Category: Business Page 5 of 18

The Innovator’s Dilemma – Book Review

On September 19, 2010

The Innovator’s Dilemma by Clayton M Christensen is one of the best business books I have ever read. It focuses on the practical aspects of innovation, with two key points (for me at least):

You are most vulnerable when you are most profitable
You need to create the start-up that undermines your most profitable products before someone else does
New markets need simple, cheap products which hit a critical new requirement

This book is great inspiration for those seeking to become entrepreneurs, it shows practical examples of where start-ups have seized on opportunities and completely blind-sided the highly profitable incumbent. That’s the dream right? It also serves as a great warning to those in big business who feel chasing the margins instead of innovation is the path to success. It certainly puts forward a compelling argument, one that even NASA seems to think has merit.

Perhaps margins should be the guide for businesses, but they should work on a goal of an average margin across all their products instead. That way they can maintain a balance of high profitability mature businesses with low profitability emerging businesses. Of course this would need to be combined with some “profit margins must never decrease on a product” rule. Doing this without cannibalising your own offerings (by differentiating based on high end vs low end customers) however is a very fine line to tread.

The other practical reflection I had reading this book was on the Engineering vs Sales argument. Which side is better equipped to run a successful business? I am still yet to work anywhere that balances these two sides perfectly, it always seems to fall one way or the other. My thoughts after reading this book were that an emerging organisation needs to be run by the engineers (focus on product success, not profits or impossible projections) and mature businesses by sales people (focus on profits, finding upmarket customers).

What did you get out of this book?

Learning business by charts

By Scott Savage

On August 4, 2010

In Business, Internet, Microsoft

I am someone who learns visually. I absorb charts, screenshots, videos etc. a lot faster than any other medium. Business knowledge is something that often doesn’t come in this format however (perhaps why the first business discipline I learned was marketing). However I have found a Twitter feed (yes, there is useful content on Twitter) that I have really grown to love. http://twitter.com/chartoftheday

This graph was used to illustrate how poorly Microsoft Office 2010 was performing sales-wise, but wow what a difference between Windows Vista (Jan 2007 launch) and Windows 7 ( Oct 2009 launch). It completely masks the decline in Office sales, even though Office sales are obviously an equally big cash cow for Microsoft. It also makes the Server and Tools slice of the pie look tiny, even though it actually represents $1b a year in operating profit.

I also liked this chart of how Apple cannibalised the entire mobile phone industries’ sales with the iPhone. I am reading the Innovators Dilemma at the moment, and the release of a well executed touch screen phone certainly represents a disruptive technology in my eyes. It still amazes me that such a massive market filled with well established players can just be turned on its head in a few short years. More specifically Nokia’s share price copped a beating ever since the release of the iPhone, the subject of yet another chart. What is interesting to me is that Apple’s rapid rise ironically precipitated a huge boom in the adoption of open source mobile software in Android. I guess that the previous market leaders had their hands full competing with Apple’s hardware and didn’t have the time or resources to produce new software from scratch.

There are plenty more charts out there that will make you stop and think, and each one can be read into (rightly or wrongly) 100 different ways.

Crossing the Chasm by Geoffery A. Moore – Book Review

By Scott Savage

On June 21, 2010

In Business, marketing

I have just finished reading Crossing the Chasm (Revised Edition) by Geoffery A. Moore. I purchased this book on Amazon after seeing it on a number of Googler’s Amazon wish-lists on LinkedIn, which is a good way to prepare for an interview with a new company! Truthfully however I decided to read the book because I have a deep appreciation of marketing and a strong desire to be an entrepreneur.

The Whole Product concept instantly resonated with me. The only thing worse than an engineer that thinks “I built it, now I just have to wait for them to come” is a sales person who thinks “we need a custom version for every customer who promises millions”. The central theme to the book is that getting a product to be successful is like organising a battle; from amassing a strong force to landing on the beach and finally taking the flag. At each stage there is a huge pit of despair that you can easily fall into. The key to it is where you spend your effort. Don’t focus too much on satisfying every product need, but just enough to appeal to a mass market. Don’t focus too much on a sophisticated marketing message, customers will get confused by and forget anything that is longer than two sentences.

One of the key learnings for me was that you shouldn’t pitch your product as a one of a kind, because nothing freaks a pragmatic buyer out more than having nothing to compare you with. How can you make a decision without a reasonable comparison? First you need to establish a market alternative (a familiar problem you are solving in an innovative new way) and secondly you establish a product alternative (a familiar solution that you have uniquely tailored to this application). By drawing a line between these two points of reference, you have created a new niche that customers will understand and appreciate.

The only aspects of this book I didn’t like were some technology references were a little outdated (even the revised edition is now 11 years old). I understand the historical examples where there was a conclusion, but some predictions are a little off (although probably good “what went wrong?” case studies). I also felt the book was a little repetitive in places, with the author jumping ahead and back again.

Overall however it was a great book and really thought provoking. It is a hard topic from my perspective because how do you teach minimalism, balance and keeping things simple? It is easy to go off on a tangent and over-invest in the area that has your short attention span as an entrepreneur. I guess not seeing the forest for the trees is a simple analogy? Anyway, I will no doubt use this book as a source of re-focusing when I do eventually realise my entrepreneurial dreams.