Category Archives: Web 2.0

Why adaptation is just a critical as innovation

adaptby szeke

Why Apple blinked
[Via Brainstorm Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0]

An analyst offers three reasons Apple relaxed its rules for App Store subscriptions

Scott Forestall demoing iOS 5’s Newsstand. Source: Apple Inc.

RBC’s Mike Abramsky was the first analyst out of the gate Friday to comment on Apple’s (AAPL) decision to make it easier for publishers and other content partners to offer in-app subscriptions.

[More]

This is not a case of blinking. It is not a game of chicken when a 21st century company is involved.

Companies of the industrial age play a zero sum game. Companies of the 21st play a win-win scenario.

Apple presented a policy that it felt was fair and beneficial to its customers. Which it was.

But the policy also hampered the collaborators that Apple depended on to make the subscription policy work, and to increase the reach of the App store.

Apple usually puts it customers first, something quite unusual these days, but does recognize more and more the importance of its collaborators.

Here, it listened to its collaborators and found a way to adapt its policy to create a win-win for everyone.

Too many analysts still try and describe Apple as if it was a company of the last century. They fail to see the real shape of the future here.

Apple strives to find the sweet spots of win-win. 21st Century companies adapt to create non-zero sum results.

You can also see this with their general business approach. All other hardware manufacturers play zero sum games – they have to gain market share and can only do that by taking it away from someone else. Profits seem to disappear in this setting though.

Apple plays a non-zero sum game – they are happy to have a falling part of a growing market, as long as they keep getting more profits.

Thus, Apple may only have a very small percentage of the cell phone market (4%) but they hold the majority of all the profits.

Which is more sustainable in the end? That is what a 21st century company can accomplish.

Describing a 21st century company

Codifying asymmetry: How Apple became Jobsian
[Via asymco]

Any student of organizational theory must struggle with the question of how to assign weight to the influence of the leadership of a company. In the case of Apple, the question is:

Is Jobs is the embodiment of Apple or is Apple already Jobsian, imbued with his ethos?

John Gruber summed up the “Apple is Jobsian” argument by saying that Apple is Steve Jobs’ greatest creation and that he has been working on crafting the company as much as he has been crafting products. The result being that it’s well designed for sustainable longevity.

[More]

Apple seems to be taking positive steps to understand why it works the way it does. As I have written several times, it is one of the first 21st century companies. I worked at another – Immunex.

The hallmark of these companies is the ability to do more with less. Their efficiencies mean they stay focussed on what really works, Much of the management of Apple has internalized these values. The simple, not the complex. Admit mistakes and move on. Deep collaboration and cross pollination.

One other – something Immunex also did well – is to focus on what NOT to do. Figuring out rapidly what does not work, examining the project to see what not to do, provides opportunity savings that can be critical with small groups. Failing quickly and successfully is a key. This is something much larger companies can not do.

Pixar does many of the same things. I wrote more in depth in my series about the Synthetic Company. (1, 2, 3)

Margaret Wheatley said it best in her essay  on The Unplanned Organization:

I also want to emphasize that emergent organizations are leader-full, not leaderless. Leaders emerge and recede as needed. Leadership is a series of behaviors rather than a role for heroes.

That is why Apple will do fine without Jobs, just as Pixar will do fine and why any 21st century organizations will succeed – the community is the leader. They can adapt to things that come at them and are resilient to changes.

20th Century companies often lived or died by their CEO. Not so for 21st Century companies. They live or die by the community that has been created.

We will see more of these as time goes on because they will be the successful organizations dealing with the complexities of this century.

Where the App economy began

appby merfam

The Class That Built Apps, and Fortunes
[Via NYT > NYTimes.com Home]

In 2007, the “Facebook Class” at Stanford created free apps for millions of users. But it also fired up the careers of many students and pioneered a new model of entrepreneurship.

[More]

I was at a meeting in 2008 where this class was first described. It was so fascinating I took no notes. Here is what I wrote afterwards:

I just listened to most of this (no notetaking) because it was just an incredible story. some good lessons. Many crummy trials better than deep thinking. Students that shared the most were also at top of lists of apps.

Generated close to $1 million in revenue, several companies started, etc.

Novelty is not best approach. Sometimes best to copy what is out there. Today’s metrics are not the best.

You can LEARN to create a winning app. many stanford’s teams were successful.

Used chaos cycle – trials, evaluate, assets, inspire, trials. Faster could run cycle, faster reached peak. like evolution.

Mass interpersonal persuasion now possible. Created $10 million in value in 10 weeks.

Better to have a rapid development cycle than think things fully through. The ones who shared the most made the most.

Rapid development cycles. Thse that share the most made the most. Learn what works instead of just decide before. Use chaos to your advantage.

What these students found in 2007 is now a part of the economy. Just look at the App Store. This approach to business will expand to many other areas.

Rapid cycles of learning and knowledge will produce better decisions.

BioScience on the Brink (Updated 5-3-2011)

Register for BioScience on the Brink in Seattle, WA  on Eventbrite

Check out the news section of the registration page to see why the Early Bird tickets are $3 off for a limited time.

What happens when the brightest researchers in Seattle get together to talk, eat, drink and listen to each other?

Join us May 24 for the organizational meeting of BioScience on the Brink. Science exchange overlooking Lake Union.

Seattle has a tremendous number of researchers working on a wide variety of projects covering biosciences. Meet some of them.

In both for-profit and non-profit research settings they are exploring problems in  global health, biotechnology, bioinformatics and much more. Discuss their work.

Science on the Brink will be an informal space for them to talk with peers and to hear presentations from this vast array of scientists. Exchange knowledge.

Science on the Brink will provide  a place where young researchers, working hard at the bench, can connect with other scientists who are perhaps developing novel drugs, designing clinical trials or perhaps even selling pharmaceuticals.They will be working at non-profit institutions or for-profit corporations. There might even be some interested laypeople in the mix.

The plan is to have an opportunity for networking with some good food and drink, along with a couple of short (20 minute) presentations by working researchers. This will generally not  be a place for CEOs and department heads to present. They have many opportunities to do that. These presentations will be for the younger scientists – the scientific leaders of tomorrow.

This organizational meeting is to gauge the enthusiasm for such an event and to discuss future ideas. We are asking for a nominal fee in order to cover some of the costs for food and for the venue. However, the ticket price will be discounted – and SpreadingScience will pay all service fees – until May 10.

The Eastlake Bar and Grill  is centrally located to the greatest concentration of researchers. It has a great deck overlooking Lake Union which should be fabulous in May.

This should be an invigorating meeting in a wonderful location. If you would like to have some critical input into the future of these meetings, be sure to attend.

Hurry. Space is limited.

Supporting Partners:

 

Founding Sponsors:

The management style of Steve Jobs

mac os xby bizmac

How Mac OS X Came To Be [Exclusive 10th Anniversary Story] | Cult of Mac
[Via Cult of Mac]

Mac OS X celebrates its tenth birthday today. The groundbreaking operating system was introduced to the public on March 24, 2001. Mac OS X helped reverse Apple’s fortunes in the desktop PC market, and has underpinned a lot of Apple’s subsequent success. Most importantly, it spawned iOS, which runs today’s iPads and iPhones.

Below is the story of how OS X’s game-changing interface came about. The story gives some insight into corporate creativity at Apple. OS X’s interface started as a side project. But as soon as Steve Jobs got wind of it, it was fast-tracked. Jobs became intimately involved in its development — a scary prospect for the programmers working on it.

[More]

There are some great insights throughout the article. One is his abrasive manner, something like a drill sergeant. It seems that he is  interested in how people respond to really withering criticism. In one, the interface designer had provided some mockups for a new Mac interface at a retreat where he was pretty much laughed at because the work would be too hard.

Two weeks later [after a presentation on some of his interface ideas] Ratzlaff got a call from Steve Jobs’s assistant. Jobs hadn’t seen the mockups at the off-site—he hadn’t attended—but now he wanted a peek. At the time, Jobs was still conducting his survey of all the product groups. Ratzlaff and his designers were sitting in a conference room waiting for Jobs, when he walked in and immediately called them “a bunch of amateurs.”

“You’re the guys who designed Mac OS, right?” he asked them. They sheepishly nodded yes. “Well, you’re a bunch of idiots.”

Think about that. The head of the company calls a meeting with your group, walks in and calls you names. How would you you respond?

Jobs reeled off all the things he did not like in the about the interface, mostly things that he did not like about Ratzlaff’s area. But Ratzlaff had a key insight: “I figure he’s not going to fire us, because that would’ve happened already,.”

They picked themselves up and began to figure out how to succeed. They stood their ground and fought for their ideas. Jobs had seen the mockups so he knew that these guys could come up with interesting ideas. But he had to know if they would be capable of actually implementing them. How hard would they fight for them, especially if he provided his support? If he gave them a lead, would they fight to get these ideas implemented – which would take a huge amount of work – or fall back into the safety of committees, as so often happens. That is what this meeting was about.

And Jobs was satisfied. For the moment. All the guys knew that they now needed to implement these ideas. They worked for three weeks, at all hours, to make mockups of what they could do. When Jobs looked at the work, he gave them the whole afternoon with him. That is simply a huge amount of time for a head of a company to give to a project that was so young. Jobs’ insight was to realize the huge importance for the company if they got the interface right. This is what people would actually see, not all the great stuff under the hood. Instead of grafting on the old interface – which is what Apple had been doing – he wanted a whole new one.

After an afternoon, he knew it could be done. During this meeting, he told Ratzlaff, “This is the first evidence of three-digit intelligence at Apple I’ve seen yet.”

From idiots to geniuses in 3 short weeks. That is how you respond to the demands of a leader like Jobs.

Not all leadership styles could be the same as Jobs’, nor should they be. But the underlying point for really creative people is this: Nothing less than the very best should be acceptable. How you motivated creative talent to do that may differ but that motivation needs to be there.

I wrote about this when I discussed Edward Tufte. He was talking about the Macintosh and Windows interfaces. He revealed why the design of the Mac was so much better than Windows. I wrote:

Tufte was discussing the different interfaces between the Mac OS and Windows. After going through a lot of the pluses he saw in the Mac and a lot of the minuses in Windows, he stated that the Mac looked like it had been created by one or a small group of people with a single purpose, a single view of how the information should be presented, while Windows looked like it had been done by a committee.

He then said that all the best presentations were this way – a single point of view forcefully pushed onto everyone. Someone in the audience then asked but what happens if your single point of view turns out to be wrong, to not work.

Tufte replied, simply, “You should be fired.” You could almost audibly hear the intake of everyone’s breath. That is exactly what they feared and why they would always want to retreat into committee decisions – they can’t be fired if the committee made the decision.

The creative, the innovative do not really fear failure, often because they are adaptable enough to ‘route around the damage’ quickly enough. They do not usually doubt the mission they are on and are certainly not uncertain about the effects. Read about the development of the Mac. They were going to change the world, no doubt about it. While you can see that there really was a focus of vision, there are also lots of ‘failures’ that had to be fixed. The key was to fail quickly, leaving time to find success.

And permitting committed individuals to find their own way to success rather than rely on committees to fix them.

Jobs’ methods may be abrasive but there is a point. The types of individuals that Jobs is looking for – those who can creatively connected to the single vision needed for success and who are adaptable enough to make that vision a reality –  do not respond to his manner by trying to hide in committees. They stand right up, against all outside pressure, and try to find a solution.

And that is why they succeed.

 

The real sign of Apple’s innovations – they fit on a table

$76 billion a year from a tableful of products
[Via asymco]

During the calendar year 2010 Apple spent nearly $2 billion in R&D. That is a significant increase from $714 million in 2006. However, as a percent of sales, R&D spending has decreased. Sales have grown more rapidly than resources hired to develop the products (or to sell them).

In Q4 2005 Operational Expenses (costs which are not tied directly to units of production–sometimes called fixed costs) were 14.2% of sales. In the last quarter of 2010, the ratio was 9.2%. Sales and administrative expenses (which include advertising, promotion and overhead) were 7.1% and R&D (which includes all engineering, testing) were 2.2%. As percent of sales both reached new lows.

[More]

I mentioned this last week but this is a nice graph to see trends.

This remark was pretty cool to think about:

The efficiency with which Apple creates sales is legendary. There can be many explanations for this but the most telling evidence of causality I can find is the small number of products in the portfolio. Tim Cook stated that given the sales value, there is more concentration of product at Apple than at any other company except perhaps an oil company. All the products Apple sells can fit on one average sized kitchen table and they generated $76 billion in sales last year.

I’ve written about Apple’s approaches, as well as those of other 21st Century companies. One of the  key aspects is their efficiency – they produce a huge amount of innovative work that belies the small size of their research groups. Pixar is another example.

I worked for a company that accomplished this – Immunex. We were able to compete with much larger companies by focussing our research efforts very tightly. Not that we only worked on a few things. We worked on a lot of them.

But we only allowed a very few to pass through to real development. We did this by having a very open and transparent vetting process for projects. We examined every research project 3 times a year in a process that could be attended by everyone.

What this did is make it very hard to carry on projects purely for political reasons. In many companies, a powerful sponsor could take possession of a project and push it through, resulting in something that dies on the market; in these companies, politcal pull can bemore important than actual innovation.

Because of the social aspect of our vetting, it became much harder to say that a project would continue “Because I said so” when everyone could see that another project held better value. It decreased the ability of politicians to get a project approved.

And, since everyone’s views were heard, people could understand why a decision was made – it was made in public.

We worked hard to kill projects or put them on the backburner. But it was all done in public. And then we allowed every scientist to spend a percentage of their time working on a project – any project – that they wanted to. This not only allowed people to continue for a time even on killed projects, hoping to rejuvenate them, but allowed really creative ideas to be examined.

But, after a certain time, each of these were vetted in public. If they did not pass the public test, they were scrapped.

We developed a lot of innovative ways to foster creativity but the most important was making the discussions and decisions open to anyone, make the important decisions as early as possible and make them public.

I don’t know if Apple does the latter but it seems likely they do the former, as this from asymco suggests:

Most observers of technology are not aware of the pace of its development. It’s natural to assume that most R&D costs are in the product creation, or early phases of development. Coming up with something new must be hard. But that’s not actually true. Most R&D work is routine polishing of products and coordination late in the development cycle. “Productization” is far more resource intensive than “concepting”.

This is absolutely true – coming up with ideas is easy; making them happen is hard.

It stands to reason that making go/no-go decisions early in the pipeline is a lot less expensive than making stop-ship decisions prior to launch.

I have no specific evidence that this is the case, but I guess Apple conceives of plenty of concepts, but chooses to move forward to develop and market very few. Most companies don’t have the ability to decide early and proceed with costly R&D and marketing in order to find out whether products will “work” in the marketplace. The proliferation of flawed products is a big cause of the inefficiency of product development.

Look at so many companies. They put out lots of products hoping the market will decide which is best. They want consumers to do the hard work. How did the Kin see the light of day? Many companies just can not kill a project that has emotional and political connections. So they let it slump on through, hoping that the market sees potential.

That is why, a year after the iPad, we have 100 different copy cats, while in the years before the Ipad there was just nothing even close. Most companies have no real idea of what is successful to they copy other’s success.

But Apple, like Immunex, repeats innovation time and again because it has developed a process of killing things that do not work and, if they can, killing them before they progress very far. They may not always succeed – they have had failures – but they usually know why it failed.

I worked for a company that came up with innovative solutions for years –again and again – so I know that what Apple is doing is not only working but is reproducible.

That is what separates a 21st Century Company from a 20th Century one.

Some reasons why Apple is one of the first 21st Century companies

appleby leoncillo sabino

Reasons for Apple’s Greatness? How ‘Bout The Cook Doctrine?
[Via Mactropolis.com – Your Friendly Global Mac Community]

Asymco has a great post up titled simply ‘The Cook Doctrine’. It’s a compilation of statements from Tim Cook in a financial earnings call (for Q1 2009), while he was the Acting CEO for Apple during Steve Jobs’ leave of absence.

We believe that we’re on the face of the Earth to make great products, and that’s not changing.

We’re constantly focusing on innovating.

We believe in the simple, not the complex.

We believe that we need to own and control the primary technologies behind the products we make, and participate only in markets where we can make a significant contribution.

We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us.

We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.

And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change.

And I think, regardless of who is in what job, those values are so embedded in this company that Apple will do extremely well.

Taken together, these add up to one hell of a great company philosophy. They also offer cause for optimism on the company’s prospects even when Steve Jobs is no longer in charge.

[More]

I’ve written about what some 21st Century companies will look like – The Synthetic Company part 1, part 2 and part 3.

And the strength of these organizations is that the core principles are not dependent on just one charismatic man at the top of the hierarchy.

Cook gets is. As did Lassiter at Pixar, another 21st century company until bought out by Disney. As I wrote back then:

In the Innovator’s Dilemma, Clayton Christensen discusses the difficulty organizations have in utilizing disruptive technology in novel ways. The dilemma is that often the same processes that helped make them successful now prevent them from making the leap to a new technology set. See Clay Shirky’s article on the collapse of business models for some examples.

Even when they know that they have to change and even what the changes must be, they almost always fail in making the leap.

That is mainly in the way they are organized, how they are run and the types of communities they represent.

Yet companies that have Steve Jobs organizing them seem to have been able to do this. Apple defined personal computing, it defined the graphic user interface, the laptop, the MP3 player, the smartphone, the tablet computer. Pixar defined computer generated animation.

By creating organizations where innovations are not shuttled through layers of middle management, with each layer sucking the originality out, Jobs has been able to drive disruptive innovations rather than react to them.

The most amazing thing to me is that Apple has succeeded in being a market leader during two separate paradigm shifting market wars – first the graphical user interface wars between Apple vs Microsoft and now the Internet as interface wars between Apple vs Google. Microsoft’s inability to become a major player in the new way of the world is an example of corporations failing to make the leap, of suffering the Innovator’s Dilemma.

One important aspect of these sorts of  21st Century companies is that their strength is their community. It is very hard to alter the principles of a strong, cohesive community – living in Seattle I can still see the strong Scandinavian culture present, not only in businesses but in politics.

It looks like Cook certainly gets it.


iTunes jackpot: Billions and billions

iTunes jackpot: Billions and billions
[Via Brainstorm Tech:]

Apple has paid out more than $2 billion to developers, $12 billion to music labels

Source: Asymco

Sometime in the next week or so, the zeros on the App Store countdown odometer will roll over and Apple (AAPL) will announce that 10 billion apps have been downloaded since the store opened two and a half years ago.

Asymco’s Horace Dediu has used the approaching milestone to run series of analytical charts. The first group, posted Sunday, showed that the number of apps downloaded per iOS device is accelerating and has grown from about 10 per iPhone and iPod touch in the fall of 2008 to more than 60 per iOS device today. Sometime later this year, the number of app downloads since 2008 will overtake the number of songs downloaded since 2003.

Of course, we pay for the music we buy from iTunes, while most of those apps are free. But there is money to be made supplying both kinds of content, and on Monday Dediu took a crack at estimating how much.

His conclusion: Apple has paid more than $2 billion to third-party app developers and about $12 billion to the music labels. To see his math, click here.

[More]

I wrote about the app economy a few weeks ago. Here we have another example. Just from Apple – $2 billion to developers for products that did not exist 3 years ago. How many markets go from zero to $2 billion in that time?

The ability of groups to generate capital with rapid creative cycles drives this. It is not built on monolithic applications that take years and hundred of man-hours to develop. Quick, rapid and fast are the hallmarks of this economy.

There is a way to create a market of early adopters

change by kevindooley

Oregon must create a market of early adopters
[Via Climate Solutions]

One reason we created the New Energy Cities program at Climate Solutions was to elevate the conversation and focus on a small number of city and utility partnerships that are serious about the degree of innovation needed to create a clean, efficient energy system at the local level.

[More]

Early adopters are a small portion of any community – the ones most in tune with new ideas and processes. The majority of people do not want new ideas or processes – they just want to continue using what they have because they know that these will work.

These doers really only change, only adopt innovative processes, when either of two things happen: 1) the people they know all change; or, 2) a thought leader they respect tells them to.

These thought leaders often act as mediators between the doers and the early adopters, two populations that often do not communicate well. The early adopters are always coming up with new things that just distract the doers.

Most communities do not have enough of these mediators and do not effectively leverage those they do have. People seldom get kudos for acting to facilitate change like this.

To create a community of change, one needs to identify and leverage these thought leaders who can effectively mediate between the early adopters and the doers. The more efficient this can be done, the more rapidly the entire community can adapt to change.

Wikileaks and Apple – why does Apple not leak anymore?

steve jobs by Collin Allen

Wikileaks: traditional liberalism with balls?
[Via Boing Boing]

The mainstream media likes to suggest, with a nudge and a wink and abuse of the word “cyber,” that Wikileaks represents a radical ideological position. But if there’s a moral crusade to be found, maybe it’s rooted in a tradition closer to home: classical Western liberal-democratic principles.

In The New Republic, Noam Scheiber takes for granted that Wikileaks is here to stay, with relentless pressure on big business and big government that permanently hampers their ability to prevent leaks. This will result in smaller, more humane organizations.

I have no idea what size organization is optimal for preventing leaks, but, presumably, it should be small enough to avoid wide-scale alienation, which clearly excludes big bureaucracies. Ideally, you’d want to stay small enough to preserve a sense of community, so that people’s ties to one another and the leadership act as a powerful check against leaking.

To make this point, Scheiber reminds us that Wikileaks’ stated aim–making organizations operate more ethically–is a mainstream one: “It’s easier for honest CEOs to run an honest business, if the dishonest businesses are more affected negatively by leaks than honest businesses,” he quotes Julian Assange.

Scheiber’s argument seems to be that Wikileaks’ disclosures could have more subtle and far-reaching effects on organizations than it expects.

[More]

Apple demonstrates today the sort of company Scheiber discusses. Maybe it is because Jobs hates leaks.

Scheiber’s article is one that should be read by everyone. It is a very important one in its implications. Wikileaks, and the ideas behind it, may alter how businesses work and adapt. It touches on some of the ideas of David Brin in The Transparent Society – the same technologies that permit the powerful to spy on us can, and should, be used to spy on the powerful.

Scheiber postulates, and I agree, that the inability of large companies to stem leaks may result in the greater proliferation of corporate ‘cells – it is easier to control the flow in smaller groups without stemming the tide totally. Inefficiencies in small groups can be overcome when needed. In larger groups, it can be deadly.

Luckily, we also have the ability today for smaller organizations to leverage the abilities of others to succeed. The small biotech company I was VP, Research at had perhaps 3 of us who were working in the lab. But we did not need more because we could have other companies do the sequencing for us – no need for a core facility with tens of people. We could have other companies synthesize DNA for us – no need for a core facility with tens of people. We were able to accomplish great work with a company with 10-20 fold fewer people than it would have taken just 10 years earlier.

So, there will be business pressures to become smaller and more adaptive as well as information pressures.

That is why I think Apple is the first of its kind – a truly large company that has somehow maintained the abilty for small company adaptability. It acts small, has research abilities that are far beyond the modest number of people it has doing R&D. It is able to run rings consistently around other companies. It is one of the largest companies by capital value on the planet yet it acts like a startup.

I don’t know all the details of why but we all know that Jobs is the reason. But I think part of the way this new sort of company came about was because of Jobs’ reaction to leaks.

Apple used to leak like a sieve with whole websites devoted to writing about them. Jobs pretty much stopped that, so much so that a lost iPhone became a cause celebré.

One would have expected this sort of iron control on information leaks would have harmed Apple. Most organizations respond to by clamping down on information flow but, and this is especially true of large ones, this is like giving themselves a lobotomy. Information flow slows, making it very hard to make good decisions and adapt properly to changing conditions.

That is what Assange claims he wants to do with Wikileaks – cause the old dinosaurs to react in ways that result in their own downfall.

Well, Apple shut down leaks and actually became a better and stronger company. I’d love to know the details but I expect that Jobs actually implemented some of what Scheiber discusses. Break the groups down into more manageable units and use pressures to make leaking a violation of social mores.

Of course, this is a two way street and these same social mores can push back on the company to be more ethical, etc. Even the smallest group is open to leaks when some feel the company is acting unethically. It all becomes a system of controls and feedbacks that does not harm the information flow needed to adapt.

I believe that when it is all said and done, we will discover that the same things that ended most of Apple’s leaks also led to a large amount of their success. That somehow Jobs’ response actually did not stifle creativity but enhanced it.

If we can replicate this elsewhere, then things like Wikileaks would not need to be feared by most organizations. In fact, Wikileaks would become irrelevant for the vast majority of us.