The Need for Continual Innovation (Nigel Lake, Part 5 of 10)

Continual Innovation

(Source: Flickr)

This is the fifth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Nigel LakeNigel Lake: If you watch what happened with the iPhone. Jobs had very particular views about the size and shape of phones. The iPhone had evolved quite significantly over time but it was still basically a very similarly shaped device.

When Jobs died the whole organisation sort of thought, we’ve just to keep on making the phone the same way because that’s what Steve Jobs would have done. But that wasn’t really who he was because he was someone who was continually reinventing all these things.

Apple got into a really pretty dark place with the iPhone 5, which just looked so kind of yesterday, and then impressively re-discovered its mojo and ability to say, look that was yesterday and we have to reinvent ourselves. They then created the iPhone 6, which is a tremendously good product and has sold incredibly well.

Tom: So they weren’t responsive to the needs of customers and what people were telling them.

Nigel Lake: That’s right.

People in senior roles got sort of hung up on “there was this guy, and he told us to do everything, and that’s what he would have told us to do” without realising that the world had moved on.

[Steve Jobs] was someone who could do something one day very very passionately, and then have the kind of whatever it takes to say, “that was then and this is now and the world has changed, and maybe we should think differently”.

When he died it left quite a shadow over the organisation but it has somehow reinvented itself. If you think about what happened the first time around when Jobs was booted out, it was a complete disaster. This time around they have managed to continue, reinvent themselves, reinvent the phone product, and bring the watch to market to what seem like quite strong reviews so far.

Tom: I guess it’s yet to be seen how things will play out. One question mark over Apple is that Tim Cook is an operations guy whereas the whole company’s magic is based around innovation, being nimble and being willing to change.

Nigel Lake: It’s going to be an amazing story to watch for the next five years or more to see what happens to that business.

It’s a fascinating thing, because on the one hand it’s hard to think of organisations which have really dominated some particular segment that have survived radical innovation in their segment. And yet on the other hand, you look at the world’s largest companies from a few decades ago and there haven’t necessarily been huge changes in those names. But that’s partly because things like oil and gas are still very big industries.

It’s starting to change quite rapidly now.

The Importance of Having A Strategic End Goal (Nigel Lake, Part 4 of 10)

Strategic End Goal

(Source: Flickr)

This is the fourth instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: Do you think that public companies are disadvantaged in being able to take a longer term view because they’re driven by the quarterly earnings cycle?

Nigel LakeNigel Lake: I’ve spent most of my career in and around public companies advising them on various things. I don’t think that the earnings cycle itself is a problem at all. I think the problem is in how leaders have responded to that earnings cycle.

When analysts and other commentators come begging for some short term faddish response, too many CEOs and management teams have tried to deliver up something which looks a bit like the latest fad with no sense of where they are actually trying to end up as a business.

An example of this is lots of companies which talk about strategy and strategic direction, but the whole notion of a strategy or a direction is completely meaningless unless you actually know where you are trying to end up.

Think about the analogy of getting on a boat or a yacht, and you sail out into the harbour and ask the captain where you are going. The captain will give you the name of the port you’re trying to end up at. She’s not going to tell you that you’re sailing North-North-East because that doesn’t really matter very much right now.

Many companies have got what they would call a strategy, which is some sort of vague sense of direction but with no enunciation whatsoever as to where they are trying to end up in five or ten years time.

Tom: I suppose in some sense it’s very difficult. From the interviews I’ve read, it seems like Steve Jobs didn’t always know exactly what the next thing would be. He had a strong emphasis on fast cycle times, paring the initial products back as much as possible to be as simple as possible, and then seeing what worked and what didn’t work and being very responsive to customers. And yet, he was probably quite a good strategist?

Nigel Lake: It’s fascinating, I think the whole Apple/Jobs story is an absolutely fascinating story, and there is a very interesting tension between exactly what you say.

There is at the same time this deeper guiding purpose or obsession [that Apple has] which is to deliver a product which completely revolutionises an entire industry, globally, by creating a product that is essentially perfect.

It’s not that it’s better than what someone else has got; it’s just the perfect thing.

The major things that Apple has done: the reinvention of the Sony Walkman effectively as a portable music player, the iPhone and then tablets are all things which have – and now query the watch, I have not yet formed views on the watch, but I’m not going to criticise it given the company’s amazing track record – they have completely revolutionised complete industries by delivering products that are essentially perfect.

That is an amazingly high ambition, and it’s difficult to think of other companies that have really set about to do something that dramatically transformational on a world scale.

Finding The Courage to Overcome Vested Interests (Nigel Lake, Part 3 of 10)

Courage to Overcome Vested Interests

(Source: Flickr)

This is the third instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: The problem for decision making is partly about short term thinking, but it seems like the problem might also partly be a result of the principle-agent problem. For example, Steve Jobs was a founder who could make tough calls and bet the company based on his vision of the future; whereas if you are a CEO taking a bonus then you might be very incentivised to ride the current business model and underinvest in new innovations.

Nigel LakeNigel Lake: That’s absolutely spot on.

So, one of the other broad areas that I deal with in my book is the whole concept that we might all believe that the free market is a wonderful thing, but of course there are all sorts of structures in place in the world in which we live which set up all sorts of vested interests in various different ways which then inhibit sensible decision making.

And I absolutely agree with the point that you make about CEOs being in a world where they are probably only going to last three years.

They’re trying to maximise their pay over that period of time because most CEOs of listed companies never get another job. And as a result, the people in those sorts of roles get lured into the belief that taking a short term approach will work really well for them.

Now the irony of course is that that doesn’t necessarily prove to be the case, and that the most successful CEOs are often those that have thought rather long term and have not been the people that have chased the quarterly reporting figures.

But that requires a very different sort of individual, who has the courage to say, look we actually need to go and do this big picture thing which will completely transform our company over the next five years. We’re going to go from a business where none of our value is, in Apple’s case, phones to where a huge part of the value is in the design of phones. And Apple doesn’t even make mobile phones, Foxconn does that.

Breaking with Experience

Innovation involves breaking with the past to create something even more remarkable

Innovation Experience

(Source: Flickr)

THE traditional Experience Curve focuses on increasing production experience which leads to predictable cost reductions.

This kind of experience is relevant in industries that are relatively stable, competitive, and production-intensive.

Experience Curve Example

(Source: Wikipedia)

But what about high tech and creative industries where the lifecycle of a new product is only a couple of years? And what about pretty much every industry nowadays from music distribution to taxi services, which are open to disruption from fast moving well-funded digital entrepreneurs?

In many industries production experience is becoming less important than innovation experience, the track record of being able to consistently break with the past to create something even more remarkable.

To highlight the distinction between “production experience” and “innovation experience” you only need to look at Apple.

Under the leadership of Steve Jobs the company created a string of amazing products which opened up entirely new product categories: the iPod, the iPhone, the iPad. Apple’s strength does not rest on its production experience and, in fact, the company outsources much of its production to Foxconn, a Taiwanese electronics contract manufacturing company.

What about you and your business?

Are you learning how to break with the past, or focusing on creating more of the same but cheaper?

The Transmutability of Desire

Desire can change from one object to another

YOU are most likely familiar with the marketing adage, “Sex sells”.

The concept is a fairly simple one. Sex is a topic of interest because humans have a biological and instinctive desire to reproduce. This hard-wired desire is exploited by marketers to attract people’s attention and, at the same time, market whatever they are selling.

An interesting feature of sex in advertising is that there is often no relationship between the images used (e.g. a buxom young woman) and the product being sold (e.g. an energy drink).

If there is no logical connection between the images and the product, then how does sex actually help sell the product?

There are two ways to think about the influential power of sex in advertising.

1. Gaining attention

Provocative images attract attention. This helps marketers sell products because it is difficult to sell a product that everyone ignores. That being said, just because people see an advertisement doesn’t mean that they will be convinced to buy the product.

Getting attention is only the first step.

2. Arousing desire

Using sex in advertising can help to stimulate desire in the minds of consumers. You might think of desire as a strong feeling of wanting to have something or wishing for something to happen. A man who sees a picture of a buxom young woman might desire what he sees.

For women, attraction is often based on different criteria like commitment, trust and social status. And so, an advertisement aimed at women might look like the one on the left.

The question is, if a marketer can stimulate desire for one thing (e.g. romance on horseback), how does that help the marketer create desire for something completely unrelated (e.g. Ralph Lauren perfume)?

Making a person desire one object can lead them to desire another unrelated object due to the principle of “desire transmutation”. Desire exists in the mind of consumers. Products themselves are not inherently desirable. You only have to look at Apple products from the 80’s to see that products which people believed were desirable at the time are no longer desirable. Each time Apple launches a new product, the Apple marketing machine (and previously the influence of the great Steve Jobs) swings into full gear to fan the flames of desire in the minds of its loyal customers.

Since desire is a state of mind, once a marketer creates desire in the mind of a consumer, this desire can easily be changed from one object to another, from one product to the next. This is the principle of desire transmutation. And it explains why the desire for a buxom young woman can sell energy drinks, and the desire for romance on horseback can sell expensive perfume.

Steve Jobs – farewell

Trust that the dots will connect down the road, love what you do, and remember that you are going to die

TODAY October 5th 2011, we received the sad news that Steve Jobs has departed.

We are lucky to have lived during the same age as Steve Jobs, a man who has put a dent in the universe, and whose lasting impact will be remembered in the same breath as Aristotle, Leonardo da Vinci, and Sir Isaac Newton.

If you have ever used a personal computer, listened to digital music, or used a smart phone, then Steve Jobs has changed the way that you experience the world.  For most of us it would be impossible to imagine using a PC without a mouse, but this is just one of the innovations that were introduced and popularised by Steve Jobs, the visionary.

In 1976, Jobs and his high school friend Stephen Wozniak started Apple in a suburban California garage. Wozniak designed the original Apple I computer to impress his friends at the Homebrew Computer Club and Jobs was immediately inspired.  Jobs saw its potential and took responsibility for marketing this creation to the world. (source: New York Times)

Jobs understood that ideas which spread win.  Apple has always appealed to a different kind of person. A person who believes that things can change, that the world can be a better place, and that we can make a difference.  Apple’s products personify this idea, and the Apple faithful purchase Apple products not merely as a consumption decision but as an expression of their personal identity.  Steve Jobs is their poster boy.

Jobs also understood that ideas which fail to spread lose … even if they embody more advanced technology. Apple has often been criticised by the tech-purists for selling shiny products which contain ordinary technology.  The amusing iPhone4 vs HTC Evo video reflects this lament.  Why would someone buy the iPhone4 when the HTC Evo is technologically superior?  Why indeed.  The answer, which Jobs intuitively understood, is fairly simple.  When you purchase the HTC Evo you only get a phone.  However, when you purchase the iPhone4 you also get to be part of the Apple community, to express your personal identity, and to tell a story about who you are and how the world might be one day.  “Things can be different, things can be better, we can change things.”

Jobs understood how to communicate his ideas effectively.  His keynote speeches at Apple’s Worldwide Developers Conference were extremely popular, were covered extensively by the international press, and were so effective at influencing software developers that they came to be referred to as his “reality distortion field.”  How did he do it?  One technique Jobs used consistently in his communications was the Rule of Three – a simple, powerful and effective tool that you can adopt to improve your speeches, reports and other communications.

Jobs used his powers of persuasion to change the world for the better.  His passion for pursuing the future, and bringing Apple and the rest of the world with him, was captured in his keynote speech at the Macworld Conference and Expo in January 2007 when he concluded by quoting ice hockey legend Wayne Gretzky:

There’s an old Wayne Gretzky quote that I love. “I skate to where the puck is going to be, not where it has been.” And we’ve always tried to do that at Apple. Since the very very beginning. And we always will.

Some would argue that skating passionately into an unknown future is not only risky, but foolish … and Jobs would probably have agreed.  His view of the world was shaped by the 1960s counterculture of the San Francisco Bay Area where he grew up.  And he identified one publication from that period as having a lasting impact on his life: “The Whole Earth Catalog”. Jobs recalled that it was an amazing publication which, after a few years in circulation, left a brief yet memorable farewell message on the back cover of its final issue:

“Stay hungry, stay foolish.”