THE PRODUCT LINE

Coffee, Tea & RFID

As a way to stay ahead in a market that is becoming increasingly crowded, we noticed with interest that Keurig, the leading brand in single-serving coffee systems, continues its drive to innovate.  The new Keurig machine have embedded RFID (radio frequency identification device) technology that allows customers to tweak the size, strength and optimal temperature of their preferred cup of coffee or tea.  Keurig appears to recognize that all coffee drinkers have particular tastes and this new control-your-cup strategy is sure to please the serious caffeine lover.  Originally engineered for professional services firms where coffee consumption is high and there is little uniformity in tastes, the system is now available for the home brewing market.

The RFID tag was the brainchild of Mario Cardullo who patented the technology in 1973.  Originally adopted by mass distribution firms like Walmart to track inventory as it moved through the supply change, Keurig is using this smart technology to encode a recipe that is read by the system to identify the optimal settings that will delight the tastes of coffee and tea aficionados.

We see a lesson here about understanding your customers and where they are headed.  Thirty years ago, just as Starbucks was opening its first location, a cup of coffee was a cup of coffee and you scooped it from a tin to drip through your coffee maker.  Today, coffee and tea are more like fine wines with infinite varieties that come from specific vineyards (locations).  Who knows we may soon be specifying the source and year our favorite coffee beans were grown, completing the cycle of mass customization in the coffee industry!

A footnote: Keurig was acquired by Green Mountain Coffee Roasters, Inc., in 2006 and the decision to keep it a separate subsidiary with its own management team is surely a key to its continued innovation track record.   

Cupcakes 2.0

Lots of companies struggle to maintain a steady stream of innovations intended to keep their product fresh and differentiated. But as we often say, there are many ways to be innovative without changing the product.  What about simply changing the way the product is delivered? Once limited to the domains of cigarettes and soda, vending machines are again changing the “delivery” game for a wide range of products.

Consider the ATM: a vending machine for money. When the ATM was first introduced, banks didn’t change their products – they still offered checking and savings accounts – they simply changed the way people interacted with them. Thanks to the ubiquitous ATM, we now rarely need to carry cash because the ATM is always open. And ATM capabilities, like the ability to deposit checks without an envelope, provided a new angle of competition for the banking industry.

In a similar way, vending machines are also changing the way we buy electronics since iPods, cell phones and all sorts of accessories are now available via unmanned kiosks in many airports and department stores. Who needs to drive to Best Buy when you can just pick up some noise cancelling headphones at Terminal B?

So who will be next to leverage the vending machine as their platform for innovation? Well, we are very excited to see the latest in cupcake technology being rolled out by Sprinkles, the popular gourmet cupcake shop that originated in California. In an effort to stay competitive in an increasingly crowded market, Sprinkles has created their own “cupcake automat.” Customers can conveniently feed their sweet cravings 24/7.  Sprinkles’ high tech dispenser stocks 500 to 600 cupcakes in up to eight of the company’s most popular flavors. Customers make their choice on a touch screen and a long robotic arm retrieves the cupcake, which comes in a lovely individual box so that consumers feel as if they are receiving a gift as well as a sweet. The stock is refreshed throughout the day to avoid stale treats. Customers can now skip the line and try this innovative new way to satisfy their sweet tooth. Maybe Sprinkles is onto something – could this be the future of food fads? Accessibility, convenience and curb appeal - what better way to stay competitive and expand distribution channels? What’s next – Starbucks in a vending machine? 

Have you ever answered your phone with your nose?

Where do the best new ideas come from? Sometimes they are lying on the street right in front of you. 

For better or worse our touch screen devices are now a part of our daily lives.  They keep us connected, informed, and some even work as personal assistants, but if you live in a cold climate, the winter months make using these gadgets miserable. If you have ever tried to answer your smartphone with a glove on, you know that no matter how many times you swipe your finger, nothing happens until you either miss the call or get frustrated enough to remove your glove and drop it in the slush.

Just like laptops need a lap, smartphones need a digit (or a nose)to be really useful. These devices count on the conductive properties of your fingertip to have any interaction with their owner.  This inability to use your smartphone in the blistering cold has left glove manufacturers only one option: create gloves that use conductive material to mimic your fingertip.  This year, if you live where the weather is cold and gloves are a necessity, you will see several glove options available for purchase with patches of conductive fabric on the pointer finger and thumb.  These gloves are available in all sizes and colors, for all applications, from sports to fashion.  The North Face even makes ski gloves with touch screen sensors.  So, whether you are on the slopes or strolling down the street, these gadget-friendly accessories can help you stay warm as well as connected during the winter months.

Once again, we are reminded that innovative ideas can come from many places and that innovation in one industry often creates opportunity in others. Where else beyond clothing can touch screen devices open new frontiers?  Any good ideas?

 

My Car is Smarter Than Your Computer

Cars are a part of daily life for most Americans. Whether you drive them, ride in them or just try to avoid them, it’s hard to ignore them. At the same time, computers, tablets and smartphones seem to have become an extension of our identity, keeping us plugged in at work and at play. Lately, we’ve been noticing that the improvements in cars seem to be all about technology that makes them act more and more like computers - it’s no longer about the sleek design or horsepower. So, have cars evolved into computers or have computers become driving machines?

Let’s take the 2012 Audi A7, for example, a luxury car that sets a new standard for automotive technology systems, while channeling your inner British spy. Perhaps Audi’s recent integration of our must-have technologies has indeed given us a computer disguised as a car. But what are the consequences of having all this technology at our fingertips?

The A7 incorporates key features you would expect to find on a computer, tablet, or smartphone into an upscale “infotainment” system. Utilizing Google, the navigation system presents 3D Google Earth aerial views on the above dash display that which populates data for a 25 mile radius, while giving traffic updates. For the Wi-Fi dependent among us, T-Mobile and Audi have teamed up to provide a data connection to the A7 owner that supplies drivers with the weather, gas price information, and even access to Wikipedia from the driver’s seat. In addition, the A7’s Wi-Fi hotspot allows 8 devices to connect to the internet, enabling passengers to stream videos to their iPads or surf the web. Is it possible that face-to-face conversation may go the way of the manual transmission? Not to mention that exploring Wikipedia at 65 mph is not a good idea.

Another novelty that Audi includes is the touchpad with handwriting recognition that allows drivers to “safely” use the data connection. The touchpad positioned next to the driver’s thigh allows you to write an address, a phone number, or search for a nearby restaurant with just a touch of a finger - think back to the Etch-A-Sketch from your childhood. And, while many of us can imagine ourselves as James Bond on the commute to work, last time we checked, it is still pretty hard to draw and drive at the same time.

A more practical innovation may be the Audi A7’s “Heads-Up Display.” Audi has cleverly adapted technology developed for jet pilots to create an adjustable display that projects the driver's speed and upcoming hazards onto the windshield. With data displayed directly in front of the driver, there is never a need to take your eyes off the road, although you may be distracted by looking through letters and numbers.

Sixty years ago, the American car went through a transition from basic transportation, to a personal statement of style and identity, culminating in some very elaborate tail fins and body treatments. So, with an $80K price tag is Audi’s latest innovation an improvement to the driving experience or the 21^st century equivalent of the Ford Edsel?

Innovation without Invention: What's the fuss about Google+?

What do you think of Google+, Google’s recent entry into the world of social media? Is this a radical departure for the world’s dominant search engine? Or is it an incremental enhancement that adds new features to Google’s existing product lines? Is this an innovative leap that threatens to demolish competitors? Or is it merely a “Facebook compatible” offering that’s been tossed into the market just because Google can?

Before we can decide, we have to take a closer look at Google+.  Is it a product? A platform? An entirely new category of social media? If nothing else, there appears to be healthy demand for it given that in a mere two months, Google+ has acquired 25 million users (consider that it took Facebook 3 years and Twitter 30 months to do the same). Regardless, the jury is still out on whether Google+ is a passing fad or a real, long term threat to companies like Facebook.

First off, advertisers like it! Perhaps more important than its search engine capabilities, Google has developed the world’s most efficient and advanced advertising platform. And Google+ just adds to those capabilities. Unlike Facebook and Twitter, Google+ has created a richer, more granular platform where users fill out their preferences for more personalized ads, offering greater predictability for advertisers. Sparks exercises users’ preferences, demographics, and behaviors to generate a news feed with stories, articles, blogs, and video clips tailored to personal preferences.  Users no longer have to scour multiple sources to keep up to date on their interests. This clearly makes being informed about what you want to be informed about quicker, but does it also narrow users' “fields of vision” and potentially limit their world views?

Next, the Google+ tagline: “real life sharing, rethought for the web” puts the emphasis squarely on human relationships.  With virtual hangouts, users can sit at their computers and “hangout” with buddies via video chat.  The idea is to eliminate distance and bring video and chat together in the context of social media, which in turn may allow Google+ to eclipse products like Webex, Facetime and Skype, leaving these vendors wondering what happened. 

Speaking of making plans with friends, Huddle, a feature targeted at mobile users, is also worth mentioning. Instead of texting friends individually, Google+ allows users to message their friends and make weekend plans in a single chat. While this is not so different from sending a Facebook message or even a mass text on your iPhone, the name is catchy and Google is heavily marketing it as an alternative use of their platform.

Net net? Google+ allows users to physically group friends, family members, and colleagues in Circles and choose what content they share and with whom. It creates a space for virtual hangouts as well as personalized reading guides and advertising. Cool and convenient? Yes. But is it innovative? The major innovation we see is in the packaging of interesting features. It's another great example of the difference between innovation and invention. Google+ innovates without invention, leveraging the good work and success of other products. Regardless, if you want to hang out for real, get off the couch and go meet your friends at your local bar or restaurant.

Product Leverage: Johnny Carson's Searchable Database

 

One of our maxims about product development and management is the idea that product success is all about leverage. Deliver more products to more markets from a common set of modules and proprietary assets, and the greater your chance for financial success. More leverage from a single investment. Too often we see businesses casting about for new technologies or investing in products that don't share any common components - an approach that makes it very difficult to sustain any innovation because resources are spread too thinly. New product development is expensive, risky and dependent on deep expertise and accumulated knowledge about customers and markets.  Keeping up with the times, and all the various forms of competition that emerge requires ongoing investment and re-investment, but your best development bets are those placed within the domain where you have deepest knowledge about how your product is produced and consumed. For example, if you've got some great material that's old but market tested, you can expand your market by creating new offerings that deliver your proprietary advantage through new channels or emerging delivery models. That is an example of a best practice strategy for growth.

We never expected to see Johnny Carson (well, Carson Entertainment Group to be exact), at the forefront of such product development best practices. Although he's been gone since 2005, Johnny's legacy continues to be innovative. It's no longer in terms of live TV performances or automobiles (did you know he was a major investor in the DeLorean Motor Company?). No, the Carson show has taken its 30 years of proprietary content (that's over 3,000 hours) and taken it to the digital, web 2.0 market. By creating an indexed  database of digitized content - clips can be located and licensed through a self-service interface. The database is rich enough to support searching by air date, guest name, or even key words from the dialog. The process reportedly included transcription of over 1 million words of dialog.

Who knew that Johnny was a product guru?

0% Willing to Pay for Twitter

By all accounts, Twitter is a wildly successful, innovative new product. But the just-released 2010 USC Annenberg Digital Future Studyfound that although 49% of people on the internet use services like Twitter, exactly 0% would be willing to pay for those services. So that makes us wonder just how successful that is because scoring a "0%" in a survey like this is hard to ignore.

"Free" is a pretty powerful incentive to get people to try a new product and it's certainly an easy way to test-market a new concept. The behavioral economist Dan Ariely has some fascinating research and observations on the irrational implications of free. At MIDIOR we say that you'll never be able to sell your product if you can't at least give it away. And, clearly you learn something if "free" is not a strong enough incentive for someone to try it. But what have you proved if the only thing you can do is give it away? Do you think you could give away mediocre cookies to about half the people on your street? If yes, what would you learn if after trying them, every single one said they would eat more (lots more) if they were free, but exactly none said they would pay something to enjoy one? Would you think you had a successful product worthy of additional investment or would you be headed back to the drawing board?

So what about Twitter? It's used (a lot) by millions of people many times every day. Even the business world has acknowledged it as an exciting new mechanism for reaching customers. And yet, 100% of the users surveyed assign it zero value. Would you continue to invest?   Which leads us to wonder if online services are really that different from other products. Over-the-air television is free, yet more than 0% of us are willing to pay for cable and satellite versions. Tap water is free, yet there appears to be a market for various bottled forms of that beverage. So that 0% finding is just disturbing.

Or perhaps it's just that the survey is somehow flawed.

What Does the World Cup Teach Us About Product Development?

With all eyes on the World Cup action in South Africa during the past two weeks, it seemed timely to reflect on what product teams can learn from international soccer. Four quick thoughts:

1 - Total football. The dominant theory of play at this level is known as "total football," an approach that depends on teamwork and on-field adjustments made by the players in real time. For example, a defensive player can move to an offensive position if the situation merits with the offensive player backfilling on defense;  "switching the field" is not limited to the play, it can also mean that the left and right defenders, mid-fielders or forwards can switch according to the flow of the game.  While critics might refer to it as "total chaos," total football has displaced conventional wisdom about the tightly regimented approaches and the creative, superstar-centric styles that have worked in the past. In this observation we see a correlation with product development teams, where we see a need for teamwork, constant communications and flexibility about roles and the project plan. The ability to make real-time adjustments depends on a team that has experience working together, is collaborative by nature, and is sufficiently in sync so that decisions can be made without waiting for the next meeting.

2 - Sh#t happens. Random, unpredictable events (bad calls, unusual bounces, food poisoning) happen and can have out-sized impact on the results of a game. These random incidents can work for you (see US goal vs. England), or against you (see US disallowed goal vs Slovenia), but you have to play on. The fact that you can't control everything about the result does not mean you don't need a plan. Come into the game with a strategy and a plan, but be ready with alternatives as reality kicks in. As we often say, "the one thing you know about the product plan is that it's wrong" because plans are not predictions, they are just a current assessment based on your most recent assumptions. Successful product teams are able to update their assumptions and rapidly change their plans as sh#t happens. They also know how to identify that they made the change and why it contributed to achieving the objective.  Successful management is tolerant of these updates, and is not married to forecasts based on outdated assumptions.

3 - Past success is no indicator of future results (see France and Italy, 2010 editions). Just because you or your company were successful with your last product does not give you reason to be confident about your next initiative. Hubris really is a deadly sin - in World Cup soccer and in product development. Your competitors saw your success and have made adjustments, and if you're not prepared to put in the same level of effort as last time, there is no reason to expect the same results. In fact, repeat success may be the least likely outcome.

4 - You can only field one team. It doesn't matter how large the country is, you can only have 11 players on the field at one time and your bench cannot be infinite. This is the great equalizer that allows smaller countries to compete with larger ones (see Serbia vs Germany). Your country may have 100 great players but you can only field a single team with 11 players. Great results come from great teams. A larger pool of players to choose from may be an advantage, but the real constraint is the strength of your team, including your bench. Product developers often believe that their critical constraints are total resources, or number of great ideas. Reality (and soccer) tells us that the true constraint is the number of great teams you can field. Great products come from great teams. If you only have one great team - it doesn't matter how many great ideas you generate. And total headcount doesn't matter either if they cannot be configured into complete competent teams.

And so, we recommend the World Cup as much for sports entertainment as for product development insights.  We hope you are looking forward to round 2 of this fascinating global event as much as we are, especially now that we've become immune to those annoying vuvuzelas (the background noise of this year's tournament)!

As American as Mexican Coke?

Coca-Cola may be the world's best known brand, and is classically associated with all things American. So how can it be that the latest fad (craze?) is something known as "Mexican Coke?" Mexican Coke is actually Coca Cola's product that is bottled and distributed in Mexico, and is now also available in the U.S. While good ole American Coke sells for approximately the same price as (in fact usually less than) bottled water, Mexican Coke commands a shocking $3 per12 ounce bottle even when purchased by the case!

Aficionados of Mexican Coke will tell you that there is a real difference, thanks to the thick glass bottle and the use of sugar, rather than high fructose corn syrup as the primary sweetener. And thus a market has been created. Now available at Amazon, and allegedly seen at Costco in various parts of the country, Mexican Coke exists as a new, alternative beverage in a crowded field. Small restaurants differentiate themselves by selling Mexican Coke (sometimes instead of and sometimes alongside the other "Real Thing").

Is this the work of some marketing genius? A product manager at Coke spotting an opportunity to innovate and increase margins by a factor of 10?  Or just another example of how unpredictable the marketplace can be? The question now is whether or not Coke should jump into this new segment more aggressively. There already so many variations of Coke (classic, diet, cherry, vanilla, etc), why not add "sugar flavored"? And just to make this puzzle even more challenging, it turns out that such a product already exists - but it's only available in certain parts of the country during Passover (because corn syrup ain't Kosher for Passover). Just look for the yellow caps! 

Gatorade - Conquering and Dividing Markets

Gatorade has long been one of our favorite product stories because of the little known fact that it is one of the most successful technology licensing deals in history. Originally developed through research at the University of Florida, Gatorade royalties have returned over $100 million to the University. The inventor of Gatorade, Dr. Robert Cade is also a great example of what we call perfect product knowledge - a single indivudual who is simultaneously the consumer, the inventor, the investor and the salesman. An accomplished athlete and nephrologist who worked as a medical researcher studying the problems of dehydration, Dr. Cade came up with a drink that combined water, sugar, electrolytes and lemon juice.

Now that Gatorade (acquired by Quaker Oats and then PepsiCo) has come to dominate the sports drink market (a market that surely didn't exist at the time of its invention in 1965), we observe Gatorade taking their game up a notch as the market evolves. Innovators often take advantage of the fact that growing markets can be split into smaller, even faster growing markets. Over the past few years Gatorade has gone the traditional soft drink route of amassing supermarket shelf space through a plethora of flavors, colors and packaging options. With their newest product announcement, Gatorade G3, they are trying something different.

While there used to be "sports drinks" to help you perform better (or at least drink the same stuff as the people who perform better), there are now before sports, during sports, and after sports categories. And guess what? Gatorade has a product for each. There is some science and technology behind those product segments, and now a whole lot of marketing too. It's the before and after segments that have been growing lately, where "energy" drinks and "protein" shakes have been encroaching on Gatorade's turf. So what do you think?  Will Gatorade divide and conquer?  Or is it at risk of trying to compete outside its domain? What's next - home brewed Gatorade?