Category Archives: Technology

It’s all about the perceived value

Posted on April 26, 2008 | 1 comment

One thing that counts a lot for any product is its perceived value. Customers do not buy the product, they pay for the value that the product provides them. The more the perceived value of the product, less relevant is the price tag on it and vice versa. The concept of perceived value reconfirms the importance of de-commoditization. Commodity by definition is something that has low perceived value. So the best way to remove the commodity tag from a product is by focusing on what value the product provides to its customer and adding a differentiating factor to it to make your offering stand above the competition.

If a product can create high perceived value, it can earn premium. This is something that makes an iPod nano worth $200, makes a customer pay thousands extra to buy a BMW rather than some other mid-size car, and makes a bottle of Fiji water cost 200% more than a Dasani’s.

It is interesting to look at the perceived value of Internet products. How valuable is your email service for you? How much do you value a good search engine? How much value does a good social networking site provides you? I believe a lot. But still you pay nothing for it. The entire concept of high perceived value seems to fall apart on the Internet…well not really. The concept does hold true in the Internet world as much as it does anywhere else.

In case of services like email, social networking and information look-up, the customer goes for the service that provides the most value. In fact the perceived value is the only thing that counts here, because price is totally out of the equation. What is important here is to understand the perceived value of the service for the payer, i.e. the advertiser. The value for an advertiser is directly proportional to the value for the end customer. More customers go to the service that provides more value. This in-turn attracts more advertisers to it…generating more advertising revenue for the service…making it all about the perceived value.

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Posted in Marketing, Technology

Dependency on competition for survival

Posted on March 24, 2008 | Comments Off on Dependency on competition for survival

Consider the situation where your life support is your biggest enemy. That’s a graphical way to put the dynamics of the technology industry in many cases. There are several companies out there that leverage their biggest competitor to survive. For example look at companies like Wikia and Mahalo– the human-powered search engines gaining popularity on the Internet. How do people reach these sites today? The entrepreneurs behind these efforts confess that 90% of their traffic is directed through Google. How do they make money? They use Google’s ad sense to show advertisements along side their search results. Who is their biggest competitor? Well, of course, Google. So this popular search engine company Google is both their biggest competitor and currently the sole source of survival.

Similar situation arises when a company builds a platform. Success of the platform is measured on the basis of number of applications that are built on top of it. Most of the times, the companies that build the platform also makes applications on that platform, hence competing with other application makers. Hundreds of Internet application making start-up companies survive on the Facebook platform. At the same time, they compete with Facebook for the time people spend on the Internet and hence for the advertisement dollars. Another example that cannot be ignored here is Microsoft. Thousands of companies depend on the Microsoft Windows platform for their survival and hundreds of them compete with Microsoft on the applications front.

This dynamic in the technology industry teaches us one very important lesson. You got to continuously try expanding your customer base without any reservations by utilizing every resource in the best possible way.  The point is to stay focused on the end goal, doesn’t matter if in that quest, sometimes you end up depending on the company that might be your worst nightmare.

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Posted in Business, Technology

Contextual irrelevance for behavioral relevance

Posted on March 16, 2008 | 3 comments

Contextual relevance for placing online advertisement has gained wide popularity due to the success of Google’s advertising programs. It does make sense in many cases. For example, if an individual is searching for a product like tennis racquet, it makes perfect sense to target that person with advertisements of online stores that sell this particular product. Similarly, when someone is emailing a friend and scheduling a time to play tennis, an advertisement selling tennis balls or racquet is effective next to this email.

But does contextual relevance make sense regardless of the situation? It is interesting to consider the relevance of contextual advertisements when you are looking for information. For example, if someone is reading a news article on Olympic games, and gets advertisements promoting to download games on mobile phone, will it attract the user? The advertisement, though contextual in the sense that it picked the word “games” to map the context, will most likely be ignored. So in such cases, why not target user with advertisements that make sense to user’s behavior or activity on Internet?

Behavioral targeting will likely get more traction as compared to contextual  targeting in such situations. If a person searched for tennis racquets a few minutes back and then switched on to read some news articles, it will be more effective if this person gets advertisements for stores selling tennis racquet next to the news article. Though this ad will be irrelevant to the context of the news, it will still be relevant to the customer based on the behavior or activity they performed on the web around that time-frame.

Behavioral targeting based on the interest, location and activities of customers can be really effective, sometimes even more than contextual targeting. But the idea here is not to take behavioral targeting and put it in place of contextual targeting. The smart way to go about is to take it and make it supplemental to contextual targeting. In our example, if a person is searching for tennis racquets, anything but an advertisement selling tennis racquets will be less effective, i.e. nothing beats contextual targeting here. But we can use this activity of the customer searching for a tennis racquet and use it at several other places where putting contextual ad does not make sense. Coupling the two together, instead of pitching one  against the other, will be a win-win for both the customers and the advertisers.

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Posted in Advertising, Technology

Reactivity vs. Creativity

Posted on March 9, 2008 | Comments Off on Reactivity vs. Creativity

Michael Dell gave the commencement address to my graduating class at University of Texas at Austin in which he said – “never measure your success based on the success of others – because you just might set the bar too low.” That’s so true with businesses as well. When businesses try and steer themselves to follow the competition, they in a way shut down the creative brains in their organizations by setting the bar too low. Blind reactivity is the killer of creativity. It’s creativity that will make you the winner in the long run, because you can react and do the catch-up only to a certain extent.

This is true in almost all the fields. For example, take branding. We talk about the Apple brand all the time. Everyone wants to be the Apple of their industry. But how many Apples are out their? Companies try to build advertisements that resemble iPod or Mac, they try to name their product to follow the conventions set by Steve Jobs, they try to shape the brand resembling Apple, but often they are a miss. So where do they go wrong? I believe they lack the originality and the genuineness in their branding. They lack the creativity which is the only thing that attracts customers to Apple.

Another area where reactivity leads to disasters is product development. What better example here than a company that redefined the Internet business? Google is known for it’s creativity in product development. Recently Fast Company rated it the most innovative company in the world. There are numerous companies ranging from biggies to the start-ups trying to catch-up with Google in search and other product development. But more than 60% of people still use Google for their search queries. Reason: it’s hard to catch them. They are always a step ahead. While other companies spend energies trying to do the reactive catch-up business, their creative engines take them a step ahead.

But then there is creative reactivity hitting aces from time to time. Creative reactivity works almost all the time. You can never be the first to come up with a product all the time. You got to use the creativity after seeing the competition doing something right and develop on top of it to take the lead. The difference here as compared to blind reactivity is that you are not trying to catch-up, you are acknowledging that the customers are embracing something new and trying to fulfill their requirement in better and more creative ways. That’s creativity invoked by reactivity.

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Posted in Business, Technology

Maximize profits vs. Build platform

Posted on March 3, 2008 | 2 comments

This is a classic one that every company faces sometime in their life: should we focus towards building a platform or try to go for maximizing profits? There are merits going either ways. Building a platform helps in the long run once you are able to make your platform the de facto standard for a customer base. Maximizing profits helps you to cash on the innovation you brought to the market before competition catches up.

At the same time, there are downsides for both the approaches. In case of the platform race, most of the time it’s winner takes all. For some reason, if your platform does not transform into the standard, you might end up losing all. Talking about maximizing profits, this is a risky if you are planning to go big in the long run. More profits normally lead to smaller customer base. It also makes the field more lucrative for other companies, leading to more competition. So now you end up with a smaller customer base and smaller profits to fight competition.

I believe building a platform is a risk worth taking. By building a platform, a company in turn raises the barrier to entry for competition. Once there is a platform, it is really hard for competition to come up with something new and replace the existing status quo. The best example in this space is Microsoft Windows. Windows is there on 90% of computers in the world. There are more applications on Windows than on any other operating system. Microsoft sold Windows for relatively low price in order to build the platform, at the end making money by converting it into a volume game. To displace Windows from the operating systems world and replace it with something else is an uphill task, to say the least.

Another growing phenomenon in the platform world is Facebook. Facebook has done an amazing job creating a platform. Facebook took a bold decision by providing application developers access to their interface and letting them serve their own ads, all in spirit of building a platform. Today there are more new applications created for Facebook than for any other social networking site. Same is true for number of new users joining any network.

Both these examples make a strong case that once a platform gets successful, it’s really hard to replace it. At the end of the day, integration beats innovation, hands down. In the process you take a hit on your short term profits. But then there are lucky (and smart) few like Apple iPhone who change this discussion to build platform “and” maximize profits.

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Posted in Business, Technology

Free vs. Close-to-free

Posted on February 22, 2008 | 3 comments

The world wide web influences cost of things. It has made lot of things people once paid for free, be it the basics like news, email and communication tools, or not so basic things like websites, storage space and office applications. The power of adware is changing the source of income for product and service providers and bringing the cost for the end customers down to as low as zero. In this world, an important pricing question arises: should the product be free or close-to-free?

Couple of things come into picture when this question is answered. What is the barrier to entry in the market for this product? If the barrier to entry is low, and the product is adware-able, the wiser strategy is to make the product free and set a customer base before competitors following the “used apple strategy” enter the market. This is much better than charging for the product initially and then driving the cost down to zero when competitive products come into picture.

Versioning plays a role. A good strategy is to provide the basic set of services that are easily adware-able for free and charge the customer for the high-end services, the ones with a smaller set of targeted customers or the ones which will look attractive to the customers after they start using the basic set of services and familiarize themselves with the product.

Whether the price is set to zero or close-to-zero, the seller should do one very important thing: communicate the reasoning behind that to the customers, or in other words, communicate the source of income to the customers. If you are providing something for free, it’s important to explain the customers how you plan to monetize it. This makes it easier for customer to adopt your service and believe that there are no hidden fees. The most rediculous strategy is to keep something free, but take the customers’ credit card for records. Even with good intentions, this challenges the customers’ trust on the company.

Similarly if you are charging for something, justify it. Explain the customer why your product or service is worth paying for, and make it attractive enough for customers to accept it with that price tag. If something is on the web and is not free, you got to explain why, because if it is on the web, the customer expects it to be free, at least partially if not entirely.

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Posted in Advertising, Marketing, Technology

Technology and Efficiency

Posted on February 7, 2008 | Comments Off on Technology and Efficiency

Just like acceleration, efficiency is another important thing that technology brings to the table. There is growing emphasis on efficiency around the world, and technology fills the primary requirement of increasing efficiency in many areas. It is very clear that there is unlimited scope for efficiency in areas where a human life is at stake. Technology enhances the efficiency in such critical fields like healthcare and security. Be it latest diagnosis and scanning machines in hospitals or secure live networks syncing international data on individuals around the world, technology brings efficiency to these fields.

In the field of marketing, technology brings in efficiency like never before. Cutting edge software applications have made customer relationship management far more efficient. Connecting with the customer virtually one-on-one is now possible for companies with millions of customers. Companies can make more effective use of advertising budgets by reaching the right set of customers through the right medium at the right time. Technology also helps in making enterprise resource management more efficiently. Retailers of any size, varying from walmarts of the world to mom-and-pop stores, can maintain their supply chains more effectively using computer software and networks.

Then there are a whole lot of areas like travel, telecommunication, information management and so on where technology has the dual effect of bringing in both efficiency and acceleration to the table. For example in case of internet search, technological advancement helps us efficiently mine through terabytes of data to reach to the right information in a fraction of a second.

When we look into technology adoption in developing countries, or countries where there is no shortage of human labor, this efficiency effect of technology counts the most. Be it healthcare, education, telecommunication or security, if technology is increasing efficiency that cannot be brought in otherwise, technology will be embraced. Due to the efficiency aspect of technology, we will see wider and deeper penetration of technology around the world in the times to come.

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Posted in Technology

Technology and Acceleration

Posted on February 1, 2008 | 1 comment

Working in the technology industry and reading case studies of successful companies out there often makes me wonder what technology brings to the table. Take any industry, you will find application of technology in it, and there will be technology companies out there working on new tools for that industry. But when leaders of great companies were asked to list the top five factors that led their companies to deliver great result consistently, in most cases, technology didn’t make the list. Though they considered technology to be very important, they just didn’t think it was important enough to be considered as one of the primary reasons for their success.

I think that makes sense. Technology in most cases is equally available to all companies in the industry, but even then, some companies succeed while others don’t. If technology was one of the prime reasons for success, why didn’t the other companies deliver the same results as the leader in the industry? But still technology is important, because even though just application of technology cannot deliver great results, neglecting the adoption of technology can drag you down. Or in other words, technology is required, though it is not enough.

So back to the original question – what does technology bring to the table? I believe technology impacts lot of things, but two things that matter the most are acceleration and efficiency. Acceleration holds great importance in lot many industries. People care about the speed with which they get something done and technology plays a critical role in enhancing that speed. Starting with the obvious industries – consider travel and communication. Technology has accelerated the speed at which we travel many folds. In the field of communication, from telegraph to telephone to internet, technology has been a critical piece of the puzzle to increase the speed.

Another industry where technology plays a very important role is the information industry. Access to information is as important as anything else in the business world and fueling this information at the right place and right time is another multi-billion dollar industry. Internet has played a very important role in providing the right information at the finger tips. Technology rich search engines help in locating the exact information out of the endless information available on Internet.

Speaking of acceleration, one thing that cannot be omitted is computer processing power. Computers have accelerated the pace of doing work in every industry out there. Innovative application of this technology in several fields gets work done in a fraction of time as compared to what it took otherwise.

Over time we have seen application of technology increase the speed of getting work done in many fields, making the new speed as the expected standard that gets noticed only when something is not getting done at that speed, be it something as simple as using elevators to reach the 30th floor in a building or as complicated as diagnosis of diseases in the human body. Breakthrough application of technology acted like an accelerator in the past and will continue to influence the pace of getting things done in ages to come.

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Posted in Technology

“Tableted Kindle” for Schools

Posted on January 18, 2008 | Comments Off on “Tableted Kindle” for Schools

Jury is still out there on how successful and useful Kindle is as a product,  but I believe a Kindle borrowing some technologies from a Tablet PC along with some software enrichments can make a very useful product for school students. 

Think of a product being used by students from class one to class twelve in which they get all their textbooks,  they can take all their notes, they can check their emails and that is easy to read and write as paper based books and notebooks respectively. Isn’t that product worthy of a wow? Well that’s Kindle plus Tablet PC I am talking about. Kindle in itself is a technological leap in the field of digitizing books. To make it useful for schools, it should have a touch screen write capability where you can take notes, and mark and highlight in books. A state-of-the-art search capability to search anything as fast as possible and reach the right page of the right book or notes instantaneously. And to top it off, Internet connection to provide students controlled web browsing and email checking facilities. I think such a product can revolutionize education industry and take it to the digitized world like never before.

Now coming to the cost factor for this product. A Kindle is $400 and a Tablet PC costs about $1500. If this “Tableted Kindle” comes to be $1800, and is used by students for twelve years, it is $150 a year expense to take the entire library of student to this one device. As far as the usage cost of this device is concerned, it can replace the cost of buying books, notebooks and other accessories that are substituted by the “Tableted Kindle”. 

I know that we are still a few years, may be a decade, away from having something like a “Tableted Kindle” in hands of every school going child, and there are potential issues like hardware upgrades, technological changes coming out year after year and so on, but with proper integration of two products already out there, we can revolutionize a big part of education delivery infrastructure.

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Posted in Technology

The seasonal dimension

Posted on January 8, 2008 | 1 comment

While waiting for my veggie burger to be cooked, I had a chat with the chef of the cafeteria I visit for lunch regularly. He asked me for cheese in my burger and I said no (as usual ;-)). He smiled and said – that’s the new year effect. The cheese consumption in the month of January drops pretty drastically because lot of people have it as part of there new year resolution to eat less fatty food, and it starts picking up again in February returning to normal in a couple of months.

This suggests that incorporating the seasonal dimension in enterprise resource planning can optimize the resources usage and prevent a lot of wastage. Another place where seasonal dimension can play a major role is advertising. Just as important as it is to target the right customer, it is also important to target them at the right time. For example, sticking to the “stay healthy” theme of new year resolution, I believe early January will be the perfect time for exercise machine sellers and fitness club owners to advertise their products and services respectively to the right set of customers. Similarly, it might not be as fruitful for airlines or travel web sites to spend on advertising in January because most of the people they are targeting just had their vacation a few days back.

These scenario show that something like seasonal dimension can play an important role in cost savings. In fact, I believe it is one of those nitty-gritty details, which if considered correctly can make your planning system stand out above the lot.

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Posted in Advertising, Technology