Volkswagen’s Art of Profitability

If you’re familiar with the bell curve that’s used to explain the concept of the mass market, you’ll know that the most profit to be had for a new product is on the left hand side of the bell curve before it’s adopted by the mass market.

This is a trend that we’re currently experiencing with the iPhone, where it was purchased by the early adopters at high prices and is now slowly moving (actually it’s moving quite fast) into the mass market.

The other great insight is to create products for niche markets, where profit margins are high due to little competition, yet the market is large enough to sustain demand for considerable periods of time. So the real question is, if everyone knows this, why isn’t everyone doing this?

Because it’s risky

Creating products for early adopters or niche markets requires a considerable amount of R&D. When successful it pays off the greatest rewards, but if not, it can put a significant economical strain on the business, maybe even putting it completely out of business.

But what if…

You could create products that served different market segments without compromising your core brand products and existing business?

Volkswagen has been playing this game right in front of our eyes for the last 20 years or so, and have been doing it beautifully.

In recent times, Volkswagen has strived to be the world’s largest car manufacturer in terms of production. Drastic changes were made in terms of structure, financial activity and manufacturing, but through all the ups and downs, Volkswagen AG is still soaring high.

In the last 10 years, Volkswagen has managed to increase its revenues by a whopping $100 billion and net profit in excess of $5 billion.^{1 2}

Compared to its two greatest competitors, Ford and GM, Volkswagen has been enjoying the fruits of its labour, despite the economic downturn, while Ford and GM have been largely swept away by the tide.

The figures below show Volkswagen’s performance for the past 10 years compared to its major competitors, Ford Motors and General Motors.

Figure 1. Revenue Comparison of Volkswagen AG

The Art

Volkswagen performed this feat through a number of acquisitions. It addressed every segment of the market by reviving a manufacturer in that space.

Volkswagen not only owns Audi, Skoda Bugatti, and SEAT, but now also Lamborghini and Scania.

Audi was purchased by the group in 1964, when Audi was no big deal to the public.³ Because of economic pressures during that time, Auto Union’s DKW brand was covering 17.9% of the German Market while Audi held only 0.1%. After the acquisition by VAG, the emergence of Audi as a separate brand became visible for the first time since the pre-war area. Audi was introduced to the United States for the 1970 model year.

SEAT was purchased by Volkswagen AG in 1990. Before acquisition, SEAT was facing funding problems. Fiat was unable to provide SEAT with a major capital investment. After Volkswagen AG’s acquisition of SEAT, it has increased its presence in the motorsport world. This was mainly down to VW’s plan on focusing the SEAT brand as ’sporty’, to appeal to the younger generation of drivers.⁴

Skoda Auto has been performing well since the 1980s, especially during the release of the Favorit model. It was very popular  in Czechoslovakia and other parts of the Eastern Bloc and also sold fairly well in Western Europe, especially in the UK and Denmark. Skoda even boomed into popularity after the acquisition. Backed by the expertise and investment of Volkswagen AG, the design – both style and engineering – of cars produced by Skoda had greatly improved. Due to the release of Octavia and Fabia, they finally made their way to the demanding European market.⁵

In 1998, Volkswagen AG also acquired Bugatti and Lamborghini and was able to acquire 70.94% of voting rights of Scania on February 2009.⁶ Recently, Volkswagen acquired a 49.9% stake in Porsche AG⁷ and acquired 19.9% stake in Suzuki.⁸

In each of these markets it revived these businesses by bringing unique innovations appealing to the specific market segment. VW was one of the first manufacturers to really push the idea of diesel as a viable and economical alternative to ordinary unleaded, and demonstrated through its TDi models that they were as fast as their ordinary fuel counterparts. With Bugatti, it introduced the Veyron, the first 1000hp road car, while with Audi it made major upgrades to compete with Mercedes and BMW. It kept its customers happy, while optimising its profitability.

Innovative cost cutting

Along with the acquisitions, Volkswagen devised innovative cost-cutting measures. Innovative, because instead of the traditional route of limiting operational costs, Volkswagen thought of other ways that they could earn more profits rather than concentrating on what they can save. Some of these cost-cutting measures have included the following:

• Creating a reenergized line-up of models²
• 1. Volkswagen began building trucks and buses through a radical scheme in which suppliers did much of the assembly work, creating an even closer relationship between automaker and supplier, and in theory a more efficient factory.
• 2.  The second being my favourite of all, and if you are familiar with Slywotzky’s The Art of Profitability book, it’s also known as the “Multi-Component” Profit Model.VW whittled down its platforms to just 16 for its four major company brands: VW, Audi, Seat, and Skoda.
• This meant that the core components and parts, used as part of the platform for each of these brands, were the same for all of them. Meaning reduced manufacturing costs and even more improved operational efficiency, since an improvement in one area meant an improvement across all the major brands.

3. In the 1960s, Volkswagen captured the North American market for the small, inexpensive automobile with the original Beetle, and soon established a Beetle assembly plant in Westmorland, Pennsylvania. However, with the rise of the Japanese and other Asian manufacturers in the entry-level market during the 1970s and 1980s, Volkswagen saw its market share in North America fall precipitously. Also facing more stringent environmental and safety standards in the US and Canada, in 1986 Volkswagen decided to cease all assembly operations in the U.S. and Canada, and rely entirely on imports to service the market. Not facing the same constraints in Mexico, production of the Beetle continued at the Puebla plant, just as it does today.

Other innovations
VW also introduced other changes into the business, that while they were not cost-cutting measures, they certainly contributed to the overall health of the business.

From the mid 1980s onwards, Volkswagen’s global strategy hinged on the following:

• 1. Offering a range of additional services to consumers in addition to the sale of automobiles. I.e. financing, leasing and insurance, modern direct banking operation, and fleet management services for private and businesses customers.
• 2. Strengthened worldwide production networking and platform strategy.
• Changed the global strategic view from production-oriented to consumer-oriented model.
• 3. Payment of employees was changed to a productivity oriented evaluation every 9 months. Higher salaries and regular wage increases were offered in return for high quality work and commitment to productivity.4. Union politics and structure changed as well from a culture of confrontation and distrust towards a model of productivity, consent and commitment
• 5. During the last five years, systems of quality management, visual management and of worker participation in product and process improvement were developed and refined.
• 6.Hierarchy levels were reduced, information flows were accelerated and new forms of interdisciplinary and inter-hierarchical team working and management were developed⁹

The numbers speak for themselves

All this and a healthy dose of persistence, gave rise to unprecedented levels of profitability for the Volkswagen Auto Group.

Figure 2. Profitability comparison of Volkswagen AG

References:

• 1 http://quicktake.morningstar.com/stocknet/income10.aspx?symbol=gm
• http://quicktake.morningstar.com/StockNet/Income10.aspx?Symbol=VW
• http://quicktake.morningstar.com/StockNet/Income10.aspx?Symbol=F
• http://www.volkswagenag.com/vwag/vwcorp/info_center/en/publications/2002/03/financial_statements01.-bin.acq/qual-BinaryStorageItem.Single.File/20011231_vwag_jahresabschluss_e.pdf
• 2 http://www.fundinguniverse.com/company-histories/Volkswagen-Aktiengesellschaft-Company-History.html
• 3 http://en.wikipedia.org/wiki/Audi
• 4 http://en.wikipedia.org/wiki/SEAT
• 5 http://en.wikipedia.org/wiki/%C5%A0koda_Auto
• 6 http://en.wikipedia.org/wiki/Lamborgini
• http://en.wikipedia.org/wiki/Scania_%28company%29
• 7 http://www.mfrtech.com/articles/2837.html
• 8 http://www.autoblog.com/2009/12/09/officially-official-vw-and-suzuki-tie-the-knot/
• 9 http://medwelljournals.com/fulltext/pjss/2005/761-775.pdf
• 10 http://www.wikinvest.com/image/FY2008_SALES_BY_REGION.jpg
• 11 http://www.wikinvest.com/image/EUROMARKETSHARE.gif
• 12 http://www.wikinvest.com/images/8/87/F_US_market_share_1.JPG
• 13 http://www.wikinvest.com/images/6/68/NSANYGlobalSalesbyCompany.png

How to get your mojo back

Humans have a curious relationship with certainty and uncertainty. We need a certain degree of both in our lives to be truly happy.

Think food, clothing and shelter, for certainty, but then think, without some entertainment, mystery and surprise on a regular basis, life would get pretty dull, i.e. uncertainty.

Tony Robbins has been speaking about this for years.

Think about the hallway in your house. If I were to ask you to run from one side to the other at full speed, how confidently could you do it? Silly question, right?

Now if I were to blindfold you and ask you to run through the hallway, you probably wouldn’t be anywhere near as confident, even though you’ve done it hundreds, if not thousands, of times before.

For me, the blindfold is your relationship with certainty and uncertainty. Without certainty, you don’t have the confidence to move forward.

Entrepreneurs face this in business on an almost daily basis. They constantly push the envelope for themselves and their business into areas where they may have not ventured before.

But it’s this push out of the comfort zone, that creates those extraordinary results, i.e. remarkable businesses.

However, we don’t all, even the best of us, have the courage to constantly push past our comfort zones, or stretch the limits of our creativity. Things get us down, circumstances change, and, more often than not, that voice of fear, doubt and insignificance starts to loom above our heads.

At this point, regardless of what you currently know and believe, if you don’t have the courage to continue, if you don’t have your mojo sitting right next to you, it doesn’t matter how talented, creative or skilful you are, you are not going to create the best results, or do your best work that we can all be proud of.

It’s at these times that the best thing you can do is create some psychological distance. Let’s face it, the only thing that is really affecting your motivation is hardly ever actuality in itself, but the reality that you, in fact, perceive – your interpretation of your current situation.

Immersing yourself in something that can alter your perception of your current reality is the best thing that you can do when your mojo is gone. At least in my opinion. Whatever form that may take, aside from the illegal of course.

I, for example, often watch videos of other successful entrepreneurs, because it reminds me, that if they can do it, so can I. That gives me certainty, which in turn gives me the courage to continue.

So don’t get inspired, get certain!

Why I’ve Stopped Reading Books

From a young age I’ve been an avid reader. I found most books rather captivating as a child. They would entertain me for weeks at a time. As I got older, I even found love with tech magazines. Remarkably, often finding some great writing in there even on subjects that weren’t necessarily completely tech. I have to thank Derek Cohen, Tom Arah and Jon Honeyball for inducing my love of reading. They always had an elegant style of writing that I admired, and (they) brought a very human side to geekdom.

But once I hit university, my fascination with print media completely dropped. Books became a serious chore, and as the Internet was starting to become the mainstay for knowledge acquisition, books and I started parting ways.

Once I made the decision to go into entrepreneurship, I quickly realised I would have to do plenty of learning, in many fields, so naturally I started with Google, albeit with very little success. You see, my problem was, I didn’t know what I didn’t know. So how would I know exactly what to search for? And ultimately, is it more important to acquire knowledge, or is it more important to have wisdom?

I remember, in the second year of business, going down to the local bookstore and browsing the books in the business section. I don’t know why, but I always walked out with the book that had the most interesting title, despite the fact that I would give the book a quick scan before purchase. I only read two books that year, and even then, I’m not sure I even finished them both. I was thoroughly bored by halfway through. I just assumed, that I was either not cut out for business, because most of the material made no sense, or there wasn’t any decent material out there. Sadly, and mistakenly for a long time, I assumed it was both.

In my third year of business, I decided to give it another shot and browsed the business book section on Amazon, purchasing the book with good reviews. I bought two just before the New Year started, and I remember finishing one book thinking to myself, “How in the world do these books even get published when they are so bad?”

That’s how bad it was. Always being the person harder on myself than anyone else. I just assumed, once again, that it was down to my poor luck, and rested no blame on Amazon or its review process.

And then late last year, I learned a very important lesson. It’s not that the right knowledge or wisdom wasn’t out there, nor was it that it hasn’t been captured in the books. It most certainly has. My selection process just happened to be deeply flawed. To be completely honest, I only stumbled on this by accident, and it may seem common sense to all of you, but I can assure you I was completely averse to it for a long time.

You see, late last year, I started mixing with more successful people; ordinary people that had been successful in their endeavours, be that business, health or any other goal for that matter. And only when I started to ask them what book or source they had gone to in order to acquire the relevant wisdom to understand and overcome their problem, did I finally start finding the right material. Ironically, it was all there in front of my eyes, the whole time, in the local bookstores and on Amazon. I just couldn’t ‘see for looking’ as they say.

Ever since then, I’ve had the mantra, that I will only ever purchase a book if either a) I’m reading a book by someone who I’ve previously heard speak or whose material I’ve already seen elsewhere or b) if a respected or trusted associate tells me the book they read was ‘life-changing’.

I have to say, this strategy is serving me extremely well, and I’ve read more than 5 books in the last 6 months that honestly have been life-changing or at least eye-opening (i.e. well worthy reads) and best of all, I have been able to get back into the enjoyment of reading once again.

What selection process do you use?
I’d love to hear from you.

What life changing, or eye-opening books have you read this year? (I’m always looking to add to my collection)

Do let me know in the comments.

Thank you.

PS. Yes, i know the blog title was a little sensational, but hey, headlines are everything

Did you hear the one about the Elephant and the Rope?

There’s often an example of elephants cited to demonstrate the power of the subconscious mind, and it goes something like this:

If you tie a baby elephant’s leg to a pole or a tree with a rope, i.e. something that it isn’t yet strong enough to break free from, the elephant will struggle  for a while, but will eventually resign itself to the fact that it can’t be done.

Take the same elephant in adulthood and tie its leg to a pole, and even though it has the strength to break free, it won’t even attempt it due to its learned experience.

[By the way, this is a real practice that takes place in circuses around the world. Sorry to break that news to you. I know, its harsh.]

Anyhow, back to humans. This example is relevant, because while we can often know things consciously, it’s the subconscious mind that actually holds our beliefs, and thus drives our behaviour and emotions. You’ve probably heard about affirmations, and possibly even afformations:
Daily exercises designed to help you consciously re-program your subconscious to free yourself of limiting beliefs and behaviours.

For many it’s a proven way of actively programming yourself for a positive outcome.
An interesting point of note, however, is that when you consciously ask your subconscious mind a question (or indeed are asked one), it does in fact provide you with an answer.

Try it for yourself. Ask yourself right now,
“Why is courage so natural for me?” and then just close your eyes, and let your subconscious give you the answer.
It might take a few seconds, but believe me, the answers are there.

Did you notice a difference in how you suddenly felt? Did a calm come over you? Now you have a more affirmed reason for having more courage, just by asking yourself a simple question.
This is how the subconscious works; it gives you a strong reason when asked the right question.

So here is the curious thing.

I posted a status update on Facebook yesterday (as an experiment) and asked a question. You can see the status update and the responses below:

Now, the thing is, while I’m not the greatest fan of Spiders, I wasn’t in fact the one to run first.

Did you notice though, how those that responded to my status update, naturally assumed that I did? That is their subconscious at work.

When you ask your audience the right question, you can leverage the power of their subconscious mind to communicate the desired message (back to them).

(you have to have tried the exercise above to know this actually works).

Of course, this isn’t some Jedi mind trick from Star Wars, it’s just a way of getting the right answers to your audience without spelling it out, with a more lasting result.

Sometimes this technique is used to save you time in terms of copywriting, but often it’s a way of getting your prospects thinking about your product/service or brand.

Isn’t that clever?

Some examples that you probably already know are:

Microsoft: “Where do you want to go today?”

Cadbury’s Creme Egg: “How do you eat yours?”

Using curiosity to build customer loyalty

I have been having a debate about the length of the introduction video for a new desktop sharing application that my business partner is currently working on.

He feels it’s too short and doesn’t go far enough into explaining what the product is about,  while my argument is that curiosity is an intriguing ‘lock-in’ mechanism.

I had to record the video early last week, and I made a concerted effort in making sure it lasted no more than approximately 1 minute as I don’t feel people have more time than that to invest anymore, especially when you consider how many sites we all browse in a day.

That wasn’t the main reason for keeping it so short however. My reason relates to my observations with Twitter (and Facebook for that matter).

You see, up until March of this year, I had visited the Twitter homepage a few times in the 12 months before it, and browsed a few Twitter homepages of people mentioned in the media. I never signed up though.

I couldn’t understand what Twitter was about, or what value it could provide for me personally.

But in late February, Andrew Warner mentioned an interesting tactic for using Twitter for potentially picking up new leads using search terms and alerts, so I was curious to learn more.

I read a little bit more about using Twitter search for a way to see what people were talking about regarding any given subject, and I came across some interesting blog posts that talked about how Twitter can be used as a valuable marketing tool.

So I decided to give it a try, which invariably meant I had to create a Twitter account. When I first joined, I found the whole experience rather overwhelming, and not to mention confusing, but I decided to persevere.

After all, if Andrew Warner was on there, it must have been serving some higher purpose. He doesn’t strike me as someone that likes to waste time with trivial pursuits.

Suffice to say, in the 4 months up until now, I have only used the search feature a handful of times, but spend at least 1 to 2 hours a day on Twitter.

Twitter ended up creating plenty of value for me in so many ways that I hadn’t even imagined when I first signed up, especially as a platform for meeting very interesting and like-minded people.

But here’s the interesting thing. The value that Twitter has been able to create for me is a discovery that I made for myself, partly by accident, but as a net result it gives me a great sense of accomplishment. This value is not necessarily the same for someone else it serves, but I think that is exactly the point.

It took me quite a few weeks to realise this, that Twitter is rather fluid as a platform and can be used in so many different ways. It all depends on what purpose you want it to serve.

When I first started to discover its real value, I kept thinking to myself “Why don’t the guys behind Twitter create a video that shows the ‘outsiders’ where the real value is?”, but then it occurred to me that if  Twitter had indeed put a video on the homepage, firstly it would have ‘made up my mind’ for me, which is never as powerful as if I make the conscious (or unconscious for that matter) decision for myself.

[Our unconscious minds don’t necessarily work the way we all like to think (no pun intended)]

And secondly, the fact that it can serve so many different purposes for so many people, it would be almost impossible to put a video together that shows all the ways in which it can be used. Not only that, but with an ‘official’ video listing the benefits and the current ways in which it is being used, you’re inherently also telling your audience that only what is shown in the video is what is possible with Twitter.

Why limit yourself by giving people pre-conceived ideas about what they can and can’t do?

As long as my need to network with interesting and like-minded people remains, and Twitter continues to serve this purpose for me, I’m going to stick with Twitter.

If it wasn’t for my curiosity, I would never have ‘tinkered’ and achieved a sense of accomplishment, which, for me, is an emotional investment that makes me a loyal ambassador.

Customers need to be given room to exercise their curiosity, in my personal opinion.

This is why, in this introductory video, I’ve demonstrated only the key points and nothing else.

I also think that by making room for the curious, it allows others to create conversation about you or your product, which in itself is excellent for creating a ‘buzz’.

What do you think about the video? Do you think I’m right or do you think my business partner has a point?

My Story on Leadership

We all know that leadership is a key part of entrepreneurship. A successful entrepreneur is also a successful leader.

I’ve been learning my own lessons on leadership of late, and here they are in no particular order.

Lesson One:

Its important to be clear about how you are going to serve your community and to understand your mission as the leader.

I learned this lesson, when i had a group on LinkedIn earlier this year that grew of its own accord, but i had failed to serve the community by providing value to each new joining member in the form of encouraging participation and creating suitable initiatives.

Now the group is just a crowd, rather than a community of active members.

It would have been wise for me to delegate some responsibilities in terms of driving the community.

Lesson Two:

Leadership is not an exercise in fear-mongering or an exertion of authority.

I had been asking one employee of mine to record regular updates, on our new chosen collaboration system, which he failed to do. I let this persist for a while, and after some time responded with an outburst.

This is resulted in a temporary, short-term change in his behaviour. However, if i had truly understand leadership, i would have known better to inspire him through helping him understand the value of updating the collaboration system.

I did that last week, and now he has been updating regularly every single day, much to my pleasant surprise.

Lesson Three:

Its ok to make mistakes, as long as you are prepared to accept them, and take corrective action promptly.

This further extends with my example above, when i realised fear-mongering was not the way, and corrected quickly by explaining the value to him.

Lesson Four:

People are inspired by leaders.

As long as you are pushing the envelope, extending boundaries, venturing decidedly into the unknown, people will unite behind you and become ambassadors of your cause.

I setup a mastermind group around 4 months ago. At the time, all three of us founding members had no idea of how to run the group, and how to work it best.

I persisted and kept moving forward, and now we have a loyal following and active participation.

The Greatest Lesson

The greatest lesson that i have learned however, is that leaders provide value through listening.

I’m currently mentoring a start-up, and in the beginning i had come close to almost dictating their plans in moving forward, but i learned a valuable lesson in taking a step back, and listening to their problems and helping each of them be their most creative and authentic selves. This energised them, motivated them and has hopefully put them on a path of success.

What are the lessons you have learned?

What is your story on leadership?

Why the iPhone should’ve sucked but doesn’t

Quick Note: While i do make a valiant attempt in this post to argue the case for what I think makes the iPhone the leading Smartphone in the market, this is not a technical discussion and is an extenuation of my last post regarding Value Propositions.

If you’re into business or marketing, then stick around, its a great discussion.

My last post explaining the importance of the Value Proposition received a small amount of minor criticism. Some readers suggested that most people who choose to go into business, inherently understand the importance of the value proposition, and therefore my post was simply stating the obvious.

I think the criticism was fair and perfectly valid, but i wanted to get back to basics, and sometimes doing this helps provide a fresh perspective, especially when you begin to ask yourself why you are doing what you do, in the first place. More importantly, however, i wrote the post in order to assert, based on my own personal observations, that, many companies, (not just start-ups) do not focus enough on refining their value proposition.

I would even go as far as saying that refining the value proposition is the predominant factor in determining whether your offering is the leader in the market, or in the middle of the pack. I know there are a fair few ‘out of the box’ thinkers out there, that share a similar view.

So i wanted to fortify my claims with a practical and universal example, and what could be better than the infamous iPhone.

The iPhone has been home to endless debates in social circles, is a frequent visitor on both Digg and the trending topics in Twitter.

Before i begin however, let me first state that:

I am not an Apple Fanboy, i have never owned a Mac, and only discovered Steve Jobs when researching the genius behind Pixar’s Toy Story.

The Lesser Beast

A couple of weeks ago, there was a debate between my two good Twitter friends Andrew Betson and Evert Bopp regarding the iPhone.

Evert’s main argument (against iPhone) was that the iPhone is no more functionally capable than many of the Smartphone’s that have come before it. He even went to the length of proving his point with the video below of his iPaq now over 10 years years old that was, for the most part, functionally just as capable at time of its release, as the iPhone is now.

While this may be a bit of a caricature example, Evert does in fact raise some profound truths.

On paper, both technically and in terms of feature set, the iPhone has nothing to offer that really sets it apart from the competition. And while i didn’t join the debate, except, for the occasional but customary ribbing, it occurred to me, that even i had to admit to myself that i didn’t know why i was such an ardent fan of the iPhone.

So I’ve had a good think, and here is what i came up with:-

My Pain

Now, remember, the Customer’s pain is a problem, need or desire that the intended audience experiences.

Need:

“I need a phone for both personal and professional use. That, at the bare minimum, can make/receive phone calls, send/receive text messages and can store contact information.”

It goes without saying that both the iPhone and every other Smartphone on the market can do this.

Desire:

“It would be nice to be able to watch the occasional video on my Smartphone, Google something quickly, and listen to music/audio while on the go”

All Smartphones even prior to the iPhone were already doing this long before its entry, and a great job at it too. The HTC based Smartphones were able to display video at a better quality than the iPhone, and had some interesting features where browsing the web and listening to music was concerned. Apple was the first maker of Smartphones however, that really made it fun to surf the web on your mobile device, for simple reasons i’ve outlined further on in this post.

Apple do their homework

I think the other Smartphone manufacturers did a good job, in addressing their customers needs and desires, but fell short when it came to looking at the problems and desires at a more granular level. I think Apple spent a generous amount of time and effort in understanding their customers pain.

As a member of their target audience, here is how i can relate personally.

Desire:

“I desire to look cool in-front of my friends.”

The iPhone sported a shiny look and came with an inherent wow factor. This was the first Smartphone device that you could actually flash in front of your friends for its aesthetic looks. This may be a trivial point to some, but Apple clearly understood that this desire existed and addressed it.

I’ll be honest, i only bought the iPhone myself, so that i could “flash” it at my cousin’s wedding where i would be meeting old friends and extended family after a long time. I had no intention of keeping it longer than 3 months.

But where, Apple is concerned, this is just the beginning. I feel the iPhone was the first Smartphone that really addressed my specific pains which is why i decided to keep it longer, and haven’t looked back since. Apple addressed my pain by addressing the following problems

Problem One:

I have an ego

My friends who had seen me prior to my iPhone purchase, saw me with a HTC based Smartphone, and always remarked how it “looked like a brick” or a “TV Remote”. This was a problem.

The iPhone is no minute device, but nor is it mock-worthy.

Problem Two:

I am lazy

Try going to the shopping mall, and while holding a basket full of shopping, try getting out your Windows CE based Smartphone, with stylus included, and try looking up the remainder of the items on your shopping list. Its no convenient feat. Not to mention the number of clicks you have to endure to get to your actual shopping list.

“Where computing is concerned, clicks and gestures are like money ; No one wants to spend them unnecessarily”

-– Khuram Malik

Enter the iPhone which can give you one-thumb operation with utmost ease.

Your Smartphone device is probably one device you are going to interact with (if you’re anything like me) over 50 times a day.
If you can save even one click and one gesture for every interaction, that’s over 50 clicks saved every single day.

This is a bargain, and as far as i am concerned, great value.

Problem Three:

I am still lazy

Getting a new phone can be very exciting and we often want to learn all we can about it, but there comes a time when you just don’t want to be labouring time inside the manual understanding how every minutiae of the device works. This was a major problem with my Nokia E71. Every time, i wanted to use a new application, or exact my device to do something new, i had to get out the manual or surf the web to see how it had to be done. And bear in mind, i have a technical background, so that’s really saying something about the lack of intuitive operation.

The iPhone was the first phone, where i spent very little time inside the manual. Many disagree when i say that i found it to be intuitive and rather self explanatory, and better yet, all the applications from the App Store use similar interface templates and gestures, so the learning curve for each new application is absolutely minimal.

A great time and effort saver, and therefore, great value once again.

This is also the point at which i had to agree with Andrew (on the left. Read bottom up)

Sure the Nokia’s and the Blackberry’s came with Internet Access long before the iPhone did, but as Andrew asserts wisely, Apple was the first maker that really convinced us to start using the internet while on the go, with smart interface additions that made it easy and convenient, addressing our pains of being lazy

Problem Four:

I’m REALLY lazy

Installing new Apps on my previous Smartphones was a problem. I had to first locate the application on the web, download to my PC, connect the mobile device to my machine and then run through the install on my PC.

This was an extremely laborious process. This was a huge amount of effort to install just the one App that i didn’t necessarily plan to use after the first few days.

The iPhone introduced probably the most seamless App installation process I’ve ever seen, which meant even with my laziness, i was happy to try App installs even if i didn’t intend to use the application after a few days. It was far more convenient for me to spend £1 to try an App i may never use again on the iPhone, than to waste 1 or 2 hours on a free App on any of my previous Smartphones.

Time is the real premium here, not money. (Unless you start going into much more expensive application pricing territory). And best of all, i never had to go anywhere near my PC and this could be done while i was getting bored waiting for my next client in their reception area. Plenty of value here.

Problem Five:

I’m impatient

Nokia were the first to introduce predictive text messaging, but despite this technical innovation, i had no greater inclination to will myself into using it. I wanted to be able to send text messages, but texting in the traditional way was too frustrating and time consuming. See earlier problem of: “I’m lazy”.

Other Smartphones had debuted with a hardware keyboard, but this made the device bulky. See earlier problem of: “I have an ego”.

The iPhone introduced a ‘soft’ keyboard. I have to admit, this wasn’t easy to use in the beginning, but remarkably i found it easier to learn how to use it and got accustomed to it in just a few weeks than i had done in the last several years with predictive text.

I now send more text messages than ever before. Nokia introduced text messaging from the PC using their Nokia suite, but this wasn’t as convenient as being able to text from the phone itself for obvious reasons.

Iphone oozes value

Overall, despite its high price, the iPhone has oozed massive amounts of real value for me, and for many others.

Lets not forget there were many limitations, in the beginning. Not being able to “copy and paste”, for example, which made it the butt of many jokes, but when one really considers the value they are getting, it was easy to see why so many loyal fans were happy to put up with that particular annoyance, in order to benefit elsewhere.

The iPhone came top in the JD Power Survey, and is also the most used non-SLR based camera on Flickr.

I know, other makers now sport similar features and mimic the user interface design, but remember, Apple did it first.

Furthermore, Apple’s hard work has paid off elsewhere too. They now have my trust, because i know they do their homework. Something the other makers did not try hard to attain. This gives Apple a major advantage, because now i consider their other devices. If they are working so hard to address my pain with a Smartphone, then surely they are doing this with other products.

Personally, i believe that if you can gain the trust of your audience, then that has far more value for both you and your customer over any short term benefits.

The Buzz

Now i know many will say, that considering Apple’s value proposition cannot be the sole determining factor in the iPhone’s success. I don’t doubt that for a second, and, yes i would agree that Apple is pretty good at creating a ‘buzz’, and I’m sure other factors need to be taken into consideration too. What i am saying, however, is that it is the predominant factor in it’s success.

Consider the ‘Buzz’ generating example of the Samsung Omnia 900 (below)

Samsung definitely played smart and understood that the best place to appeal to their audience, was YouTube. This was some very clever piece of viral marketing and an amazing promotional launch.

But then consider, that my father bought this phone off the back of this excitement, kept the phone for about 2 weeks, couldn’t figure out how to use it (for very similar problem reasons as myself) and gave it up.

He’s now buying an iPhone incidentally.

Buzz generation is great for creating an awareness, and Samsung definitely raised the bar here, but without a well refined Value Proposition, your offering doesn’t stand the test of time.

iPhone image courtesy of Kaneda99

With thanks to my two good Twitter friends Andrew Betson and Evert Bopp for their consent in using their material.

There is only one currency, its called “VALUE”

On Friday i had my first meeting with my mentoring student, as part of the local enterprise initiative to provide support to individuals with little or no previous business experience.

I had been paid a visit by the representative of the community initiative about 6 months ago, who felt i could provide valuable insight based on my own experiences.

I was reluctant to commit, but in the interest of further building relations with local establishments i decided to put my name down as a mentor.

My hesitation was due to two reasons. Firstly, i have no interest in expending my time and energy with people, who are always looking for others to ‘do their push-ups’ for them. A rather, cynical view, i agree, but unfortunately i have met too many such people in the last few years.

Secondly, i was unsure of exactly how useful my insights could be and wondered if it would be a pointless exercise for both myself and the student.

Nonetheless, i received a phone call from my first candidate last week, and agreed to meet him in the local cafeteria on Friday afternoon, to discuss his plans and ideas for a new online business.

We sat down with a cup of coffee, and got straight down to business. The student was much older than i. Not that it should matter, but i was expecting some loose pant wearing graduate from college.

Anyhow, he explained to me his idea about his online business, which i wont disclose in the interest of confidentiality, but suffice to say it was a worthy enough idea and i felt it had a fair chance.

I asked him, about how he came up with the idea and he explained to me, that he felt he had seen a gap in the market, and he had done some market research by handing out surveys at local events and exhibitions related to his industry sector of interest.

So far, so good.

He also explained that he contacted his local chamber of commerce which were keen to help him, but said that they had no staff who were qualified to assist anyone who wanted to start an online business. Truly remarkable, i thought.

Neither he, or i, could believe that even in 2009, the local business support initiatives were inadequately equipped to help new start-ups. After all, pretty much every business, if not all, requires at the bare minimum, an online presence.

He had participated in some brainstorming classes, as part of a large group, at the local chamber, for the purposes of basic business planning and so on, but felt it lacking and was keen to find someone who could help him further refine his ideas, and put an actual workable plan together to move forward.

This was why, in the first instance, he was put in touch with me.

I decided to start with the very basics, after commending his efforts thus far, and empathising regarding the current state of start-up support in the area.

The Value Proposition

I started by asking him to explain, what the specific customer pain was that he was addressing, and in what way.

At this point the candidate gave me a rather perplexed look, and he must have wondered if perhaps i was asking him to demonstrate his expertise in allopathic medicine. I could see clearly, that for the remainder of the meeting we would have to discuss what a ‘value proposition’ actually is, and what it means to address a specific customer pain. After all, for any business, this is the fundamental question that needs to be answered to ensure marketing success.

The value proposition is the reason why people are in business. This term ‘value proposition’ also goes by other names such as Competitive Advantage, and Unique Selling Position. On a side note Jaynie Smith’s “Creating Competitive Advantage” book is a great primer if you are currently planning or refining your value proposition.

So i proceeded to explain my own understanding of the value proposition starting with the components.

The Pain

The customer pain, (in my own words) is; A problem, need or a desire experienced by the intended target audience .

Problem: “I cant find what i’m looking for on the Web”

Answer: Google

Need: “We need good quality education for our children”

Answer: Schools, private education institutions and paid tutors

There is a common mis-conception where ‘desire’ is concerned, in that, many believe desire is not a customer pain, because the word ‘pain’ carries a negative connotation.

Desire is still a form of understanding what it is that the customer wants, which is ultimately the true essence of understanding the customer pain.

Desire: “I want to watch Pixar’s latest animation in high quality definition”

Answer: Blu-Ray DVD

Value exchange

When we deem something of value, it is something that is useful to us, or of benefit. i.e. it addresses our ‘pain’.

Our value proposition, therefore is our offering (a product or a service) that addresses a specific customer pain and often in a specific way.

When a member of our target audience consumes our product or service, this is when value exchange occurs. We give something of value to this member of the audience, and in return this person addresses our own pain in whatever form that may be, usually money, but not necessarily.

While it is true, that in business, the consumer will usually part with money, this case is not necessarily universal.

Consider Google as an example. In its simplest form, Google facilitates my desire to find ‘cheap flights to Malaysia” with fast and relevant search results for all the websites that have cheap airline tickets. I attain value as soon as i find what i want.

In return, i give Google value in the form of Web Traffic. That is all Google wants from me, if we consider this point in isolation.

Yes, ultimately, Google wants to benefit its bottom line financially, but for the purposes of my personal relationship with Google that is not the scope of the value exchange it wants with me, nor i with it.

Maybe Google uses that Web Traffic to entice advertisers, maybe it sells data, whatever the case may be, it is a separate discussion.

A valuable meeting

Suffice to say, the student felt he got great value out of the meeting, and he had experienced a shift in his thinking. I got great value too. It was rewarding to be able to contribute.

Over the next few months we are going to be working together on his start-up, and he might just end up creating the next eBay. You never know!

Of course, the next fundamental question is going to be, how is his value proposition better than the existing competition, and whether his proposition is a solution to a pain that already exists, or if its a solution to a pain that doesn’t yet exist (yes, that does happen)

Image courtesy of Will Lion

Are you losing customers because they’re blind?

Homepage optimisation is an important part of your online strategy, and I’ve been wrestling mercilessly these last few days to get the homepage just right for one of our Websites.

I had the opportunity to speak to Jeremy Shoemoney a couple of weeks ago, who was kind enough to explain to me that the homepage needed a lot more work, so i set out to find out what needed to be done.

That’s when i had my ‘aha’ moment, so watch the video and you will see what i found.

Are you losing customers because they are blind? from Khuram Malik on Vimeo.

You can try WebSnap for yourself at this link(below):

Websnap – Website Snapshots

Let me know how it goes for you, and i’ll see you in the comments.

Godfather: The Entrepreneur’s Handbook?

Aside from the blazing guns and Mafioso suits and hairstyles, The Corleone Family, should be an inspiring model for all budding entrepreneurs.

I cant seem to find many people that agree with me, of course I know why.

Everyone keeps asking me why chopping off a horses head, or shooting someone in the eye, should be the perfect business lesson to learn.

That’s not the point here. Just cast aside the actual mafia “business” for a moment, and look at how they actually operated.

1. Competition

Don Corleone always understood his competition. He knew their strengths and weaknesses, and often anticipated their moves.

“Tattaglia is just a pimp, he was never a match for Sonny”

“I should have known it was Barzini all along”

…

When Michael visits his father in hospital he arranges to have his bed moved, because he knows men are coming to assassinate his father.

This insight is always crucial to business. How else will you outsmart your competition otherwise? Don’t tell me your area of business has literally zero competition…that scenario doesn’t exist.

2. Resourcefulness

After the Don was shot and ended up in hospital, it was known that men would come to kill him from the other families.

Michael and Enzo the baker would have been no match for the men that were coming to kill his father at the hospital. However, he formed a position with Enzo outside the hospital and created the impression they were security guards and that there were more guards inside.

He worked with what he had and he did quick thinking on his feet.

A good entrepreneur works with what he has and improvises.

3. No compromise on core values and principles

The family, or the real word we should use is company, always stuck to its core values and principles and never compromised them. The men never discussed business with their families, never discussed business at the dinner table and tried to keep female involvement to a minimum (as per Italian culture).

Its important to recognise what your core business values are and never to compromise them. You will never have peace of mind if you don?t.

4. A good team

There’s no doubt the that The Corleone family had an excellent and loyal team. Clemenza and Tessio were excellent caporegimes (captains) who always recruited the best, and The Don always surrounded himself with people he knew he could depend on, and those that he believed would do a great job.

Look at Tom Hagen, who was a good and loyal lawyer and had the ‘company’ interest at heart.

Even Luca Brasi, who was a mean mean man, but still due to his love and respect for The Godfather, he was a great asset to the company.

Its all about hiring the right people. Get the best staff, that are the best in their respective fields that are committed to your company’s cause. A great team is invaluable.

5. Adhering to corporate policy

Remember when Tom visits the Movie Director Jack Woltz, who refuses to cast Johnny Fontane in his new movie.

Remember Tom’s response at the dinner table after Jack refuses outright?

“The Don likes to be notified of bad news immediately”.

Here was an employee, that was executing his tasks perfectly in line with corporate policy you could say.
He returned immediately and notified the Don of Jack’s refusal.

There were many examples of this kind of adherence throughout the film and can also be a considered as a continuation of the idea of adhering to core values and principles.

Always outline your expectations to your staff, and your promises of commitment to your customers. Make these thoughts known at every step of interaction.

6. Market research / industry knowledge

When Solozzo appeared on the scene with his idea of Narcotics, The Don took the time to understand Solozzo’s predisposition and assessed its market feasibility. He knew narcotics could and would do well, even if he didn?t want to be involved for personal reasons.

Tom also expressed his concerns to Sonny who was intending to go head on with the Tattaglia family because of his fears of five family war.

Tom understood the market, i.e. the other families, and understood what the consequences could be.

This intuition is an important skill to possess.

Understand the market you are entering, but more importantly understand where the market is heading and what your role is going to be in this change. Position yourself correctly and take a firm stance.

7. Outsmarting the competition, thinking outside the box, and making bold moves

Probably the most important point of all. There were so many examples in the film where the Corleone family outsmarted the competition using combinations of its strength, bravery, good decision making and resourcefulness.

Take the shooting of the police officer. A police officer had never been shot before, and this had never even been contemplated.

Or take, buying out “Moe Greene”. It had never been considered that a company with less money and less overall clout would even try to buy out someone with more wealth

“No! I buy you out”…remember when Moe Greene said that when Michael made the offer?

Some of the best business examples have been due to thinking outside the box. Just look at how Bill Gates took DOS from IBM and turned into something that could actually work.

Or what about Michael Dell who removed the middleman when wanting to sell desktops to the masses.

8. Persevering during the hard times.

Lets not mistake this for expecting things to get better with the flow of time, but pro-actively taking the bull by the horns and doing something about it.

When Don Corleone was shot and Luca Brasi was killed, the morale was at an all time low, and the family was low on resources.

Michael stepped in and came up with a unique strategy that could turn everything around.

Did you not see how Steve Jobs came back to Apple and revived the ailing company with the Imac, Ipod and the Iphone?

9. Taking risks

Business is all about taking risks. Godfather shows it best with Michael’s bold moves.

Killing the police officer was a big gamble, that actually paid off and turned the company around.

Richard Branson put the whole Virgin company on the line when signing up Janet Jackson.

It was a £400m record deal.
If Janet Jackson had not been a success there is a good chance Virgin wouldn’t exist right now.

10. Above par execution

The other important point next to outsmarting the competition is perfect execution for your plans. Planning things meticulously, managing all the variables and enacting according to the plan.

How well was Michael’s restaurant shooting executed?

Cant say fairer than that.

I’m sure many of you reading this will dis-agree with what i have to say. Feel free to comment. Bring it on!