What people don’t get about Apple

Apple-1To the casual consumer Apple stands for high prices and their walled garden strategy or the Apple ecosystem. To those more sophisticated, Apple stands for the primacy of design.

But neither is correct, what sets Apple apart and has from Day One, thanks to Steve Jobs, is their relentless focus on the consumer experience.  That experience starts with elegant, cool advertising and leading edge retail stores.  When computer retail stores were dying Jobs launched Apple stores, which were widely derided by the cognoscenti at the time, but have gone on to be the leading retailer in the world as judged by the retailing metric of revenue per square foot. Rather than a typical retailer’s transactional focus, Apple stores focused on the customer store experience, inviting people in to see, touch, play with, and learn about its products in a comfortable, aesthetically pleasing place.

Once you buy an Apple product you will see the Steve Jobs’ touch in the packaging – every element of the package reflects the Apple ethos of clean and elegant design. Unboxing videos of Apple products have become a thing on YouTube, now emulated by fans of dozens of other products.

While other hardware companies touted specs – what we used to call speeds and feeds – Apple has always offered extreme ease of use and a very shallow learning curve for its products. Features and performance won’t be taken advantage of if you first present the customer with a clunky, hard to use interface. People who used to bill themselves as user interface(UI) designers now have gone up the value chain to become user experience (UX) designers. Apple’s influence has created an entirely new profession!

As Tony Fadell, father of the iPod and very close relative of the iPhone said, “At Apple Steve Jobs showed him how to go beyond designing a product; the key is to design the customer’s whole experience, from packaging to messaging.” Apple’s recent focus on services from Apple Music to iPay to their new credit care extends the customer experience beyond hardware and software to provide a seamless mesh of services to deliver the simple and elegant Apple experience post-product purchase.

Solving a problem for your customer is necessary, but not sufficient. Designing a clear and simple UI is also necessary, but not sufficient. What founders must do is to design their customer’s experience from marketing communications to product first use to tightly integrated services that add value to the product. It’s far too easy for founders to think they are on their way once they find a solution to a customer problem. But your journey has just started! You need to think through every element of the customer’s experience from marketing to using the product to solve a problem to upgrading to the latest software and services on offer and polish every elements of that experience so it shines brightly.

Focus & simplicity: twin drivers of success

 

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I’m a strong advocate of both simplicity and focus, but hadn’t give a lot of thought to how the two are related until I read the article on MacRumors by Joe Rossignol entitled iBook Turns 20: Watch Steve Jobs Unveil the World’s First Notebook With Wireless Internet.

When Steve Jobs returned to Apple from his exile of 11 years at Next, Inc. he found a foundering company with a bloated morass of products. The company totally lacked direction and focus and had just spewed out product after product, confusing its customers and costing a lot of money in product development and manufacturing. Jobs inherited John Sculley’s bid for tech stardom, the failing Newton MessagePad, which was totally unrelated to anything else the company was doing, but had attracted some of its top tech talent. In two words, a total mess!

As I recall after reading the article, Jobs called his hand-picked lieutenants into a conference room and drew a simple two by two matrix on the whiteboard. The two columns were labeled Consumer and Pro: Apple’s target market. The rows were labeled Desktop  and Portable, Apple’s two and only two, product lines. Out went the Newton and a host of other miscellaneous products. In one bold stroke Jobs had greatly simplified Apple’s product development, manufacturing, and marketing. But as should seem obvious, he also seriously tightened focus. It became abundantly clear to those in product development and manufacturing what they were building for whom. And now marketing and sales could focus on two groups, consumers – Apple’s largest and traditional customers, and professionals – graphic designers, software developers, and other creative professionals who had been loyal Apple customers since the invention of the Laserwriter and desktop publishing.

Mentorphile is focused on startups, not company turnarounds like Steve Jobs faced upon returning to Apple. But I encourage founders to focus their teams in much the way Jobs did: by diagramming out your product(s)  and customer (s). I put the s’s  in parentheses because startups need to start up with a single product and single target customer, but a roadmap to the future expansion of both needs to be part of any investor presentation.

Jobs was famous for his insistence on focus and once said he was prouder of the many things he had said “no” to than the products he had shipped. (Job was also famous for his grandiose exaggerations!). But note how focus can drive simplicity and how simplicity serves focus, even if you only have a single product and customer base, not the dog pound of mongrel products Steve Jobs inherited.

 

What’s missing from “Rise and Quick Decline of the First ‘Killer App’

 

visicalcThe Wall Street Journal article 40 Years Later, Lessons From the Rise and Quick Decline of the First ‘Killer App’ subtitled Remember VisiCalc, the world’s first spreadsheet? Today’s tech giants do, and that is why they buy up and invest in potential competitive threats is accurate as far as it goes, but misses two very important points.

I joined Software Arts in 1980, the year after it launched VisiCalc, the first electronic spreadsheet. And I was there when Mitch Kapor’s Lotus 1-2-3 for the IBM PC became the standard spreadsheet in business, until it too was eclipsed, this time by Microsoft Excel, now the long standing spreadsheet standard.

Most of the founders I work with can’t remember VisiCalc because they weren’t even born 40 years ago! I find I have to be very careful in the examples I give from my 39 years in the tech industry, as for example I found out the hard way that no one in my mentorship cohort has even heard of Alan Kay, esteemed computer scientist. So if you are up for learning a bit of personal computer history, read the WSJ article on how VisiCalc was developed for the Apple II and by the time it was ported to the IBM PC which took over the business computing market, it had been virtually totally replaced by Lotus 1-2-3. There were a lot of mistakes made at Software Arts, but I’m going to focus on only two of them.

While Christopher Mims gives Mitch full credit for going from VisiCalc’s Product Manager at what was then called Personal Software, to being king of the personal software marketplace with Lotus 1-2-3, he leaves out very important experience Mitch had which drove the success of 1-2-3. Mitch was quick to realize that VisiCalc users wanted to be able to plot graphs of their spreadsheet models. He went on to develop a program called VisiTrend/VisiPlot that imported VisiCalc files and created a variety of charts and graphs. He later sold it to Personal Software. Graphing became the “2” of 1-2-3 and helped it become the powerhouse of spreadsheets (#3 was a flat file database). Mitch was no novice in the personal computer industry having created two programs of note before VisiTrend/VisiPlot: Tiny Troll, a graphics and statistics program, and Executive Briefing System. While neither was a killer app, he gained vital experience in user experience design and graphics, his contribution to 1-2-3, which was programmed by Jonathan Sachs.  Software Arts never added graphing to VisiCalc because it was too busy developing new programs, like TK!Solver, rather than learning from VisiTrend – nor by buying it, as Personal Software did.

The meta point that Mims misses entirely is my saying, “When the platforms change, the players change.” I doubt that is original with me, but I don’t know who said it first. Be that as it may, it has proven true over the past 40 years.  Microsoft was the early leader when personal computers were called “microcomputers” as it developed the killer app for the Altair, the first microcomputer, by porting the BASIC language to it. That lead to a significant business for Microsoft in developing programming languages for the personal computers like the Apple II, Radio Shack TRS-80, and the Commodore Pet.

VisiCalc was the king of the first true platform, the personal computers that succeeded the Altair and knocked Microsoft out of its leadership position by being surpassed by Lotus Development Corporation.

But Microsoft drove the next business software platform by creating Windows for PCs, thus providing the graphic user interface for the IBM PC and its many clones. Mitch and Lotus missed this opportunity, as it was too busy developing 1-2-3 for IBM’s operating system, OS/2 which proved to be a loser, as Microsoft totally took over the operating system market with Windows.  The platform change from DOS to Windows left many developers behind. Microsoft rode Excel, which it had developed specifically for Windows, to overtake Lotus as the world’ biggest software maker.

But the platforms changed once again when Apple unleashed the iPhone. But Steve Balmer, then Microsoft CEO ridiculed the iPhone, as did Bill Gates. Thus Microsoft totally missed the platform change to mobile, where Google now dominates by volume, though Apple dominates by revenues. Microsoft totally gave up on their mobile software development efforts when it became clear that they would be a distant number three to Google and Apple, at best.

And why did Mark Zuckerberg acquire Oculus for $2 million dollars before it had even shipped a product? Because he was afraid the next platform would be virtual reality (VR) and he didn’t want to miss that platform change as Software Arts, Lotus, and Microsoft had missed the previous platform changes.

My estimation is that VR will not become the next platform, but perhaps AR in the form of stylish glasses may make an impact. Wearables seem the most likely next platform for individuals. What’s next in terms of business and social platforms – your guess is likely better than mine.

Pros and cons of building on platforms

slack

As I’ve written previously, a lot of my founders aspire to creating platform companies. But many don’t pay enough attention to what it takes to create an ecology of developers around a platform and the many platforms out there already competing for developers’ attention.

But there’s another route developers can take – develop for a popular platform, like Slack. In fact it’s clear that Slack aspires to be the workOS of the enterprise.

The article Why we’ll see more startups built on platforms like Slack by ANDREW KIRCHNER on VentureBeat provides a very good list of the pros and cons of taking of such a pilot fish strategy.

  • Pro: You’re fishing where the fish are – I consider customer acquisition as the major challenge for most tech startups. As I tell my engineering mentees, I believe engineers can build just about anything, but I don’t believe they can sell just about anything. The goal of a platform is to be a demand aggregator. Instead of your venture spending gobs of money finding customers you just have to present a compelling proposition to the customers of your chosen platform. Still a challenge, but much less expensive. The key to success is choosing the right platform. Years ago Evernote was hot; now it’s not. Today it’s Slack, but tomorrow it could be something still incubating in someone’s garage. You also need to make sure there’s a match between your competencies and the tools your chosen platform provides. Choosing an integration-first product like Salesforce is similar to choosing iOS or Android or Windows or Mac – but far more complex, as there are at least two orders of magnitude more would be platforms to choose from than operating systems.
  • Pro: No extra login for customers Estimates put the total number of cloud products per enterprise at more than 1,000! Who wants to deal with even 10% of those logins and passwords?!
  • Pro: It’s easier and cheaper to get to market. By developing for a platform you can use their UI and save lots of development time and effort. Plus you eliminate 90% of the learning curve for your customers. Much, much more efficient for a small startup to join an existing ecosystem of a giant than to go it alone. 
  • Pro: You’re immersed in the culture of your clients. This is the weakest argument, but certainly you want to choose a platform that shares your values.
  • Con: Smaller customer pool. The total size is not as important as the growth rate. You want to choose a platform with a high growth rate, not one that is stagnant or even shrinking. It’s not as simple as a pure numbers game. You are going to have to predict the future – just like any other startup – by picking a winner.
  • Con: You may struggle for visibility.  This is an issue of timing. Getting in early with a platform gains you visibility, but increases your risk. Apple’s App Store and Google Play with their millions of apps, make invisibility the norm, as they are mature platforms. So once again you have to pick wisely, a young but growing platform versus a larger, but mature platform.
  • Con: You’re at the mercy of the platform. Some platforms, like iOS and Windows, have years of experience and teams of engineers supporting their ecosystems. But others, like Twitter have even shut down their platforms after a period of time. So once again you have to measure risk versus reward and choose wisely.

Let’s face it, startups are risky. Typically investors consider there to be three risk factors: technical, market, and team. Riding the wave of an existing platform can do a lot to reduce the technical and market risks. But that path introduces a new type of risk: your chosen platform may not grow or may even shut down to outside developers.

How do you build retention into your product?

 

retention 2There are three key customer-related tasks for any consumer company: customer acquisition, customer engagement, and customer retention. Subscription businesses, be they telecom companies, Netflix, Apple Music, or SaaS companies, are all faced with the problem of customer turnover, known as “churn.” In fact churn can be so high that many telecom and cable companies report churn on a monthly basis, trying vainly to disguise how high their rate is on a yearly basis – typically in double digits.

Previously I blogged about building virality into your product, an issue I’ve written several posts about. I read a lot of business/tech news, but I’ve yet to find anyone sharper and more helpful to founders than Gabor Cselle, who posts on Medium. I have to admit to not considering how founders build retention into their products, but Mr. Cselle obviously has given it a lot of thought, resulting in his article 11 Ways to Build Retention Into Your Product. Interestingly Mr. Cselle breaks startup growth into just two components, customer acquisition and retention, baking engagement into retention. But I beg to differ, as getting a lot of users registered for your product or downloading your app does very little for your business unless they are engaged. In fact studies show that the vast majority of smartphone apps downloaded by users sit unused on their phones.

As before with Mr. Cselle’s brilliant post on building virality into your product, I’m not going to attempt to annotate all his eleven ways to build retention in your product, but will highlight a few and refer you to his original article for a deep dive into the subject.

Perhaps the most powerful tool is variable rewards, and here’s why:

Highly retentive products often draw in the user with variable rewards. Research shows that levels of dopamine in the brain surge when you’re expecting a reward. Introducing variability into the reward multiplies the effect. Variability creates a hunting state, activating the parts in the brain associated with desire. I recommend reading Hooked if you want to learn more about this.

Classically, slot machines and lotteries have benefitted from this effect, but variable rewards are prevalent in popular tech products as well. Building variable rewards into a product is incredibly powerful — please use them for good, not evil.

eBay did a brilliant job of building an entire business on the hunting state, with a focus on buyers winning auctions. The entire auction model, which fires off competitive urges that can cause buyers to pay far more than an item’s actual worth just to win the auction, has been successful for generations.

1. Human interaction

Facebook and Twitter discovered early on that human interaction was necessary, but not sufficient for retention. Baking in notifications seals the deal. Users are curious as to what that notification is about, thus driving clicks and engagement. Of course, developers are going to kill the golden goose as users are getting notification burnout from the flood of notifications from different apps interrupting their lives.

The solution to this is personalized notifications, which is number 7 on the hit parade of 11 ways to retain your users.

2. Turn-based Structure

This is a game based modality in which one person is expected to act first – make the first move in chess – which then creates the very powerful expectation and motivation in the second user to act reciprocally. The more turns, the better. Turn-based structures can create expectations of responses in users, basically guilt-tripping them into responding to requests, such as the feeling of obligation in LinkedIn’s contact feature: Ignore or Accept.

4. Status or Badges

Status and badges are part of the attempt to gamify applications. However, there’s been a backlash against this recently as some apps are now hiding status numbers that they were once highlighting. In general, I would warn founders to be careful of the whole gamification strategy unless you are addressing sports or fitness, which by their nature are very competitive, with winners receiving actual medals, as in the Olympics.

8. Share Improvements

Continually improving your product – known as upgrading – has been a software retention strategy for decades. But with the rise of social media and messaging it’s far easier to notify users of improvements that may incentivize them into staying with your product. But as Mr. Cselle points out, this is by far the most expensive way to retain users because it demands expensive engineering resources. But given how competitive tech markets are today, sitting pat and not upgrading your product is a formula for slow-motion suicide. You must continually improve your product, so make sure you publicize these improvements, especially to your installed base.

9. Drip Marketing

Drip marketing is a fancy way of describing sending email to your users. Given how much email most users get and how often they will unsubscribe from emails from vendors, I suggest you tread very carefully on this one. However, if you have a deep product with a lot of features users may welcome tutorial emails that help them get more return on their investment in your product by learning about how specific features help them get their jobs done faster, better and/or easier.

Mr Cselle divides retention techniques into those that are built in and those that can be added to any product.

retention

I would recommend the following strategy:

Always include human interaction in your product, as it drives engagement and retention and should be core to any product that can be used more than once. Then decide if any of the other five “Core to the Product” techniques align with your strategy and build that one in. There are really only three “Can be Added to Any Product” as you can eliminate Spam, and should include Share Improvements. Try A/B testing to determine if any of the three will increase your retention rate.

 

 

How do you build virality into your product?

virality

The classic marketing funnel and where virality helps

I’ve posted previously about the need to build virality into consumer products, for one simple reason: any other cost of customer acquisition is just too high. But how do you go about building virality into your product? Easier said than done! Everyone wants WOM (Word of Mouth) marketing but how do you go about obtaining it? The best guide I’ve seen yet is the article by Gabole Cselle on Medium entitled 9 Ways to Build Virality into your Product. He is a partner in Area 120, Google’s internal startup incubator and a very impressive bio.

The author and I are in violent agreement: “Consumer product startups have to bake a viral channel into their product from the get-go. They can’t merely glue it on later.”

I’m not going to repeat all of Gabole’s suggested techniques, but as usual I will just comment on a few of them. But if you plan to develop a consumer product I highly recommend you don’t just read the original article, but study it closely.

1. Two-Sided Reward

You need to have a product which lends itself to rewarding both your user and friends they invite. The example given is DropBox, which initially offered up to 500 mb of free storage space to both sides and created what Gabole calls a viral loop. A more generally available value is a store credit. That costs real money, as it requires the vendor to offer both a free item to the friend and cash value to the customer. Wonder why consumer companies raise hundreds of millions of dollars? It’s simple, for marketing and sales! I would steer towards DropBox’s model which doesn’t require cash out of pocket and is intimately tied into the product – enhancing its capacity – and avoid the double reward model used by delivery services – too expensive.

Here’s a twist for you: combine the freemium model with a two-sided reward: if your customer converts to paid from free give the them ability to gift a version of your membership or subscription to a friend. Perhaps in the case of a subscription for a limited time.

2. Appeal to Vanity

As I said years ago, social media is a place where voyeurs can watch exhibitionists. Likes on Facebook, connections on LinkedIn both enable users to show off. Can you enable some sort of feature, like a counter, in your product that enables your customers to show off as well?

3. Collaboration

Collaboration is one of the most powerful drivers of virality; based on Metcalfe’s Law, the value of a network grows as the square of its nodes. Slack, which just when public with a rare direct listing, is a great example of a collaboration product that has gone madly viral. One reason that Slack doesn’t tout is that it can be used within a company for non-business use cases, like groups who like to go out to lunch together or watch sci-fi films together. By making both personal connectivity and business connectivity very easy to setup, Slack created a very powerful viral marketing effect.

5. Artifacts Shared on Social

I would title this social sharing and it’s the backbone of apps like Instagram and Pinterest.

For user-generated content (UGC) products, there exists an even more powerful viral channel than embeddable content: social sharing. If your product creates uniquely interesting content, users can be encouraged to share it on their social networks, thus spreading knowledge of your product to their network. The most successful examples in this genre is auto-shared content onto other networks.

The key phrase here is user-generated content, which is virtually free (you will have a moderation cost to keep out violent, pornographic, or other extreme anti-social content).

9. Highly Visible Hardware

This is a special case, but it’s a worthwhile one: a hardware product that is set in a highly visible location that is exposed to potential customers. The example given is Square, the store point of sale terminal.

Keep in mind, virality is not cosmetic, it’s not something you can just slather on your completed product. It must be built-in from the get-go. And be wary of viral methods like the two-sided reward which can drain your capital resources. I highly encourage developers to study all nine ways to build virality into their products well before they write the first line of code. Without built-in virality the cost of customer acquisition in the consumer market will in all likelihood sink your company.

What founders can learn from a game company founder

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I’m not a gamer. Never even played one on TV. But as a kid I played checkers, chess, Monopoly, Parchesi and various card games. But I only did so because all my friends and acquaintances did, it was a “social network.”  By the time I went to college I had abandoned games entirely. And when the PC revolution hit in the late 1970s with its focus on games I continued to ignore them. And as a mentor, I can only recall on single session with a game developer in my ten years of mentoring.

But The Wall Street Journal article The Man Behind ‘Fortnite’, sub-titled At age 20, Tim Sweeney founded Epic Games in his parents’ basement. His company now owns one of the most popular videogames on Earth. But he doesn’t want the credit, caught my attention, perhaps because it was on the front page of the Exchange section with a great photo (see above) and but more profoundly, the last sentence in the sub-title:  But he doesn’t want the credit.

What can founders learn from Tim Sweeney, founder and CEO of Epic Games Inc., the developers of the worldwide blockbuster Fortnite?

Let’s start with company location:

While the biggest U.S. videogame companies are clustered in Los Angeles, New York and the Bay Area, Epic is based in Cary, N.C., down the road from Raleigh. Mr. Sweeney said the location prevents Epic from being swayed by Silicon Valley groupthink.

Actually there’s a bit more to it than that. The Research Triangle of North Carolina is rife with universities, the hiring pool for all startups, and high tech companies. Yet its moderate climate and moderate cost of living beat the heck out of Boston and New York. So lesson one is carefully consider where to locate your venture, taking into consideration the wants and needs of your future employees.

Secondly, Tim Sweeney spent a tremendous amount of time and energy making sure that Fortnite ran on virtually every device that could run a game. Why? Because of lesson three, games are inherently social. So making Fortnite ubiquitous created the largest possible social network for players of the game.

By erasing the barriers between players with different devices, Epic effectively turned “Fortnite” into a massive social network. Wearing headsets to talk to one another, groups of friends trade jokes and gossip while battling to survive.

Lesson four is how to set up your office. Rather than a cube farm or long tables of developers elbow to elbow, all wearing headphones, Epic has a series of six-person offices. “We find small group offices like this strike the best balance between individual work and group collaboration, versus solitary offices or cube farms.” says Sweeney.

Perhaps the most important decisions Sweeney made concerned the business model and playing mode, for lack of a better term.

Most free games make money by charging for weapons and super-hero powers that help gamers triumph over each other. But Epic resolved not to charge for those items. Rather it sells cosmetic add-ons, like dance moves or a pair of limited-edition Air Jordan sneakers. And again swimming against the tide, while Fortnite is a “war game” there’s no blood or guts. Its cartoon, bloodless style is welcomed by gate-keeping parents.

So two lessons here: tweak existing business models and user experiences, don’t try to totally remake them.

Perhaps the key lesson is how Fortnite keeps the user experience fresh:

Epic’s daily restocking of its virtual store and weekly content updates gave “Fortnite” another advantage. It could quickly incorporate player feedback and seize on sudden pop-culture obsessions, such as a hip dance move like The Floss.

“Every week we learn what’s working and what’s not, and we constantly evolve the game,” Mr. Sweeney said.

People have an innate need for novelty but also an aversion to the totally alien; refreshing a familiar experience hits the sweet spot between novelty and alienness.

Epic conintues to innovate. The company has added a “creative mode” to Fortnite, enabling players to build without the threat of enemy fire. And Epic is now competing with Valve Corp’s Steam by launching an online store that sells computer games.

And finally giving credit where credit is due:

“I think the thing I’m proudest of is not creating ‘Fortnite,’ ” Mr. Sweeney said, “because I didn’t create ‘Fortnite.’ But I did create and nurture the company that built ‘Fortnite.’ ”

A plethora of lessons from a videogame company founder. Don’t try them all, but some no doubt will be a fit and help your company compete. They won’t turn your venture into Epic Games, but they may up your game.

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