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Innovation and Business Architectures
Early Prototypes This page has some early thinking for update topics, as well as some random ideas that aren't topical or developed enough to make the updates.
The role of Brand in the Four Factor Model Jeff V. wrote: I was curious - what is your take on the iPod using four factor? My eval says that you have high benefits and easy to buy but dings on easy to use and price. Is it simply a case of a design proposition that is too good to pass up? It is an elegant solution, which could be a wild card in your four factor model. Make a product emotionally compelling enough, and you can overrule maybe two of the four factors. I responded: I did a little bit of work on the iPod, which has been a tremendous success for Apple. This example touches on the power of Brand in certain kinds of products, and Brand extension (pun intended) of the 4 factor model is something that I’m just beginning to work out. Some of my colleagues at Nokia pointed out the same thing. The iPod is much pricier than similar kinds of products. It does have an edge in terms of performance, and that’s where I think brand plays its major role – it gives the product a performance boost above what it would be simply due to its specifications. Brand might also reduce some of the barriers. Apple customers will look to the brand as a badge of approval, so that makes the iPod easy to buy. It would be interesting to see the share of iPod buyers who are also Mac users. My bet would be that it would be much higher than the total number of Mac users in the population. I haven’t used an iPod, so I don’t know how easy to use it really is. Apple’s marketing implies that it’s very easy, and some folks who have bought them say so as well. In this market, it’s certainly positioned as easier to use than the competition. Apple is a trusted brand to these folks, and the iPod delivers on its promise – a rugged, functional product in a cool design. So a trusted brand might succeed in boosting performance and reducing barriers, enabling it to get a premium in price. I think this is a pretty classical formulation – it’s what every marketing department hopes to achieve. This is why many branded new products often come out at a price premium with new features – the company is counting on its brand to cover the price premium.
15 Aug 03 For instance, I keep being tempted to do a piece on outsourcing, because there are all sorts of interesting foreign policy / global big think implications of outsourcing: Wouldn't you rather pay someone in China or India $20 an hour than pay someone in the US $150 an hour, for all sorts of commercial and development reasons? The only reason you wouldn't want to do this is a variant of "NIMBY" (not in my backyard) - which is that the $150 an hour person might be ... you. I heard Jeff Immelt of General Electric talk about this issue, and it was apparent how difficult it was for him to handle.
9 Sep 03 Prasad K, a development manager for a large industrial company located in the midwest, adds: We outsourced some software development work last year and the topic continues to be of interest to us -- The same arguments were made in the 1980's and early 1990's when manufacturing jobs were moving to low cost locations. Isn't the point of globalization (and elimination of world trade barriers) that every one does what they do best and get paid accordingly? If someone is willing to do a job for $20, then that is the price of the job. If one cannot find a way to do it for that price, then one must find a competency where one can demand a better price. All organizations (and locations/countries) have their core competencies (industries?) that enable them to provide products and services in an efficient, and therefore, cost effective manner. The community interest argument doesn't hold because if communities "retain" the work even when they are not the best at it, the work will eventually go away whether someone like GE's Immelt chooses to move the jobs or not. The strength (survival?) of any organization (and community) depends on continually finding ways to do what it does better than anyone else. Alternatively, the organization can (should) find new competencies and reinvent itself. This country has done "(re)inventing" better than anyone else in the past. That is why it continues to be a superpower while other superpowers have faded. To which I responded: This argument, framed as comparative advantage of trade, was first made by David Ricardo in the 1700s, regarding wine growing in Portugal, and it has stood the test of time. What I find a little puzzling is why we don’t hear this argument more in this particular debate – particularly from free market folks. Last little bit on this – I was just on the phone with Quicken technical support, and I asked the guy who was helping me where he was located. After a short pause, he said: “I’m sorry, sir, but for security reasons I can’t tell that to you.” And I didn’t pursue the matter.
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