e.g. the MDiamond Rio and the MPMan player) – but they didn’t have the panache of the iPod – and so were quickly overtaken when the iPod entered the scene.

At the same time, entering too late – or basing your product on competitors is also not the way – as Microsoft’s Zune product showed.

The jury is still out on Microsoft’s iPad type product – the Surface. This, at least, is not a copy but something different. To a large degree, it’s fate will depend on Windows 8 (RT). I think the Surface has a place – and I can see it destroying the netbook and low-value laptop market, and so it will be disruptive. I don’t believe that it will damage the iPad or most Android tablets (and also not the Kindle type e-book reader). People buy these for the apps – and there are too few Windows based apps. I don’t see this changing with Windows 8 either. (Why should an apps developer spend time and money building a Windows based app when the vast majority of tablet computers & smart phones are Android or Apple iOS?)

So who will buy the Surface. Techies – obviously! However businesses that currently equip sales people with netbooks or low-price laptops will also go for it as it is lighter, cheaper and trendier while offering the same or greater utility than the netbooks and laptops they had previously bought.

Of course time will tell. That’s what makes something truely disruptive – it’s often only after the new technology has taken over that you can say “but it’s obvious that it would succeed“. If this wasn’t the case – we’d all be flying across the Atlantic on another seemingly disruptive technology that failed to spread even though it provided utility, speed and worked. The supersonic Concorde aircraft never really took off, even though British Airways claimed it was profitable. Only British Airways and Air France flew Concordes. No other airline purchased the aircraft and the Concorde crash in Paris in 2000 effectively sealed its fate.

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