Setting Expectations for White Space - Apple iPad

by Adam Hartung

It's easy to misunderstand White Space. About twenty years ago Apple launched the Newton. The company sold about 375,000 of the first commercial PDAs, but Apple's leadership thought the market wasn't really there - and decided instead to focus on growing Mac sales. Obviously, as Palm and other PDA makers demonstrated, there was a tremendous market for PDAs. Apple misread the feedback from White Space.

Look now at the recent iPad launch. Silicon Alley Insider headlined "Now That They've Seen Apple's iPad, Most People Don't Want One." The headline keys on the fact that after the launch the number of people who said they were not interested to buy doubled (26% to 52%). Wrong fact to grab onto.


Instead, look at the fact that the number who said they would buy one tripled, from 3% to 9%. This is incredible, and should excite Apple's management as well as employees, suppliers and shareholders.

Most people will see a new, innovative product and say "why would I want that? I already have this other thing and it works great." And that is what marketers should expect. Most people are just trying to 'Defend & Extend' what they regularly do, and thus all the want is a product that helps them do their thing a little easier, faster, better and cheaper. They want minor improvements - variations and derivatives of what they already have. Improvements that are immediate, without them doing anything new or different.

All new deeply innovative products start with customers who are under-served or unserved. And this is why it is so important they be launched in White Space. White Space teams aren't intended to develop the big, mass market of known customers looking for something new. White Space is about doing new things that bring in new customers, give new solutions that attract real growth. And White Space teams have to learn how the market is evolving, how they fit into the market shift and how their solution will advance the market in order to sell more.

For the iPad, the 3% to 9% shift in likely buyers is huge because it shows that the iPad is an offering that appeals to people who are not today well served by their existing PC, laptop, netbook, mobile phone, kindle or mix of these solutions. 9% of respondents are saying that they see the iPad and they see a solution for what they want to get done. And if 9% of potential buyers see this option, that is HUGE. By White Space standards, often there are only .5% or 1% or 2% of people who initially see how the new product fulfills their under-served needs.

Set expectations right for White Space. White Space is not for launching variation 4 of an existing product - targeted at existing customers. That's what the marketing and sales department can do fine, thank you very much. White Space is the team that finds the 3% (or in Apple's case 9%) of users that see value in this solution, then works with them to implement the product/solution in order to make sure it fulfills the market need and is priced to sell effectively while providing a profit to the company.

Apple understands this, you can be assured. Look at how successfully the Apple White Space teams found the underserved users that jumped all over the iPod and iTunes, the iTouch and then the iPhone. They got the product positioned and selling in a hurry. And now that Apple has that skill, the company is going to apply it to the iPad. If you understand this chart correctly, you understand that it bodes very, very good things for Apple.

And it tells you the importance of having White Space teams, setting their expectations correctly, and managing them for the kind of results that can turn your organization into the next Apple. It took Apple 10 years to reach this skill level. It did not happen overnight. Or with one product introduction. And it will take your organization a few years to build this skill. So, what are you waiting on?


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Adam Hartung, author of "Create Marketplace Disruption", is a Faculty and Board member of the Lake Forest Graduate School of Management, Managing Partner of Spark Partners, and writes for "Forbes" and the "Journal for Innovation Science."

What does Apple do when it all goes pear-shaped?

by Yann Cramer

Most CEOs would say that innovation is critical to their companies' success. Loads of people would like to exercise their creativity and innovate, but whether at the corporate or at the individual level, something holds everyone back: risk. "What if it all goes wrong?" This can be more or less marked depending on the degree of acceptance of trial-and-error as a learning process, but to some extent it exists in all cultures, countries and companies.

What can we do about it? There are process answers around framing the project and keeping it focused, rapid prototyping different versions of the product or piloting in the market. But most importantly there is a mindset answer which is both accept it and don't accept it.


Accept It

Forbes provides an interesting list of Apple failures: a few forgotten computers such as the Lisa, the Mac portable, the Taligent, the power mac G4 cube, and a raft of other products that most people may be surprised to hear about: the Newton PDA, the Quicktake digital camera, the Macintosh TV, the Pippin video-game console, the Motorola Rokr mobile phone/mp3 (Apple developed with Motorola).

For all its resounding successes from the Apple II to the iPhone, Apple has not been immune to failure. The difference that makes the difference is that they accept that there will be some failures along the way. They have a portfolio mindset: they continuously scan the environment, they identify potential opportunities, they try, they go for it. When it does not work they pull the plug decisively, but when it works: bingo!


Don't Accept It

Apple may have failed with the Newton, the Quicktake and the Rockr but they have remained true to their multi-media vision, they sticked to the strategic challenge they had set for themselves to get into the handheld market, and ultimately they found "the magic number" to succeed with the iPod and the iPhone.

Accepting failures does not mean accepting that these mark the end of the road. Too often, a company's response to a few innovation failures is to abandon the field and shift strategic priorities in another direction. As they do so, they actually reduce the relevance of what they have learned (or should have learned) from their failures, they land themselves in a new field where they need to learn everything, and their chances of success are actually lower than if they had sticked to their initial strategic priority.


So, accept that you will be thrown off-balance along the way, but don't accept being blown off-course.


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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

Fantastically, Brilliantly, Insanely Amazing

by Kevin Roberts

One thing about the January 27th launch of the Apple iPad clashing with President Obama's first State of the Union address was that they both focused on Jobs.

And check out the awesome enthusiasm Steve Jobs and his team have for their new baby in this video!





A lot of hype and hyped-up criticism have accompanied the launch of the iPad. Nothing new there. Apple attracted lots of criticism with the launch of the iPod in 2001 (total sales: 220 million) and the iPhone in 2007 (total sales: 34 million). They centered on a perceived lack of functionality. So it's not surprising to hear gripes that iPad doesn't support HDMI or Flash graphics, or have a built-in camera.

The critics have missed the point. The iPad is not a netbook or scaled-down laptop. In fact, it is only a distant relative to the traditional PC or Mac. Instead, its lineage is the DVD player, the VCR, the television set, the radio, the newspaper, the telephone, the telegraph. It is not a workhorse loaded up with functions and hardware. It is a platform for story-telling, interactive, personal and immediate.

The story of human technology is the relentless advance in the direction of greater utility, connectivity, immediacy, affordability and flexibility. The iPad represents a quantum leap in that direction.

We want to communicate with each other, cheaply and easily. We want information where and when we need it. We want to be entertained and to entertain ourselves. We want to get closer to the people and the things we love. The iPad promises to do that. Technology that fails to serve that purpose is just a gadget, suitable for little more than collecting dust.

There's an interesting blog post in the NY Times predicting that the iPad will become an irresistible toy for children because kids will love the tactile nature of the device (they love to jab at things!), 'painting' software allows for mess-free splatter, it's an ideal distraction for car trips, and the screen offers endless story opportunities. I couldn't agree more, but the author could go even further: They are pretty compelling reasons for adults to get their hands on an iPad, too.

Related Articles:

• Radical Innovation of Meaning


• Apple's Hidden Disruptive Innovation


• Insights to Drive Apple iPad Success


• Will Apple Introduce the Innovation Expected From Google?

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Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Dear Cable TV Executives,

by Steve McKee

I don't want 300 channels. I only want 18 channels. OK, the average person wants 18 channels. I really only want six. Why can't I have just six?

I know, I know, it's the economics of the industry. But industries change, don't they? I mean, look what has happened to the music industry. I used to have to purchase an entire CD just to get the one or two songs I want, but now I can buy and build my own playlists song by song. It's funny, but I'm sure I spend more on music now than I used to.

You should know I just bought an Apple TV box. That's not your fault - since the Blockbuster Video stores near me closed (and RedBox, while cool, doesn't exactly offer a huge selection) I didn't really have a good option for renting movies. So I thought it was worth a try. Now I can select from a huge selection of movies and TV shows, and when I'm not in a buying mood I can use it to watch YouTube on my HDTV. I'm beginning to think of YouTube as the ultimate TV network - there's so much on-demand entertainment there. (Hmm. You might want to make a note of that.)

Speaking of entertainment, I've held off on getting a Kindle because I knew Apple was coming out with a similar device. I'm excited to get my iPad, not only to check my email and surf the web but to download books. I guess Apple is shaking up the book publishing industry just like it did the music industry. "Saving it" is probably a more accurate description; I'm sure my book purchasing behavior will mirror my new music buying habits. I wonder if they're thinking along the same lines when it comes to TV. I guess time will tell.

So if you don't mind, I'd like to subscribe to individual cable channels. For that matter, I wouldn't mind subscribing to individual programs. I know you won't get as hefty of a monthly fee from me, but I'd be willing to pay more per network than you're getting now. And I suspect other people would be too.

Anyway, it's something to think about. But no pressure. If you don't do it, I'm sure I can find other things to do with my time and money.


Editors Note: I'm with you Steve. I've got limited cable because I don't have much time to watch television. When I really want to watch something specific I can get it online. Cable TV is going to face much the same problem that fixed line phone service faces now (declining subscriber #'s). And, if more and more networks develop their own 'apps' for a variety of mobile or IP platforms (Apple TV, iPhone, Blackberry, iPad FloTV, etc.), it's only going to accelerate.


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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Apple's Hidden Disruptive Innovation

by Braden Kelley

People often think that disruptive innovation happens overnight, but often it happens one step at a time. Before the iPod was an innovation, Apple had to not only launch the device, but also the iTunes Store for music, and the Microsft Windows version of iTunes. Apple also expanded the iTunes Store to include audiobooks, movies, and television, but by then it had already become a mass-adopted disruptive innovation that has changed the music industry forever.

Apple then launched the iPhone and changed the power paradigm in the mobile industry around mobile applications publishing - resulting in the App Store.

Apple is about to do it again, but nobody is writing about it.

In retrospect I believe we will look back and point to January 27, 2010 as the day that Apple changed the power paradigm of mobile data plans and subsidies in the mobile industry.

Up until now, the mobile postpaid market has been defined by mobile phones subsidized in exchange for two-year contracts (at least in the United States), and mobile data plans that also often require a two-year contract. Even when Google announced the Nexus One as an unlocked device, T-Mobile (or any other carrier) is still going to charge you the same monthly cost as someone who bought the subsidized phone. Meanwhile, The carrier partner announced for the iPad, AT&T, has two regular 3G data plans:

1. $35 per month (200MB limit)
   
2. $60 per month (5GB monthly limit)

AT&T sells two 3G data cards - free or $49 - both requiring a two-year contract. But Apple yesterday announced that AT&T will provide 3G service to iPad users WITHOUT a two-year contract (or any contract for that matter). Pay as you go data access that is actually CHEAPER than their regular 3G data plans:

1. $15 per month (250MB limit)
   
2. $30 per month (unlimited)

To my knowledge, this is the first time (at least in the United States) where a carrier has given a cheaper price for service to a customer bringing an unlocked, unsubsidized device onto their network. This is of course how it should be, but still this is a watershed moment. If other carriers adopt this model with the iPad, then eventually some carrier may start to do this with other devices, and it may open the door for a different subsidy to emerge.

If carriers finally start to acknowledge that people who bring unsubsidized devices onto their network should pay less, then it opens the door for someone like Google to start paying people to use their device. Google could leverage their ad-serving platform and Google Checkout to launch a phone that effectively gets cheaper the more and longer you use it, regardless of which carrier you use and whether you're using pre-pay or postpaid (standard monthly service).

This is the innovation that I thought Google would launch with the Nexus One, but they didn't. Can Google now lean on T-Mobile and others more now to offer differentiated pricing for owners of unsubsidized devices?

The data plans offered by AT&T for the Apple iPad may have not seemed very interesting on January 27, 2010. But, I think looking backwards we may very well see this as a defining moment for the mobile industry.

Thank you Apple.


To see what I think of the Apple iPad, please go here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Insights to Drive Apple iPad Success

by Braden Kelley

Apple announced it's rumored tablet device yesterday and chose to call it the Apple iPad - a very strange and difficult choice. "iPad" is a trademark that is apparently at present owned by Fujitsu. Apple had a similar problem with the iPhone and Cisco, which they were able to resolve with a bit of cash. I suspect that Apple will have to get out their wallet again to make Fujitsu go away. But even more troubling for Apple is that "iPad" is also the name of a fictious product that was lampooned by Mad TV three years ago in a less than flattering video. This has sparked the kind of viral buzz that a new product lauch hopes to avoid - the kind that may cause prospective buyers to not take the device seriously.

The launch of the iPhone was a home run. People immediately got it and lined up around the block to get it when it first came out. The launch of the Apple iPad, like I said before the launch, will likely turn out to be much more like that of the iPod - a single followed by a few more singles to finally score a couple of years later. Why?

Well, Apple themsleves didn't exactly convince everyone that they know why the Apple iPad is a revolutionary device. Here is the tagline for the device:


"Our most advanced technology in a magical and revolutionary device at an unbelievable price."


This would make you think that the Apple iPad is aimed at the tecno-lusting, uber-geek apple faithful who always want to be earliest of early adopters for any gadget from Apple. But from those people, the response to the device was a yawn. Those people are going to want the $829 version and that is a lot of cash for a piece a tecno-jewelry in this economy.

Will they buy a backlit-LCD iPad to use as an eReader or a portable DVD player? No, this group of consumers is not likely to do that either in the volume necessary to make the rumored 10 million first year unit sales. I'm not even sure there are 10 million of this consumer group out there. And if there are, they've probably already got an iPhone or an iPod touch or a Macbook Air that does pretty much anything that they might want to do on an Apple iPad.

Apple has definitely launched a solution in search of a problem. Apple's launch marketing shows that. In my mind the key question as to whether the iPad will be a success or not is this one:


"Do people want or need a fourth screen?


Most people already have three types of screens:

1. Large Screen (currently a television)
   
2. Personal Computer (Desktop, Laptop, or Netbook)
   
3. Mobile Phone (increasingly shifting to pocketable PC/phone devices)

Will the iPad realistically replace one of these? Probably not. Head-to-head it doesn't solve the relevant problem any better than the device in use. So it has to be a fourth screen - for most people. And, that is the way they've launched it. The iPad is a fourth screen for people who have lots of cash and can afford to have the iPad just laying around to pick up and use when their iPhone screen is too small and they can't be bothered to go boot up their computer. In the home it will probably be used most often when the Large Screen is already on. But that's a tiny market.

Apple doesn't know who this device is really for. But, when you're so focused on the technology and the design, somtimes you forget about the customer. Is the Apple iPad cool? Yes. Will Apple sell massive quantities of them in its first year? No. Will they eventually? Maybe.

For innovation to occur you must progress all the way from insight to adoption. Here is how I lay that out in my Innovation Moonshot framework:



For the iPad to become an innovation, Apple is going to spend probably 2-3 years in the Solution Education phase for the iPad (similar to the iPod):

• Getting it in customers hands
  
• Having them experience it
  
• Enhancing the device
  
• Finding ways to lower the price

$499 is a lot for a fourth screen. To do big numbers as a fourth screen, the iPad is going to have hit the $199-299 price point (or lower). I can't see Apple wanting to go there for a couple of years (if ever).

So, if Apple wants to sell large numbers of these, they might consider targeting non-customers in the primary screen market. These would be people who don't have a computer or have one but don't really want one. Let me explain. These are people like mother-in-law or my dad, who have no interest in computers or their complexity, but might want to do a bit of e-mail, get on the internet and look at some photos that people e-mail them or post online. For this group of non-customers, $499 isn't a bad price point because for them they would be buying one of their first three screens (probably their second or third). You can read more on this particular insight here.

But, if you're listening Apple, I've said it before and I'll say it again.


"People don't want a fourth screen. What they want to do is extend the screen they have in their pocket."


In the future as I see it, three screens will be too many. I've laid out my vision for the digital future before and I'll give a snapshot here again. If a hardware manufacturer would actually like to discuss my vision at length, please contact me. Here is my vision again:

What would be most valuable for people, what they really want, is an extensible, pocketable device that connect wirelessly to whatever input or output devices that they might need to fit the context of what they want to do. To keep it simple and Apple-specific, in one pocket you've got your iPhone, and in your other pocket you've got a larger screen with limited intelligence that folds in half and connects to your iPhone and can also transmit touch and gesture input for those times when you want a bigger screen. When you get to work you put your iPhone on the desk and it connects to your monitor, keyboard, and possibly even auxiliary storage and processing unit to augment the iPhone's onboard capabilities. Ooops! Time for a meeting, so I grab my iPhone, get to the conference room and wirelessly connect my iPhone to the in-room projector and do my presentation. On the bus home I can watch a movie or read a book, and when I get home I can connect my iPhone to the television and download a movie or watch something from my TV subscriptions. So why do I need to spend $800 for a fourth screen again?

Tell me Apple...


For some of my other articles on the Apple iPad written pre-launch, please go here.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Apple Tablet Won't Be Runaway Success

by Braden Kelley

First we had incredible hype around Motorola's Droid and its sales so far have proven to be just okay. Then we had even more hype around Google's phone entry - the Nexus One - and its sales results so far have been meager.

So, now along comes Apple with its much-hyped (and only rumored) tablet innovation, which we expect to be announced on January 27, 2010 at a special media event in San Francisco.

There have been reports of Apple expecting to sell 10 million devices in the first year, and there have been rumors of a device price in the $800-1,000 range. If Apple's new device does in fact turn out to be a 3G tablet, and even if Verizon and/or AT&T (or possibly even Sprint/Clear for 4G) subsidize $300 of the cost like they do with smartphones, that would still be a $500-700 price tag with another $60 per month for data service.

Are 10 million people really going to be willing to spend between $1,000 and $1,500 in year one for a tablet device after probably buying a laptop, an HDTV, and maybe a smartphone in the last 24 months?



I don't think this will be the case. It took Apple over three years to sell 10 million iPods (Q4 2001 to Q4 2004). Three years! Apple took eighteen months to sell 10 million iPhones (2/3 of those coming in months 16-18 from iPhone 3G sales). People need to remember that even if someone launches an innovation into the marketplace, its sales don't take off immediately. Let's re-visit my definition of innovation:


"Innovation transforms the seeds of invention into a solution valued above every existing alternative."


It's that last bit (valued above every existing alternative) that will be a struggle for Apple's rumored tablet in the short term. Even if people think that the device is better in some ways than devices they already have, will people replace a smartphone with it? Will they trade their laptop in for it? Or will this be an additional device?

While the device will likely ultimately be successful, it won't set the world on fire out of the gate like people are expecting. It won't be another runaway success like the iPhone, say what you will. It won't exactly be the Newton, but its success will likely be more akin to that of the iPod.

It's a good thing too because cellular providers are going to need time to build out additional network capacity, and possibly to even acquire additional spectrum, before the whole world moves from fixed-line and WiFi computing to cellular-network-based computing.

While the smarter strategy would be to make the iPhone faster and more extensible (creating a true pocketable computer), if Apple does launch a tablet with incredibly innovative capabilities, it will probably take 18-24 months for Apple to sell 10 million of them. Apple will be held back by the speed of 4G network rollouts (currently expected between 2010-2012 depending on provider) and by competition from the iPhone 3GS, iPhone v4, Macbook Pro, and other computing and entertainment options.

Even if Apple's rumored tablet will take a while to catch on with consumers, it has already sent shock waves through the technology and publishing industries with every technology company under the sun rushing out either a new tablet computer or a new e-reader. Amazon is running scared. This week Amazon announced both better royalty terms for e-book authors and publishers, and new application development capabilities for the Kindle.

So, is Apple's stock overvalued?

Do you think I'm completely wrong?


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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Microsoft - Apple - Google in Tablet Battle

by Braden Kelley

2010 may be the year of the man purse, and it will be very interesting to see what people to choose to put in the new gadget bag they will keep close at hand.

In this article we've got a video sneak preview of another potential Apple Tablet application, and two videos of what Microsoft's entry into the tablet wars might look like. Microsoft might actually fire the first shot in the tablet wars at this week's Consumer Electronics Show (CES).

Apple (iSlate) and Microsoft (along with HP) are both already trying to re-imagine what my be possible in the mobile computing environment, and I'm sure Google with join the fray soon (along with HTC). The key thing to watch here though is not the technology that the companies come up with, but the changes that we are going to start seeing in people's computing behavior. That will be the fascinating bit. Computing is about to undergo a major transformation, and while I would rather see an extensible mobile phone than a proliferation of new devices, I think they'll help us get there.

First let's take a look at a video sneak preview of Microsoft's Courier:





And then here is another video showing a conceptualization of how Microsoft thinks people might use it:





And finally, Coursesmart, a digital-publishing joint venture of five major textbook publishers,looks to move beyond their current iPhone and iPod Touch offerings to woo students to adopt their planned eTextbooks for the planned Apple Tablet in place of regular textbooks. Check out the video here:





So what do you think?

Which device would you like to have close at hand in your gadget bag?

Follow the link for another sneak preview of a magazine application for the Apple Tablet.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Value Networks and Innovation

by Tim Kastelle

Today I will tell you why it is so hard for you to get your innovative new idea to spread quickly. Well, one of the reasons, at least. It's because the economy is so interconnected. This is a bit counterintuitive - after all, I was just telling you how we can use networks to spread ideas. The good side of networks is that they can make it easier for ideas to spread. The problem with networks is that to get people to actually adopt your new idea, you often have to get them to break links within their existing network, and this can be very difficult. That is why it is important to understand how to build a position within the value network.

Value networks show up in most of the various business model frameworks. The idea is that when you have an innovation, you have to understand what products, services and routines are related to your new idea. Once you understand this, you can then figure out how much of the value network you need to control yourself. Anders Sundelin just wrote a terrific post on his Business Model Database blog describing how you can map the value network for your innovation, anlyse your position within it, and take steps to improve your position. He does a great job of explaining the mechanics of value network analysis. I would like to show you why it's important.

As an illustration, here is a model of the value network for mobile phones, adapted from the book Invisible Engines by Evans, Hagiu & Schmalensee. It shows the postion within the value network that Apple has taken with the iPhone:



Apple has chosen to control everything within the circle - in other words, everything! Even the application developers don’t have full autonomy, since every new app has to be approved before it shows up on iTunes. The advantage to taking a position like this in the value network is that it is easier to coordinate the system. Because Apple controls nearly everything, every time they have a new idea, it is relatively easy to decouple the existing value network, insert the innovation, and move along. The disadvantage is that having such tight control over the value network limits the scope of the innovations that can emerge.

In contrast, look at the position within the value network that Google has taken with Android:



They have taken almost the exact opposite approach, controlling only the operating system directly. This greatly increases the the range and number of innovation opportunities within the value network. There are two big downsides though. The first is that they are at the mercy of the other players within the value network. One of the reasons that there are very few Android phones here in Australia is that all of the handsets using it so far have been lousy. The second problem is that with less control over the network, all of the innovations within this network take longer to diffuse as there is no central coordination.

Google has the market pull to take a position within the mobile phone value network that is similar to Apple's if they choose to. So we have to assume that this is a strategic decision, and that their bet is that the increased innovation scope provided by their more open value network will outweigh both Apple's first move advantage, and also their relatively slow increase in market share.

And this illustrates the problem that most of us face with our value network - we can usually only control a small piece of it - as Google does with Android. This means that not only do our end users have to prefer our idea, but we also have to get others within the value network to stop using our competitors. This process is slow, difficult, and frustrating - and it adds an extra delay to the spread of our great new idea. Innovations require many players within the value network to unconnect from competitors before they can reconnect with us. This unconnect-reconnect process is often independent from the process of customers adopting our innovation, and it adds another delay to the spread of our new ideas.

There are many different models of business models available for you to use. I don't care which one you use, but you have to use one of them. They all include an element like the value network as one of the key things that you have to understand and manage when you try to get your innovative ideas to spread. The better your understanding of this network, the more effective you'll be at innovating.

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Tim Kastelle is a Lecturer in Innovation Management in the University of Queensland Business School. He blogs about innovation at the Innovation Leadership Network.

Innovation Perspectives - Insights and Execution

This is the seventh of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'What is the most dangerous current misconception in innovation?'. Now, here is my perspective:

by Braden Kelley

For my money, the most dangerous misconception that leaders have is that coming up with a great idea is the key to innovation.

This is not the case. Insights and execution are the most important ingredients for creating innovation. As more industries become commodity battlegrounds, success will now be the driven by two key things:

1. The quality of the insights a company has identified to build ideas upon


2. The organization's ability to turn their insight-driven ideas into reality

As innovation moves front and center in an increasing number of companies and industries, the quality of insights and execution will separate the winners from the losers.

Apple moving into the phone business should not have surprised a single handset manufacturer out there. What competitive response did handset manufacturers expect as they introduced increasingly music-capable phones?

The idea of a phone that is also a music player is not, in and of itself, a differentiated idea capable of capturing the imagination of the consumer, and so the iPhone was not created with the goal in mind of creating a digital music player that is also a phone (though that was the strategic purpose for its creation). Apple needed a strategic response to protect their digital music player market from being disrupted by the mobile phone handset manufacturers.

But, Apple also knew that to be successful in an industry that they had no experience in, mobile phones, that they needed to introduce a truly differentiated and valuable offering. To achieve that goal, they needed a unique insight to build their ideas on of what a mobile phone should aspire to be.

The insight they chose to build their mobile phone business on, was the insight that people were now ready to make their computing experience more portable, while also at the same time making it more personal. The key idea built on this insight was that of the App Store. In building their phone around this insight, they were able to create a device that not only could play music (and help to protect their digital music player market from being disrupted), but could also perform just about any other function that a user might desire (or even imagine to build).

A lesser company would have endeavored to build the world's best music phone, but instead Apple realized that it was more important to build the world's most personal and customizable mobile phone (that happens to play music). This is the power of building around an insight instead of an idea.

Apple realized that the contracts with AT&T and the permission to do something like the App Store, along with building an application development platform that developers could rally around, were possibly even more important than the device itself.

One of the lesser known innovation truths is that a true innovation is often more than just a single idea, but is often several ideas coming together to serve a new key insight. Apple's insight was that computing was about to become more personal and move to the hand as part of this increasingly personal transition.

What insight will you build your business around?


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'What is the most dangerous current misconception in innovation?' by clicking the link in this sentence.

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Hello - The Future is Calling

by Steve McKee

Ninety-eight percent of American households have telephone access. Over the past 130 years, this once-revolutionary device has become so ubiquitous that we don't realize how much of our modern lifestyle has been built around it, from ordering takeout to scheduling doctor appointments, from responding to polls to hanging up on telemarketers. The telephone is something that we - as consumers and as marketers - have always taken for granted.

Not so anymore. Research from the Centers for Disease Control and Prevention now says that for the first time ever, cellphone-only households (20%) outnumber those with landlines alone (17%). And the trend towards wireless is gaining momentum. Nearly one third of 18-24 year olds live in households with no landline whatsoever, and - in a finding that seems odd on the surface - wireless-only households are more likely to include the poor, many of whom made the choice to eliminate their landline bill during the current recession.

This is a radical change with significant implications, not only for pizza makers and Yellow Pages companies, but for all marketers. Among the new dynamics:

• The telephone is no longer a device tied to a household, but to an individual. That opens up a world of personalization, from packaging (my wife's cell phone cover is pink) to performance (my daughter has a different ring-back tone for the weekend than the one she uses during the week) to pricing (there's a payment plan to suit just about everyone's needs).


• The telephone (and the telephone number) is no longer a place-based device. Marketers that once relied on area code information to determine the location from where a customer was calling now can't be so sure, as members of our increasingly mobile society take their cell numbers with them wherever they relocate.


• The telephone is no longer just a telephone. Two-way voice communication has now given way to multiparty, multimedia (and even satellite) access, making the ability to speak to someone on the other end just one rather quaint feature. You may even be reading this blog on your phone.

Most of us are content to let the Apples, AT&Ts, Motorolas and Verizons of the world think about where this once single-purpose device should go next. But as my firm has discovered in working with clients in a variety of non-telecommunications categories, we can't be content to let the future come to us.

With each technological advance comes new obstacles and new opportunities, and brands that pause to consider how they might leverage them are likely to find competitive advantage (and in some cases completely redefine the playing field).

Do you suppose there's an iPhone app for that?

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Apple, Nintendo, Innovation, and the CEO

by Braden Kelley

I came across this quote from Satoru Iwata, the president of Nintendo:


"My job is to find the potential in something that others can not see, to secretly pour our resources into them and turn them into hits before anyone else catches on,"


The quote was too long to fit in Twitter, so I thought I would share it here because I love the insight. This is the key to successful innovation captured in a single sentence. This quote also highlights one of the most important jobs of a CEO - to lead innovation:

1. To invest in the insights research and exploration necessary to identify the next innovations


2. To fund projects built on these insights (even though they may be risky)


3. To shield the exploration efforts of the company from its ongoing exploitation of current products, services, and markets


4. To build a balanced innovation portfolio


5. To build a tolerance for risk taking and individual project failure within the portfolio


6. To encourage collaboration and to serve as a bridge across silos


7. To be a champion for innovation both inside the company and externally amongst suppliers, partners, and even customers

The quote came from a Wall Street Journal article where the author implies that Mr. Iwata thinks that Nintendo and Apple aren't competitors. In my view, Mr. Iwata is either posturing so that the press doesn't hype the rivalry, or he is a bit blind because Apple most definitely views Nintendo as a competitor.

The real question though is who will dominate mobile gaming five years from now?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

It's Tough to be a Follower

by Steve McKee

The news is out. Sales of the much-ballyhood Palm Pre are...a disappointment. The new smartphone, launched to compete head-on with Apple's groundbreaking iPhone, has lost its momentum.

The Pre, which was launched June 6, got off to a good start but has faded in recent weeks. According to the Wall Street Journal, analysts projected lower sales in the current period than had been expected, and Palm reported a loss of nearly $165 million for its most recent quarter--the first full quarter to include Pre sales results.

Jon Rubinstein, Palm's CEO, says the company "will face near-term pressures until we transition to a more diversified carrier base and expand our family of webOS products, but we are confident we're on the path to success." Makes you wonder if this is a case of actions speaking louder than words, as Palm recently cut the Pre's price by 25 percent (tied to a two-year service agreement), and is issuing 16 million more shares of common stock to overcome a cash problem.

The Pre, by all accounts, is a terrific phone, and offers some enhancements that the iPhone doesn't yet have (see "Features, Smeachers"). But drafting behind the leader isn't the same as taking the lead, and being a little bit better often isn't enough. Especially when the guy up front has his own race strategy (Apple cut the price of its first generation iPhone to 99 bucks within two days of the Pre's launch).

Perhaps Palm will do better with Pixi, a phone targeted at youth, which should be available in time for Christmas. If it's different enough from other offerings in the marketplace, Palm may get it share of attention (and accolades). But if it's another me-too product, the Pixi will get little more than a yawn.

Sometimes a company, like an athlete, falls behind and simply has to catch up. But "catching up" is not a strategy for victory. Innovation is all about finding a way to get--and stay--out front.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

iPhone Virtual Reality

Real and virtual worlds are about to collide in a big way.

In September with the expected release of iPhone OS 3.1, some pretty amazing augmented reality applications will begin appearing for the iPhone 3GS. These applications overlay useful info on your view of the real-world using the iPhone's camera. The new crop of augmented reality applications due in September make use of common features like an internet connection and GPS, but because they also utilize a compass, only users of the new iPhone 3GS will be able to install them.

There are several cool demos floating around which I have shared below, but these applications are using unpublished APIs which prevent them from being allowed on the App Store. Apple, however, told one developer that the tools necessary would become available in the pending iPhone OS 3.1.

Here is an application that shows the closest subway stations and how to get to them:





But, my favorite is this concept of an application that proposes to use facial recognition to overlay people's social networking profiles when the application is engaged. I hope they succeed in creating a working real world application based on this concept:





Finally, the innovations in augmented reality will not be restricted to the iPhone 3GS. A new augmented reality app called Layar is described as the world's first mobile augmented reality browser. The Layar browser currently runs on Google Android devices and shows you what is around you by displaying realtime digital information on top of reality through the camera of the mobile phone. Just flip through the directory to find ATM's, bars, houses for sale, hotels and other useful real world items around you.

While Layar is currently available only for Android devices, the developers are working hard on porting it to other platforms (read iPhone 3GS).

This video from the developer shows it running a real estate application:





What other cool applications can you imagine using this techology to augment the real world?

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Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Crowdsourcing Delivers Personalized Innovation

The new dimension of innovation is about having customer as an integral part of the system. Firms can no longer afford to stay separate from customers and still come up with great innovations. The success of social media websites (like Facebook) is frequently attributed to engaging customers in the creation of new innovations - also referred to as crowdsourcing.



The topic of innovation is multi-dimensional, which no firm in the globe can afford to ignore today. Being innovative is necessary to stay competitive in the business. The new age of innovation has a lot to do with making the customer an integral part of the innovation system by engaging and involving them with the product or service that the firm is working on.

This is all the more true with consumer-targeted social networking sites like Facebook, where the users drive how the product should look. The customer-centric innovation started off with creating and opening up a software development kit (SDK) for anyone to create and host their applications.

Want to get a real experience with what we are talking about? Just login to your Facebook or Orkut profile and click on the "applications" link. You will see an array of cool stuff in the form of quizzes, music, games, etc. Who do you think has developed them? Do you think Facebook or Orkut has enough employees to develop thousands of these applications? Definitely not!

It is done by enthusiastic folks around the globe with decent web programming knowledge. They downloaded the SDK, developed the app and hosted it all for free. The buck doesn't stop there. After it gets uploaded, the importance of these applications is decided by other users. As more folks add a particular application to their profile, its rating goes up. If the application is not interesting enough for the community, it gets automatically pushed down the stack. From the user's perspective, they can choose and install applications of interest to them, thereby 'personalizing' their profile. This is the real power of crowdsourcing - consumers as creators.

According to Wikipedia, crowdsourcing is a neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people or community in the form of an open call. In the context of social networking, the crowdsourcing goes beyond outsourcing, where users become voluntary creators to benefit of the community.

By democratizing their SDK, firms like Facebook benefit greatly by harnessing the innovative ability of anybody in the world. This breadth of innovation is impossible to groom and sustain within the confines of the firm's employees. Also, the cost of making such innovation happen inside the organization is extremely high compared to crowdsourcing.

On a larger scale, the idea of crowdsourcing has been harnessed by Apple (iPhone) and Google (Android) - these firms designed a monetization model allowing developers to host their applications and quote a price. When users download the developer's application a portion of payment goes to the developer.

In his recent work on 'New age of Innovation', renowned management thinker C.K.Prahalad calls this phenomenon as 'N = 1 R = G'. In order to provide one unique user experience (N = 1) firms need to leverage resources (R) globally (G). It is mainly because every consumer has his unique preferences when using a product, which cannot be satisfied by the firm hiring more people. This new school of thought is much different from the previous generation of technology products where every feature was developed by the firm in a closed development environment. In this new age, the role of the firm is to create a platform and leave it open for consumers to create the applications they want.

So, next time you are set out to innovate something, ask yourself: 'Am I involving my customers in the process?'

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Jayakumar Balasubramanian is an engineer by profession. This article originally appeared on MyBangalore.

Apple iPhone OS 3.0 to Enable New Innovations

Apple's next iPhone might contain both video input as well as a magnetometer (digital compass). This opens up some interesting possibilities for iPhone application developers to innovate.

Here is an example of a virtual pet application being developed that would use the video input capabilities:



And here is an example of an application showing what might be possible with magnetometer capabilities:



What do you think?

@innovate

iPhone Pro in June 2009?

Ok, it was a year ago now that I started making noise about the iPhone Pro that I expected to arrive, based on the underwhelming iPhone 3G launch.

I, of course, thought that the iPhone Pro would make its appearance by Macworld in January (not the iPhone Nano thought other people were suggesting would be introduced), but neither was released as Apple announced that the iPhone was on a June annual release cycle.

Now it's February. The speculation is mounting on what Apple might release in June. Some people are theorizing that Apple will introduce a new $99 iPhone.

I can see a $99 iPhone happening, but I'm not sure I can see Apple investing in building an entirely new design to sell at that pricepoint, given the limitations that the iPhone 3G already has.

Apple will definitely introduce a new iPhone in June, but I still believe it will be a new high-end design, not a new low-end design. If there is a new low-end design it will, in my opinion, only be modestly different than the current iPhone 3G.

Instead, Apple will be looking to reclaim its design leadership with some new capabilities to delight customers, and to provide application developers with some new possibilities. In the past year the Blackberry Storm, the 3-megapixel Sony Xperia X1, the 5-megapixel Nokia N97, and the 8-megapixel Samsung Memoir have all come on the scene to provide attractive alternatives to the iPhone.

I still believe the main new features will be a 5-megapixel swivel video camera (or a front/rear facing camera combo) and a video iChat application for the iPhone Pro.

As a recap, here are the features that I predicted almost two years ago for the third version of the iPhone (noting those achieved), which I now believe will be the iPhone Pro that will launch in the June timeframe:

• 5-megapixel swivel camera (or paired with a 2-megapixel screen-side video-enabled lens)


• Video iChat capability (iChat AV)


• Next generation Bluetooth


• DONE - Bluetooth 2.0 + EDR


• A slightly bigger screen (every millimeter counts) - if the bevel can be reduced


• 16gb or 32gb of flash memory


• Hopefully a faster 3G or WiMax network connection


• DONE with 2nd version


• 802.11n WiFi


• Faster processor with lower power needs


• Improved battery life


• Lower price - $299 or less


• 2nd version hit $199-299 - I now think iPhone Pro will also be priced at $199-299 and the iPhone 3G will drop in price to FREE-$99

So, who thinks I'm right?

Note: These are purely my opinions based on my understanding of technology and of strategy, and are not based on any inside knowledge. For someone else's view on possible specs, see here.

@innovate

iPhone Pro Update

For those skeptics out there who doubt that Apple will launch an iPhone Pro sometime between October 2008 and January 2009 at Macworld, check out this BusinessWeek article. The synopsis is that the iPhone 3G is $53/unit cheaper to manufacture than the original iPhone according to analysts. This puts the cost to produce the iPhone 3G at $173 versus $226 for the original iPhone, and they go further to predict that iPhone 3G costs will fall to $148 in 2009. They go further to estimate that Apple is selling the iPhone 3G to Apple for $499, leaving Apple a huge $281 profit per unit (or about 56%).

This means there is plenty of room for Apple to drop the price of the iPhone 3G to AT&T when they are ready to launch the iPhone Pro, in order to support AT&T dropping the iPhone 3G 8GB to $99, $49 or even free.

Now that Apple has embraced the subsidy model and launched the AppStore, they have a lot to gain by getting to a free phone as soon as possible to boost their volume and increase their chance of winning the mobile application platform battle. Even if Apple doesn't win this battle and only continues on their current desktop/laptop share accumulation trajectory they stand to make big money through increased desktop and laptop sales.

Microsoft has good reason to be obsessed with Apple...

The Second Coming of the iPhone

To commemorate the launch of the second version of Apple's iPhone, I'd like to revisit my original iPhone article from one year ago. In that article I theorized why the iPhone would not succeed, at least not in its first incarnation, and why it would not be until its third version that it would be a runaway success.

So, one year on I still believe that it will be the third version that will cement the iPhone's position in the same way that the third version of the iPod led to the iPod becoming pervasive. The iPhone definitely has the potential to become as pervasive as the iPod, but it is still not ready.

When I look back at the specs I predicted would lead to ultimate success, Apple has only moved part of the way there with its second iPhone. If Apple is truly honest with people, this new iPhone really only serves to take the iPhone global (through the addition of 3G) and to enable more accurate location-enabled applications.

Those are really the only two new features of note on the phone. This new iPhone is really only a minor tweak, a repackaging of the existing iPhone so they can drop the price and have it better accepted globally, not the revolution that is truly necessary to finish the job of making the iPhone the number one mobile phone in the same that the iPod became the number one digital music player.

And what about the price drop?

Here is my theory on that. The price drop serves two purposes. The first is to hopefully increase sales outside of the USA where people looked at the original iPhone as an over-priced, under-powered toy (no 5MP video camera, no 3G, etc.). This offering fixes the 3G and price problems, but does not address the camera issue. This leads to the second purpose of the price drop. This "new" iPhone is to be the entry-level phone in a new expanded lineup that will come at Macworld in January, if not before. My leading thought is that the new iPhone Pro is likely to launch in October - just in time for the holiday shopping season.

The iPhone Pro will likely come with the specifications I listed in last year's article. Apple's strategy is brilliant really. By "launching" the low end phone before the high end phone, it is an easier sell, and in that October-January timeframe the carriers will be able to drop the price of the low end phone even more (to either $99 or even to FREE) and spread it even farther. The other reason to launch the low-end phone first is to give developers an incentive sooner to develop applications for the iPhone/iPod Touch platform sooner, which will serve to enhance the value of the iPhone Pro when it launches.

At the launch event for the iPhone Pro in October or January, Apple will be able to make a lot of noise about all of the applications that the new iPhone Pro will be able to take advantage of and they will be able to highlight a few new ones that take advantage of the capabilities unique to the iPhone Pro. The main new features of course will be a 5MP swivel video camera (or a front/rear facing camera combo) and a video iChat application for the iPhone Pro. This capability will then be introduced into a new low-end phone this time next year at the WWDC.


As a recap, here are the features that I predicted one year ago for the third version of the iPhone (noting those achieved), which I now believe will be the iPhone Pro that will launch in the October-January timeframe:

1. 5-megapixel swivel camera (or paired with a 2-megapixel screen-side video-enabled lens)
2. Video iChat capability (iChat AV)
3. Next generation Bluetooth
• DONE - I think - Bluetooth 2.0 + EDR
4. A slightly bigger screen (every millimeter counts) - if the bevel can be reduced
• UPDATE - Phone might get smaller instead
5. 16gb or 32gb of flash memory
6. Hopefully a faster 3G or WiMax network connection
• DONE with 2nd version
7. 802.11n WiFi
8. Faster processor with lower power needs
9. Improved battery life
10. Lower price - $299 or less
• 2nd version hit $199-299 - iPhone Pro will also be priced at $199-299 and v2 will drop in price to FREE-$99

So, who thinks I'm right?


Note: These are purely my opinions based on my understanding of technology and of strategy and are not based on any inside knowledge.

Following the Line to Innovation - Mobile Applications

I came across a queue reduction application for the iPhone and iPod Touch yesterday that was intriguing. The application isn't quite finished or certified for use yet by Apple and Starbucks, but from what I gather it works something like this:

1. User comes in range of a Starbucks WiFi Hotspot
2. Application recognizes the Starbucks WiFi Hotspot or user initiates application
3. Application engages the user interface portion of the application
4. Application makes a connection
5. Application prompts user to order a Starbucks beverage
6. Application user interface facilitates the selection and transmission of the drink order (including a list of saved favorites to speed the process)
7. Application connects to the user's iTunes account
8. Application deducts funds from the user's iTunes account
9. Application creates a visual barcode with the information necessary to register payment
10. User places iPhone or iPod Touch with visual barcode under a reader at the pickup counter
11. User collects their beverage
    

The visual barcode (semacode) and scanner portion of the system could be made unnecessary (or relegated to backup system status), by instead transmitting a payment confirmation to Starbuck's on-site systems directly via the WiFi connection. In the backup scenario, the visual barcode would serve as an electronic receipt to show proof of payment in case the systems in the store doesn't receive the systematic payment immediately.

Imagine the convenience of getting a block or two from your favorite Starbucks, connecting, clicking 'The Usual' and proceeding directly to the drink pickup counter instead of waiting in line to order and pay.

Of course there is no reason why companies like McDonald's or Cinemark couldn't create similar applications to eliminate some of the queueing from our lives. If people could order this easily with their phones then businesses could reduce staffing or reallocate resources from order taking and payment processing to more value-added activities like preparing food or beverage orders.

Apps like this could be extended to the Web through the introduction of a store number field or store locator mini-application or pulldown at the beginning of the application sequence. This would allow you to order out of range of the in-store WiFi over your cellular network or from your home or office internet connection.

Less time spent waiting in lines?

Oh what a beautiful world.