Apple R&D and Steve Jobs Methodology: User Centric Design

I have been fascinated with Apple’s R&D successes (Platform-based approach, Portfolio Management, etc.).  I have always suspected that Steve Jobs is a significant contributor to the R&D success at Apple. So I was thrilled to find a treasure trove of information on the Steve Jobs Methodology at the website Cult of Mac (In the transcript of an interview with ex-Apple CEO John Sculley On Steve Jobs).  I think we can all learn a lot from the this article:

1. User experience centric design: See below
2. A long-term platform-centric vision to support said user experience (and perseverance to take risks to achieve the vision)
3. Leadership thoroughly engaged in R&D (e.g. Facebook, Google, Microsoft with Bill Gates, etc.)
4. Small product development teams with real respect across the organization
5. Understanding and focus on a niche (or align the entire company strategy around that niche)
6. Align hiring with product platforms / niche strategy (For Apple, hire the best)
7. The CEO defines and drives company culture!

Steve from the moment I met him always loved beautiful products, especially hardware. He came to my house and he was fascinated because I had special hinges and locks designed for doors. … 

Steve in particular felt that you had to begin design from the vantage point of the experience of the user. He always looked at things from the perspective of what was the user’s experience going to be? But unlike a lot of people in product marketing in those days, who would go out and do consumer testing, asking people, “What did they want?” Steve didn’t believe in that. He said, “How can I possibly ask somebody what a graphics-based computer ought to be when they have no idea what a graphic based computer is? No one has ever seen one before.” He believed that showing someone a calculator, for example, would not give them any indication as to where the computer was going to go because it was just too big a leap.

One more lesson is that this user centric design has to be based on a long-term vision – not just the next step.  This is important because a small step in user centric design is not  going to build a long-term differentiator:

Steve had this perspective that always started with the user’s experience; and that industrial design was an incredibly important part of that user impression. And he recruited me to Apple because he believed that the computer was eventually going to become a consumer product. That was an outrageous idea back in the early 1980′s because people thought that personal computers were just smaller versions of bigger computers. That’s how IBM looked at it.

Even user centric design is not enough though, one has to fine tune this idea and make a precise niche:

What makes Steve’s methodology different from everyone else’s is that he always believed the most important decisions you make are not the things you do – but the things that you decide not to do. He’s a minimalist.

I can not over emphasize the importance of User Centric Design.  It drives long-term competitive advantages.  But more important, it is the foundation of new software-driven digital world.  So the culture of user centric design along with the digital revolution helped Apple succeed in the consumer electronics space (iPod, iPhone, etc).  As opposed to Japanese businesses such as Sony, whose culture revolved around analog components:

The Japanese always started with the market share of components first. So one would dominate, let’s say sensors and someone else would dominate memory and someone else hard drive and things of that sort. They would then build up their market strengths with components and then they would work towards the final product. That was fine with analog electronics where you are trying to focus on cost reduction — and whoever controlled the key component costs was at an advantage. It didn’t work at all for digital electronics because digital electronics you’re starting at the wrong end of the value chain. You are not starting with the components. You are starting with the user experience.

I have been learning about how difficult it is to change cultures.  The analog-centric culture still remains strong in Japanese consumer electronics companies.  For example, they are ceding the entire user experience design to Google Android in the smart phone segment and accepting the fact that they can not compete!

And you can see today the tremendous problem Sony has had for at least the last 15 years as the digital consumer electronics industry has emerged. They have been totally stove-piped in their organization. The software people don’t talk to the hardware people, who don’t talk to the component people, who don’t talk to the design people. They argue between their organizations and they are big and bureaucratic.

In summary, what does and R&D manager need to remember:

1. There is no substitute for true product planning / development.  We can not just ask the customer what to do (at least not all the time).  We have to actually define what the user experience is going to be and then develop a product around it.
2. R&D managers have to link future technologies to customer experiences and develop a  product development plan.  This requires bridging technologists with marketing / product management and is rather hard to do.  If one had resources like Intel, we could just hire stand-ins!
3. R&D strategy and vision has to be broad (platforms) and long (far in to the future)
4. User Centric Design has to be imbued into the company culture.  Or else it will not work…

GE – Interesting perspectives on R&D strategy

The NY Times article For G.E. and Jeffrey Immelt, a Return to Basics has some interesting sound bites from the CEO Jeffery Immelt:

Strategies are useful, he says, but only if they can quickly adjust to nasty real-world surprises. “In the words of the great philosopher Mike Tyson,” Mr. Immelt says, smiling, “everybody has a plan till they get punched in the mouth.”

The focus seems to be adaptability in face of a rapidly changing environment

And what wisdom is on tap at the United States Military Academy? “Adaptability” and “resiliency” amid uncertainty, says Mr. Immelt — skills as vital to surviving in business as they are on the battlefield.

I think effective R&D planning and portfolio management is key to adaptability.  If market forces require a change in products under development, managers need to have detailed visibility into every single R&D project.  This access needs to be so comprehensive that executives can quickly perform what-if scenarios on what new products can be developed by minimal tweaking of existing projects.  More on this below.

The other GE strategic focus is Technology-differentiated Manufacturing:

He’s most animated talking about heavyweight products that take patience and piles of cash to develop, weigh tons and last for years — next-generation jet engines, power turbines, locomotives, nuclear plants, water-treatment systems, medical-imaging equipment, solar panels and windmills. Mr. Immelt notes, for example, that the cost of a good-sized solar-panel plant, about $70 million, is more than twice the total investment in Google in the six years before it went public in 2004.
The costs and complexities of such businesses, he adds, make it hard for just any company to compete. These are markets, he says, that have “big moats. They’re tough to get in.”

So, if there is significant investment (both capital and R&D) in developing these moats, then being adaptable is going to be rather difficult.  So, if the jet engine market shifts from higher efficiency / lower operating costs to higher speeds, how will GE be able to respond?  Or if the solar business sees new entrants with low cost organic cells, how will GE be able to change its $70M plant?  This will be rather difficult:

Despite the financial crisis and recession, Mr. Immelt has kept investing for the long haul. Research and development spending increased last year to $3.3 billion, and will be still higher this year. “It would have been easy to say times are tough and we’ll pull back on research spending and long-range projects, but he didn’t do any of that,” says Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth and a former consultant to G.E. “Jeff Immelt really held onto his technology-led-innovation agenda.”

 It is not just that the Mr. Immelt held onto his strategy, it is also that it is very difficult to change these strategies mid-stream.  Most differentiating technologies take years to develop and a start-stop-restart approach just will not work.  Furthermore, most R&D is still managed using gut feelings.  It is extremely difficult to adapt to new markets when one does not know what drove old decisions to start with…  We need a new paradigm to managing R&D!

Case study on too much of a vision?

The article on Ars Technica about OLPC’s Negroponte offers to help India realize $35 tablet could be an interesting case study on how too definite a vision could actually be counter productive to over all results.  The single minded focus on $100 per laptop could have been a good stretch goal, but then project execution problems and may be technology challenges led to pretty big problems.

OLPC designs low-cost education computing devices for developing countries. The project aimed to produce a ubiquitous $100 laptop that would bring constructivist learning theory to the developing world. The project has fallen far short of fulfilling its initial goals due to serious setbacks, ranging from technical and logistical failuresto divisive ideological conflicts. OLPC was forced to reorganize and downsize much of its development staff last year as its funds dwindled. Despite these cuts, the organization was able to continue moving forward by narrowing its focus and pursuing a less ambitious strategy.

Add to it the problems of multi-organizational R&D where goals of “partners” were often at odds with the overall goals of the project and it became a significant mess:

When the OLPC project first launched, Negroponte argued that OLPC’s agenda could only be achieved by harnessing economies of scale. The laptops would be sold to governments in massive quantities in order to reduce overall manufacturing costs. Negroponte contended that competing efforts and alternative low-cost laptop products were harmful to OLPC’s vision because they would fragment the market and undermine OLPC’s ability to achieve the level of scale that he believed was necessary for success. 

This became a contentious issue that isolated OLPC from potential partners—particularly Intel, which parted ways with OLPC and built its own competing Classmate PC. Intel frowned on OLPC’s one-size-fits-all approach and argued that diverse offerings were needed in order to encourage adoption of low-cost educational computing. 

None of the problems here are easy to solve and I applaud OLPC for achieving everything they have.  However, there are several lessons we could learn for more effective R&D management in large cross-organizational R&D:

1. Flexibility in vision (not at the expense of drive and focus)
2. Ability to identify, express clearly and discuss diverse goals
3. Ensure that some team members are not going to work to weaken the overall effort
4. More collaboration and inclusiveness

Looks like OLPC is at least becoming more flexible:

The world needs your device and leadership. Your tablet is not an ‘answer’ or ‘competitor’ to OLPC’s XO laptop. It is a member of a family dedicated to creating peace and prosperity through the transformation of education,” Negroponte said in his letter. “[I offer] full access to all of our technology, cost free. I urge you to send a team to MIT and OLPC at your earliest convenience so we can share our results with you.

Strategic Thinking and Dependence on Forecasts

An interesting article in McKinsey Quarterly with significant implications or R&D strategy: Applying global trends: A look at China’s auto industry.  The overall idea is that forecasts are important and can drive strategic plans and R&D plans. However, forecasts are often wrong and R&D organizations need to be careful not to be tied to strongly to one particular forecast.  In fact, strategy / R&D plans need to be flexible enough to support multiple outcomes.

Strategists can challenge conventional wisdom and better prepare for uncertainty by analyzing the complex and not-so-obvious ways global trends interact in their industries.

Here is a good example of how forecasts were wrong in adoption of mobile phones in Africa:

Only a dozen years ago, for example, authoritative predictions for the coming decade envisioned no more than a few million mobile-phone users throughout Africa. Local income, consumption, technology, infrastructure, and regulatory conditions seemed to hold little promise for significant growth. Less than ten years later, though, Nigeria alone had 42 million mobile subscribers—80 times more than initial forecasts predicted—as growth skyrocketed, largely as a result of the interaction between just two trends: improved income levels and cheaper handsets.

Scenario analysis is an effective approach to address such vast mismatches between expectations and reality:  The article proposes a four step approach that might facilitate better scenario analysis:

1. Establish the reference frame: Scenarios are difficult to construct.  Sometimes, it is possible to find published scenarios that might form the foundation for analysis (For example, CIA  global economic/political scenarios).  However, in absence of such background material, it helps to have a frame of reference.  For example, as the article points out, if one is worried about Chinese automotive entry in USA, it might be worth thinking through Korean market entry back in the 80s.  Or may be, Japanese entry even before.  It might also be worth looking at other industries and see what has happened in them.

The right frame of reference—a specific problem statement and a clear sense of the industry context for long-term shifts—is a critical starting point.

2. Expand the solution space: Now it is time to modify/update the reference frame based on current geopolitical scenarios, technology and industry specific environment:

Having carefully defined the problem and the industry context surrounding it, the challenge for strategists is to broaden the potential solution space by challenging conventional wisdom through the lens of global trends. Most companies have a broad range of experts who can help, yet these people are often tucked away in organizational silos that make it difficult for them to connect the dots.

3. Define scenarios
4: Quantify Industry Impact (under different scenarios).
The article also had a great listing of the Delphi tool that is helpful.

Finding Competitive Advantage in Adversity

HBR article Finding Competitive Advantage in Adversity has some important learnings for R&D managers:

Unlike many managers whose instincts are to hunker down and play it safe during difficult times, entrepreneurs like Bush hear a call to action in the oft-repeated advice of Machiavelli: “Never waste the opportunities offered by a good crisis.”

Opportunity 1: Match Unneeded Resources to Unmet Needs – That is to find resources that are not being used because of adversity and then repurpose or redirect them to meet unmet needs. This is extremely important in R&D management. As budgets are reduced, a lot of projects are cancelled midstream. Wise managers will build on projects being cancelled to deliver something new.

Adversity comes in many forms—acute, cyclical, long-term, and systemic. It sometimes affects individuals or single firms; other times it cuts across a wide swath of entities. However, its pathology is consistent: Adversity constrains a key resource, which then depresses demand, supply, or both. That gives rise to unmet need and releases other resources that become redundant. An opportunity emerges for inventive entrepreneurs who can reroute the redundant resources to fill the unmet need.

Opportunity 2: Round Up Unusual Suspects – somewhat less directly relevant to R&D. However, take away is to look for usual areas for cost cutting and unlikely areas for reuse.

Adversity is also characterized by missing or inadequate elements at critical points in the business system. These may include key inputs, capital, technologies, or partners in the supply, distribution, and marketing chains. Entrepreneurs who can creatively identify unlikely, alternative candidates are able to get a leg up. However, the art of aligning the incentives of an unorthodox coalition and maintaining equilibrium among the members is no small challenge.

Opportunity 3: Find Small Solutions to Big Problems – Take away is that do not make a big project out of repurposing R&D projects that are being cancelled (self explanatory).

The more severe the adversity, the harder it is to change the status quo. Comprehensive solutions that require many changes can appear to be dead on arrival, leaving only tiny cracks as points of entry to break the mold. The message for the intrepid entrepreneur: Small innovations can be huge. First, they are potentially more affordable and can be produced with less initial outlay. Second, they economize on features and complexity and may be just good enough to fulfill an unmet need. Third, their size can help minimize environmental effects or other negative externalities. Finally, they may be easier to integrate into the current model, with only minimal adjustments. In fact, four characteristics that, according to Trendwatching.com, define future consumer priorities may be the tiny cracks to look for: affordability, simplicity/convenience, sustainability, and design informed by local knowledge about product usage. Small solutions that fit within these tiny cracks represent major opportunities.

Opportunity 4: Think Platform, Not Just Product – This is probably the most important consideration for R&D managers.  By thinking long-term and focusing on platforms, the costs can be spread out over longer term.  The benefits can also be larger because platforms have larger revenue potentials.  Finally, stretching out R&D allows organizations to target solutions for when the adversity is mitigated.

In general, the underlying factors that constrain one situation of adversity also constrain others. This offers an opportunity to invest in a meta-solution that can address several unmet needs simultaneously, either in multiple market segments or various product markets. The multifaceted character of the opportunity also hedges the entrepreneur’s risk and helps the venture grow beyond the initial point of entry. Clearly, entrepreneurs can expect varying levels of success, but the broader the venture’s reach is, the greater the value to be unlocked. The profit potential comes from the capacity to enhance the business model at three possible leverage points: customer value, cost management, and growth-vector creation.

Great data for Entrepreneurs

The article Perspective: Economic Conditions, Entrepreneurship, First-Product Development, and New Venture Success in Journal of Product Innovation Management studies 539 new ventures started between 1998 and 2001 and has the following great findings:

1. Consistent with prior research, less than half of the 539 ventures survived more than two years. 
2. Economic downturns lead to higher failure rates for new ventures. 
3. New venture success is highly correlated with first-product success. 
4. First-product success is enhanced when those products are introduced into markets with emerging market needs but with established industry standards. 
5. First-product and venture performance are significantly higher for products based on ideas that came from the founders. 
6. Most successful first products are based on ideas that reflect both technology development and an analysis of customer needs.