Monday, April 30, 2012

Has Nokia lost the battle for Smart Phones?

I have been a loyal user of Nokia phones for last 10+ years, until I recently changed to Apple iPhone and it is not just me. A lot of my friends and colleagues too have moved from Nokia E series smart phones to iPhone or Android. Few of them moved from Blackberry to iPhone.  Till now, I have not seen any of my friends and colleagues moving to a Nokia Lumia Smart Phones and worse still I have not seen anyone who is planning to buy Nokia Lumia phones.

Last year, in late October, I was passing through Heathrow Airport terminal 5 - where Nokia had a major marketing campaign for Lumia 800. I saw the advertisements and as soon as I landed in India, I walked into a local branch of Univercell - a leading chain of cell phone retailer to see if I can see a demo of Lumia. But the local store did not have any thing to show. I checked again after 2 months and the story was the same. The three local stores had no demo models, they even did not have a new boxed phone of Lumia 800 in-stock, and the salesman could not even tell me when I can visit again to see a demo.

What struck me was that all the retail associates across the city were not selling Lumia. Despite having big banners & advertisements of Lumia phones, the retail salesmen were not excited about Lumia. Even the store manager did not have a Nokia Phone, He had a Samsung!

The cell phone store salesmen were eager to sell/promote Samsung in the Smart Phone category, they had full functional demo units. At one store, there was a dedicated sales counter for Samsung products - with full range of models on display and live demonstration. Unfortunately, Android is not a supported platform at my office for emails. So, I decided against Android phones.

Next, I checked out iPhone at the local Apple store. The retail experience was completely different. Adding to the fact, was that I needed no introduction to IOS platform - as I own an iPad. The salesman had several demo units and that closed the deal. I had made the decision to change to an iPhone from a Nokia E71.

Now, I am just taking my example and generalizing it. But the signs of Nokia's defeat is everywhere. If the retail associates are not eager to sell Lumia, then it is a clear sign that the front line troops (i.e., salesmen)  have given up the fight. And the results reflect that: In the last quarter, Nokia sold only ~2Million Lumia phones Vs 34Million iPhones and ~50+Million Android phones.

Nokia's Q1 2012 results in a glance

Revenue in Q1 2012 - $9.65 Billion - down from $10.4 Billion in Q1 2011
Sales of Smart Phones: Q1 2012: 12 Million - down from 24.2 Million in Q1 2011
Of which Lumia phones accounted for only 2 Million!

Indian revenue numbers show a different story:

FY 2011 revenue: Rs.12,929 crore - a growth from Rs.12,900 crore, while Samsung's revenue was Rs.5,720 crore. Nokia is the market leader with ~39% market share. In short all the numbers paint a rosy picture.
These numbers just indicate that Nokia is not finished yet, and can still recover its old glory, only if Nokia can execute. Any business transformation will be painful, and Nokia is currently going through that painful transition.

Disjointed Marketing Effort?

Nokia's marketing in India and the world seems to be totally disjointed.

While the marketing on the Internet is concentrated on Lumia 900 - their flagship product, the website is promoting Lumia 710 - the lower end product in the main homepage. Worst of all, website does not even show Lumia 900!

The banners and posters at retail shops advertise Lumia 800 - while the salesman does not have a demo unit for Lumia 800.

I checked on the pricing of Lumia 800 today on several Internet sites and found that prices vary from Rs24,000 to Rs 23,500. This implies that Nokia has already started discounting the price from the initial launch price of Rs 33,000. This sends out a wrong message to the potential buyer - who now has an incentive to wait further for the prices to come down. In short the pricing model does not encourage customer to buy the phone today and people would rather wait for prices to comedown even further.

Pull Sales strategy is not working

Nokia has tried several new marketing strategy to promote Lumia: Flash Mobs, Facebook, Lumia Challenge campaign etc. While all this marketing efforts created the buzz for the product, the retail sales channel did not have phones to show!

From the customer point of view, the customer would like to see, touch & feel the product before buying. So all the marketing efforts have come to a naught!

When a potential customer walks into to a retail store and not having phones to sell is not a good strategy.

Its the Ecosystem that sells Smart Phones

When it comes to Smart Phone Ecosystem, Nokia has two major disadvantages:

1. Not many Apps that run on Windows Phones.
2. Many Enterprises do not support Windows Phones.

Apps is the number one reason why users are choosing Smart phones. In this area, Nokia or rather Microsoft will have to get really aggressive. Right now, Windows platform is not popular for the Apps. App environment on Windows is improving - but it still a laggard. So Lumia customers feel dejected when their friends show off a cool iPone/Android App - which is not available on Lumia.

Even in my organization, the first mobile platform we target is IOS for iPhone/iPad and then develop the Android version of it and stop. We do not develop the apps on Windows or Blackberry.

Another big challenge is the enterprise customers. Most of the corporate enterprises today limit the number of smart phone platforms they support. My organization does not support Android phones and when it comes to Windows, the support is limited to emails only. No business Apps such as Live meeting or enterprise IM etc. Users cannot connect Windows mobiles to corporate Wi-Fi either.

Smart Phone users want to have one single device for both work and personal use. So if the corporate IT does not support Windows Phones, like it does on Blackberry or iPhone, users are being discouraged to buy Windows phones.

Nokia and Microsoft, especially Microsoft will have to increase its efforts to promote Windows Phone as the preferred enterprise mobile platform - if they intend to succeed.

Apple and Android on the other hand are leveraging the users to force enterprise IT to support their platform, and in my organization , I can now connect my iPad, iPhone and Laptop to corporate network - and that was a major factor in my final decision to opt for iPhone.

In my opinion, Nokia and Microsoft have not yet developed an integrated marketing strategy for the Apps and Enterprise usage.

Closing Thoughts

Nokia has developed a good Smart Phone - Lumia 800 & 900. The device itself is very good. But Nokia has blundered in the sales & marketing of these new smart phones.

Despite having a huge sales network across India, a dominant marketshare, a loyal customer base, Nokia is struggling. If Nokia fails to execute on all fronts then Nokia will have a long down hill ride to abyss - just like Sony & Motorola.

Saturday, April 28, 2012

Why has Android based Tablets Failed?

In the last 3 years, several iPad competitors have come and gone, but none has succeeded.

None of the iPad competitors have been successful. Even the high priced Samsung Galaxy Tab, Blackberry Playbook, HP Notepad, Sony Tablet S - all have failed. Even the low priced tablets - such as Akash, ZTE also failed. Only the Kindle Fire and Nook has seen a moderate success.

So the question is: Why has non iPad Tablets Failed?

As I had mentioned in my earlier article - Will tablets replace PC as preferred computing device?  Tablets computers are not really the preferred devices for data consumption or for data creation. In short there is not a strong use case for a Tablet computers.

iPad has been successful because Apple was able to define a very strong use case of a Tablet computer. The use case for iPad has nothing to do with real computing, rather it is based on lifestyle statement. Apple defined the iPad use case and positioned iPad as:

1. Uber Cool device
2. Power & Status symbol
3. Unique, innovative toy

The success of iPad spawned lot of competition - which had a different market position. For most Android tablets, the use case or market position was defined as:

1. Cheaper than iPad
2. Alternative to iPad
3. Low cost computing device.

Positioning Andriod tablets as an altenative to iPad or being cheaper/low cost computing  is hardly appealing for people who want to use a Tablet as a power/status symbol.

Android Tablets not the preferred devices for data consumption. Most people who are looking for a low cost device for data consumption will already have a smart phone or can afford only one - either a smart phone or a tablet, and will end up opting for the cell phone.

Amazon Kindle & Nook have been an exception to this category - as these devices were positioned as eBook readers. As a book reader, cell phones are inadequate for the task. So for reading books, tablet computers have a distinct advantage over cell phones.

Also read: Product Positioning of Amazon Kindle Fire

Closing Thoughts

Android Tablets does not have a compelling use case. Andriod tablets do not have the style/status/power symbol. Tablet computers are totally inadequate for digital content creation, and are too expensive for digital data consumption - when compared to cell phones. Without a compelling use case, consumers will not buy Android tablets - with the exception of eBook readers such as Kindle Fire & Nook.

Friday, April 27, 2012

Will tablets replace PC as preferred computing device?

Lot of people have been asking this question lately. Many of them are putting off upgrading their PC/Laptop for an iPad. (And Apple stock continues to rise) Even prominent industry analysts have predicted the demise of the PC.

While there is no denying that tablets are more handy, more mobile and has longer battery life, PC still has an upper hand when it comes to content creation. Tablets are very good for information consumption.

To answer this question: Will tablets replace PC?  We need to ask the question in a slightly different way.

  1. What is the preferred way to consume digital data?
  2. What is the preferred way to create digital data?

And then ask the question: Will Tablets replace the PC?

When we rephrase the question, the relevance of tablet computer seems to fade a bit.

Are tablets the preferred way to consume digital data? 

Well, the short answer to the above question is "NO".

Today, Cell Phones or rather Smart phones are the preferred way to consume digital data. Today cell phone users are the largest consumers of Internet bandwidth, followed by PCs, in the third place are the Tablets.

Looking ahead, cell phones will evolve and will be able to connect to bigger screens - such as TV screens and will continue to be the preferred way to consume digital data.  If I look at myself, in last two years, cell phone has become a preferred way to search the Internet, listen to music, and watch YouTube. I have a desktop, two laptops, an iPad, and iPhone, but the phone is still the preferred way to read news, search for information and my personal entertainment system. I checked with several of my colleagues and friends in the USA and their usage pattern is similar as mine. Some of them still use the wired Internet to download stuff, which is consumed on the cellphones - mainly due the the data plan caps imposed by the operators.

Most people in the world cannot afford to have a tablet and a smart phone, and they will use the phone as the preferred means to consume digital data. As vast populations in India, China, Asia, & Africa come out of poverty, the only information device they will ever use will be the cell phone. So I would assert that smart phones will be the preferred devices to consume digital data.

For digital information consumption, Tablets will be a niche device - sandwiched between the Smart TV and the Smart Phone and this niche may even disappear.

Now coming to the second question: What is the preferred way to create digital data?

The very fact that I am writing this on my laptop, while my iPad is sitting right next to me is a testament to the content creation capabilities of tablets. Today, we are seeing the first generation tablets and they are really lousy when it comes to digital content creation. I still have not come across people who have used an iPad to write a book or create a poster or develop a video game.

Personal computers are the preferred way to create digital content and it will remain that way for next decade. Personal computers will evolve to have tablet like touch interface, or even evolve into a PC-tablet hybrid device. But then such an hybrid will eventually kill the tablet.

Now coming to the main question: Will Tablets replace the PC?

Did the PC replace the mainframe/server? Well the short answer is NO.

Likewise, tablet will not replace the PC either. Tablet and PC will co-exist for sometime till cell phones become powerful enough to replace the tablet. Book readers such as Kindle or Nook may hang around longer, but eventually tablets will have to evolve into an hybrid PC or vice-versa.

As I see things, pure play tablet computers - iPad or Kindle or Galaxy Tab & the like are transitionary devices - which must evolve into an hybrid-PC or die. There will be small niche market segment which wants the PC and the Tablet and the Smart phone, but that will be a very tiny minority.

Closing Thoughts

Most people consume data. Its almost 80-20 rule that applies. 80% of the population are consumers, and 20% are producers, and 80% of the world population cannot afford both a smart phone and a tablet, and will use cell phones are the preferred way to consume digital data, while for the content producers - PC will remain an indispensable tool.

Tablet computers in its current form is only transitional and will evolve into a Tablet-PC hybrid device. I predict that in next 2-3 years we will see tablets that will have many of the PC like functions - like native printing capability, multi-input devices: keyboards, pen/stylus etc., and then at that point, Tablets will start looking like a PC.

Do Product Managers need Sales Experience

"Do product managers need Sales Experience?" I was asked by an engineer who wanted to become a product manager.

A question is a loaded one and it requires a detailed answer.

Product manager's main function is to build products which customers want to buy. Ideally, a product should sell by itself - like iPhones or iPads. But in reality it will require lots of sales and marketing effort.

To build products that customers want to buy, one must understand:
1. What the customer really wants?

2. What is the customer's buying process?

3. What pricing models will work for customers?

4. How to sell the product?

5. Why customers want your product?

To answer these questions, product manager must have a deep understanding of customers and this comes with sales experience. Product manager often need to go out in front of the customer, present his product and make a sales pitch. Having this real sales experience is invaluable as it gives deep insight into the real issues customers are facing and how the product will help solve that problem.

As legendary Harvard Business School marketing professor Theodore Levitt put it, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!"

The only way a product manager can understand the real requirements is to meet customers on a sales call, or in post sales follow-up calls. This calls for real sales experience.

Product managers should not be Sales Centric

But remember that sales should not be the key focus of product management. Having a sales centric approach will spoil the product by redirecting product development towards the "next prospect". This leads to knee jerk, reactive product management which will destroy the product value in the long run.

Closing Thoughts

Sales experience is vital for product management. But product managers must not get involved in day-to-day sales activities focusing on numbers and the next big deal. Ability to understand customer requirements is the key - which comes with good sales experience.

Wednesday, April 25, 2012

Product Management and Innovation

In the book "CTOs at Work by Scott Donaldson, Stanley Siegel, and Gary Donaldson", Don Ferguson, CTO, CA Technologies has said: 'My folksy story for that is, product management, competitive analysis, these things are all-important for marketing, you know, market intelligence. But in 1880, if you did standard product management, market analysis for illumination, you would have gotten cheaper candles, you know, scented whale oil.'

As I read the book, I knew what was being said about product management is not true and I have a good example from my own recent experience.

Recently, there was a big discussion at my work regarding the size of the server need to host a network management software - which can monitor 50,000 devices. The discussion was purely technical - in terms of database size, memory size, I/O requirements etc. While this discussion went on, I decided to try out a different approach. I challenged the conventional engineering thought process by asking a different question: "Can we do that with an iPad?"

In other words, I challenged the current product paradigm of using heavy iron servers to manage the network infrastructure, instead use something really lightweight platform instead.

It was a bold and a open challenge to engineering. Can we change the way we do things? Can we develop the same functionality in a different way? Can we innovate?

It is not just challenging the current paradigm that leads to innovation, but the follow through on the thoughts. What happened next was very interesting. I created a small team of engineers: two engineers and myself to take a first crack at the challenge.

We huddled up in a room, and brainstormed about it using basic principles of TRIZ. At the end of 3 months of investigation and re-engineering the product, we came out with a product concept of distributed network manager - where different segments of the network are managed by a light weight application which runs on a single VM. Each of these manager apps interact with one another and with a central application on need-to basis. The central application is connected to a web page for user interaction - which could be running on an iPad.

This new idea spins the entire concept of IT infrastructure management on its head and challenges the current product with a revolutionary new approach.

It may take some more time for this concept to become a successful product. As a next step, product management will have to take this concept and develop a new product out of it.

Product management is not just about producing a cheaper/better product. It is also about looking at the very nature of customer needs and then bringing out breakthrough innovation by challenging the current product paradigm.

Product Manager's dilemma

Product Manager' dilemma arises from two conflicting demands on product management:

1. How to continually develop disruptive innovations to retain their current market leadership position?

2. How to increase profitability of existing products? Based on which product managers are rewarded?

It is challenging to meet both the objectives simultaneously within the same organization. The dilemma of developing disruptive innovations that cannibalize current products while maintaining profitability is a complex challenge that goes beyond the traditional boundries of product management, that involves organizational transformation. (Think of Nokia & its shift from Symbian to Windows)

Organization transformation requires a deep understanding of the organization's current pre-dispositions towards innovation and risk appetite. If the organization is very responsive when it comes to customer orientation - i.e., would like to listen very closely to customers, and targets early/late majority markets, then commercialization of break through innovative products is very difficult. In such cases the entire organization will be fine tuned to cutomer's needs and will not accept innovative products.

To commercialize a breakthrough innovation, the organization must have a proactive or evangelical approach towards customers, and must always target early adaptors or innovators as a customer group. Customers who are also innovators or early adaptors are more likely to adapt innovative products.

Closing Thoughts

The biggest challenge is not innovation.  Radical innovations that challenge the current product are always tough to commercialize in an existing organization - due to constrains imposed by opportunity cost models. For product management, the biggest challenge is make an innovation a commercial success, and that in most cases will require organizational transformation.