From Urban Dictionary: “2000-and-late,” Meaning something or someone is late to the party. Originally used in the rap song "Boom Boom Pow" by the Black Eyed Peas. I finally bought my first iPhone. #2000-and-late
In the late 1980’s and into the early 1990’s – before the personal computer became mainstream, when we still saved our computer-based simulation files on floppy disks – several business strategy books were released that fundamentally changed the future of business. Michael Porter’s Competitive Advantage, Clay Christianson’s The Innovator’s Dilemma, and Tracey & Wiersema’s The Discipline of Market Leaders all provided frameworks of strategic thinking that are as relevant in 2014 as they were more than 30 years ago:
- Porter proposed that successful strategy is about making choices to be different from your competitors.
- Christianson proposed that companies fail because they don’t change and adapt to new innovations quickly enough.
- Tracey and Wiersema claimed that that the most successful organizations in the world choose one value proposition, focus their efforts, and align around flawless execution.
Christianson cites many examples of organizations doing the right business strategy and tactically but missing the opportunity to create or adapt to disruptive innovations. For example, mainframe computer companies did the right thing by investing in and building fast mainframe computers, but neglected to evolve their value proposition in a changing marketplace. One of the classic examples he uses is the legend of Digital Equipment Founder and Chairman Ken Olson saying, “Why would people want computers in their homes?” when asked about building a personal computer business. Other examples include Kodak and Polaroid missing the digital photography evolution and paying a steep penalty for it.
While Christianson may have coined the term “Disruptive Innovation” in the specific context of his writing, the concept has since come to stand for any game-changing technology that starts out small and inexpensive but grows rapidly to devour an existing market by turning it onto a new market.
Apple has done this twice: they went into the mobile music market created by the Sony Walkman and reinvented it with the iPod; a decade later, they created a new frontier in personal computing with the iPad tablet. Within five years of launch, these disruptive products totally redefined the markets they were introduced to.
Today, the makers of smartphones and their associated applications hustle to outdo each other by disrupting the market. There’s an app for nearly anything you can think of, from starting your car remotely on a frozen winter day to monitoring your personal banking while on a business trip to Shanghai. Disruption is no longer a by-product of serious innovation – it’s the goal.
So How About this Fire phone?
In a market dominated by Apple and Samsung, Amazon announced the debut of the Fire phone this week. Just as it did with the Kindle Fire, Amazon has thrown its hat in the ring with the bigger players in an existing market, hoping that small differences in features, pricing, and service will drive success for the brand. On the technical side, the Fire phone boasts a 4.7 inch 3-D display, 2.2 GHz quad-core processor, 13 megapixel rear facing camera, and 2 GB of RAM. That’s some powerful technology, but is it game-changing? The features of the device seem to be a key differentiator, with the new Dynamic Perspective and Firefly systems positioned as major advantages over competitive operating systems. It remains to be seen if these “innovations” are disruptive enough to give Amazon a foothold among the strong players in this space.
Beyond the basic features, the Fire emphasizes multimedia, with unlimited photo storage, a button just for the camera, and a clear integration with all of Amazon’s other services. On top of that, customers who purchase a two-year contract with AT&T get a free year of Amazon prime. Some of Amazon’s preinstalled services will include Instant Video and their music-streaming service. All of this bundling makes the fire sound less like a disruptive innovation and more like a one-stop Amazon shopping experience.
The Firefly program allows you to scan objects, songs, and TV shows in real time; the system identifies them and gives the option to purchase them from the Amazon store. The 3-D capabilities of the Dynamic Perspective system are being touted as the next big thing: cameras located on the phone’s front face track your head movements, allowing for more depth to images than the average smartphone. In the maps application, skyscrapers appear to leap off the screen, creating incredibly realistic images. And multiple motion sensors allow for touchless control of certain apps by tilting the phone instead of tapping the screen. These features sound pretty cool, but the question from a business acumen perspective is whether there is enough disruptive innovation to make this device a success.
Amazon is constantly looking for opportunities to improve and innovate on products and processes, which is commendable largely because the company is not executing a product leadership strategy; Amazon is an operationally excellent company that looks to drive volume and scale of good products and services on a global basis.
And yet, despite all of its renown and the success of the brand, Amazon has yet to turn a profit in its lifetime. While the hope is that the Fire phone will turn that tide and position the company for profitability, we don’t think that’s going to happen. Our reasons are listed below, and we’d love to hear from you to debate them:
- Not enough innovation in a market that brings out new features on a daily basis
- Apple and Samsung have established strong brand and product leadership
- The market is becoming commoditized
- It is a complex value chain that has to include deals with service providers
- What may have worked with books won’t work with communications, especially in an already crowded market
- There isn’t a clearly defined unique customer segment
- While Amazon is busy looking for new disruptive innovations, they are taking their eye off of their core pillars of success; they will soon wake up with raging battles in too many markets and not enough resources to compete in all successfully
- And then there will be Google
Summary
Disruptive innovation as a business strategy requires focus and discipline. It is the perfect storm of things going right to be successful. Amazon has done it a couple of times, Apple has done it a couple of times, and Google has done it a couple of time. However, it can’t be taken for granted and it certainly can’t be treated like a commodity. When treated like a commodity, or under-resourced, it will fail. Will the Fire phone will be the spark that Amazon needs to turn a profit or will it go up in flames? Either way, we’ll be watching to see what happens!
