Volkswagen Evergreen Beetle Car: Enduring Principles for Living Legacies

Volkswagen recently advertised in India the commercial launch of its iconic small car, Beetle. Sporting the almost similar exterior that made the car a folklore for decades from its first launch in 1938, the Beetle of today incorporates ultra-modern technologies. The author of this blog post is gratified that the launch coincides with the topic of retro-futurism which the author has discussed in his recent blog post titled “What Palm Holds, Eyes Behold: The Retro-Futurism of iPhone SE”, Strategy Musings, April 18, 2016. (http://cbrao2008.blogspot.in/2016/04/what-palm-holds-eyes-behold-retro.html). Without doubt, the arrival of Beetle in a new avatar is a striking example of retro-futurism, and reinforces the insights of the previous blog and offers additional perspectives.

Some comparisons and contrasts with Apple SE are also inevitable and quite necessary. 

Fundamentally, Apple SE being an electronic product and Beetle being an automotive product they are as different as chalk and cheese in design, manufacture and usage. Yet, they represent, in real time context, the relevance and practicality of retro-futurism as a concept. They also demonstrate that ‘retro’ can be as recent as four years (as is the case with Apple SE) and as distanced as eighty years (as is the case with Beetle). Given the thousands of products that have been designed, developed and used as well as rendered obsolete and phased out over all through the four hundred years of successive industrial revolutions, the impact of retro-futurism as a practical paradigm is self-evident.

Origins, growth and decline

The first Beetle was designed as an idea by Joseph Ganz, a Jewish Engineer in early 1930s. Adolf Hitler, however, grabbed the concept and ordered Porsche to develop a Volkswagen (literally, a “people’s car”). The design and manufacture of the Beetle including building of Volkswagen factory was completed in the late 1930s. Enduring the trials and tribulations of successive world wars, Beetle survived to grow as the most sustained small car design, and Volkswagen as the most dominant European automobile company. The Beetle was designed as a basic small family car at the cost of a motor cycle to transport two adults and three children (Is not Tata Nano a retro-futuristic concept?). It was one of the first to have air cooled rear engine and chassis mounted on torsion bars, and a roundish body looking like a bug!

In its long history, over 21 million Beetles were produced. Beetle’s most successful period was the decade of the 1960s, with it becoming a favourite all over the Americas and Europe. However, the emergence of new global designs, especially from Japan, brought its glory down. Volkswagen had to officially end the declining production run of Beetle in 2003, worldwide. There is no denying that Beetle was the most successful rear engine design and had little spec to spec competition in its class. Volkswagen itself had to go through several iterations before its successor Golf could be perfected and popularized.

Interestingly, Volkswagen attempted to update Beetle in 1995 itself with a redesigned vehicle based on its Polo platform. It had the same exterior but used a higher horsepower engine and multi-speed gearbox. The final edition of the New Beetle happened in 2010, marking the demise of the New Beetle as well. The phase-out of the New Beetle demonstrates that there is a difference between the ongoing requirement for annual updating of automobiles and retro-futurism as a distinctive repositioning. Typically, retro-futurism needs to deploy a few breakthrough approaches to breathe new life into the retro designs.

Upgrade versus reinvention

Over the first twenty years, Beetle had continuous upgrades which by today’s standards would look very marginal. For example, the engine capacity moved from 1 litre to 1.2 litre and engine power moved from 24 HP to 36 HP. Elimination of starter button, repositioning of ash trays, redesign of bumpers, windows, turn lights and fenders were all that to claim for upgrades. The first syncromesh gear box did not arrive till the 1960s. Such minor changes continued to propel Beetle until the fade-away years of the 1970s, which brought hot new competitive designs from Japan on one hand and stringent fuel economy and emission standards in US and Europe on the other. Yet, supported by improvements like electronic fuel injection internally and convertible body designs externally, Beetle moved on with a niche positioning until the complete phase-out in 2003.

Volkswagen realized that notwithstanding the decline in sales, there was a huge reservoir of goodwill for Beetle as a design concept and owner experience. The New Beetle which was designed in the late 1990s was aimed at making the car contemporary with 1.8 litre capacity engine developing 150 HP, transverse mounting of engine, nippier drive train, independent suspension, bright colours, ABS brakes, high intensity discharge headlights, traction control, and other stylistic changes. Yet, the combination of the largely untouched Beetle exterior profile and the more powerful Golf internals as the new Beetle was not enough to fuel a new rally for the new Beetle. This is ample proof that retro-futuristic designs must not only retain the best of the old but also integrate the best of the future.

Digital Beetle 2016

After decades of incremental mechanical engineering as above, the Beetle is now reinvented as Beetle for the millennials’ era incorporating digital technologies to make the much loved buggy car future-proof. It is a combination of classic style and contemporary engineering in a future-ready digital platform. It retains the iconic two-door design and rear wheel drive but has now a larger engine series capable of delivering up to around 200 HP of power and up to around 30 KgM of torque, previously unthinkable for such a compact car. It also sports a seven speed automatic transmission, large alloy wheels, keyless starter, light sensing Xenon headlamps, electronic braking distribution, anti-lock braking system, traction control, electronic stability programme, six air bags and digital multimedia. It features all the digital bells and whistles that make travel in a contemporary car a joyous ride of safety and pleasure.

With affordable pricing, the Digital Beetle could scale up to sell in millions again. With premium pricing it could just be an everlasting niche product, selling in just thousands. Either way, the product could continue to retain its iconic status even decades later. Beetle reflects the requirements of retro-futurism brought up in the earlier piece on Apple SE: (i) A product should be developed with a state of elegance that could enable it to qualify itself as a new product even years later, (ii) Recalling a retro design has to be more than for emotional or reminiscence reasons; it should bring the latest technologies within the restored contours, (iii) The higher the size of the industry market base (and its growth rate), the greater is the potential for retro-futuristic products, (iv) Retro-futurism is not about using old dies, moulds or chassis for cheap products but is more about creating superior products with re-optimized cost and technology balance, and (v) importantly, Retro-futurism should never be mere refurbishment; it must be on reinventing the ‘old’ as a contemporaneously relevant ‘new’. 

Living legacies

Additionally, however, there are a few important lessons from Beetle that supplement the above. It is not uncommon to have legends and legacies. What is relatively uncommon is for such legends and legacies to live on physically across generations, which is not impossible as Beetle demonstrates. The enduring living legacy principles are as follows.

Inspirational designs have no expiration risk. As demonstrated by Apple SE and Beetle, inspired, and inspiring, design have no shelf life. They can survive and succeed in perpetuity. Indian epics and Raja Ravi Varma paintings are irrefutable evidence on an entirely different level. This is because inspirational designs and products appeal to the spirit as much as to the eye.

Structured teams can continuously develop innovative themes to perpetuity. History has it that Beetle concept was the brainchild of one innovative designer, way back in 1930s. By virtue of the design getting passed to Porsche, the established car maker, the concept became a reality, with continuous updates by Volkswagen teams. Designers and Developers in harmony can embed lasting value in products.

What lasts in crisis outlasts competition. Beetle was a pre-World War car. Though essentially a civilian design, the product was hijacked for military purposes. Its manufacturing facility was ravaged in bombings. Lasting through the crises, Beetle proved its mettle as a product that is crisis-proof, and hence as a product of sustainable success over generations.

Global businesses can be built on single but marvellous products. Many companies and leaders believe that they require multiple products to scale up, more so globally. While such a strategy has its relevance, Beetle is one example (along with scores of others) that one great product can create, or at least lay a lasting foundation for, a global corporation. Sony, Intel, Microsoft, Facebook, Google, and several other global corporations, each founded on just one core product, are living examples.

Glorious past gives lasting legacies but unflinching faith shapes living legacies. Managements that are driven by numbers of margins and viability as well as phase-outs and fade-outs lose track of the evergreens they have in their midst. It requires more than ordinary managerial skill and leadership insights to identify, support and nurture designs and products of perpetual value.

It is an evolved human characteristic to be creative and innovative and to constantly invent or discover something new, and build new businesses around it. While there can be no two opinions that it is a natural path, it is equally important to retain the soul and spirit of the original innovation and creativity. The paradigm of living legacies, as discussed herein, inspires us to recognize that certain types of unique innovation and creativity are everlasting in nature.   

Posted by Dr CB Rao on April 28, 2016

What Palm Holds, Eyes Behold: The Retro-Futurism of iPhone SE

Retro design is not a new occurrence. In the field of fashion and accessories, for example, cyclical emergence and re-emergence of trends is commonplace. In respects of industrial and consumer products, however, retro themes are reborn usually decades later, particularly based on niche repositioning. Re-emergence of vinyl records is an example. Re-contouring of automobiles is also another example. With the emergence of digital technologies, miniaturization and minimalist form factor have emerged as one-way development. Yet, the smart phone industry has been home to some contrarian trends. The ‘smaller the better’ principle has been reversed in the smart phones with the emergence of large screen smart phones (usually screen sizes of 4.5 to 5.5 inches) and larger screen smart phones, called phablets (usually screen sizes of 5.5 to 6.5 inches). These have not been retro cases but more of re-forming diverse design options with superior digital technologies.

Steve Jobs, the late Founder and CEO of Apple, Inc was a visionary product conceptualizer and developer.  His iPod and iPhone devices revolutionized the era of palm held devices. The real revolution of smart phones started with the emergence of the original iPhone in 2007. The first iPhone had a screen size of just 3.5 inches. Jobs resisted the trend of larger smart phones popularized by most other manufacturers, especially Samsung, even as iPhone underwent successive annual iterations. In fact, Apple stuck with the first iPhone’s 3.5 inch screen until late 2012 (launch of iPhone 5), and even then the increase was to the relatively small size of 4 inches.  After the takeover of the CEO position by Tim Cook, the screens had a real bump up to 4.7 and 5.5 inches with iPhone 6 and iPhone 6 plus respectively in 2015, a move that received both qualitative and quantitative appreciation. As was the wont with Apple, the emergence of large screen phones saw the phase-out of the earlier smaller screen models.

iPhone SE

Apple sprang a surprise this year by bringing back its 4 inch iPhone 5 as Apple SE, signifying on the face of it one of the most dramatic retro returns of all time. The earlier perception was that it was intended as an option to address mid-range price point, especially in emerging markets such as India and China. However, the announced pricing of Rs 39,000 for the 16 GB version and Rs 49,000 for the 64 GB version defy that assumption by making SE as pricey as the larger siblings. Apple SE actually brings out certain interesting lessons. First, the profile of Apple SE packs the contemporary iPhone 6s and 6S Plus specifications in the 4 inch form factor by featuring the latest A9 chip, iOS 9.3, 12 megapixel camera, 4 K video, retina display, Siri, and features such as live photos and night shift. In terms of body materials, finishes and colour options, it matches the latest generation iPhones. Experts who reviewed Apple SE vouch for the top-of-the-line features of the phone.

At one level, Apple SE may be seen to be following what Samsung or Nokia did to date, offering different products in different form factors and at different price points. There is one important difference, however. Samsung and Nokia brought in different products with different specifications; moreover, in their case, lower positioned products had lower specifications, invariably. On the other hand, Apple SE offers the best of specifications in a retro form factor. There is nothing retro on its form factor finish either! On the other hand, it represents what Apple always represented, a combination of the top end hardware and software. The logic and rationale behind Apple SE, the first retro revival in the smart phone industry, have important considerations, which are relevant not only for smart phones and other electronic devices but also for all other products as well.

Style and substance

Ever since the launch in June 2007 of the first generation iPhone, Apple sold over 820 million iPhones of successive generations. Of these, over 60 percent belong to iPhone 5 (4 inch screen) or earlier generations (3.5 inch screen). They typically have 1.3 GHz dual core A6 or earlier generation single core processor, 1 GB RAM and below (as low as 128 MB RAM), iOS 6 or earlier versions and 8 MP or lower MP (as low as 2 MP) primary cameras as well as internal storage as low as 16GB. They compare with the latest generation iPhones, not unnaturally, sporting high end specifications like dual core 1.84 GHz processor, 2 GB RAM, iOS 9.3, and 12 MP primary camera as well as internal storage as high as 128GB. More than just specifications, it is the overall user experience that took a quantum jump over the last two iterations of iPhone, of larger screen sizes (4. 7 and 5.5 inches). The launch of iPhone SE is more than an admission that an overwhelming proportion of Apple iPhone users are still comfortable with small size iPhones that can be held conveniently in the palm.

Apple iPhone SE is a phone that, no doubt, brings back reminiscences and nostalgia to early Apple users but more importantly, is a phone that encourages them to upgrade to newer and smoother user feel. This, coupled with the Apple recent philosophy that the average expected life of iPhone is only 3 years, is indicative of a larger strategy of Apple to hold its loyal base fully secured to itself. That the earlier 5S chassis is as elegant today as it was a few years ago is proof that deployment of design and manufacture of high elegance leads to sustainable product strategies, almost on the lines hypothesized by this author in a blog post of 2009. Reference may be made to author’s blog post, “Style is Substance: Management of Product Design and Manufacture’, Strategy Musings, August 8, 2009, http://cbrao2008.blogspot.in/2009/08/style-is-substance-management-of.html.  In sum, iPhone SE represents a coherent product initiative with demand management at its core. More importantly, it has implications applicable across all products.

Demand management

The demand for a product is driven as much by product innovation as by customer population. Demand for any product has two basic components, namely incremental demand and replacement demand. Both may arise from own customer base and competitor customer base. Incremental demand happens when a product-naïve customer (example, someone who never owned a smart phone or an automobile) buys such a product. Incremental demand also happens when an existing user of the product buys the same product or its variant from the same company for use by other members of his or her family, or his or her friends.  Replacement demand happens when the user of an existing product desires to upgrade the current product with the purchase of a new product.  Four grids are possible: Incremental Demand from Product naïve or Existing Customer (IDEC), Incremental Demand from Competitor Customer (IDCC), Replacement Demand from Existing Customer (RDEC) and Replacement Demand from Competitor Customer (RDCC).

Apple, as one knows, is extremely strong in IDEC and RDEC segments. iPhone SE helps the company consolidate its hold in these two segments. Importantly, given the superior technology it has deployed in the compact smart phone segment, it has enhanced its chances of weaning customers from the competitors’ fold. The new phone is the first open admission that demand need not, and will not, necessarily migrate to different product segments just because of a market leader’s phase-in and phase-out policy. As the user base exponentially grows, a broad-based product strategy is vital for comprehensive and effective demand management. Even then, it is still less than what a mighty designer and manufacturer like Apple could do to address all of the potential customer universe. For example, iPhone SE still sports the rather primitive 1.2 MP front camera for selfies when the current trend is for 5 to 16 MP front cameras to please the selfie enthusiasts.  

Retro-futurism

A firm which has an integrated approach to product development and manufacture as well as product positioning and marketing would have an exceptional ability to drive growth. Apple iPhone SE, whether so intended or not by Tim Cook and his team, provides us a platform, which the author would like to christen as retro-futurism to develop such an integrated strategy. Retro-futurism must have the following essential features: (i) A product should be developed with a state of elegance that could enable it to qualify itself as a new product even years later, (ii) Recalling a retro design has to be more than for emotional or reminiscence reasons; it should bring the latest technologies within the restored contours, (iii) The higher the size of the industry market base (and its growth rate), the greater is the potential for retro-futuristic products, (iv) Retro-futurism is not about using old dies, moulds or chassis for cheap products but is more about creating superior products with re-optimized cost and technology balance, and (v) importantly, Retro-futurism should never be mere refurbishment; it must be on reinventing a contemporaneously relevant old.  

For Indian companies, Apple SE represents a new but relevant paradigm of retro-futurism. Several Indian companies and products can benefit from retro-futurism. Tata Motors had a uniquely Indian truck called Semi Forward Cowl (SFC) truck. Retro-futurism would be an ideal application for SFC truck, which is still an attractive truck, to be refitted with modern engine and gear box options as well as digitised systems to bring it up to date. The Western world, not so much used to the Indian ceiling fan concept, can be a great new market for ceiling fans provided continuously variable and noise free operation can be ensured by the Indian manufacturers. Indian jewelery houses can revitalize the royal ornamental designs with modern gold and diamond finishes, and discover new global markets. With Mann ki Baat being the communication medium for the Prime Minister Narendra Modi, the good old radio can take a new ubiquitous digital avatar. The dialing telephone could become a new cellular communication system with all the capabilities of a new age smart phone built in. The possibilities for retro-futurism could be endless but the key is to make every product, as the legendary Steve Jobs did, with the best of design and manufacture that could last successive generations too.

Posted by Dr CB Rao on April 18, 2016   

The Mind of the Eternal Innovator: Imaginative, Re-imaginative or Disruptive?

Innovators are intellectually and attitudinally driven people who are essential for progress. Without their innovations, the world would not have been, and would not be, a better place to live in. Granted that some of the innovations have had negative consequences for the society (for example, explosives) and granted also that each positive innovation can be wrongly used for negative purposes (for example, cyber-hacking), the overall benefits of innovation far outweigh the negative consequences. We can also take heart from the fact that misuse of innovations can be moderated, if not controlled, by positive social alignment and family environment. The common purpose of innovation is to create devices, equipment and infrastructure that can improve human life. The ultimate purpose of innovation could be to extend life by eliminating diseases and enhancing wellness, and to even monitor, regenerate and recreate life.

Innovation is not for all; otherwise there would not be two distinct classes called innovators and copiers or leaders and followers in business, academia and society. Steve Jobs once said, “Innovation distinguishes between a leader and follower”. That said, the greater the divide between the two, the greater would be the power of monopoly built around innovation and the less would be the distributed social impact of innovation. In leadership and management theories, there is an embedded view that innovation at individual level is for people with rare endowments and at a firm level is for companies that are willing to bet huge investments and efforts on innovation. Evidentially, however, the contrary seems to be true. Innovation is as much about an innovative mind-set as it is about intelligence quotient or investment commitment. Innovation is also about a facilitative ecosystem that supports generation and acceptance of innovative ideas.

Imagination, re-imagination    

Innovators not only imagine but also re-imagine. Eric Schmidt, Chairman of Google, Inc said, “The characteristic of great innovators and great companies is they see a space that others do not. They don’t just listen to what people tell them; they actually invent something new, something you didn’t know you needed, but the moment you see it, you say, I must have it’’’. This implies that innovation is about having a vision for novel products and services and converting it into commercial reality. The ‘Pushpaka Vimanam’ of Hindu mythology and the aeroplane of industrial revolution are perfect examples of imagination bringing forth new products to fulfil intrinsic needs. Organized and structured research in academic and industrial laboratories follows the path of imagination to create synthetics that mimic or excel over the natural or the pre-existing synthetic.

That said, innovation is also re-imagination of what has been existing all along. For example, measurement of blood pressure has been there from the time medicine became organized, for centuries in fact. However, making measurement of blood pressure real-time and self-monitored through a wrist band or a wrist watch is the result of re-imagination of an existing activity. Driverless car is not a fundamental creation; rather it is re-imagining the process of human driving in terms of machine driving. In re-imagining, innovators consider several parallel developments in other technologies that could make re-imagination feasible. The important point to note is that imaginative innovators and re-imaginative innovators are significantly different in their approach to life, be it individual or corporate.

Visualization, re-visualization

Imaginative innovators set out to develop reality out of the abstract. They set and re-set innovation goals, conduct and re-conduct experiments to validate hypotheses and eventually succeed in bringing to life a new product or service. They look to bring novelty as the prime dimension of their innovation. Such inventions can be very purpose-oriented and goal-driven or quite accidental and serendipitous. Development of aeroplane by Wright Brothers, imagining the bird as the inspiration, was a very specific purpose driven invention. Discovery of stainless steel by Harry Brearley while experimenting with different proportions of metals, especially chromium, in steel was an accidental discovery. So was the discovery of Penicillin by Alexander Fleming or discovery of radium by Marie Curie, in a sense. That said, imaginative inventions are never by chance but are a result of serious application of knowledge and generation of experiments in which chance may also play a part in steering the course of discovery.

Re-imaginative innovators, in subtle contrast, are keen observers of what is available to create new realities that fulfill new needs or help perform current needs in a different way. Re-imaginative visualizers adopt convergent thinking (bringing together different functionalities and products in one product) in some cases and divergent thinking (deploying current products for different functionalities) in some cases. As products and technologies keep getting developed in an exponential manner, the potential canvas for re-imaginative innovators vastly expands. The projects by Google to deploy its Google Glass technology for diabetes management is one example. Re-imaginative innovation may deploy common technologies for multiple uses. It is interesting that while one purposive mind-set drives imaginative innovation the same mind-set could block re-imaginative innovation.

Disruption, transformation

The potential for innovation is, more often than not, never fully exploited. Companies and individuals may be known for consistent innovation but could have their blind spots in harnessing the full potential of innovation. Leading automobile companies of the world, including such innovation stalwarts as Toyota and Nissan of Japan, had decades ago deployed unmanned automated guided vehicles to move materials, components and products into and out of warehouses. However, it never occurred to such innovators that they should develop driverless automated cars. The companies had, for decades, used sensor technologies to govern movement of components and fool-proofing production and change-over cycles on the shop floors. Here again, it did not occur to such manufacturers that they should lead projects to elevate sensor technology and deploy it to improve navigation and safety in automobiles.

There can be several such examples from different industries where despite commitment to, and achievements in, innovation organizations fail to make the best use of their innovation potential. The reasons are not far to seek. Firms, typically, work in silos, focusing on maximization of efficiency within the existing business construct rather than disrupting a successfully operating business model. Reverting to our example of automobile industry, innovation focused on engine efficiency, transmission smoothness, chassis sturdiness, lighter but stronger materials and elegant aerodynamics to make the automobile better and safer for driving, travelling and owning rather than eliminating driving itself. That Google and Apple have taken this project is a classic reaffirmation of Eric Schmidt’s statement that the characteristic of great innovators and great companies is that they see a space that others do not.

Innovation horizons

Fundamentally, transformative Innovation can be disruptive, and hence many firms tend to delay disruptive innovation until it begins to take the form of a serious competitive threat, especially by new entrants. Rather than baulk at the prospect of disruptive innovation, competent and capable firms must find approaches integrate disruptive innovation into long term business models in a seamless way. The author of this blog post suggests charting the business in terms of three innovation horizons, the first one being the horizon of incremental innovation, the second one being the horizon of breakthrough innovation and the third one being the horizon of disruptive innovation.  Lasting businesses can be built only when a firm operates in all the three horizons of innovation.

The first horizon corresponds to imaginative innovation for performance and specification improvement, the second horizon corresponds to re-imaginative innovation where product-market interface is completely redefined through either convergence or divergence, and the third horizon corresponds to disruptive innovation that eliminates key product anchors in favour of new disruptively innovative ones. Firms may vary in approaches with regard to revenue-investment mix in each of the three horizons; some may follow a 50-30-20 mix while others may risk a 20-30-50 profile too. The extent to which the innovation horizon model is adopted depends on the innovation mindset of firms and individuals, and the innovation ecosystem they are able to nurture in their organizations.

Innovation mindset

There are certain characteristics of innovation oriented firms, their leaders and their team members that tend to be unique. Leadership for innovation is a separate competency-set by itself. Innovative leaders explicitly seek expressions of innovation, from simple ideas to complex prototypes. They embrace the idea of products doing things differently or doing things never done before. They take responsibility for incubating ideas, providing innovators with financial and people resources as well as equipment. They also understand that intellect and data powered debate is an essential component of bringing the best of innovation to the fore. They respect the short term improvements (to sustain current business) but without losing the aspiration for longer term transformations (to reinvent and transform business).

When businesses operate in terms of the three innovation horizons they move from a position of business sustainability to ‘future-shaping’ business. Rather than keep pace with innovations that come in from multiple sources as competing businesses they create their own innovation engines to influence the future. The acid test for such innovation leadership is a willingness and boldness to make its own current products obsolete. If Apple tried to protect its iPod as a music player without providing music-play capabilities in iPhone, the latter would never have been a blockbuster while the former would, in any case, been overshadowed by other smartphones. Disrupting one’s own product line-up and business strength by norm-defying innovative mindset is probably the best assurance of business perpetuity, besides being provider of global competitiveness.

Post-script

After the author has penned the post, the report of World Intellectual Property Organization (WIPO) on global innovation rankings has been published in the Press. Disturbingly, it says that India has slipped further down the Global Innovation Index, ranking 81, from 76 in 2014. In this survey of 141 countries, China retained its ranking at 29 while Switzerland had the top spot. India’s performance on innovation marks a sharp decline in the assessment of the state of innovation in India over the past few years; in 2008-09, the nation had ranked 41^st globally. India’s low performance on innovation is troublingly inconsistent with the aspiration and expectation of turning into a global economic and industrial powerhouse by 2030. The author hopes that the discussion in the blog post on the types and horizons of innovation would help policy makers and leaders to embed innovation as an essential part of India’s economic, industrial and social culture.  

Posted by Dr CB Rao on September 19, 2015      

Sustainable Success through Competencies: From Mere Assembly to Strategic Alchemy

Apple’s recently launched new phones, iPhone 6 and iPhone 6Plus, have received highly favorable reviews. Apple’s foray into the field of larger smart phones and phablets through these two phones, long after Samsung pioneered this segment (followed by a host of other companies), has been much appreciated. There has been no evidence that Apple has suffered any of the launch and sales blues that a late follow-on competitor in a crowded market space typically suffers. Rather, the market reception makes it appear as though the fragmented field has been only waiting for Apple to come and conquer. The new phones do not necessarily offer, in individual departments, features that are superior to those offered by other noted competitors. Yet, the verdict seems to be that the phones would be winners as a total package.

The new iPhones, accompanied also by iWatch (where too competition has been ahead of Apple in time), indicate a case of sustainable success; success that is not necessarily dependent on any single traditional sustainability factor such as first mover advantage, competitive specifications, lower price, brand loyalty. Apple’s success is often linked to its core competencies, from design elegance to supply efficiency. It is also linked to its leadership and people; the personal imprint of the late founder-CEO Steve Jobs and the current CEO Tim Cook on one hand and the expertise of functional leaders and their teams on the other. The theory on the whole is that Apple’s success is one of core competencies. This blog post examines if the phenomenon at hand lends itself to a simple competency explanation, or indicates the need for a more robust explanation.   

Competence set

If products and services are the bridge between organizations and markets, competencies are the driving force for products and services to be successful. The triad of customer, product (or service) and the organization is an ecosystem by itself where the boundaries and functionalities of the three elements seem to be physically defined but practically are overlapped. The collection of competencies that exist in that ecosystem defines the entry barriers and mobility barriers relating to the ecosystem. For a firm to dominate such an ecosystem, the set of competencies must be relevant and honed. There are usually limits to which an existing ecosystem can be expanded to integrate new products and services. There are also limits to which existing competencies can be honed and kept relevant. The theory of core competence needs to be revised as the theory of competence based delivery.

Structured competence set is very specific to the strategic direction. Apple has earned envy for the elegance of its product design, capabilities of its hardware and software, and for the unique formatting of its retail stores. Yet, Apple has been on a hiring spree over the last two years, bringing in some top-notch talent from related and unrelated fields. Tim Cook, the current CEO, himself has an addition for supply chain efficiency under Jobs. Angela Ahrendts, CEO of Burberry brings retail and marketing experience of a different kind to Apple. Paul Deneve, CEO of Yves Saint Laurent brings the experience of fashion and luxury goods. So does, celebrity designer, Mark Newson In terms of multi-product internal and external design elegance. Yet, it is not only a new found passion for fashion that dominates Apple’s competency diversification. Kevin Lynch, the CTO of Adobe and Ari Partinen, Nokia’s PureView technology camera guru have been inducted to add technology power to Apple.

Translation loss

It is one thing to bring together a set of competencies with an eye on the future, and even realize them as specific product or service attributes but it is entirely another thing to realize sustainable profits from such products and services. Sony, the electronics giant, was determined to assert itself in the smart phones business. It brought in ownership alignment by buying out Ericsson’s stake in the joint venture. Thereafter, Sony has evolved an exciting new design philosophy with its Z series smart phones and T series phablets. It has its famed camera technology with some of its highest mega pixel count. It brought in its Bravia and Triliminus display technologies. It also brought the industry pioneering dust and water-proof construction to its smart phones. It increased the renewal frequency of flagship models to twice a year compared to the annual frequency of Apple, Samsung and LG. It priced its products cheaper than competition while not pulling any stops in advertising. Like Samsung, it became a full range product provider, each with superior features.   

All this has been to no avail. At a time when Apple continues its smart phone dominance even with limited products and late stage diversification Sony has admitted to huge losses in its well updated and widely diversified smart phone business. Clearly, the whole of Sony’s formidable competencies has been lower than the sum of its parts. High competencies can create outstanding products and services but they may encounter either fusion inertia or translation loss as the firm aspires for commercial success. This is by no means confined to electronics. IT majors that set up consultancy verticals with highly competent business professionals have found it difficult to drive into such new businesses. FMCG companies which diversified into water purification products failed to compete with the established water purification giants such as Kent and Aquaguard despite the formidable brand power and retail network reach that the FMCG companies have. More than an assembly of competencies, alchemy of competencies could be a sustainability driver.

Alchemy versus assembly

In the physical world of management, assembly of competences is just an assembly of functions, with divergences reduced and alignments enhanced by cross-functional collaboration. To achieve sustainable success with industry pioneering or industry dominating features, organizations require alchemy of competencies. Alchemy, in a medieval sense, related to a form of chemistry pursued in the middle ages which tried to discover methods to change ordinary metals into gold. In a more modern sense, however, alchemy reflects a mysterious power that can change things or provide exceptional longevity. Addition of new people competencies certainly helps firms develop new products and services. Without hiring of Sumatran and Pawan, with their experiences of international automotive development, Tata Motors and Mahindra & Mahindra would not have been able to diversify into passenger cars and utility vehicles as they had been able to. That said, such successes have not been sustainable and repetitive leading to a question as to whether more than assembly of competencies is involved in sustainable success.

The concept of alchemy becomes relevant in the perspective. One hears of teams that tick; like the Indian cricket teams that won laurels in the World Cups, from 1983 onwards. One also hears of dream teams that deliver beyond expectations; many Hollywood blockbusters are shaped by dream teams. Such teams are shaped by alchemy. Alchemy in an organizational sense is neither mysterious or mystique; it represents complete emotional and professional bonding between members that ensures an ecosystem of creative ideas, open conversations, considered discussions and aligned executions. Teams empowered by alchemy continuously examine how the existing competencies are reinforced by the new competencies and vice versa. Alchemy is about everyone, and not the just new ones. It is not about one’s capability alone but everyone’s mutually fortified. As the examples of induction of new capabilities and the development of dream teams demonstrate, alchemy needs more than just those two elements.

Principles of alchemy

The challenge, therefore, is retaining alchemy in organizations as an all time phenomenon, irrespective of who comes and leaves. This blog post suggests a few principles of organizational alchemy. The first is organizational refresh. Staid organizations can produce only average solutions. By addition of new talent or upgrading of existing talent, organizations must refresh themselves constantly. The second is continuous collaboration. Typically organizations focus on collaboration based on projects. The more complex and more cross-functional or cross-border a project the more is the exhortation for collaboration. In organizational alchemy, collaboration has to be perpetual. It is neither issue based nor project based; it is a way of life. The fourth is technological flair. Alchemist organizations have the ability to create technological solutions to human problems; generating a satisfaction of pushing the horizon. Everyone in the organization understands technology even though only the defined ones may practice it.

The fourth principle is to look beyond the ordinary. The miraculous power to transform gets harnessed only when extraordinary goals are set. Alchemist organizations believe in growth as a way of life.  The final principle, that also enables the prior principles, is organizational chemistry. Personal chemistry works usually bilaterally or at best in limited teams. Organizational chemistry wherein every member of the organization is emotionally and professionally bonded is the essential element of alchemy. As Apple embarks on a new journey transforming Apple as a life companion with a slew of new products such as watches, wearable computers and health devices to supplement its smart phones, tablets, laptops and desktops, and as it inducts new talent from related and unrelated fields, the watch will be on if Apple would be the one company that moves from assembly of competencies to alchemy of competencies. Apple would be an interesting iWatch for students of management and leadership in times to come.

Posted by Dr CB Rao on September 21, 2014        

Mobile Body and Agile Mind: The Prescription for a Wholesome Life

Human life is one of the greatest gifts of God. It is also one of the most complex phenomena in terms of predictability and management. The multiple destinations one reaches in one’s life journey, and how fulfilling some of the sub-journeys would be are in many ways beyond one’s control. For centuries, therefore, Hindu religion, spirituality and philosophy analyzed the phenomenon of human life in terms of multiple models which combine materialism and spiritualism and which harmonize existentialism and nirvana. All through the models and paradigms of life, the need to keep one’s mind and body healthy comes through as a constant underlying thought. Over the centuries, the human race has learnt to understand itself and the environment better, and seek comfort and security for itself better; modern lifestyle and modern medicine are products of that awareness. Yet, there remains much more to fathom, and worse still, the human race’s solutions of industrialization and commercialization have created new problems; from profligacy and pollution to domination and exploitation. Economic growth with social equity continues to be a distant goal even in the most advanced countries.

The knowledgeable individual is at crossroads today. He or she has to compete on the current rules of society to live a useful life. He or she also is painfully aware that relentless competition, without matching competency, is not a winning game either. The Indian family system has been providing a safety valve; the current generation invariably gives up competition at some point of time and expects its future generation to become what it has failed to become (or has given up becoming). Even the family safety valve is now getting clogged. Life seems so remorseless, for the young and old alike, with the multiple options that influence and beckon the young, and the crumbling joint family and community options that stare at the elders. In a sense, and probably in the only logical sense, the individual in the contemporary world has no one except himself or herself to rely upon. The mushrooming of spiritual leaders and institutions points to the fact that the Indian individual is yet to come to grips with the challenge of self-management and needs support and guidance. Yet, the prescription for fulfilling life, independent of any particular stream of religion, spirituality or philosophy could be just very simple: a mobile body and an agile mind!  

Good life, balanced life or wholesome life?

Everyone seeks a good life; unfortunately like the multiple meanings the word good has, the word good life has also different meanings for different people. Some of the meanings or implications of good are high quality, pleasant, sensible, favorable, morally right, skillful, following rules, kind and thorough, to take some of the more prominent or popular meanings. Generally, good reflects agreeable. Good life does not differentiate between personal life and professional life; either or both can be described by all these nuances or not. There is a natural flaw in pursuit of good life as a goal it is highly individualistic, and enables high variability unrelated to one’s capabilities and environmental positioning. Of late, there is a view that individuals in the competitive world tend to maximize returns from their professional life in order to pursue a good personal life. This has led to two types of professionals. The first type is for whom work has become a passion, an obsession and an end in itself leading to individuals becoming workaholic  to utter neglect of their personal side; here personal does not mean merely family life, it also means the life-space for one’s own development. This has led to the formulation of the concept of work-life balance. This again is a highly variable concept, and leaving the options to individuals to define balance, and the goodness within each life segment. There is a third concept of wholesome life, which this blog post proposes,  that could be considered to as an alternative to the apparently determinate concept of good life and the truly indeterminate concept of work-life balance. 

Wholesome life covers the physical and intellectual dimensions of life. It is a holistic concept of life that combines the concepts of goodness and balance in terms of what one can deliver for oneself and one’s family as well as for one’s organization, society and nation. Every individual, from the mason who constructs a laboratory, to the scientist or the engineer who operates the laboratory and its equipment and the financier who funds a project qualifies for the concept of wholesome life. The dimension of physical wellbeing is ignored while that of intellectual life is misunderstood. Neither of these can be pursued independent of the other and, in fact, the two dimensions are interrelated, interdependent and even synergistic.  Physical wellbeing is often seen in terms of athlete-grade strength, lean frame and even sleek abs. The real wellbeing is maintaining oneself strong, stable and self-reliant with optimal physical alertness and responsiveness under healthy circumstances and assured resilience under conditions of sickness. Physical wellbeing is part genetic but largely developed through a lifetime as well. Intellect is often linked with formal education. Everyone has, and does exercise, intellect. The mason who judges the heights and slopes, understands the strength and malleability of steel, knows the right proportioning of concrete and builds the building brick by brick with the right tolerances has as much intellect as a civil engineer would have in respect of construction. The physical and mental wellbeing is determined by two factors: mobile body and agile mind.

Mobile body

Human body is a wonderful musculoskeletal system that is connected with, and operated by, the brain through the neurological and blood capillary systems, among others. Not one of the human systems is less or more important than the other. However amongst all the human tasks, maintaining physical mobility or movement must rank amongst the highest priorities of life. Mobility is the essence of life; the more mobile a person is in terms of using all the limbs and muscles the more healthy and more productive he or she would be for himself or herself, his or her family and the larger organizations and communities. Today’s industrialization favors largely sedentary lives (office environments) or stationary lives (factory environments) with minimal human effort. It, therefore, devolves on the individuals to achieve as much mobility as possible, both at work and off-work. Safety and mobility are highly related. The more stable and safer a person is the more mobile he or she can be. Conversely, the more unstable and unsafe a person is the more immobile the person is likely to be. Walking, running, jogging, sprinting and climbing are some of the mobility options one can exercise.  Office systems that confine people to eye movements on computer screens and factory systems that limit people movements to machine movements are invitations to progressive immobility. If one understands the scientific kinetics of movements well, one can master the intricate dynamics of personal productivity.

Every human discovery, made ostensibly to make life more secure and comfortable, has ended up creating new problems. To provide flexibility of indoor walking treadmill has been invented. It has brought in its wake problems of unnatural impact of walking and running. To cater to the need to provide safety and comfort, running and jogging shoes have been created. They have started modifying the kinetics of using the foot. The personal automobile has emerged as one of the greatest inventions, but it ended up enhancing and curbing mobility at the same time. Escalators and elevators, ideal for the aged and handicapped, are mobility-curbing temptations even for the young and fit. The march of technological progress is relentlessly oriented towards curbing mobility. It is, therefore, necessary for making mobility an essential ingredient of one’s daily life. It will boil down to how one manages one’s time to provide for mobility. Five factors determine safe mobility for a human being in his or her quest for quick mobility. Safe mobility can be achieved by choosing the appropriate base of support for the feet, low center of gravity,  appropriate positioning of the center of gravity over the base of support, movements aligned to body mass and weight, and the coefficient of friction of the movement surfaces. There is more physics and engineering to the science of safe mobility than is commonly known. Daily exercise routines and office/factory ergonomics must integrate the kinetics of safe mobility in day to day life.

Agile brain

If physical mobility is the essence of physical wellbeing, mental agility is the essence of mental wellbeing. Many people incorrectly see body and brain apart, with body being dedicated for action and brain being dedicated for thinking, feeling, cognition, memory and sensory functions. On the other hand, the end goal of all human body, including brain, is aimed at action or movement. The motor system of the brain is a critical facet of physical mobility and mental agility. The brain has a huge memory of prior knowledge, and every moment it keeps receiving new data as new sensory inputs. The brain has the intrinsic wonderful capacity to combine both of these to trigger a motor control mechanism that can physically display itself as ultimate movement, which could be one of the following: verbal talk, body language, writing or typing and physical movement. It is important to understand that the speed and specificity of the brain to store, retrieve and analyze memory on one hand and to receive and analyze new data inputs on the other hand leads to the agility of the brain. There is, however, a big catch. The set of beliefs, some positive and some negative, some action oriented and some inaction oriented, stifle or speed up, and distort or reinforce the motor control mechanism of the brain, influencing the ultimate agility of the brain to proactively or reactively act.

The above illustrates that the agility of the brain is a function of not only knowledge and sensitivity, which must be at high levels, but also of the beliefs which must be appropriate to the situation. There is, however, one more paradigm that influences the agility – the feedback mechanism. Every movement of the type mentioned above leads to a new sensation; the brain always has a prediction of the intended response. The ability of the brain to sensitively receive the physical response and read the actual response determines the effectiveness of the feedback mechanism. Here again, the set of beliefs one has, about people, circumstances and outcomes, influences the effectiveness of the feedback mechanism.  The outcomes of each of the feedback experiences go into the memory bank.  There is, of course, the importance of sleep in the agility of the brain. A well-rested brain is an optimally agile brain. A sleep-deprived brain is a negative influence on physical mobility and mental agility. It is, unfortunate, that not much research has been conducted to enable personalization of sleep as a daily prophylactic essential medicine that each person needs to have. In the absence of that individuals tend to adopt erroneous models of sleep (often benchmarking with other individuals), with unknown adverse influences on the motor ability and mental agility.

Mobile body with agile brain

This blog post aims to draw attention to the fact that a wholesome life that is enabled by a mobile body and agile mind is essential for fulfilling life. There is a larger challenge in understanding the interdependence and synergy that exists in the mobility of body and agility of the mind in the context of wholesome life. There is an enormous understanding of the physical attributes and kinetics of the human body. Though much less understood, the secrets of the brain are also getting unraveled at a fast clip. Unfortunately, individuals view the knowledge, even if expressed in layman’s language, as a subject of medicine rather as a valuable component of active living. The interrelationship between physical mobility and mental mobility needs an even greater appreciation. The prescription for wholesome living is in one’s own hands. The blog post cannot obviously deal with all the associated factors that have certain fundamental importance to the two goals; factors such as food and nutrition, lifestyle and exercise, emotional stability support the two goals enormously.

Today (September 29, 2013) is World Heart Day. The Indian newspapers are flush with valuable information on exercise and nutrition, among others, that enables a healthy heart and a happy living. The information also contains warnings on the deleterious impact of alcoholism and smoking on the human wellbeing. If nothing else, they adversely influence mobility and agility. Yet, we see the twin temptations simply not moving away from the society. There are, of course, several other person-specific detractors of good health such as carbohydrates, sodium and gluten. Processed foods have an overdose of these factors. Governing one’s life through these and other ‘gifts’ of modern, instant living is truly a complex challenge. The only way to address the complexity is to have a simple all-encompassing objective of wholesome life, whether at work or off-work, and achieve it through a synergistic combination of mobile body and agile brain. Beyond the God-given DNA, this requires a carefully cultivated iDNA (Indian Dietary Nutrition Ayurveda). In a climate when the hoary Indian vegetarian food system is under threat of instantaneous modernization and westernization, the society, at least in India, requires an iDNA revolution much like the famous Green Revolution and White Revolution that transformed the agriculture and dairy scenarios n India.

Posted by Dr CB Rao on September 29, 2013   

Synergy of Innovation and Perfection: Towards the Ultimate Competitive Advantage

Apple is reportedly working on a smart watch, called as iWatch by the media.  Will this be a successful product? Probably yes, if one were to consider Apple’s string of successful products such as iPod, iPhone and iPad; need not necessarily be, if one were to take into account its occasional failures such as its early generation gaming devices and portable computers.  Apple’s recent successes have, in large measure, been due to its ability to design, manufacture and deliver an innovatively perfect product for the market. From the looks and objectives, iWatch seems to have the innovative specifications and the perfect form factor that are in keeping with Apple’s core competence of innovation coupled with perfection. Apple’s track record does suggest that the combination of innovation and perfection is a pathway to success.

A study of several successful firms suggests that introduction of new products or services on a systematic basis is a key factor of success, but only if such products and services are delivered with perfection, that is, without any faults or weaknesses, and in a completely correct and exact manner. The relative importance of innovation and perfection in the combination has, however, been a matter of subjectivity. Companies that sparkle with innovation but fail to deliver it with panache have been far less successful than companies which have been merely followers but delivered products and services of impeccable quality. It would, therefore, appear that companies need to not only ensure both innovation and perfection but also get the right balance of innovation and perfection that makes economic sense.

Innovation

Innovation has no end. What appears to be an innovative product at the time of innovation or commercialization is soon rendered obsolete by a more innovative product or by a clone that is designed and manufactured more perfectly. Smart phones, for example, led a wave of innovation in mobile phones and convergence devices. The current experimental trend of iWatch and Google Glasses indicates that certain products, be they computers, smart phones or cameras, can be rendered obsolete by the trend of wearable or communicable computers that these smart watches and smart goggles signify. Companies which recognized the cycle of innovation and obsolescence, and have in addition made their own products obsolete by more innovative products have enjoyed consistent success. 

Innovation has no limits. What appears to be beyond the reach of a first innovation becomes a facile task for the subsequent innovations.  Having 256 MB RAM was once a design feat for computers. Today, a smart phone is designed with 2 GB RAM and quad-core processors. HD screen was unthinkable in a cellular phone not too long ago. HD screen capability of 1080p is now passé in contemporary mobile phones. iWatch with Bluetooth and wireless connectivity could lead to remote connectivity between the wearer and his or her devices easy. With development of needleless diagnostics, Apple may develop its iWatch into an iDoctor next. The more innovatively hardware and software are designed, and more importantly they are integrated, the more innovative a product would be.

Innovation has no boundaries. What appears to be a partial innovation in a component of a product can be a dominant driver of total product innovation. Samsung may be a follower in smart phones but its innovative edge in touch screens, ranging up to the latest large format Organic Light Emitting Diode (OLED) screens as well as bendable and extendable OLED screens has driven innovation in its smart phones. Ordinary components can be assembled into an extraordinary product through software innovation as Apple has demonstrated. As firms systematically specialize in innovation, they also acquire core competence in certain categories of innovation, as exemplified by Toyota in hybrid vehicles, Intel in computer chips, Qualcomm in mobile chips, Nintendo in gaming devices, BD in needles and so on. Continuous and systematic innovation leads to product specialization on one hand and erects entry barriers on the other.

Perfection

Like innovation, perfection has no end. As nano measurement technologies emerge, tolerances can be defined more tightly, for example. Perfection, however, tends to be comparative and contextual. Perfection is measured against the specifications set by the designer. Companies committed to high quality go in for high specifications to set the design tone for perfection. Each successive generation of products sets higher standards for perfection. In an automobile engine, spark plugs, for example, have become 30 percent thinner while moving parts like pistons, connecting rods and crankshafts have seen reductions in weights ranging from 30 to 50 percent. Perfection in measurement technologies has enabled such improvements.

Unlike innovation, perfection has a limit, a limit that is Zero in defects of manufacture and another limit that is infinity in “meantime between failures (MTBF)” of a product in service.  These limits are not easy to achieve, though. They are dependent on the sophistication, consistency and reliability of the manufacturing equipment and the manufacturing process as well as the quality of materials of manufacture on the other.  Continuous improvements have led automobile component makers to specifying defects from defective parts per  thousand that was in vogue years ago to defective parts per million that is the standard more recently. Six Sigma is another approach that tightens the limits for process variability. The term Six Sigma originated from statistical modeling of manufacturing processes and denotes 99.99966% of the products manufactured are statistically expected to be free of defects (3.4 defects per million).

Like innovation, perfection has no boundaries. It is not confined to products and services or product and process technologies. It is equally related to people and processes. Quality and avoidance of defects needs to be a credo, right from construction of language to manufacture of products, and from understanding consumer needs to fulfilling them. This assumes great importance given that consumers are more demanding, regulators are more watchful and competition is unrelenting. Over the last few years, millions of cars have been recalled by marquee companies such as Toyota, BMW and a few others, indicating that not being perfect has a significant cost attached to it. Perfection does not necessarily mean getting things right first time. There are enough practices in the design and manufacturing processes such as simulation and piloting to ensure that all defect-prone systems, causes and interventions are identified and addressed.

 

 Synergy

If innovation drives the boundary of user experience, perfection establishes the quality of user experience. Innovation has onetime design costs while perfection has recurring manufacturing costs. The combination of innovation and perfection thus determines the lifecycle costs for the company and the lifecycle value for the company. Depending upon their strategies, individual companies choose that combination which best suits their business position and market standing. The synergy of innovation and perfection comes from a combination of technology and people, a competitive and proactive mindset being the underlying behavioral foundation. Without innovation, perfection has little space while without perfection, innovation can go awry. This is best illustrated by the story of the modern day spark plug (first engineered in 1860  with the engineering of the internal combustion engine) which demonstrates how innovation and perfection are synergistic.

Spark plug is the heart of the internal combustion engine which in turn is the core of the petrol-powered automobile.  Spark plugs have seen a leapfrog in sparking efficiency and maintainability over the last several decades due to a combination of the use of more advanced materials (innovation in materials sciences) and the deployment of tighter tolerances in each of the components, not limited to the electrodes (perfection in design and manufacture). Use of exotic iridium and platinum materials for central electrode and ground electrode respectively, and tight ultra-fine tapering and gap setting promote not only high efficiency sparking but also long life and more effective self-cleaning characteristics. The synergy of materials innovation and manufacturing perfection that the modern day spark plug represents is also illustrative of how innovation and perfection can be synergistic to achieve ultimate competitive advantage for firms.

Posted by Dr CB Rao on February 17, 2013