Disruptive Innovation-V

61. One needs one strategy for sustenance and one for disruption. The questions and process adopted for the sustenance strategy is the following : Make assumptions, Build projections based upon assumptions, make decisions to invest based upon projections, implement the deliberate strategy. If one’s projections are going wrong one reexamines the assumptions. For instance one assumes that based on a GDP growth of 7% one will achieve a certain revenue figure. If one’s projection is not being achieved one goes back and examines the assumption.

62. For a Disruption innovation one indulges in Discovery – driven planning. The steps one follows are : One makes projections on a pilot basis. Now in this pilot what assumptions must prove true for the projections to happen ? Implement the plan to learn – to test whether the critical assumptions are reasonable. Invest when the key assumptions prove valid.

63. Be sure the brand is positioned on a job and move up the value chain as fast as possible.

64. When one integrates with another company be sure it’s for resources and not for processes or profits.

65. Everyone has a desire to create history. How can empty nos. create passion.

66. What matters is challenge, a desire to create history, burn one’s bridges, removing the escape buttons, and getting a breakthrough insight.

67. Most leadership teams outsource insight. One cannot outsource insight. The Grameen Bank in Bangla Desh was built on an insight which stated that people in the rural area are not affected by a loss of money inasmuch as a loss of credibility and face. Small loans are therefore given to women with the community as collateral. This could not have come from outsourcing.

68. All markets are ready but we just don’t have the ideas. We need to rethink the source of insight. We can’t source it from the same journals read by everyone. Big ideas don’t get killed; they just get diluted. We need to convert ideas into real time experiments. Just one idea is not enough. We need more and then roll them out as ‘fission’. We can’t execute new ideas with the previous mindset. We need to create escape velocity and avoid dilution.

69. There is a disruption taking place in management education. Operating companies are starting their own universities. Today there are 2000 corporate universities. The number of students applying to Harvard is coming down. Another thing is that everything is being uploaded onto to the Internet and is made foolproof and idiot simple for professors in corporate universities. In this way professors in management institutes are getting commoditized. If this is done by Harvard then Harvard would make money because it would be providing the teacher with better material rather than targeting the end user.

70. There are examples where incumbents killed entrants. Kodak came out with Easyshare targeted for girls. Where there is an emphasis on ‘Click and send by email’. It’s share jumped from 6% to 28% of the Digital Market. Fuji and Polaroid missed it.

71. What kind of innovation which a competitor would ignore or adopt ? is a key question to ask when approaching disruptive innovation.

72. By becoming so good hospitals overshot their patients with so much of care which these patients could not afford. So now if the technology is made available for these patients in outpatient clinics, doctors’ offices and homes of patients, there will be a new disruption. With nurses doing more sophisticated work the doctors are getting commoditized. The nurses become low cost high quality providers.

73. Culture needs to shift from proof seeking to experimenting.

74. A company relies on people as resources for innovation. But if it is to be sustainable then one needs to make it process dependent.

Disruptive Innovation-V

61. One needs one strategy for sustenance and one for disruption. The questions and process adopted for the sustenance strategy is the following : Make assumptions, Build projections based upon assumptions, make decisions to invest based upon projections, implement the deliberate strategy. If one’s projections are going wrong one reexamines the assumptions. For instance one assumes that based on a GDP growth of 7% one will achieve a certain revenue figure. If one’s projection is not being achieved one goes back and examines the assumption.

62. For a Disruption innovation one indulges in Discovery – driven planning. The steps one follows are : One makes projections on a pilot basis. Now in this pilot what assumptions must prove true for the projections to happen ? Implement the plan to learn – to test whether the critical assumptions are reasonable. Invest when the key assumptions prove valid.

63. Be sure the brand is positioned on a job and move up the value chain as fast as possible.

64. When one integrates with another company be sure it’s for resources and not for processes or profits.

65. Everyone has a desire to create history. How can empty nos. create passion.

66. What matters is challenge, a desire to create history, burn one’s bridges, removing the escape buttons, and getting a breakthrough insight.

67. Most leadership teams outsource insight. One cannot outsource insight. The Grameen Bank in Bangla Desh was built on an insight which stated that people in the rural area are not affected by a loss of money inasmuch as a loss of credibility and face. Small loans are therefore given to women with the community as collateral. This could not have come from outsourcing.

68. All markets are ready but we just don’t have the ideas. We need to rethink the source of insight. We can’t source it from the same journals read by everyone. Big ideas don’t get killed; they just get diluted. We need to convert ideas into real time experiments. Just one idea is not enough. We need more and then roll them out as ‘fission’. We can’t execute new ideas with the previous mindset. We need to create escape velocity and avoid dilution.

69. There is a disruption taking place in management education. Operating companies are starting their own universities. Today there are 2000 corporate universities. The number of students applying to Harvard is coming down. Another thing is that everything is being uploaded onto to the Internet and is made foolproof and idiot simple for professors in corporate universities. In this way professors in management institutes are getting commoditized. If this is done by Harvard then Harvard would make money because it would be providing the teacher with better material rather than targeting the end user.

70. There are examples where incumbents killed entrants. Kodak came out with Easyshare targeted for girls. Where there is an emphasis on ‘Click and send by email’. It’s share jumped from 6% to 28% of the Digital Market. Fuji and Polaroid missed it.

71. What kind of innovation which a competitor would ignore or adopt ? is a key question to ask when approaching disruptive innovation.

72. By becoming so good hospitals overshot their patients with so much of care which these patients could not afford. So now if the technology is made available for these patients in outpatient clinics, doctors’ offices and homes of patients, there will be a new disruption. With nurses doing more sophisticated work the doctors are getting commoditized. The nurses become low cost high quality providers.

73. Culture needs to shift from proof seeking to experimenting.

74. A company relies on people as resources for innovation. But if it is to be sustainable then one needs to make it process dependent.

Disruptive innovation-IV

46. There are 3 levels of architecture where a job is concerned viz. What is the fundamental job or problem the customer is facing? This includes its functional, emotional and social dimensions. What are the experiences in purchase and use, which if all provided, would sum up to nailing the job perfectly ? What are the products’ attributes, technologies, features, etc. that are needed to provide the necessary experiences ?

47. Any company’s products get hired for 3 to 4 jobs. We need to catch customers right after they hired a product. We don’t ask ‘why’. We understand and write a case about the situation. We need to ask what the customer hired or did when in that same situation but didn’t hire your product. We then need to do research on what else is the product hired to do as well as find out what were the situations in which one made do with nothing. Understanding customers without understanding the jobs which arise for them, will give one a wrong direction.

48. By understanding jobs we find for example that most people take photoprints and look at them just once. They like to put them in an album but seldom look at them. From this perspective the use of a digital camera is mainly restricted to the click and attach facility. What is the use of trying to get the customer to do editing which he/she is not interested in. A Purpose brand is not built through advertising. It is built around the jobs it is hired to do. If one has a job to do and the brand pops up in one’s mind then one will go out and hire it.

49. The following steps need to be adopted :

• Design a product that does a job well.
• Create this brand that uniquely links the product to the job.
• Trust that brand for that purpose.
• Whenever that job space comes up the customer will hire that brand and talk about it.
• Only then can advertising help to build it.

50. Sawzall helps to drill a hole in the wall. It is a brand built around this specific job. It’s share is more than 80%. Similarly Holehawg is another brand built around a product which is a right angle drill for plumbers. It’s share is again more than 80%. Both brands belong to Milwaukee. All the rest of Milwaukee’s brands have less than 10% share. Purpose brands create value. Corporate endorser brands do not create value. Similarly Sony has Walkman and Playstation which are huge Purpose brands while the other Sony brands have a much lesser share.

51. Usually companies have a proprietary end to end architecture. They are integrated. When the modular architecture takes off the coin flips. If Apple opens up its architecture then iTunes will be in every iPod no matter who manufactures it just like Intel. Components become more important.

52. Automobiles today struggle to sustain a premium through differentiation on some dimensions. If one looks at jobs which need to be done by cars then one can come up with the following possibilities viz. a gift to a loved one of the family which then necessitates creation of a package of experiences for that car. Or one can say that my car is my office. There are 20 mn. people who need to work out of their car. The car can then become a Purpose brand. Customers will then be willing to pay a premium for the job the car is being hired for. In the automobile market one cannot have the attitude of one size fits all.

53. Every brand today that is valuable started as a Purpose Brand. One can develop other product forms to do the same jobs or develop brands for different jobs.

54. Crest Fluoride is a disruptive technology because it prevents cavities. The advertising is associated with that job. If Crest is extended to other product forms like mouth rinse then the consumer gets confused. Because J&J also has mouth rinse. When P&G did that with Crest and applied it to many jobs it transformed it to an Endorser brand. P&G lost its leadership. The hotel chain J.W.Marriott created a hotel chain for conferences and company meetings. When there were other jobs like if one is just interested in a clean and inexpensive room then J.W. Marriott created another brand ‘Courtyard’. ‘Residence’ is another brand which is meant for the job of catering to those who get transferred. In this way one lessens the confusion.

55. If you hire the product to do the job but it doesn’t do it then you will lose trust in it. If consumers don’t hire it for the wrong reason they will not lose trust in it.

56. The dilemma is that one can’t prioritize low margin and high margin at the same time. Echo is a small low end car of Toyota. But it is sold through the same channel as other cars. One can therefore not prioritize ‘Echo’ because of the other bigger cars having bigger margins. When one is dealing with bigger margins one cannot prioritize smaller margin products. One needs to grow faster to sustain the stock market. The bigger one gets one can’t prioritize emerging markets. Drugs coming out of R&D will be evaluated by Pfizer in terms of how much will they contribute to the growth of its current base of $5bn. revenues.

57. When looking at disruptive innovations one needs to ask the following questions viz. Do they have the Resources ? Will they have the right Processes? A process which is good at one thing may not be good at other things. Will the profit model (Business Model) allow them to prioritize medium range/low range products?

58. For organic fibers, some years ago one needed to go to Dupont to find a molecule. One engaged in unstructured and exploratory exercises. But as others came into the field patterns emerged. One now didn’t feel the need to be an expert. When Quantum theory began to be used they found that they could predict properties even before the molecule was developed. So reverse engineering was indulged in.

59. Original problem solving was embedded in the experts. And there was a lot of experimentation. But gradually patterns emerged which were recognized. One now knew how the world worked and created a set of rules.

60. When it’s a new business one doesn’t know the right assumptions. In 93% of the cases one finds that the strategy that leads to success is different from what the initial strategy was.

Disruptive innovation-III

31. Disruptive innovations enable a larger population of less-skilled, less wealthy people to do things in a more convenient, lower-cost setting, which historically could only be done by specialists in less convenient settings.

32. A new disruption brings in a new population which are mainly non-consumers.

33. The low cost advantage of India is temporary but the number of non-customers is huge.

34. The transistor disrupted the vacuum tube. The vacuum tube manufacturers concentrated on Table top radios and floor standing TVs and kept on trying to improve their vacuum tubes for these products. While this was happening Sony created the transistor radio which was a pocket radio which was not of a good quality but was targeted to non-users who were teenagers. Sony didn’t sell to Parents. Sony then came out with the portable TV with the transistor. Again it was competing with non-consumption. Soon the vacuum tubes just got sucked out by the transistor using devices. The vacuum tube improvements were being crammed into the space where one would certainly fail.

35. Similarly voice-recognition software was being developed by IBM and was being crammed into the space of the Word processor. In the meanwhile this software was launched in toy robots with simple standard phrases being used and in chat rooms. Not very sophisticated but gradually improving over time. The disruption of new technology is accepted more by non-customers.

36. IBM needed to make the voice-recognition software more cost-effective and increase its performance. This is not so achievable in the upper segment as it is in the low end segment. Among non-customers one doesn’t have to spend so much money to be successful.

37. Billions of dollars are being spent to make the use of solar energy more widespread among current users of electricity in the urban area. No matter how much improvement one makes in solar panels its adoption in the urban areas will not be much. The expectations are too high. Whereas in Mongolia 40% of the population lives in tents. They have no access to electricity. The adoption of solar panels is a tremendous success here. They are non-consumers.

38. Linux is a modular architecture. It cannot compete head-on with Microsoft which is an interdependent architecture. So Linux creates a web-centric use which is a new space. It will disrupt by fuelling web-centric computing. There are problems in the software today but gradually it will improve.

39. Not only products and companies get disrupted but whole channels get disrupted. Vacuum tubes were being sold through appliance stores. When Sony started developing its transistors the same appliance stores were refusing to keep them. At the very same time K-Mart and Wal Mart were coming up and they decided to sell Sony’s transistors and thus disrupted the whole channel of appliance stores.

40. In new markets rules don’t apply. Rules like IRR, ROI etc. Patterns need to be seen and which customers one is serving. One needs to go after non-customers.

41.The rule of shareholder value is no longer valid. In the 60s it was valid because the average time a share was held was 6 years. Now it is 60 days. Shareholders have become speculators. Therefore the long-term value of the firm is the goal and not increasing shareholder value.

42. If existing managers are taught how the world works they can use disruption effectively.

43. The way we segment markets makes new products fail. We usually segment markets according to product categories or customer categories. It’s usually an inside-out approach. We need to look outside-in. From a customer’s point of view he/she needs to get ‘jobs’ done or important problems solved. We need to find out what are the ‘jobs’ which are arising in the customer’s life and for which jobs will the product be hired.

44. In the example of Milk Shakes purchased from a Mcdonald’s outlet the question one needs to ask is ‘What job arises that gets a milk shake hired?’ It was found that 40% bought milk shakes in the morning from the Mcdonald’s outlet. They did not consume it in the outlet and bought the milk shake alone. It was found that they used it as a nourishment and pastime while driving to work in the morning. So they had one hand on the wheel while the other hand held the milk shake. Competition for this ‘job’ therefore gets restated to include bananas, snickers, bagels etc. In the evening the same milk shake was being hired by parents who were saying ‘no’ to their children throughout the day and needed to alleviate their guilt by giving in to their children by buying them a milk shake in the evening. Once one understands the ‘jobs’ for which the product is hired one can now go on improving vis-à-vis the ‘job’ for which it is hired. For instance the morning milk shake could become more viscuous and fruity while the evening milk shake could be packaged differently. The size of the market now gets defined from the customer’s perspective.

45.From this perspective one sees that the market is larger, one’s share smaller, the real competition is not in the product category, the growth potential is greater, and one understands the constraints under which non-customers operate.

Police to take action against Playboy!!!

Jakarta: Indonesian police could take action against the publishers of the Indonesian version of 'Playboy' if the magazine carried pictures and stories against the norms of decency, National Police said today.

"Any pornographic taints will be dealt with. But so far we have not found such indecent factors," Deputy Chief Spokesman, National Police Brig Gen Anton said here yesterday. He also said there was no need to wait for the passage of the pornographic bill to take action, because the Penal Code was "quite sufficient" to take action against indecent behavior and acts. "Penalties under the Penal Code are normally much lighter than those under the pornographic law," he said. The magazine as pornographic icon in the United States has appeared for the second time in Indonesia.

In its maiden edition in Jakarta in April this year, the publication triggered protests from the community although it did not carry any pornographic content. On the pretext of averting any social unrest, Jakarta city police managed to persuade the magazine's publishers not to publish it from Jakarta.

This week, the second edition of the magazine appeared but its office had moved to Bali. Even this time the publication triggered protests from various circles who have already been opposed to the magazine from the beginning.

World Cup Fever Goes Digital and Mobile

SINGAPORE: A recent online 5-country survey revealed China is set to catch a strong dose of World Cup fever, with 95% of respondents preparing to follow the tournament, of which 32% plan to track results on their mobile phones.

On average Chinese fans plan to watch over 11 nights of matches on television, and 84% plan to visit sports websites for World Cup news. The games will also be followed closely in Singapore (84%), Malaysia (82%), Australia (63%) and Thailand (59%).

World Cup goes digital in Asia Since World Cup 2002, penetration of digital media, including the internet and mobile phones, has increased substantially across the region, and fans intend to use both to track the matches. More than half of the respondents are likely to visit websites to follow their teams. Official World Cup websites were cited as the most likely destinations in Singapore (67%), Malaysia (71%), Thailand (46%) and Australia (57%), but Chinese fans are most likely to head to other sport websites (84%).

A surprising number of Asian fans are preparing for 'World Cup information on the go' using their mobile phones, ranging from 32% in China, to 14% in Singapore and Malaysia, 10% in Australia and 7% in Thailand.

"The only thing Asians are more passionate about than the World Cup is their mobile phone, so it's not surprising to see so many fans starting to track their teams in real-time,
on-the-go," said James Chadwick, MindShare Asia-Pacific Insights Director. "It's just another reminder that we need to think beyond traditional marketing and media."

You'll never walk alone in Asia Although their teams may not have qualified this time, fans across Asia have picked favorite teams to support. Many Chinese will be supporting the hosts Germany, Singaporeans favor England, and many Thais will be adopting underdogs Australia. Australian fans of course will be firmly behind their team, which has reached the World Cup finals for the first time in 32 years, and 80% of Australians fans will be cheering for the Socceroos.

Wives and girlfriends making game sexy

Berlin: It's not just the 32 teams at the World Cup who are about to have their shape, style and movement furiously picked over. The same fate awaits the image-conscious, credit-card wielding army of players' wives and girlfriends at the month-long tournament.

Some relish the limelight; others have it thrust upon them. As wife of the England skipper, Victoria Beckham is used to the cameras, Wayne Rooney's fiancee Coleen McLoughlin is growing into her role while Melanie Slade has gone from unknown blonde student to snapper's delight courtesy of being the girlfriend of shock call-up Theo Walcott. Asked how the pressure of being a footballer's girlfriend was affecting her, the 17-year-old Slade said recently: "I just concentrate on my school exams. I just keep my head down and keep doing it."

However, she received advice from beauty queen Danielle Lloyd, the partner of former England player Teddy Sheringham. "It is difficult for all of us. We are all used to this situation, but it is still scary," said Lloyd. It must have been equally frightening for former Spice Girl Victoria Beckham to find that she was voted top of a poll to find the most annoying footballer's wife. She polled 46 per cent of the votes, while McLoughlin, lampooned in the British tabloids for her love of shopping, was second with 18 per cent.

Even England manager Sven-Goran Eriksson's partner Nancy Dell'Olio couldn't escape coming in third with 16 per cent. Victoria won't be too concerned. Type her name into the Yahoo search engine and it will feature in 2,520,000 entries. Both Beckham and McLoughlin have seen their partners' off-field activity splashed all over a voracious tabloid media.

Rooney's girlfriend believes she is a victim of jealousy aimed at a couple who grew up together on the mean streets of Liverpool's run-down Croxteth district. "People call me names," she once complained to Marie Claire magazine. "When people see that you have money, you're the worst person in the world."

However, she shrugged off the bricbats to buy a new car for the boy wonder. According to one report, it was a 190mph Aston Martin Vanquish worth 195,000 pounds. "She wanted to do something lovely for Wayne," said a member of the army of 'friends', all anonymous, who are the source of a limitless production line of red-top tittle-tattle.

Brazil's superstar striker Ronaldo can breathe a sigh of relief that his supermodel girlfriend Raica Oliveira has pledged never to pose nude. "I never felt right about it. It's not something that would make me proud," said the 22-year-old at a pre-World Cup fashion show in Munich where she modeled 'football lingerie'.

By contrast, Alena Seredova has done 'glamour' work which will help boyfriend and Italian World Cup goalkeeper Gianluigi Buffon take his mind of seeing his name dragged into the Italy football corruption scandal. Meanwhile, Ukraine coach Oleg Blokhin has no problem with players' wives.

He says that if his team, making their World Cup debut, reach the semi-finals, he will insist his men spend time with their wives. "Even those who don't want to go, I will drag them there," said the veteran coach. (AFP)

India’s first e-Wallet launched

India’s first e-Wallet, Wallet365.com has been formally launched on Wednesday. Times of India group’s Managing Director along with Amitabh Bachchan formally launched Wallet365.com at a glittering ceremony in Mumbai.

Wallet365.com is a revolutionary service that enables secure electronic payments. Users can send money to anyone, receive money from anyone, or make payments to businesses. Wallet365.com will also ease payments for online shopping and utility bills. Using Wallet365.com the user can store money electronically.

Wallet365.com is safe and secure for its users. It is 128 bit encrypted and VeriSign certified. Customers are often averse to e-commerce and using credit cards online fearing financial loss. Wallet365.com takes e-commerce beyond credit cards and all financial details are protected during transactions. Customers can use any bank account on Wallet365.com.

Customers can log on and sign up for a FREE e-Wallet account with Wallet365.com and experience the “Future of Money”.

Disruptive Innovation-II

16. One sees that in the 60s, 70s and 80s Japan grew rapidly by following this strategy. In every industry they entered at the low end and then moved up the value chain. By the 90s they had done this in every industry. And therefore by the 90s in every industry they were at the high end. And there is relatively no growth in the high end and therefore for 15 years they have experienced stagnation. In the U.S. one has the facility of venture capital which encourages one to go back to the low end of the market and create market disruption all over again. But in Japan they don’t have a culture of venture capital.

17. In Innovation the creation of new products or services will give one a temporary benefit. But the creation of a new process will give one more staying power.

18. Within the same business it is difficult to find the leader in the sustaining wave as well as in the emergent wave. In order to capitalize on the emergent wave the leader usually creates another business.

19. IBM was able to remain atop its industry when minicomputers disrupted mainframes because it competed in the minicomputer market with a different business unit. And when the personal computer emerged, IBM addressed that disruption by creating an autonomous business unit in Florida.

20. Originally Department Stores were more involved with selling Hardware. As Discount stores entered the Hardware segment, Department stores moved into Clothing and relinquished the Hardware segment. Soon Discount stores moved into clothing and other segments and gradually the Department stores started shutting down. Today only 9 Department Stores remain out of an original number of 315 Department stores.

21. At the highest end of the market there is too much capacity and therefore mergers take place.

22. IBM had a better operating system than Microsoft and a better processor than Intel. IBM could easily have entered the PC market but still continued in the mainframe business and outsourced the operating systems and processors. We need to question whether it is always good to outsource.

23. Integrated firms compete on the basis of functionality and reliability. But as the market needs change to desiring improved speed, responsiveness and customization, the structure moves from being Integrated to being Modular.

24. Interdependent or integrated architectures optimize performance, in terms of functionality and reliability. These architectures are proprietary because each company will develop its own interdependent design to optimize performance in a different way. A modular interface is a clean one. Modular components fit and work together in well-understood and highly defined ways. A modular architecture specifies the fit and function of all elements so completely that it doesn’t matter who makes the components or subsystems, as long as they meet the specifications.

25. IBM as the most integrated competitor in the mainframe computer industry, held a 70 per cent market share but made 95% of the industry’s profits: It had proprietary products, strong cost advantages, and high entry barriers. For the same reasons, from the 50s through t he 70s, General Motors with about 55% of the U.S. automobile market, garnered 80% of the industry’s profits. Most of the firms which were suppliers to IBM and General Motors, in contrast had to make do with subsistence profits year after year. These firms’ experiences are typical. Making highly differentiable products with strong cost advantages creates these circumstances of dominance.

26. When this circumstance changes - when the dominant profitable companies overshoot what their mainstream customers can use - then this game can no longer be played, and the tables begin to turn. Customers will not pay still- higher prices for products they already deem too good. Before long modularity rules, and commoditization sets in. When the relevant dimensions of your product’s performance are determined not by you but by the subsystems that you procure from your suppliers, it becomes difficult to earn anything more than subsistence returns in a product category that used to make a lot of money. When your world becomes modular, you’ll need to look elsewhere in the value chain to make any serious money.

27. When one looks at IBM and Intel one finds that because the architecture of IBM was integrated it did not enter the components segment even though it had the capability of doing so. There was less profit in that segment. But when the market expectations shifted to more speed, customization and responsiveness then Intel opened up its architecture and entered every computer and thus created a modular structure. Intel now solved problems that absorbed IBM’s engineers. And thus commoditized IBM’s engineers. A similar scene was witnessed in the case of Compaq outsourcing to Flextronics and ultimately Flextronics the circuit board manufacturer commoditizing Compaq. The irony is that if Compaq had not outsourced it would have been killed earlier. But because it outsourced it was killed later.

28. As the low cost entrants move forward up the value chain, they trivialize what is left behind so that very little value can be added after disruption.

29. Implant makers have commoditized doctors who are surgeons for, say, ‘hip and knee’. The implant makers have created ‘fool proof and idiot simple’ solutions. Diagnostics have commoditized physicians. Once one has been diagnosed precisely one can then be given standardized therapy. Bloomberg has commoditized Wall Street analysts.

30. Low end disruption or low end businesses address over served customers. That is when existing products and services are ‘too good’ and hence overpriced relative to the value existing customers seek. Wal-Mart is a low end disruptive innovation. It began by offering customers a low-priced, relatively straight-forward product. These customers were over-served.