Outsourcing is all the rage these days, everything but my pizza delivery seems to be outsourced to India, China or some other far off place that takes away jobs. Years ago the western nations calmed themselves by agreeing that only low-tech production, assembly of paperclips and realdolls, would be outsourced – that complicated products needed our expertise. Then came callcenters. Then came high-tech production. Then came development. Will this ever end, or will all our engineers be stuck with pizza delivery jobs?br /br /Of course not. So what is the solution?br /br /If you look at the weakness of almost all Asian companies, and engineers it is design. Good design requires much more than good engineering. It requires a whole back-catalog of ideas, opinions, and culture. And it takes time for a society to develop good design standards. It takes time and effort to create beautiful products.br /br /The two mp3 players below illustrate my point.br /a onblur=”try {parent.deselectBloggerImageGracefully();} catch(e) {}” href=”http://www.maximise.dk/blog/ipod.jpg”img style=”cursor: pointer; width: 320px;” src=”http://www.maximise.dk/blog/mp3.gif” alt=”” border=”0″ //abr /The first one, of course, is an Ipod from a href=”http://www.apple.com/”Apple/a, the second one is a player from a href=”http://jgz.en.alibaba.com/product/50079995/50988397/MP4_Players/MP4_Player.html”Shenzhen Jingguanzun Electronic Science Technology Co., Ltd./a, and it features FM radio, digital voice recorder, and 7 equalizer modes, all of which the ipod is missing. Yet it is not as popular as the Ipod, even though it is considerably cheaper. Why?br /br /The answer is design – the ipod is beautiful. The no-name mp3 player from Shenzhen Jingguanzun Electronic Science amp; Technology Co., Ltd. isn’t. Even the name is ugly…br /br /This is not a unique example, most electronics that come out of Asia have the overall lack of usability, and lack of good design that this no-name mp3 player has. And most well designed electronic products (a href=”http://www.apple.com/”Apple/a, a href=”http://www.bang-olufsen.com/”Bang amp; Olufsen/a, a href=”http://www.thomson-europe.com/”Thomson/a) are simple, elegant, and easy to use. In a word they are beautiful. And they are not from low-income Asian countries.br /br /So why do some companies make beautiful products, while others don’t? The answer isn’t simple, but it has to do with cultural heritage, and maniac attention to detail.br /br /The asian economies learned in the eighties that they could make a substantial amount of money by copying western products, because they had cheaper labour, and plenty of it. The requirement for this effort was speed, low pricing, and lots of features. The Asian economies grew to be masters of this trade, and churned out copycat products at a rate that was alarming to many western companies. And this is, to a large extent, what they are still doing. But society is moving on, and the standard of living keeps rising in the western world. And the consequence of this is that we can buy as many no-name mp3 players as we care for – we can afford it. But we don’t. We would much rather have a beautiful product, that shows how much style, elegance and coolness we have. And we don’t mind paying for it.br /br /And this is where many of the Asian copycat companies fall short – it is much harder to copy “beautiful” than it is to copy the technical specs of a product by buying the same components as the competitor and putting them in your own box. The Ipod copies are just not as cool or elegant, we would rather have the real thing, and pay a premium for it – afterall we have the money to do so.br /br /When you make a beautiful product you need very different virtues than when you make a cheap product. You need patience, and you need rigorous attention to detail, making mock-ups and prototypes until you get it just right. Steve Jobs is well known for being a pain in the ass to work for because he is never satisfied – every little detail must be perfect. But the Ipod has a 60% market share even though it doesn’t even come close to being the cheapest – Apple is virtually printing money with it. So it is obviously worth the effort.br /br /And this is where especially European companies have a tremendous advantage. They tend to be much more focused on detail and quality than their Asian and American counterparts (Yes, I know Apple is Americen, but they are an exception) – Beautiful cars come from Germany, beautiful clothes come from Italy, and beautiful furniture comes from Scandinavia.br /br /Style is not something that is easily copied, it is weaved into the fabric of society. Look at how the cities of Vienna, Venice and Copenhagen compare to Shenzhen, Shanghai, and New York. If you have been to these places it will be obvious what i mean. European cities have a calm and tranquil atmosphere, Asian and American cities have a hectic and confused atmosphere. I overheard a conversation about the Copenhagen Metro by two American tourists, “Wow – this is so beautiful, everything is smaller but cooler” and it hits the nail pretty much on the head – not big or full of features that nobody needs, but beautiful. And this trickles down through society, and shows in the products that we make.br /br /So European electronic companies should not be pursuing the faster-quicker-cheaper road, but the beautiful-elegant-simple road – the success of the Ipod clearly shows that this is where the money is.
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Engineers of the West, engineers of the East
January 11, 2007 by max
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Format wars
September 7, 2005 by max
Here we go again, giants in the consumer electronics world are flexing their muscle, trying to promote, partner, steal or buy their way to dominance of the DVD format of the future. We have seen it before with betamax and VHS, but will we see it again ?.br /br /In one ringcorner is a powerful consortium consisting of Sony, Apple, Samsung, 20’th Century Fox, and a host of other players trying to promote the Blu-ray format. In the other ringcorner is an equally formidable consortium of amongst others Toshiba, Sanyo and Microsoft. The fight has begun, and the opponents are throwing both muscle money and integrity into the battle. All because the winner is expected to gain dominance of the market, and make zillions of dollars on licensing and IPR fees. But will they ?br /br /The whole assumption of the Betamax/VHS wars was that the consumer would only buy one machine. If there had been cheap combi-alternatives that could play both formats the situation would be much different. This is what is happening in the Blu-ray/HD-DVD war. a href=”http://www.theregister.com/2005/09/06/samsung_hdvd_bluray_player/”Samsung has just announced/a that it will launch a player that is capable of playing both formats. Soon, pressed by demand, others will follow. Now the format war takes a drastic turn. The consumer will not care what format is used as long as it works. And with a dual player the two standards can live side by side without the consumer caring, or even knowing. For the two consortiums this is bad news. The expected outcome is that the winner will be able to set prices, control the format, and charge exorbitant licensing fees because everyone will be dependant on their proprietary format. But with two formats living side by side a monopoly situation will not arise, the market will demand the format with the best quality or the cheapest sales price. Meaning that the advantage is gone. The producer, distributor, and ultimately the consumer will choose the best or cheapest alternative, indifferent to the format because his player supports both. br /br /Know your history, but do not let it guide you blindfolded into the future.
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Why the bubble burst
April 27, 2005 by max
I remember the heyday of the Internet bubble back in the late 90’s. Champagne, million dollar business plans and irrational exuberance everywhere you looked. Those were the days. But why did the bubble burst ? Were we really that ignorant ? Did the emperor have no clothes on ?br /br /I think that many of the ideas, businesses and paradigms conceived during the bubble made good sense. ( Of course, I have to say that, I founded one of the crash-and-burn dot-coms) The problem lay not in the ideas, but in the psychology of consumers. br /br /What happened was that a new enabling technology, The Internet, emerged and brought with it a vast array of business opportunities. Entrepreneurial minds saw the opportunity and jumped at it, convincing investors and media that this would change the world in a way we couldn’t even begin to imagine. And they were right. But they missed the timing. br /br /Entrepreneurs argued that consumers would use a technology if it would save time, money, or make the consumers life easier in some way. Which all sounds perfectly credible. Unfortunately for the entrepreneurs, and the investors backing them, humans don’t deal very well with change. We like things to stay the way they are, we are a reluctant species when it comes to change. br /br /The graph shows how entrepreneurs argued implementation of a new technology would roll out, and how quickly it actually happened.br /br /img src=”http://www.maximise.dk/blog/implementation.gif” /br /br /br /We all made the mistake of assuming that consumers would be rational and use a technology if it made sense. But they didn’t. They waited. And the bubble burst. But history shows us that we are reluctant. It took ten years from the commercial introduction of microwave ovens until it was a commonplace household item. Even though it solved a real problem. This discrepancy in time meant that investors didn’t get the returns they were promised, and pulled the plug leaving the dot-com’s to sink. br /br /But when you look back at the predictions of the dot-com age, many of them are beginning to become realities. Consumers are getting into the technology, and getting on the learning curve. Now is the time for making money on the Internet. Even my mom uses it now.br /br /So if you are an entrepreneur, make sure that your tming is right, and if you are an investor make sure that your pockets are deep enough to keep the company afloat until average Joe and his neighbour discovers your amazing new technology.br /br /A first mover advantage often requires deep pockets and lots of patience.
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Probabilistic classification
April 27, 2005 by max
Most of us are overwhelmed by information in our professional lives, and we are hard pressed to organise it in a consistent and coherent manner. This is a profound change from 10 years ago, yet we still cling to a hierarchical classification of data. We desperately roam our computers, trying to organise the overflow of information coming at us from all angles into neat folders. But for most of us it doesn’t work. Does the funny e-mail from a client belong in the “customers” folder, or the “fun stuff” folder. Does the powerpoint you made for the board on rising sales belong in the “presentations” folder, the “board of directors” folder, or maybe in the “sales” folder. Or maybe in all three ? The hierarchical way of sorting information is becoming obsolete, it just can’t keep up. br /br /It doesn’t take a genius to see that there is a major market waiting to be tapped into, and the bets are being placed to replace the old paradigm of hierarchical classification of information. Google Desktop search, A9 and Apples spotlight are all trying to corner this market. All of them by using search algorithms, letting the user search for a word or phrase and returning appropriate results. br /br /But I think that this approach is not good enough to fulfill a users need for information. How do I search for pictures of my motorcycle ? And how can I be sure I have got all of them in my results ? How do I search for funny e-mails ? Can I make a search for tender and loving e-mails from my former girlfriends ? No, not really. br /br /So we need something different, that will present me with the information that I need when I need it. Probably in a graphical manner, since this is the best way of presenting a lot of information in a limited space. br /br /What will it be ? How will it work ? I don’t know, but I am thinking hard about it, the stakes are high.
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Why Danish programmers are the best in the world
April 7, 2005 by max
A friend of mine was trying to sell one of his companies a few years ago. The company in question collected sportsinformation from various sources, condensed and filtered it, and offered it as an SMS based service to media outlets, so that these could offer their customers up to date sporting information and not have to handle all the technicalities themselves. The company did quite well, and were leading in their technology. Eventually a large American corporation approached them, and wanted to buy them. The initial terms were drafted and due diligence performed. br /br /Then something strange happened. When the Americans discovered that the company had only one technical employee they got very worried, because according to them there was no way that a company with that kind of technology could have only one technical employee. According to them it would take at least a staff of eight to develop and maintain the product they were seeing. And so the deal fell, because my friend could not convince the potential buyers that this one guy had actually programmed the whole thing. Which he had. br /br /This made me wonder. Especially as this is not unique, I have seen similar cases before. br /br /So the obvious conclusion is that Danish programmers are just plain better, or at least more effective, than their American counterparts. And why is this ? After having thought about it for a while, I came to a conclusion: In Denmark programmers (and other employees) are paid to think about what they are doing, in America they are, at least to a greater extent, paid to do what they are told. The implication of this is that a Danish programmer will spend a substantial time thinking through the the project, asking questions, and coming up with alternative solutions before he starts doing anything whereas an American programmer will start coding right away, changing things as he goes along. Often with the result that things need to be redone, and that unexpected problems arise late in the development phase. br /br /It is obvious to me that paying people to think is more productive than paying people to do as they are told. So why don’t more people (especially Americans) do it ? Well, because it is hard and because thinking has to be part of your culture. br /br /It is harder to manage people that constantly ask questions, and leave if they don’t get sensible answers than it is to manage people that do as they are told. It requires management to be very fluid and constantly open to new ideas. And actually know what they are talking about!br /br /It is also a culture thing. Danes take pride in doing a good job, and shipping a great product that works flawlessly. Americans take pride in shipping a product that sells, no matter how it looks. This is also why Danish design is generally held in very high esteem, why American cities and cars are terribly designed, whay Windows always crashes, and why Danish designed products don’t sell as well as they should. Americans may be terrible designers and developers, but they are the greatest salesmen in the world. br /br /So when I grow up and become a billionaire I will place my R D labs in Denmark, and my sales force in America. Maybe Danes are great at designing and creating products, but nobody beats Americans on sales.
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High-end Vs. Low-end
March 10, 2005 by max
Take a look at a market over time. Any market. Now look at who has the bigger marketshare: The players in the high-end or low-end of the market. In the beginning it will typically be the high-end market that dominates the market. Primarily because the market is new, the technology is hard, the idea is novel, or simply because customers are willing to pay a high price for a new commodity. Inevitably, at some point low-end players will enter the market, and start selling cheaper products. Over time, the low-end players will want to increase their marketshare and the only way to do this is by cutting into the high-end market. Usually by offering better and cheaper products than the players in the high-end market. The high-end players don’t have the option of going into the low-end market because they will cannibalise their high-end market. You can’t all of a sudden start to sell your highly priced product at a fraction of the price and expect to retain your current business.br /br /The graphs shows how a market will develop.br /img src=”http://www.maximise.dk/blog/highend_lowend.gif” /br /br /So the players in the low-end market squeeze the players in the high-end market against the ceiling. Sun did it to mainframes, Intel did it to Sun, Apple is doing it to Avid, and Henry Ford did it to the high-end carmakers of his day. br /br /So aim for the low end of the market, and rest assured that the rest will come to you over time if your product is any good.
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Good marketing practises
March 10, 2005 by max
I find it interesting that Google has become a global brand in less than 6 years a href=”http://www.maximise.dk/blog/2005/01/time-flies.html”(see earlier post)/a and that they have done so without much marketing, if any at all. How do they do it ? Well of course they are the best of breed in their category, delivering a service that outpaces all the competitors. But then again, BetaMax was a better technology than VHS so technical superiority doesn’t seem to be quite enough. br /br /I believe that much of their succes lies in their integrity. I trust Google. I believe them when they tell me something. I give them my e-mail address, because I know they won’t abuse it. And I endorse their product, and tell my friends about their great service. So they don’t have to market their product.br /br /So how did they gain that integrity. br /br /Well for one, they give me a simple and understandable service. Their main page contains 35 words and one graphic. That’s it !!! (Yahoo has 478 words, and 20 graphics) They don’t show off, try to push stuff down my throat I don’t want, or give me irrelevant information. I get exactly what I want. br /br /But more importantly, they have a strong culture, that they stick to. a href=”http://www.google.com/intl/en/corporate/tenthings.html”You can make money without being evil/a is one of the ten philosophies at Google. These are not just words on a webpage. They live by it. For example: a href=”http://www.eweek.com/article2/0,1759,1774677,00.asp?kc=EWRSS03119TX1K0000594″Recently they have removed one of their own webpages from their search engine, becuse it uses cloaking, a controversial technology used to get better ranking in search engines/a. They have, in other words, taken the unusual step of severely penalising themselves, because they do not live up to their own high standards. And this is not a unique example.br /br /This is worth taking note of because it goes against much conventional wisdom. It doesn’t do any good for the immediate bottomline, it doesn’t make the next quarterly report look good, and it doesn’t push their service to the customer.br /br /Yet Google is not only one a global brand, but they make heeps of money. And they do so, not by constantly pushing services we don’t really want, but by being honest, trustworthy and having integrity. And for these reasons they also attract the very best engineers in the world. br /br /And they seem to be having a lot of fun too !!!
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