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Why, How and What

A few years I listened to Tedtalk where the speaker- Simon Sinek elaborates on what sets great companies like Apple apart from others in a highly competitive market. And he breaks it down to the concept of three concentric circles- Why, How and What. This is a concept which is applicable across all industries ( startups to MNCs), functions and individuals.

Why: What is your higher cause or purpose?

How: What skills, credentials and mastery do you or the company need to attain the Why?

What: The end goal or product you achieve.

( Below picture from seer interactive)

The traditional approach which most companies take is to complete answering the What and then focus on the How and Why. But great companies start with the Why question and then answer the How and then What. And this applies to startups too. Many a time, entrepreneurs facing constrained time or resources do not ask the Why question and instead jump to How and then What. This ultimately leads to wasted resources because the What which is developed does not have a correlation to the Why.

True mastery of this concept takes years of practice but will have a profound impact on a company or individuals success in the long run.

Worldwide-Smart-Connected-Device-Forecast-Market-Share-by-Product-Category-2012-2017-iCharts

The recent write down of the acquired Nokia assets by Microsoft does give many pause to ponder on the future of Microsoft. With Microsoft holding less than 3% of smartphone OS share and with the PC market in slow decline, it is essential for Microsoft to gain mind share in the fast growing smartphone market. And this should happen soon before iOS and Android start using there dominant positions in smartphones to penetrate the enterprise PC market.

The underlying theme for Windows 10 holds much promise: “one unifying platform, one unifying experience” across all personal computing devices ( laptops, tablets and smartphones). But consumers in the smartphone industry will not be swayed by this unification experience argument. And without consumers in the smartphone industry adopting Windows 10, the overall strategy would fail completely.

When Microsoft bought Nokia, I was one of the few who actually thought it was a great acquisition. It allowed Microsoft to have hardware expertise thus giving it more control on building a tighter ecosystem within its Windows phone OS as opposed to the issues faced by Android. But sadly Microsoft has not been able to take advantage of it. Millions of consumers would swear by the build quality of Nokia hardware but hardware alone does not lead to smartphone sales. There were two main issues which Microsoft failed to address after the Nokia acquisition:

1. App Store: Any consumer using a smartphone knows that the Windows store is lackluster in App quantity and quality. Some of the popular apps on the iOS and Android phones are not present in the Windows store and even if some are present, their quality is far less than those on iOS and Android. Microsoft has been calling for more developers to come to its platform but the success rate is very very low.

2. Consolidation of smartphone categories: In the past Nokia made the mistake of rolling out smartphones of every size, feature and price out into the market. This strategy is based on the perception that consumers value a range of offerings when buying a smartphone. But Nokia’s offerings were just too many which lead to huge operational costs in the long run. Microsoft continued that mistake by rolling out numerous Lumia models confusing their consumers and not reducing their operational costs. In addition developers who develop apps do not want to spend a long time testing whether apps work on the various Lumia devices, of varying sizes and features, in the market.

Below I list two steps which Microsoft has to implement immediately to survive in the smartphone industry and the personal computing space:

1. Develop Apps: Microsoft faces a chicken and egg issue. No consumers, so no developers to develop apps, and with no apps there are no consumers buying Windows Phones. Microsoft has to take a tactic from their Xbox gaming division. The Xbox division uses a strategy of developing games though its Xbox Studios and at the same time helping 3rd party gaming studios through financial and manpower resources to develop games on its platform. Microsoft should immediately create Windows Phone Studios to develop high quality Windows 10 Apps and promote them to consumers. At the same time, it should look at the list of top 100-500 apps on iOS and Android, call up the companies which develop those apps and form partnerships to develop similar apps on Windows 10. If it means throwing money on these companies to develop those apps then so be it. ( This financial resource is more essential to Microsoft’s future than the recent $2.5B acquisition of Minecraft.  Just imagine how many high quality apps could have been developed to bolster the Windows store). The recent news that iOS and possible Android apps could be ported over to Windows 10 is good news but Microsoft would still need native apps to be developed for the best consumer experience.

2. Categorize your Lumia portfolio: There are just too many Lumia phones on the market with little to no differentiation among themselves. My advice to Microsoft is to categorize the Lumia phones into three distinct categories: Low, Mid and High-end based on price and features. The low-end would address the under $200 range, Mid under $400 and the high-end flagship phone would be priced similar to iPhone. Only 3 phones and no more. This will give enough range for consumers to choose , reduce the difficulty on developing apps by 3rd party developers and reduce the operational costs. But seeing Satya Nadella’s statement recently, I believe Microsoft is trying to concentrate only on a flagship phone and leave the rest of the lower end categories to 3rd party device makers. If Microsoft is trying to do what Google does with its Android ecosystem, then it is even more imperative that Microsoft start creating a robust, high quality Windows App store before 3rd party devices makers even buy into the idea of creating Windows phones.

The Windows 10 launch is coming soon, but if Microsoft does not announce some high quality apps to go along with the launch then the future of the Windows 10 platform is at risk and with it Microsoft’s own global market share in the personal computing space.

Traditionally supply chain was designed and managed as a uniform entity across all Product/Platform SKUs in a company. Independent of the product strategy or intended markets for a particular set of products, all products were considered equal in the supply chain framework. Recently the emphasis is on designing appropriate supply chains for different groups of products since the company’s focus has shifted towards product quality and delivery time to customer rather than just overall supply chain costs.

Mckinsey Supply chain portfolio The adjacent chart is from McKinsey’s research article on supply chain and shows how a consumer durables company has created the right way to identify groups of products which require different supply chain network. In this post I would want to go one step further to identify various other methods of supply chain portfolio management depending on two different industries.

1. Capital Goods Industries: Companies in this industry are mostly B2B focused with long product life cycles. It is best to create a supply chain portfolio wherein products are grouped by the product lifecycle stage which they find themselves in. An aging product/platform might not have similar customer expectations for delivery/quality vs a product in growth phase. So In effect a company might have slightly different supply chain designs depending on whether a product is in Introduction, Growth, Mature or Decline phases.

2. Consumer Durables Industry: As mentioned by the McKinsey article, a good way to create a supply chain portfolio is by grouping products by volatility and demand. The products in this industry have short product life cycles, varying volatility and demand. Though I would go one step further by adding another dimension of Technology.  Some consumer durable products- for example Nike’s Flyknit, constitute a highly technology process to manufacture and therefore the location of manufacturing plants are deeply influenced by this technology factor.

global-manufacturing-locationsSupply chain network design strategies depend on a set of criteria which has changed over the past decade. Previously the most relevant criteria for location of manufacturing plants was purely cost driven whereas now the criteria is more revenue driven. Part of this realignment is due to the increased influence of supply chain in corporate strategy for competitive differentiation in gaining/retaining market share.

The movement of MNC’s global manufacturing plants to Asia in 1990s to 2000s was to reduce costs and take advantage of economies of scale. But the new emphasis for supply chain design is on having manufacturing locations closer to demand and innovation. This has two distinct advantages:

1. Customization Option: By been closer to demand, manufacturing plants catered to specific regions can react dynamically to allow customers to customize products in varying degrees and deliver these products asap.

2. Process Innovation: In many industries, product innovation alone cannot prove as an effective differentiator from competitors. Process innovation is much harder to replicate and can be a true differentiator in the long run. But this can only be achieved when the product design team is close to the manufacturing process teams so that a mutually collaborative environment can be created for product development.

So does it mean that all MNC’s should consider Distributed manufacturing with 4 major locations in Asia, Europe, USA and South America? I would say no. Centralized manufacturing is still relevant to many companies. For those companies whose corporate/brand strategy is based on cost leadership, it is better to chose a Centralized manufacturing supply chain design due to the effective cost reductions due to such practices. For companies whose corporate/brand strategy is based on differentiation, it is better to chose Distributed manufacturing since these company’s higher priced products can absorb the increased costs of Distributed manufacturing while offering better customer service and innovative features to customers.

Sony is on an uptick

Last year I made a case for why Sony should not break up as suggested by various analysts and shareholder activists.

(https://mbatraveller.wordpress.com/2013/06/01/should-sony-break-up/)

One year on, my thoughts are justified seeing the impressive performance Sony is building in its Playstation brand and using it and its other Media offerings as the foundation to rebuild its other consumer electronics businesses. The future of the consumer electronic industry is not hardware or software or services. It is all three but driven by content. Years ago “Content is King” was the oft repeated adage but it was forgotten or sidestepped. But this is changing going forward. As innovation stagnates or YoY product offerings become evolutionary rather than revolutionary, companies need to look at in-house content as a way to build new customer relationships and reduce churn. For example: Netflix is pushing forward with their service offerings through new content developed in-house. And if this trend stays true which I think it will in the next few years, Sony is best placed among all the consumer electronics companies to pull ahead.

Sony has an impressive catalog of content from movies, TV shows and video games earning it a loyal following among its consumers. Using this content, Sony is pushing ahead its hardware and network services products to consumers by making its content exclusive or with added value on these products. Will other companies like Apple or Samsung or Google follow suit in developing their own content to fuel market growth in their core product offerings? As long they can keep launching innovative breakthrough products the need will not arise, but then the important question is, can they keep continuing to do so?

The age old ideology of “Work Hard, Play Hard” is ingrained within our society as the ideal state. Companies swear by it and employees practice it to achieve success. But is it the gold standard that we should still adhere to?

Work Hard, Play Hard ( WHPH) effectively means to concentrate on your work or play, with diligence and commitment. And this is indeed a noble aim. But WHPH in recent years has also meant that you Work Hard literally in terms of number of hours spent at work (with no regard for productivity), and in Play Hard to be aggressive and push for win at any cost (without any regard to game situation). The above leads to employees committing work hours for accomplishing tasks without spending time to how to do things better or lead to sportsmen without the ability to adapt their game to changing conditions.

I believe that Work Smart, Play Smart (WSPS) is a better ideology to live by. Efficiency is the name of the game in life whether you are working or playing on the sports field. A person needs to strategize and find the best way (ethically), with least resources, to accomplish his work or to win on the sporting arena. WSPS does not state that you should work less hours or be less aggressive while playing. What it emphasizes on is productivity of each individual’s actions and to be mindful of your work/play environment, so as to adapt your approach to eventual success whether at work or on the sports-field.

Image

* Above from Gartner Research

There was a time when Apple’s iOS was the only mobile software that was relevant to App developers. But Android broke that trend and is currently the No1 Mobile software platform in terms of market share. Windows Mobile with the new Nokia Lumia is the new kid on the block and is currently beating blackberry OS handsomely in taking market share but it is not seen as a true contender to iOS or Android.

But the above graph shows that the fight for Mobile OS will no longer be between iOS and Android but instead a 3 way fight with Windows Mobile entering the picture. The above graph will rightfully be contested by iOS and Android loyalists who currently look at Windows Mobile as half baked and inefficient. But is that true?

I myself use an iPhone and have on several occasions tried both Android and Windows Mobile. And to be frank, I have to say that the new Windows 8.1 is really good and can stand up to both iOS an Android in terms of features and functionality. Combine Windows 8.1 with Nokia’s hardware powers in the Lumia and you have a very good phone in your hands.  In fact Canalys has recently put out a report that Windows Mobile is beating iOS by market share % in 19 countries in 2013. Apple has to really up its ante with the iPhone 6 or else it risks the danger of been seen as just another smartphone instead of being a cut above the rest. ( And having a bigger size is not game changing in my opinion).

The new Nokia Lumia phones of 630, 635 and 930 ( all on Windows 8.1) will only accelerate Windows adoption at the expense of both Android and iOS. Microsoft has been ridiculed in many intellectual circles for buying Nokia, but in my mind it was a bold decision and the best that Steve Ballmer ever did in his tenure at Microsoft. Ironically it came just before he stepped down from the CEO role. With emerging markets fueling smartphone adoption, the Lumia brand with its lower price point and great build quality both in hardware and software have the advantage over iOS. In addition by having a tighter OS platform with less buggy features,  inbuilt Windows office etc as compared to Android, gives Windows Mobile an edge. Now that does not mean that Android and iOS will become irrelevant or lose market share substantially, but it would certainly mean that Windows phone would gain higher market share in emerging markets as compared to the other platforms.