Keep your nose clean

Although you can’t tell by what I drive, I like cars. I’m not a fanatic, but I appreciate a nice or unusual car when I see it. That’s why I noticed the Nissan Leaf this morning. Then I saw the driver with his finger knuckle-deep in his nose. Yuck! My inner child thought and I turned away. But, like digging for gold, I found a lesson in it.

Two questions quickly sprung to mind:
How many drivers pick their noses? More than I care to think about.
Why did I only notice him? Because I was attracted to his car.

In business we all occasionally do the equivalent of picking our noses. These are the small mistakes or errs in judgement that are often part of the learning curve. But as you or your business become more successful and make more of an impact, those minor transgressions have a greater ability to damage your reputation.

For the people around us or consumers we are trying to attract, they can be split into three basic categories in regards to “nose picking”.

1. Not bothered – These people understand that everyone makes mistakes and aren’t agitated by yours.

2. Suffer in silence – For this group, they don’t tell you, but they turn away or lose faith in you, your business, or your vision. And keep in mind that “in silence” means towards you alone as they will most likely share their opinion with others.

3. Opportunistic rivals – The last group is filled with those waiting for you to make a mistake and then use it to damage you or your business. They use it to simultaneously push you down and lift themselves higher in the public view.

The second and third group are clearly a potential threat. And although the first group is not a concern itself, it be influenced by the other two groups.

Since it’s impossible to stop making mistakes all together, we have to focus on how to minimize the impact they create. One of the best ways to do this is to acknowledge and address the transgressions with the appropriate level of clarity. That way, the negativity felt or generated by others is drastically reduced. When Apple decided to abandon the EPEAT standard for their computers it created a media induced uproar. Apple quickly admitted the err in judgement and scrapped the idea. The story then quickly faded from our collective view.

Did Apple really make a mistake by trying to move away from the EPEAT standard? To groups 2 and 3 it was enough to start a sway of public opinion. But would those groups have push so hard if Apple wasn’t on top? Not likely.

Whether you actually make a mistake or it’s perceived as one, it should be addressed in the same way. Clearly acknowledge it and the steps you plan to take in its resolution. You may not completely recover your reputation, but you’ll at least minimize the damage the situation causes.

And if you drive an electric vehicle, an exotic sports car, or even a pink Cadillac, be careful picking your nose. People are watching.

Am I doing it right?

Incompetence is a constant problem in business. The results of incompetence can range from almost nothing to death (in a factory environment). For supervisors and managers, dealing with this problem is an everyday struggle. Unfortunately, most managers tend to “put out fires” by dealing with the problems as they arise as opposed to taking the preventative measure of managing the individual.

Managing each individual employee helps achieve many things like keeping the lines of communication open, easier delegation of tasks, and of course recognizing potential problems. Knowing about the people under you is just as important as understanding those above you. For upper-level managers this may also mean trusting in the opinions of subordinates regarding their teams.

But before we get any further into managing individuals, let’s look at a list of common reasons for incompetence.

The top 5 reasons (and one more) for incompetence in the workplace:
1. Improper training
2. Belief that their way is better
3. Following examples of others
4. Laziness
5. Rebelliousness towards boss, company, or job
6. Lack of Mental Aptitude

If there is an employee that lacks the mental aptitude to do the job, then it should have been recognized during the hiring process. So, that leaves five other reasons for the issue. All of which can be addressed by directly managing individual.

It may sound obvious, but managing individuals should be the responsibility of their direct supervisors. Initially, general information regarding those individuals should be passed up to the next level of management to be followed by updates when deemed necessary. This pattern should work it’s way to the top of the company.

Since there are so many techniques for managing people and addressing the reasons listed above, I won’t get into them in this post. (It would also make this post ridiculously long.) But what managers should train themselves to do is look for changes in behavior, quality or quantity of work, and competency; good or bad. Recognizing negative changes can help to address them quickly, but also noticing positive changes can help to find strategies or ideas that are working. Once aware of a change, speak to the employee about it in a non-confrontational way in a neutral area. For some, even if they know they’re getting called to the managers office for a positive reason, they still get anxious.

Once an issue is addressed, set a scheduled follow-up with the employee. This will help commit to working towards a solution. Again, this shouldn’t be a formal meeting unless the situation calls for it. Something like, “Let’s see how it goes until next Friday. Then we’ll follow-up and see if things have improved.” The focus of being non-confrontational is a must when dealing with potential problems, that way stress and concern don’t cloud the situation.

Managing the individual is a style that may take some time to develop. There are many books and workshops around that get into the details of it. When finding the best way for your business, don’t feel obligated to adhere to only one method. Any style you choose should be molded to your business and its needs.

Annoying Opportunites

The world is filled with minor annoyances. Whenever we go out, the air is filled with sighs, grumbles, and curses said under breath. Thankfully for our sanity, we are able to ignore this constant stream of negativity. But that blessing is also a curse. By ignoring the annoyances of the world, we inadvertently miss the opportunity to innovate.

The world is full of innovators who found discovered their ideas through annoyances. Henry Ford wanted a faster, more cost effective way to produce cars, Akio Morita wanted to listen to music on the go, and Larry Page and Sergey Brin wanted a better way to find things online. All of these people created things that forever changed the way we look at our world. And all of these ideas came from recognizing that the cause of their annoyances were actually opportunities to create something new.

Of course, every annoyance you see won’t lead to the next Google, but learning to recognize them is the first step in creating innovations that matter. Training yourself or your staff to do it is easy. The first step is developing the habit of noticing an annoyance when you experience it. Since we so often adapt without thinking, this is actually the hardest step. To do this, we can make a control situation by creating an annoyance for ourselves. One example is to move the garbage can in your home or office to another part of the room. Every time you instinctually start for the old location you’ll feel the sting of annoyance and minor frustration when you have to change direction. Since you created the situation yourself, it’ll be easier to stop and take notice of how you’re feeling at that moment.

Once we start noticing annoyances around us, it’s all a matter of due diligence. Start by asking yourself, “Why is this annoying?” Then try to answer the question, “What would make this better?” The second question is obviously more difficult than the first, so don’t worry if you don’t know the answer. That’s what the internet is for!

Is your wallet too thick to fit in the back pocket of your skinny jeans? When you search, you’ll find others with the same problem, but you’ll also find information about slim wallets or smartphone cases with built in wallets. If you search online for a particular problem or issue, you’ll have a good chance of finding others who have had similar experiences. You’ll also find some solutions to your problem. And if you don’t, there may be an opportunity there for innovation.

The fact is that we’ve all missed these opportunities in our lives. The good part is that there an infinite amount of them. All we need to do is train ourselves to see them. The ability to find the problems that need solutions is the key to innovation. Without understanding the problem, finding the solution is next to impossible. And finding a creative solution or innovation could change your life, your business, or even the world.

Wii Lost?

The Wii-U is a failure. For Nintendo fans this statement is a hard one to swallow, but from a purely business standpoint, it’s true. When Nintendo released the Wii-U in November of last year, they hoped to repeat the success of the original Wii in 2007. Unfortunately, the market is a very different place today than it was at that time. The problem is that everyone seemed to understand the situation except for Satoru Iwata, the current president of Nintendo.

In 2007, the iPhone was introduced and began a new handheld revolution. As consumers continued to embrace their smart phones and later tablets, their expectations for gaming software changed dramatically. With introduction of games like Angry Birds, consumers began to realize they could have fun, well produced games on devices they already own at little or no cost. Because of this, the old model of “High Cost = High Quality” fast deteriorated, creating huge losses for handheld and home console markets. But since Nintendo’s market is mostly casual gamers and those under 18, it can be argued that Nintendo is feeling more of that impact than any other console maker.

Nintendo’s latest console, although innovative, stubbornly tries to target the casual gamers and parents while ignoring their desires. The Wii-U is a type of portable gaming device that is awkwardly tethered to the living room, which is completely understandable considering that Nintendo doesn’t want to step on the toes of its own handheld market. So this tethered system in combination with the high cost of software, has many casual gamers and parents turning to devices that are not only portable, but are also multi-functional like iPods, smart phones, or tablets. But the question remains, is it really necessary for Nintendo to continue making home consoles? Or even portable devices in general? No, not really.

Many Nintendo fans will tell you, the allure of the company is in the games. Their simple beauty and elegant design has been the driving force behind Nintendo’s hardware sales for years. The fact is that few third-party titles have ever done as well and many of those companies have stopped producing software for Nintendo’s platform. If we look at the launch of Nintendo’s portable handheld 3DS it’s easy to see when their key franchise titles are not available at launch, Nintendo more than any other console maker, suffers.

One of the biggest problems for all console makers though is the cost of producing the machines themselves. The time and money invested in creating a new console is staggering and may not be recouped at the point of purchase. For Nintendo, this means selling their Wii-U at a loss, then limping into the black once a separate game is purchased. Other types of companies use this model, but it’s usually because there’s no other way for them to clear a profit. But Nintendo has a choice that many have been demanding, sell the games on other platforms. I would go even one better and say stop making hardware all together and focus strictly on game development.

What if we imagine that Nintendo decided to stop making hardware? Is there an exit strategy? Here’s a scenario that might work:

Stage 1 – Porting classic handheld titles to Android and iOS

The library of titles that Nintendo has is immense. And most of those titles are well made and hold up in today’s “retro-stylized” game market. Companies like Square are offering there classic titles on iOS for prices over the $10 mark. Nintendo cult favorites like Pokemon have the potential to outsell some of the top selling iOS and Android titles currently to date.

Stage 2 – Make peripherals for Android and iOS devices

One of the biggest complaints for gaming on a touch screen is the controls and one of Nintendo’s biggest targets when making games is user experience. Making a snap on or lock in case with a controller system to be used with games could solve the problem. Nintendo could sell this type of peripheral for their games and license the technology to other game makers. This type of product could sell for anywhere from $9.99 to $29.99 without any argument. As I mentioned earlier, Nintendo knows how to make software to sell hardware, so this is almost a given.

Stage 3 – Porting classic home console titles to Android and iOS

Once the peripherals user base is large enough, start selling classic home console titles that require (or greatly benefit from) the use of a controller. Other than increasing the number of titles available to consumers, this will also push those lagging behind into purchasing the peripheral.

Stage 4 – Porting the same classic home and handheld titles to other home console marketplaces

With solid footing in the portable device market, moving into Xbox Marketplace or the Playstation Store would be the best move to continue reaching new customers and increasing sales. With no need for a peripheral, the cost would mostly be invested in the porting process. But the main reason for this step is to begin the final stages of transition away from hardware.

Stage 5a – Porting last generation titles to other home consoles with peripherals

Although PS3 and Xbox 360 have movement based control systems, making a peripheral for Wii games may not be necessary but should be done to ensure the quality of the experience for the user. This connectivity is delicate work for programmers porting the games and should not be taken lightly. One game with faulty controls could cause a fear within the market that future titles will suffer from the same issue.

Stage 5b – Porting last generation titles to Android and iOS devices

This stage coincides with Stage 5a

Stage 6 – Port delayed Wii-U titles to other home consoles

Porting Wii-U titles to other home consoles with a delay of at least one year will give owners of the Wii-U the feeling of exclusivity while still maintaining the transition away from hardware manufacturing. Also, at this point every game made for Wii-U should also be designed with other control schemes in mind so that porting will be more cost effective.

Stage 7 – Porting delayed 3DS titles to Android and iOS

The benefits of delaying the sale of new titles on Android and iOS are the same as mentioned in Stage 6, but, the lack of 3D technology on most Android and iOS devices is a problem…albeit a small one. The 3D fad is coming to an end with little complaint from most. If the loss of 3D is a burden to users, they can always purchase some of the 3DS remaining stockpile.

Stage 8 – Announcing the end of hardware manufacturing

As with layoffs, announcing the end of hardware manufacturing has to be timed well enough so that late adopters don’t feel shorted and long time fans don’t feel cheated. Of course, any early leakage of this information could send sales of still available systems plummeting.

At this stage there should be a renewed focus on software development geared towards follow-up titles and new franchises.

Stage 9 – Quick release of key franchise title for non-Wii-U home consoles

A quick release of a key franchise title would solidify Nintendo’s new direction and help motivate current Wii-U owners and Nintendo fans to buy other home consoles. Therefore increasing Nintendo’s future customer base.

This is a very rough strategy, but the possibility is there. Going the software-only route kept Sega from going under, but it could help Nintendo flourish. And with Nintendo’s stocks hovering around $15 per share, it seems like the perfect time to make the jump.

Will Nintendo do it? Eventually, but by Satoru Iwata own words, not while he’s in charge.

Kaizen – The achilles heel of Japan

When the book Kaizen: The Key to Japan’s Competitive Success was released in 1986 Japan was unstoppable. On the back of the tech industry Japan was growing at an astounding rate. It was the start of the Japanese bubble economy. Companies all over the world looked to Japan for guidance or inspiration in every aspect of business. Then it all came to crashing halt. There are thousands of articles online detailing and analyzing the bubble economy. The interesting point is that 20 years after the bubble burst Japanese tech companies are still struggling and the reason is essentially the same as what created it, Kaizen.

Kaizen or CIP (Continuous Improvement Process) as it’s referred to in western countries is the idea of identifying points of improvement in a process and then taking continual, incremental steps to address those points. It’s amazingly logical and surprisingly simple. Where it becomes a problem for many Japanese tech companies is that they’ve taken it too literally and rarely risk doing anything new. For many upper-level managers in there 50s and 60s, with the bubble economy still fresh in there minds they idle the decision making process in a bureaucracy that is almost government-like in nature and using Kaizen as a crutch to avoid making big decisions. They work to protect their image and only do what’s necessary to keep the company afloat until they retire. This has created a system that’s comparable to walking through a tar pit. Slowly moving forward, but always sinking.

What happens when a company abandons Kaizen as the leading factor of their business model? We only need to look at Toyota for the answer. Toyota was one of the major proponents of Kaizen in the 1980s and 1990s and still uses it today, but not in the same capacity. Toyota suffered from the same problems that the Japanese tech industry is facing today. They continuously improved their vehicles making them more reliable, safer, and fuel efficient. The problem was that the vehicles had no personality and few factors visually separated low and high end models. Kaizen was not the answer, as it turns out Akio Toyoda was.

Akio Toyoda was appointment as president of Toyota Motor Company in 2009 and has since instituted sweeping changes in vehicle design and direction for the company. One of the most notable ideas was the recent release of the Toyota 86 (FR-S in the N.A.) in collaboration with Subaru. It’s Toyota’s first sports car since the end of the Supra run in 2002. The Toyota 86 has been extremely well received by critics and the public alike receiving numerous awards and accolades.

Although Akio Toyoda is the company’s new face of this movement, the company has been headed in this direction for over a decade. In 2002 Toyota introduced the Scion sub-brand in North America giving itself a chance to target the youth market with the introduction of its more interesting JDM (Japanese Domestic Market) vehicles without changing the consumers’ image of the Toyota brand.

Another example is the 2003 redesign of the popular Prius hybrid. Designed to be “ugly” it became the flagship vehicle for the green movement. Driving the easily recognizable Prius is like wearing your “environmentalist” badge. This was in mind when the Prius was designed and is an intelligently creative solution. It’s unique styling combined with the sudden boost in fuel prices meant unprecedented demand and months long waiting lists.

Today, with the South Korean tech industry rapidly advancing on Japanese market share, there is no choice but to follow Toyota’s lead and take the risks and make tough decisions. Moving away from concepts like Kaizen and focusing on the risky path of innovation is the only way for the Japanese tech industry to make its long awaited comeback.

Lock-In Model – The best and worst idea for your business

Locking customers into products or services is an old business model. Mobile carriers lock customers in with 2 year contracts and subsidized phones. Then they tighten the lock by changing to new contracts with fewer benefits or higher fees and forcing customers with old contracts to stay “Grandfathered in” or lose their original contracts.

Whether you agree with the Lock-In model or not, it’s never going away. In fact, it’s growing. To decide if you can or should apply it to your business let’s look at a couple of examples that work and couple more that don’t.

Case 1 – iTunes (Investment Lock-In Model)

When Apple released iTunes in 2001 few outside of the company expected it to become the juggernaut it is today. It was the at a time when Napster and piracy ruled the internet. Who would pay for something they could get for free? The answer – a lot of people.

Apple’s Lock-In really took off in 2007 when the iPhone and iPod Touch were released and iOS 2.1 introduced the ability to download apps directly to the devices. The ease of downloading apps, songs, and video content help customers compile huge catalogs of goods that are non-transferable (except for music). Since the buying experience is almost seamless, most customers don’t take notice…until they want to buy a different brand device. And that’s when the Lock-In really pays off.

This Lock-In model demonstrates that the more money a consumer invests into a product, the less likely they are to change products. If a company can figure out where that point is and get more of their customers to it, the company wins.

Case 2 – Home Computer Printer Manufacturers (Risk Lock-In Model)

Printer manufacturers use a common business model that is then connected to a Lock-In. They sell their printers for little profit or even a loss to increase their customer base and market share. Then they sell the ink cartridges at high markups. Since customers will continue to buy cartridges, the companies quickly make it back into the black for each printer sold. The problem that most manufacturers face is how to keep consumers from buying cartridges or refills from competing companies. And that’s how the Risk Lock-In Model came to be.

When it comes to printer manufacturers, the Lock-In is written into the warranty of the printer itself. It generally states that if any other brand of ink cartridge or refill is used in the printer, it will void the warranty of the printer. This scare tactic works well and keeps customers in line since replacing the printer out weighs the savings at the register when buying a new cartridge. Once again, the company wins.

These ideas have worked well for these companies, but it isn’t always the case.

Case 3 – Sony (Proprietary Lock-In)

Sony has continued to suffer from the seldom rewarding idea of creating proprietary products. Using the Memory Stick as an example, Sony created a specially shaped flash memory card for use with their devices. The Lock-In was that the products they produced that used flash memory cards would only accept Memory Sticks. And then priced their Memory Sticks significantly higher than other types of flash cards.

It seems that Sony expected (and continues to expect) consumers to be blinded by the reputation of the brand and buy everything Sony. The problem was that consumers have a better understanding of electronics than they used to and saw past the hype. They were angered by the move and many loyal customers were lost to other brands.

In this case, the Proprietary Lock-In created rigidity in a world where flexibility and choice reign supreme. Today, many Sony flash-using devices include ports for other types of memory. Lesson learned.

Case 4 – OS X 10.8 Mountain Lion (Monopoly Lock-In)

This one is very new and hasn’t created a huge negative impact yet, but it’s indicative of the direction Apple has been moving in for quite some time.

With the introduction of Lion (OS X 10.7) Apple included the App Store where users could buy software quickly, easily, and safely. The App Store is very much like the App Store found on iOS devices, which means Apple receives a cut of every sale. The Lock-In didn’t take place Lion, Apple waited until Mountain Lion.

The media praised Mountain Lion’s price when it was released. It was very reasonable. But many users noticed that once they upgraded to Mountain Lion, their purchased copy of Lion disappeared from the App Store. All of this was part of the Lock-In strategy.

Mountain Lion’s default settings create a Monopoly Lock-In. The default setting for downloading applications is “Mac App Store” only. Which means a user can only download applications from the Apps Store. For advanced users, it’s a minor annoyance, but for the larger general user market, it creates a Lock-In where Apple is guaranteed a cut of the sales. For example, Keka an archiving application can be found on their website for free, but in the App Store costs ¥190.

To avoid any litigation, Apple has cleverly put the setting into the “Security” menu and can successfully argue that it does create a safer experience for the user, but the Lock-In is obvious.

Similar to the Sony situation, Apple is forcing their customers into narrowing user experience and the backlash is beginning to show as the guise of “user experience” is beginning to crack.

The idea of a Lock-In model is a good one. Using a forcing hand to increase customer loyalty isn’t a bad thing, but we have to think about how consumers perspective of the experience. If they feel forced or limited, they will probably go elsewhere. If they see value in the Lock-In, they tend to stay. Unlike cattle, consumers are often aware of the fences your trying to wrangle them into.

 

On the Surface – Welcome

First, thanks for coming. This is really just a way for me to work through some ideas I have in my head about business situations that I’m curious about. If you’re interested and want to follow along, be my guest. If you decide to use any of my thoughts or ideas elsewhere, please give credit to me or the blog. And if you find it useful or know someone that might, share it.

On the Surface is a blog using public information about business and companies and a bit of logical thinking to create insights that anyone can use to improve their business.