Repeatability model for success
Feb 27, 2012
In their book, Repeatability: Build Enduring Businesses for a World of
Constant Change authors Chris Zook and James Allen, outline design
principles of successful businesses. These principles were termed the “Great
Repeatable Model”. Companies that adopt these principles can repeat their
success, hence the name repeatable model. According to the authors, there are
three key principles:
1. Principle of Focus
2. Principle of Embeddedness
3. Principle of Adaptability
As per the first principle, companies need to identify how they differentiate in
comparison to others. Faced with new markets or changes, identification of a
clear source of differentiation gives the company an edge over others. Many
companies believe they have differentiation, but customers might disagree. At
this point, a genuine leader can identify the gaps to fill in and remodel to
deliver things differently.
E.g., Apple was able to repeat its success with the iPod, iPhone and the iPad.
Apple provides its customers with a high quality product that has excellent
design. All its products aim at superior user experience. With iTunes
integration, a customer is at ease with the entire range of products.
The second principle emphasizes core values that a company must strive for
and embed it into their culture. A leader must drive these core values and be
in-sync with the employees. The core values must drive all major decisions the
company makes. A customer must identify with these core values when he/she
interfaces with the product or service provided by the company.
E.g., Google has been successful with many products like Search, Gmail and
many others. Google’s core values – focus on the user and rest will follow, fast
is better than slow or great is not just good enough. A customer identifies
these core values in each of Google’s products and company founders
communicate and live these values as well.
The third principle is straightforward. A company has to adapt to changes.
With failure or competitors catching up, it has to question its assumptions and
adapt its model. It is essential therefore that a company learns and the rate at
which it learns (or measures its product or service quality and performance).
However, learning is not enough. A correct interpretation of the learning helps
in repeating success.
E.g., Zara the world’s leading fashion retailer deployed a new process to
deliver shipment to its stores (more than 1500) globally from its two
warehouses in Spain by relying on operations research techniques. Zara was
able to build an innovative and highly responsive design, production and
distribution structure. By determining the best shipment quantities to deliver,
it was able to increase its sales by 3 to 4% in 2007 and 2008.
Apple’s Four Quadrant product grid
Feb 26, 2012
Complexity distorts information flow and decelerates clear decision-making. Any decision
made in the face of complex operations, unnecessary product types or models are
increasingly incoherent. Companies that do well have a sense of clarity and focus with less
complex operations and product lineups.
Companies whose business models are simple can replicate their successes repeatedly.
Apple’s co-founder Steven Paul Jobs (Steve Jobs) realized this quite early. At the MacWorld
Expo in 1998, Steve revealed a four-quadrant product grid. Upon his return to Apple, Steve
toured the company and found that there were far too many teams working on the Mac. Each
team had different names and viewpoint of the Mac in mind and lacked coherence. He came
up with the idea of a simple four-quadrant grid with two rows labeled as ‘Consumer’,
‘Professional’, and the columns as ‘Portable’ and ‘Desktop’. This way Apple engineers and
managers had to focus on only four core product areas and the company could deploy the best
engineers in the right area. Additionally, there would be no product or resource overlap. Even
the naming convention seems simple e.g. ‘i’ in consumer products and ‘Power/Mac’ in
professional products.
A newer grid today might look like this:
Recent examples of companies reducing product complexity are Google, HP and MTV.
Google has retired many products. In a recent conference call in Feb 2012, HP’s CEO Meg
Whitman emphasized the need to trim down its many products models, SKUs and
configurations and to remove unnecessary complexity from designing to manufacture and
delivering products. MTV India, the music channel is shifting its focus back on music and
reducing non-music format shows.
How companies differentiate from competitors?
Feb 13, 2012
The goal of any company selling a product or service is differentiation. A company
pitches its unique selling proposition that is going to be most advantageous for it.
Successful differentiation requires a good product or service and customer insight
(customers’ perception of a company’s product and those of competitors). Setting its
products or service apart from its competitors is necessary to create preference and
loyalty.
Here are a few examples on how companies differentiate from competitors:
Apple – Appealing Design, robust software
Hands-on software, simple product design and unified iTunes ecosystem.
BMW – Ultimate driving machine
“The ultimate driving machine”. It gives many professional reviews on how BMW’s
drive its ergonomic design, maneuverability, non-overweight engine.
Holstee – Powerful mission statement
A mission statement can set you apart from competitors and can be enough to sell
products. Quite literally, this is what happened in Holstee’s case. Holstee, a New
York–based company, sells eco-friendly clothing and accessories. Its mission
statement different from the usual was labeled as the Holstee manifesto. It became a
best seller and was viewed more than 50 million times and translated into 12
languages. The mission statement printed on recycled paper sold at $25 a poster.
J. C. Penney – Simple pricing strategy
J. C. Penney, the 110-year old department store, has a new “Fair and Square Every
Day” pricing strategy. The store’s differentiation strategy is to keep pricing simple
and build long-term relationships with customers. The store will have only three
simple prices – Every Day, Month Long Value and Best Prices.
Nike – Brand Power
Brand power, strong bonding with top athletes (Michael Jordan, Brazilian national
soccer team), and performance-focused product design. Nike produces products that
are customers recognize to be of high value with exclusive features. Nike is also
known to use guerrilla marketing to publicize its products e.g. Nike’s use of small
Gone Running signs in amusing situations.
Qantas – Safety record
Qantas, Australia’s largest domestic and international airline distinguishes itself as
the second oldest airline in the world (founded in 1920). Its reliability and
immaculate safety record are main selling point. The company identifies safety as its
first priority and prides itself on its safety first culture.
Singapore Air – Distinctive services at premium costs
Distinctive premium services on long-haul business flights at practical costs. It was
the first to introduce many services like video-on-demand, hot scented towels, hot
meals etc. It uses a young fleet of aircrafts and its well-dressed ‘Singapore Girl’ cabin
crew is a brand icon.
Tetra Pak – Innovation that adds value and inspires customers
Products that add value (eliminating need for refrigeration), save costs (easy
logistics) and help customers increase production (e.g. laminated material which aids
high-volume dairy operations)
Virgin Atlantic
Funky fun and good value. In 2009, Virgin Atlantic was the first commercial airline
to use bio-fuel.
Why online business in China will
become the world’s largest by 2015?
Aug 9, 2011
A Boston Consulting Group report stated that by 2015, the yearly value of
China’s e-commerce market would grow by four times to $305 billion to
become the world’s largest. Many e-commerce enterprises that are famous
globally have emerged in China. Here are a few factors responsible for the
successful growth of e-commerce in China:
Internet Usage
The Chinese spend about 1 billion hours online each day and are younger (73%
of China’s total online population is aged less than 35) than their western
counterparts. This is more than double the daily total in the US. Cheaper
internet and increasing disposable income contributes to higher spending
power. China has an average connection speed of one mbps compared to its
neighbor India’s 0.8 mbps.
% of Chinese population which shopped online
2006
3%
2009
8%
2012
19%
American E-Commerce does not work in China
“Foreign e-commerce companies should be acutely aware of the differences
in China’s cultural, political, social, and economic development, and adapt to
those differences.”
– Justin Ren, associate professor at the School of Management.
While American e-commerce firms have been successful in non-Chinese
foreign markets, they have not fared that well in China. In 2004, Amazon
bought a Chinese website to enter the China market but flopped. eBay spent
around $400 million in China but could not capture even 10% of the market.
Google had its own problems with the Chinese government over censorship
and hacking scandals. Foreign firms hire Chinese mangers but the centralized
management renders it ineffective. Moreover, website designs which work
back home do not work in China. For example, Chinese websites are less about
selling while eBay’s Chinese website emphasized low priced products and was
similar to the design in the U.S. Therefore, even famous brands like Louis
Vuitton, Levi Strauss, and Ray-Ban have teamed with the Chinese websites
like Taobao to sell their goods.
China’s Internet entrepreneurs
The Chinese online entrepreneurs’ drive to win & sheer hard work is
unmatched. Many work part-time and study as well.
Filling voids than disrupting existing industries
Unlike the west, Chinese online businesses fill voids in market rather than
disrupt existing industries. Moreover, offline businesses are less efficient.