Here is how their nice graphic links to my uglier but more specific one:

Optimization only goes so far. UX Designers need to make bold leaps to find the next mountain

Getting to that higher peak is where product vision comes in.  Optimization methods (including metrics-driven design and usability testing) don’t take you there — you need product vision methods.

After the initial rush, nobody will buy it, except for:

1. Gadgetphiles (because it’s nifty)
2. Anyone who was considering a Kindle.  (I mean, why bother?)
3. Anyone who needs a living room surfing computer
4. Anyone who travels a lot
5. Apple-philes (who must collect ‘em all)
6. The status conscious (you look mahvelous with it)
7. Your parents, who will receive one as a gift from you (especially when it does video conferencing)
8. Lucky kids of wealthy people
9. Many who had been considering getting an inexpensive netbook.
10. You, because you will receive one as a gift.  (And you will love it.)

So  please temper your expectations.  Except for these groups of people, nobody will buy an iPad.

Legendary.

1. Satisfy important unmet needs
2. Convince people that they are doing #1 (whether or not they actually are)
3. Exploit a human weakness
4. Exploit cracks in the system (creating them if necessary)

You might want to think about this a bit.  What types of companies epitomize each?

The focus of this blog and my company is succeeding on the basis of method #1, satisfying important unmet needs.  It’s the sustainable, no-BS way to go about it.

But we must acknowledge that companies can and do succeed — at least from a financial standpoint — without actually having to do so.  You can, in fact, make a good living selling snake oil.

How about you?  How does your company succeed?  What type of business do you, personally, like to be involved in?  Which of the four are you personally driven to, and which are you repulsed by?

A commenter asked, and I paraphrase, “The question is, will people care? Is existing voice quality ‘good enough’ that a jump in quality won’t matter that much?”

What is important about this question is that it gets to the product vision skill of being able to distinguish revolutionary technologies from those that only sound revolutionary.

One guy seemed to think HD audio was radical, “This is a bigger innovation than cameras on handsets or app stores for the industry.”

Is he right?  Here was my response on Steve’s blog:

Will customers care about HD audio? I like to think about these things in terms of needs. The HD audio people cited in the NYTimes thinks that this is more revolutionary than the camera in the mobile or the app store.

The guy is wrong. The cellphone camera and the app store are important because they enable the satisfaction of a host of new needs and scenarios. You can now email a picture of a sinking airplane from a boat on the Hudson river.  The innovation is valuable to customers because more real needs are being met.  Simple as that.

HD audio,while difficult to do and very welcome, is still an incremental innovation to customers, because it merely does a better job of addressing needs that were adequately covered for the last 70 years.

In the market, incremental refinements like HD Audio are not irrelevant, but they tend to be tie-breakers.  Given two otherwise equal offerings, a customer might as well choose the more refined one.

Eventually the competition responds, and the refinement becomes table stakes for all players.  But until the advantage is neutralized, the company with the more refined solution has bragging rights that can distract customers from more important unmet needs.

It may be fairly obvious that HD audio is a nice-to-have, because we are all intimate users of telephony.  However this way of thinking — connecting the technology back to scenarios and needs — applies to less familiar ideas.  It’s a useful way to break through reality distortion fields and make predictions about the true relevance of exciting looking technologies to customers.

And if none of us make it that far, why not make as much money as we can?

Here is an inflation-adjusted chart of 100 high-tech companies (click for interactive chart):

This chart is a useful reality check on business plans.  It’s very hard to be a “rocketship” – one of the red curve companies in the chart that attains $50mm within 5 years.  Neither Microsoft nor Oracle did so and if your business plan says you will, it’s probably incorrect.

Nokia reported a $1.36 billion loss in the third quarter as the company wrote down the value of its wireless networks venture by $1.35 billion and global sales declined 20 percent.

The company [..] acknowledged that its lead in smartphones, the fastest-growing segment of the market, had fallen to 35 percent from 41 percent, losing ground to Apple’s iPhone and Research in Motion’s BlackBerry devices.

Nokia’s problem is not execution.  It knows how to build things and bring them to market: it cranks out new models by the dozen.  Its problem is not innovation, at least not at the tactical level: every feature you’ve heard has made it into a shipping Nokia device.  Nokia’s problem is in product vision, of being able to imagine a coherent future reality with an ideal smartphone.

You might think that Nokia, with 25 years in the business, wouldn’t have allowed itself to be surpassed so easily.  But we should expect it.  It’s common pattern among big, old, successful companies.  Sony, Dell, GM, Motorola and countless others have fallen into the product vision trap, opening the door to disruptors.

Product vision becomes a bigger factor the more dials there are to turn in product formulation.

Sony traveled a similar arc in consumer electronics.  Sony was untouchable when their gadgets did only one or two things.  Like Nokia, it could master those core capabilities and move on to providing a variety of product variants for every segment, on marketing and on operations.  These were the business drivers as long as there was a steady state in the market.

But as technology enabled new classes of products, those old recipes no longer worked.  As the number of dials to turn in product formulation increase, the tried-and-true approach of cranking out incrementally better products breaks down.  Leadership gets overwhelmed by the plethora of choice.  In lieu of product vision to guide the way, they resort to guesswork, throwing everything against the wall to see what might stick.

Without a clear, coherent image of how things should be, design suffers.   Nokia’s products (and Sony’s, and Motorola’s, etc.) became complex, incoherent, and frustrating to use.  When products take on more capabilities, keeping things simple gets exponentially harder, because every feature relates to every other feature.  The possible associations grows with the square of the number of features.  (Even the best-of-class iPhone and Palm Pre are not immune.  Both could do their core tasks considerably easier.)

When products get more and more capable, the only way to cut through the jungle of choice, and the only way to keep the user experience coherent is with a clear product vision.

PS: Nokia has the market power but not the product vision.  Palm has the vision but not the market power.  I’m hungry for my Reese’s Peanut Butter Cup.  When will Nokia acquire Palm?

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Philip Haine is principal of Product Vision Associates, a product innovation consultancy that helps product leaders and their teams envision new, breakthrough products and reboot older ones.  To follow him on Twitter click here.

Mr. Jobs [..] insisted that Disney build a prototype store to work out kinks, a costly endeavor that most retailers skip.

Most retailers skip the prototype step for store redesigns?  Really?  Then how do they know the full rollout, which is much more costly, will work?

What is this, advertising?  (ba dum tchhh)

your top priority is to ensure that the team is building something worth building, and that the development team is a very big investment for the company and should not be wasted, either by having people waiting around or by rushing to build something that will just have to be done over again later.

Enter, product vision.

• a second on-board OS (Linux) and subsystem for instant-on computing:

“Some users Dell surveyed spent 70 percent of their time working in the instant-on mode. Microsoft is sure to take note of that figure. Windows has turned into a clunky, cup holder.”

(Then again, this sub-system is not integrated with the main system.  Different OS, different file system, different apps.  It’s like having a cheap netbook hacked into your laptop.

This all points to the still-unmet need of a truly instant-on system.  I still await the time when our main laptops achieve the instant-on performance of the 1983′s TRS-80 model 100.)

• a docking without cables, including inductive charging (is that energy efficient?),
• wireless USB (sweet!) and:
• wireless display interface (beat Apple to the punch)
• a super thin enclosure (Zzzz)
• an interesting black cherry finish (ooh aah)
• “the right side of the monitor acts as a sort of touch-wheel, letting you scroll through application icons and start applications just by rubbing your finger along the edge of the laptop.”

  It reportedly doesn’t work well in this incarnation, but the idea of having more touchable surfaces has potential.  (Wouldn’t it have been more convenient to reach along the edge of the base rather than the edge of the display?)

• a few other minor innovations

Good for Dell.  These premium innovations can be perfected, reduced in cost, and trickle down over time to their lower end hardware.

Take this as a sign that the world is finally learning Apple’s lessons.  Consumers will be better off.  Product companies better be prepared for more intense competition.

My big question: did Dell pull all of this off in-house?  Or did they enlist the help and vision of an external innovation agency?

If you can’t beat ‘em, buy ‘em, and then either grow ‘em or eliminate ‘em off the market.   It’s a common tactic for the big guys who have trouble growing breakthrough products in-house.

The problem is, it’s too risky to be a reliable strategy.  A competitor might snap up the company first.  It could start a bidding war forcing you to overpay.  Bad acquisitions will happen, as with any huge investment.  (I’ve seen too many).  And the upstart may refuse to sell themselves to you for inordinate greed or non-business reasons (such as, you are Microsoft).  You have to be among the fattest of cats to be able to absorb this risk.

Intuit has struggled to invent substantial new products.  And the Quicken business was slowly dying off (even Microsoft exited the business).  Intuit got a great deal by buying the disruptive Mint.com for a mere $170m.

Let’s focus on a great Yahoo! Our average user is just trying to get through the day…looking to find out what’s going on in the big world and their own world. They want their Internet site to be great, and to work. They don’t care about how or about deals. They care that we are a trusted dependable site.

That is our simple mission. Focus on it!!!

Let’s itemize that.  Yahoo’s simple mission is to:

1. Help users get through the day
2. Help users find out what’s going on in the world and their own world
3. Make an Internet site that is great, and works
4. Have a site that is trusted and dependable

That’s a rather hazy vision to try and focus on.  Only #2 provides a modicum of guidance.  And even that amounts to, “Let’s do more of what we’ve been doing for the past 10 years.”  If that was the right strategy I doubt Yahoo would be where they are now.

Someone could use a little help with their product vision.

1. The New, Faster Face of Innovation

This article discusses the qualitative changes taking place in the nature of innovation itself:

Technology is [..] allowing companies to test new ideas at speeds—and prices—that were unimaginable even a decade ago. They can stick features on Web sites and tell within hours how customers respond. They can see results from in-store promotions, or efforts to boost process productivity, almost as quickly.

The result? Innovation initiatives that used to take months and megabucks to coordinate and launch can often be started in seconds for cents.

And that makes innovation, the lifeblood of growth, more efficient and cheaper. Companies are able to get a much better idea of how their customers behave and what they want. This gives new offerings and marketing efforts a better shot at success.

2. Succeeding with Scrum: Start by Creating an Effective Product Vision

A common question I am asked is how my product vision process fits in with Agile.  The short answer is that they are complementary.  The product vision process is for establishing the product vision.  Agile, on the other hand, is a development methodology.  It can help tune the vision, but it is not a proper process for generating the idea.

Have you ever worked on a Scrum project where the overall goal was not clear? Where you had a product backlog but the people involved in the development effort only vaguely understood the purpose of the release? It happens more frequently than any of us would like, even on projects with multi-million dollar budgets! Often Scrum’s emphasis on “getting work done” is misunderstood as a rush to develop with not enough thought to where the project should be going. Don’t make that mistake. Every Scrum project needs a product vision that acts as the project’s true north, sets the direction and guides the Scrum team.

3. Apple Afraid Google is Taking Over the iPhone?

If you consider yourself a student of product vision and strategy, you might want to follow the fascinating dance playing out between Apple and Google.  Two of the world’s most visionary companies are erstwhile friends, and now, looming competitors.  Techcrunch has the scoop:

[..] Apple expressed dismay at the number of core iPhone apps that are powered by Google. Search, maps, YouTube, and other key popular apps are powered by Google. Other than the browser, Apple has little else to call its own other than the core phone, contacts and calendar features. The Google Voice App takes things one step further, by giving users an incentive to abandon their iPhone phone number and use their Google Voice phone number instead (transcription of voicemails is reason enough alone). Apple was afraid, say our sources, that Google was gaining too much power on the iPhone, and that’s why they rejected the application.

4. Reed Hastings on Culture of Innovation

This slideshare on Netflix’s corporate culture is really about your corporate culture.  There are enough powerful insights and ideas here to warrant multiple careful viewings:

Lots of companies have nice sounding value statements.  Enron had a nice-sounding value statements with 4 values: Integrity, Communication, Respect, Excellence.  Their four values were chiseled in marble in the main lobby, but had little to do with the real values of the organization.  The real company values [..] are shown by who gets rewarded, promoted, or let go.

This remarkable deck on Netflix corporate culture reflects what he figured out in those two years.  It’s longish, but worth grabbing a cup of tea, closing your door, and taking time to reflect upon each slide and what it says about your company.

Reed Hastings has been added to my list of heroes.

But if it were to happen it would have to be done right.

Over at my sister blog, StealThisIdea, I describe a strategic approach for newspapers to start charging for content, that borrows heavily from the proven precedents and takes customer psychology into account.

Please check it out:  How to transition newspaper readers to paying customers

Earlier I wrote about the need for fundamental cultural transformation at GM.  I was cautiously optimistic that bringing in outside leadership might usher in real change.

Well, the “new” GM has brought back some old leadership, Bob Lutz, and here is what he had to say:

The problem we have right now is getting the breadth of the American public [..] to realize the transformation that has taken place in GM’s quality, design, fuel efficiency and so forth, and to expunge some of these hoary old conventional wisdoms that General Motors builds gas guzzlers, General Motors has sloppy interiors, General Motors this, General Motors that, none of which is true anymore.  But it tends to get endlessy repeated in the popular press.

Incredibly, this is the same story that GM has been telling itself for years.

Dear Bob, it cannot possibly be true that GM is transformed.  You just emerged from bankruptcy. You are still necessarily selling the cars built by the old GM.

Those “hoary old conventional wisdoms” you deride?  They are true.  Anyone who rents a GM vehicle can reconfirm this for you in a minute.

Your biggest job right now is not to “get the American public to realize the transformation that has taken place.”  That’s the old PR-driven culture rising from the ashes of the old GM.

Your biggest job is to actually to create better products for customers.  Drive success by driving better products that customers will, um, want to drive.

In contrast is Ford Motor Company, which, while suffering, is managing to get by without government bailout money.

What’s so different about their culture?  A group of prominent shareholders who passionately care about the company, the descendents of Henry Ford:

The Ford family members own a special class of stock that gives them 40 percent voting control.

“I feel this is one of Ford’s greatest assets, and one that G.M. has never had,” said David L. Lewis, a business historian at the University of Michigan. “The family has been an oasis of stability through the years.”

Ivan points out that elements like the business case and competitive analysis are irrelevant to audiences like engineering.

While this is true it is still very important to capture that information. They state the assumptions behind the product vision, and while the engineers may not care about it, they are extremely relevant to anyone who needs to scrutinize the product vision.

There are other fundamental problems with fat documents: they are extraordinarily laborious to produce. Especially the part about finishing it: having to comb through it carefully, finishing each section, and trying to perfect it for the momentous occasion of publication.  Readers will only read it carefully once (if that), and minor errors can damage its credibility and distract the reader from the critical messages.  So the fat document has to be very high-quality, and that means some very late, and burnout-inducing nights indeed.

A couple of years ago, I underwent the most significant change in my toolset in years. I switched from word processors for such documentation to wiki’s.This had a number of huge beneftis:

• The documentation is more useful because each audience can read only the sections they need to. Business managers can read the business sections, and the engineering staff can read the product requirements sections.
• The publish cycle is streamlined.  In the word processing world, everyone waits while you write and perfect the MRD. They provide comments, you incorporate feedback, and publish another fat version of the document. And possibly another, by which point everyone dreads having to read your document again. When you pass in the halls, people avert their eyes out of guilt for not having re-read your master work.
• You are now free to build up your document from rough notes that are incomplete or not 100% baked.   With wiki’s, the whole ritual of document creation is changed.  The document is always published, even in rough form, even when it’s just a skeleton.  Everyone understands that the  document is never “finished;” it is always a work in progress.
• The document can be created in pieces.  You can put out a section for comment while you work the next section.
• The document becomes a group conversation. Reviewers can comment to each page and can react to one another’s comments (unlike change tracking in word processors).
• It’s much less daunting for a reviewer to re-read just the sections they care about, than a fat word processing document.
• The document is always up-to-date.  You can incorporate someone’s comments immediately, even while meeting with them.  Everyone always gets the most up-to-date thinking available. They don’t have to wait for the next publish cycle.
• Wiki’s are hyperlinked. This means less repetition, and it lets the material scale to the needs and interests of the reader.
• Wiki’s can be created collaboratively. Different product managers on a large project can own different parts of the MRD. And any reader can jump in and fix typos or make minor edits.
• Wikis are globally searchable.  Old but valuable information is findable.
• No more wasteful printing of hundred page documents
• And you don’t have to throw the baby out with the bathwater. You can document everything that needs to be documented. You don’t have to arbitrarily excise important information just because it makes the documents too cumbersome.

This approach just so happens to be the Agile way of doing documentation: put out something small but something useful quickly, and keep adding and refining it.

My wiki of choice these days is Google Sites.  While it’s not without its quirks, the net benefit over word processors is so great that they are tolerable.  The greatest downside is that the information is hosted at Google, not within the secure confines of your corporate firewall.  This may or may not be a deal-breaker.  [Readers, is there a clear favorite intranet wiki that deals nicely with rich text and graphics?]

If you are still publishing word processing documents, give a wiki a try instead!

See also:

• Top 7 Tools for Interaction Design and IA

—

Philip Haine is principal of Product Vision Associates, a product innovation consultancy that helps product leaders and their teams envision new, breakthrough products and reboot older ones.  To follow him on Twitter click here.

After all, they permitted the competition to consistently be superior in quality, not for a few quarters or years, but for a few decades. Their best efforts at innovation were directed not towards better cars, but the problem of preserving the status quo.  And they willfully ignored the writing on the wall with respect to future oil crises and the latent demand for efficiency.

Did you know that, as a result of progressive legislation, GM had an early lead not just in electrical vehicles like the EV1, but in hybrids as well? As soon as lobbyists managed to squelch California’s strict emissions standards (with the aid of the White House at the time) GM yanked the plug on electrics.

The incredible postscript to this story is that it was America’s call-to-arms for efficient vehicles that panicked Honda and Toyota into action.  The Japanese manufacturers invested heavily in hybrids, leading to Toyota’s years-long lead in hybrid vehicles and the birth of the Prius.  While the American auto execs congratulated themselves for persuading government not to force it to invest in the inevitable future, Toyota went ahead and invented it.  Hybrids “make no economic sense,” said GM vice-chairman Bob Lutz.  Oops.

And so an epic failure of product vision it certainly was. But that is not the heart of the story, or its root cause. The root cause is a cancerous corporate culture.

It’s a corporate culture where dissenting opinion is marginalized and only the yes-men survive. (For a taste of this, check out the sycophantic employee comments at GM’s own blog.)

It’s a corporate culture that’s driven by PR rather than product.  It’s a culture with a cynical view of customers that says that you don’t have to actually deliver the best products to them.  You only have to convince customers that they are the best products. You don’t have to actually be a green company.  Job #1 is to convince everybody that you’re green.  The first act of a supposedly chastened GM?  Yet another PR campaign stating (yet again) how it’s turned the corner.  At GM, image follows product.

This culture neglects the fact that between what you say and the money you want to make, you actually have to provide significant value to customers.  Making a lot of money in a sustainable fashion requires consistently satisfying important unmet customer needs.

GM’s is a corporate culture that resolves the cognitive dissonance between the claimed and actual quality by truly believing that they are delivering quality. A company that believes its own BS sets sail from the reality-based community.  If it cannot be honest with itself, so loses its ability to self-correct and goes increasingly off-course.

GM’s is a corporate culture that is in denial about its own and failures and limitations, where everyone else is the scapegoat.  No failure is admitted, except perhaps the failure to get their message across to the public.

“G.M., for all these decades, has been a ‘know-it-all’ company that had all the answers [..] I think it’s been proven that they really didn’t know it all.” – David Lewis

GM’s culture is a systemic cancer that is not easily cured.

That’s why I was not very hopeful that a new GM, radically cut back, would be much different than the old, bloated GM. The only hope of turning around a corporate culture around like this is by decapitation.  The old leadership is simply too vested in their past decisions, too stewed in ancient assumptions and attitudes.  For fundamental change, the company’s values, reward system and world view must be turned upside down.  That is only possible with strong new leadership.

And that’s why it’s encouraging news that the shareholders of GM — i.e. us, the American public, as represented by our government — are replacing its leadership.  Not just the CEO, but the entire board of directors, which somehow — someone please tell me how — tolerated the destruction of billions of dollars of value before their eyes over decades.

It won’t be easy to turn GM’s culture around.  Old habits die hard, and remember, it’s the yes-men who survived at GM, not the innovative rebels.  But at least now, with new leadership, it stands chance.

For the rest of us, GM’s insidious corporate culture is worth pondering and comparing against the institutions over which we have influence.

Update 6/10/09 nytimes has more on the challenges of reinventing GM’s culture.

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Philip Haine is principal of Product Vision Associates, a product innovation consultancy that helps product leaders and their teams envision new, breakthrough products and reboot older ones.  To follow him on Twitter click here.

Typically, what happens when somebody designs a conventional plan is they start off with the revenues they hope to get. They estimate what the costs are. They subtract the costs from the revenues and that tells them what the profits are going to be. A reverse income statement starts with the profits I must earn to make it worthwhile. I can then calculate what the maximum cost can be in order for me to make those profits, and then what the revenue should be in order for me to make the profits.

So, you start with the income statement at the bottom and you work up instead of starting at the top and working down. That’s what we mean by the reverse financials. Very rapidly, you may find that in order for you to be able to make the numbers that you plan to make in terms of profits, all you need is 5000% market share — at which stage you say, “Oops, let’s go and do something else.” You really don’t know, but it gives you a sense of what the scope is.

[By Rita Gunther McGrath, courtesy knowledge@wharton]