Guy Kawasaki – Enchantment

**Management Blog   Article and Video

The pillars of customer enchantment

“A new book by venture capitalist Guy Kawasaki entitled Enchantment argues that brands must be likeable to be successful, BNET reports.

Kawasaki claims many marketers are so fixated by engagement they are ignoring what he calls the three pillars of enchantment: likability, trustworthiness and a great cause.

In this video Kawasaki outlines how organisations can boost their enchantment capabilities.”  – Article and Video

Costly lesson on outsourcing

**By Michael Hiltzik   Article

787 Dreamliner teaches Boeing costly lesson on outsourcing

“The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won’t be boarding until this fall, if then. Some of the delay stems from the plane’s advances in design, engineering and material, which made it harder to build. A two-month machinists strike in 2008 didn’t help.

But much of the blame belongs to the company’s quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing’s dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house. …

Boeing’s goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits. … Some subcontractors couldn’t meet their output quotas, creating huge production logjams when critical parts weren’t available in the necessary sequence.

Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints. Some then farmed out their engineering to their own subcontractors … That further reduced Boeing’s ability to supervise design and manufacture. At least one major supplier didn’t even have an engineering department when it won its contract ….”  – Article

Every plant on a barge

**The Week   Article

“Why aren’t U.S. corporations hiring?
Actually, many of them are. They’re just not hiring Americans. In the two years after the Wall Street meltdown triggered the Great Recession, large American corporations slashed U.S. payrolls by a net of 500,000 jobs. At the same time, they hired 729,000 workers overseas. …

When did offshoring become so prevalent?
The trend began in earnest in the late 1970s at large manufacturers such as General Electric. GE’s then CEO, Jack Welch, who was widely respected by other corporate chieftains, argued that public corporations owe their primary allegiance to stockholders, not employees. Therefore, Welch said, companies should seek to lower costs and maximize profits by moving operations wherever is cheapest. “Ideally,” Welch said, “you’d have every plant you own on a barge to move with currencies and changes in the economy.” Not only did GE offshore much of its manufacturing, so did its parts suppliers, which were instructed at GE-orchestrated “supplier migration seminars” to “migrate or be out of business.”” – Article

Users thank you by paying you

**By Ryan Kim Article

“Marco Arment, the former CTO of the Tumblr blog platform, is best known these days for his time-shifting reading app Instapaper. But he could start a side-job as a financial advisor to start-ups. His motto: Get the money from your customers, not investors.

Arment’s more traditional take is built largely on the idea that if he puts out a good product, there’s no shame in asking customers to pay for it. And the more they pay, the less he needs to rely on outside investors. Arment said many developers are of the mindset that they need to amass a huge number of eyeballs through free services. But they don’t focus enough on building a solid product that can command loyalty and payment from consumers, and instead try to gain profitability through advertising and turning to outside venture capital. …

Arment launched Instapaper as a free website in January 2008 and became profitable later that fall when he first began selling a paid iPhone app alongside a free version. He’s been profitable ever since. … Though Arment maintains a free iPhone app, he said the focus of the company has been on the paid versions which are updated first …

Let Users Thank You by Paying You

That’s what’s allowed Arment to really focus on the paid segment. In fact, he still questions the value of the free version at times because it can leave a more negative impression for users with its limited set of features.”  Article

Kanab, Utah or Augusta, Georgia

**By Jessica Stillman Article

‘Managers thinking of establishing virtual teams may have visions of the best and brightest in New York, San Francisco and Shanghai dancing in their heads. The untapped workers of rural places and small cities like Kanab, Utah or Augusta, Ga. probably feature less often. Now the proponents of a still embryonic but expanding trend known as “rural sourcing” are trying to change that. …

Before imagining dreary call centers springing up in Nowhereville, U.S.A. staffed by hordes of marginally skilled drones, consider this profile of Atlanta-based firm Rural Sourcing, one of around 20 U.S. companies that are locating skilled IT-workers in small towns — often those near universities with plenty of job-hungry graduates — to take advantage of lower living and labor costs, higher quality of life and an underutilized talent pool. …

Rural Sourcing chief executive Monty Hamilton reports that his employees are:

in places where … $150,000 still buys you a great house with a great piece of property, where people want to stay and raise their families.

Obviously, outsourcing abroad isn’t disappearing anytime soon, and for some positions, the best-qualified applicants will still be found in major cities. But could looking for virtual team members in small towns, whether through a firm like Rural Sourcing or independently, be a triple win for your organization – good for costs, good for workers and even good for small towns (and your PR department), too?” – Article

Apple biggest competitor

**by Saeed   Article

“… before most of Apple’s competitors have established their first generation products in response to the iPad, Apple announced a new, faster, thinner, less expensive upgraded version of their product: essentially obsoleting the original iPad. And this strategy is not new to Apple. Look a the history and evolution of the iPod, and you’ll see the same pattern. Year after year, newer, more feature laden products were introduced, with more storage, video playback, video recording etc. driving new demand and staying well ahead of any competitors like the Zune.

Apple was it’s own biggest competitor. Given their dominant position in portable audio/video market, why would they let anyone else take market share? And looking at the tablet market, it looks like Apple is following the same pattern with the iPad. A 3rd edition iPad is already rumoured to be coming out by the end of 2011. Can Apple’s competitors keep pace?

Now ask yourself, how does your own product strategy compare to this? Are you in a position to obsolete your own products, or will you let your competitors do that for you?” - Article

Let’s bring it home

**By Brendan I. Koerner, wired.com Article

Made in America: small businesses buck the offshoring trend

“In early 2010, somewhere high above the northern hemisphere, Mark Krywko decided he’d had enough. The CEO of Sleek Audio, a purveyor of high-end earphones, Krywko was flying home to Florida after yet another frustrating visit to Dongguan, China, where a contract factory assembled the majority of his company’s products. He and his son, Jason, Sleek Audio’s cofounder, made the long trip every few months to troubleshoot quality flaws. Every time the Krywkos visited Dongguan, their Chinese partners assured them everything was under control. Those promises almost always proved empty.

As he whiled away the airborne hours, Krywko made a mental list of all the manufacturing glitches that had nearly wrecked his company. There was the entire shipment of 10,000 earphones that Sleek Audio had to discard because they were improperly welded, a mistake that cost the company millions. Then there were the delivery delays caused by the factory’s lackadaisical approach to deadlines, which forced the Krywkos to spend a fortune air-freighting products to the US. Even when orders were produced on schedule, Krywko wasn’t too pleased with the situation: The company always had precious cash tied up in inventory that took months to arrive after the prototypes had been approved.

The headaches had finally become too exasperating to bear. And so, on that flight, he turned to Jason and said that he was done with Dongguan. “I can’t do it anymore,” he said. “Let’s bring it home.””  – Article

Combating Cannibalization

“Cannibalization. It’s an awful word, isn’t it? …It’s a critical topic for many companies. I bet many readers have had a project shut down or seriously altered because of corporate fears of cannibalization — the idea that a lower-priced product might eat away at the market of a higher-priced one. It’s not that the fears are ungrounded. After all, what company would want to replace a high-priced product with a low-priced product? That’s a good way to end up on the corporate chopping block. But companies must come to grips with their cannibalization concerns, because getting overly defensive can curtail powerful growth strategies.

The topic came up on the panel I moderated in Singapore the other week. Shamik Desgupta, the head of Medtronic’s CRDM division in Asia, noted how he has to deal with a strange but real challenge: Medtronic’s core business is, well, amazingly profitable. The company’s gross margins are around 75%, and its net margins after taxes are about 20%. Almost anything looks bad in comparison. So how do you combat cannibalization concerns? Three ideas emerged from the panel discussion. …” – Article

Souring on outsourcing

“According to a survey of 100 chief financial officers at technology companies by BDO USA, LLP, just 35 percent said they are currently outsourcing services or manufacturing to companies outside of the US. This represents a 43 percent decrease from the 2009 high when 62 percent of companies were outsourcing and a slight decline from 2010 (37 percent). What’s more, the 65 percent that are not outsourcing would not consider going overseas even if they did decide to farm out production. Rather, they would outsource within the US (25 percent) or Canada (13 percent).” – Article

Be the only one

Source

Becoming customer-centric and data-drive

“No company will tell you, ‘I don’t want to be customer centric,’ but do you know the difference between taking an inside-out versus an outside-in approach?” – Ranjay Gulati

“Most companies (small to Fortune 500 and everything in between) are not customer-centric—even if they think they might be (market-oriented or customer-focused isn’t the same, but they are a great start!). Driven by revenue generation, product and service development (i.e. profit centers) usually takes the lead and determines the hierarchy, culture and power within the organization. While products and services may be innovative, creative, and useful often the complete inward focus creates a fundamental disconnect between function and actually solving a customer’s challenges—from the customer’s perspective—and therefore companies only gain a temporary brand loyalty foothold. …

the “Five R’s” of IMC help companies to focus on reversing the traditional notion of value. That is, the customer determines what is valuable, not the company (not great news for fans of value prop creation).” - Article

Hire a jazz musician, a dancer, or a captain in the Israeli army

“Over the years, as I’ve studied high-impact organizations that are changing the game in their fields, they’ve adopted a range of strategies and business models. But they all agree on one core “people” proposition: They hire for attitude and train for skill. They believe that one of the biggest challenges they face is to fill their ranks with executives and front-line employees whose personal values are in sync with the values that make the organization tick. As a result, they believe that character counts for more than credentials.

Arkadi Kuhlmann, founder and CEO of ING Direct USA, has invented a whole new approach to retail banking. Over the past decade, as he has recruited thousands of employees to his organization, he has made it a point not to look to his competitors as a source of talent. “If you want to renew and re-energize an industry,” he told me, “don’t hire people from that industry. You’ve got to untrain them and then retrain them. I’d rather hire a jazz musician, a dancer, or a captain in the Israeli army. They can learn about banking. It’s much harder for bankers to unlearn their bad habits.”" – Article

Why you should charge more

“The  video at the link below reminded me again why it’s important not to be the cheapest product or service provider in your market. How much you charge is directly related to the type AND quality of customer you get. … you must charge a premium price so you have a large margin to provide an extraordinary value & experience. By charging more, you can do more “high level” activities and over deliver.

There are psychological advantages to charging a premium as well.

Those that pay more for a service are generally better customers, value it more, and usually make the most of their investment. These clients are the ones that give you the best testimonials.

If you give away too much for free, others don’t value you/your service as much in the long-term. … Start to really think about strategic positioning in your local or national market and how you can provide 10x as much value for the premium price you’re going to charge. Also, what can you do to be different and make doing business with your company fun? ” – Article

A measly $4.38

“I spent a day crowdsourcing for Amazon’s Mechanical Turk and all I have to show for eight hours in an online work marketplace is a measly $4.38. …

It’s 8 a.m. on a Saturday morning and I’m ready to make some money. The coffee’s kicking in and I’ve logged on to Amazon.com’s (AMZN) Mechanical Turk. It’s an online marketplace that matches workers with employers willing to pay on a per-piece basis for such tasks as verifying addresses, transcribing interviews, and translating text.

I’m no stranger to grunt work. I worked my way through college. Early in my subsequent career, I held stints as an editorial assistant—which meant a lot of typing, photocopying, and schlepping lattes for editors in exchange for the occasional byline.

None of that could have prepared me for Mechanical Turk, which posts jobs—known as “Human Intelligence Tasks”—in a format that resembles a job board.” – Article

The Microworkers

A new breed of online worker is paid by the task

“When Julia Lee first heard of Tongal, she thought it was a scam. Tongal pays people—anyone with a good idea, really—to create online videos for companies such as Mattel (MAT), Allstate (ALL), and Popchips. Companies typically pay $15,000 to $20,000 for each project they post on Tongal’s website. Tongal runs the projects like contests. Yet, instead of a winner-take-all approach, it breaks up the projects into stages, such as ideas and videos. The top-five ideas are rewarded with cash and then participants in the video phase can use any of those five ideas to create the video.

Lee’s first submission, an idea for a 30-second commercial for a wine-related iPhone app won $1,000 and it only took three hours of work. When she created an animated video for a nonprofit, she earned $4,000. There have also been projects where her ideas or videos didn’t make the top five, so she didn’t make any money. Still, in the past year, Lee, 36, has earned more than $6,000 for about 100 hours of work, or $60 an hour on average. …

The idea of breaking up a job into small pieces and then using the Internet to find workers to do those tasks was pioneered by LiveOps about a decade ago and Amazon.com’s (AMZN) Mechanical Turk in 2005. LiveOps lets call-center workers sign on for shifts in 30-minute increments and then uses the Web to route calls to them. Mechanical Turk pays per task—often less than 50 cents—for quick jobs like checking Web pages for errors or transcribing audio recordings.

The trend, which goes by many names—crowdsourcing, the human cloud, microwork—uses the Internet to access workers around the world for short-term projects that pay a few bucks to hundreds of dollars per hour. The tasks might require a few minutes or a few days to complete.” – Article

11 different jobs, 200-300 projects

   Thomas Frey

“The average person that turns 30 years old in the U.S. today has worked 11 different jobs. In just 10 years, the average person who turns 30 will have worked 200-300 different projects. Business is becoming very fluid in how it operates, and the driving force behind this liquefaction is a digital network that connects buyers with sellers faster and more efficiently than ever in the past. …

Business colonies are an evolving new kind of organizational structure designed around matching talent with pending work projects. The operation will revolve around some combination of resident people based in a physical facility and a non-resident virtual workforce. Some will forgo the cost of the physical facility completely, opting instead to form around an entirely virtual communications structure.

Most will be organized around a topical area best suited for the talent base of the core team. As an example, a team of photonics engineers will attract projects best suited for that kind of talent. Likewise, a working group of programmers specializing in computer gaming applications will serve as a magnet for new gaming projects.

In some instances, large corporations will launch their own business colonies as a way to expand capability without adding to their headcount. Staffed with a few project managers, the company will use the colony as a proving ground for experimental assignments best performed outside of the cultural bounds of existing workflow.’ – Article

The Power of the Platform

“SIZE is the enemy of growth. It is one of the unwritten laws of business, a matter of simple percentages. After all, when a company has $1 billion in yearly sales, an extra $1 billion doubles its size. Add $1 billion in new business to a $10 billion-a-year company, and it amounts to just 10 percent growth. The size-growth tradeoff seems inevitable, an inescapable force like gravity. Try telling that to Apple, the corporate giant that two weeks ago reported a 71 percent jump in quarterly sales. Apple generates revenue at the rate of $100 billion a year. … “Apple has hit that magical combination of gradually shifting from a product to a platform strategy” …

Successful platforms aren’t confined to the technology industry. America’s interstate highway system, built by the government, could also be seen as platform. The more that people traveled it, the more opportunity it created for businesses and towns linked to its transportation network — and the larger the market for Detroit automakers. A Barbie doll, Mr. Cusumano notes, qualifies as a platform, too. Legions of outside suppliers make clothes, accessories and toys for the doll, while online Barbie fan clubs nurture sales. …

Oracle has built a rival computing platform, surrounding its database software with business applications and hardware. Google’s search service, combined with its in-house advertising marketplace, is the leading Internet platform strategy. In personal computers, Microsoft has been the platform-strategy master. Its Windows operating system running Microsoft’s Office productivity applications is probably the most lucrative product platform in history.” – Article

 

To be charitable – Google hubris

“JUST before Google first sold its shares to the public in 2004, Larry Page, one of its founders, excited the nonprofit world with a bold commitment to philanthropy. He vowed to dedicate about 1 percent of Google’s profits, 1 percent of its equity and a significant amount of its employees’ time to the effort, which became known as Google.org, or simply DotOrg. … Although Google intended to tackle major problems like climate change, global poverty and the spread of pandemic diseases, it declared that DotOrg would not be “conventional” — a four-letter word in Google-speak. For starters, the organization would operate in part as a business, thus freeing itself from various constraints placed on nonprofit groups. …

Nearly five years later, however, the hyperbole looks more like hubris. DotOrg has narrowed to just … engineering-related projects that often are the outgrowth of existing Google products. … Although Google gives tens of millions of dollars to charity each year and says the overall company is meeting its 1 percent giving goal, DotOrg itself is no longer making grants to nonprofit groups or financing new companies.” – Article

The Power of the Platform

“The combination of hardware, software and services is what corporate executives, economists and analysts call a platform. Successful technology platforms sustain and reinforce growth. And this self-reinforcing cycle is known as a network effect. It helps the platform owner and raises a barrier to competitors. “Apple has hit that magical combination of gradually shifting from a product to a platform strategy” …

Successful platforms aren’t confined to the technology industry. America’s interstate highway system, built by the government, could also be seen as platform. The more that people traveled it, the more opportunity it created for businesses and towns linked to its transportation network — and the larger the market for Detroit automakers. A Barbie doll, Mr. Cusumano notes, qualifies as a platform, too. Legions of outside suppliers make clothes, accessories and toys for the doll, while online Barbie fan clubs nurture sales.” – Article

China “not as a host but as a home”

“NINETY minutes north-east of Beijing lies what may be the future of medical technology. Weigao, a Chinese firm that started as a state-owned “township enterprise”, has built a research and manufacturing centre where the laboratories are surprisingly chilly. Only the clean room, it seems, is fully climate-controlled. …

Though cold, Weigao’s labs are a steaming cauldron of creativity. Medtronic, a giant American maker of medical devices, entered a joint venture with the Chinese firm two years ago. Its designers and engineers work side by side with local talent, and have already launched half a dozen inexpensive, novel products that Medtronic would not have made on its own. This is new territory for Medtronic, which has hitherto made high-end, costly kit. Simon Li, the well-connected head of the joint venture, says that three things persuaded the American firm to see China “not as a host but as a home”.” – Article

Microsoft desperately needs to …

“I’ll start with a rundown of mergers and acquisitions announced by major Internet and tech companies since the beginning of this year, which, notably, is less than a month ago:

Google acquired eBook Technologies (12 Jan), SayNow and fflick (25 Jan)

Facebook acquired Rel8tion (25 Jan)

Amazon acquired LOVEFiLM (20 Jan)

Skype acquired Qik (13 Jan)

Yahoo7 (a joint venture between Seven Media Group and Yahoo) acquired Spreets (21 Jan)

Groupon acquired SoSasta, Grouper, Twangoo (11 Jan) and GroupsMore (26 Jan)

Zynga acquired Flock (5 Jan) and Area/Code (21 Jan)

LinkedIn acquired CardMunch (26 Jan)

Salesforce acquired DimDim (6 Jan)

LivingSocial bought a majority stake in Let’s Bonus (13 Jan).

Dell acquired SecureWorks (3 Jan)

Concur acquired TripIt (13 Jan)

I could go on for a while, but by now you see where I’m going with this.

Since October 2010, Microsoft has announced exactly zero acquisitions, joining struggling companies like Myspace and Nokia for that dubious honor ….

Then there’s of course Apple, which has been notoriously non-acquisitive ever since the company was founded back in the seventies.

In fact, for the full year of 2010, Microsoft announced only two acquisitions of small companies, namely Canesta and AVIcode. The contrast with rival Google’s M&A activity (roughly 25 acquisitions in 2010) was particularly staggering.” -Article

Mexico vs. China

“The Mexican economy is getting a helping hand from unlikely allies: Chinese workers whose rising wages are leading more companies to build factories in Mexico. Meco Corporation, a U.S. maker of folding chairs and barbecue grills, is shifting production from China to Mexico after wages at its Chinese operations more than doubled since 2007. …

For the first time since China entered the World Trade Organization in 2001 and became an exporting superpower, Mexico posted a bigger gain in U.S. market share than its Asian rival during the first 11 months of 2010.

Mexico probably ended 2010 with just over 12% of the U.S. import market, its largest share ever. Mexican factory wages are now about 14% higher than those in China, the Mexican finance ministry estimates. In 2002, officials calculate they were 240% higher, canceling out Mexico’s natural advantage of proximity. This advantage has also been highlighted by a rise in shipping fuels to two-year highs, making shipping goods across the Pacific a less attractive option.” - Article

Completely asymmetric business models

““The reason why ARM is going to kill the microprocessor is not because Intel will not eventually produce an Atom [Intel's low-power microprocessor] that might be as good as an ARM, but because Intel has the wrong business model,” said Dr. Hauser. “People in the mobile phone architecture do not buy microprocessors. So if you sell microprocessors you have the wrong model. They license them. So it’s not Intel vs. ARM, it is Intel vs. every single semiconductor company in the world.”

… ARM licensees use a different model than Intel. The development of an ARM-based microprocessor is done in a modular way; in contrast to the integrated way that Intel builds their products. ARM supplies a license, and designers build the chip adding various other circuits like Bluetooth or music decoding on the same silicon as the processor creating so-called SOC (system on a chip). …

In contrast, Intel has a proprietary microprocessor architecture that is not available for licensing and they have their own designers and their own fabs to build chips that they sell from a catalog to device builders. … Because of the differences in business models, the markets for SOC and microprocessors are diverging rapidly with subsequent business model priorities becoming completely asymmetric.” – Article