Category Archives: insightful?

insightful?

Why Apple has to make inroads in the autonomous self-driving car space, and fast.

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Autonomous vehicles; not wearables will be the new mobile platform.

Autonomous self-driving vehicles (AVs) will be the new mobile platform, on top of which a host of new products and experiences will be developed. Like Apple’s iOS and Google’s Android mobile operating systems, on top of which multi-billion dollar iTunes and mobile advertising businesses have been built, connected autonomous vehicles will enable a multitude of new products and experiences that the consumer will be purchase and/or consume during the ride.

Ride-monetization opportunities are valuable competitive advantages to a robot taxi platform.

As we have learned first-hand in the ride-hailing business, any ability a ride-hailing platform possesses to keep ride fare prices low is a strong competitive advantage. The reason for this is simple. Consumer demand for a given platform’s rides is highly sensitive to ride prices/fares it charges. That is, the platform that offers the lowest prices and wait-times will enjoy the most demand. The ability to generate revenues on AV rides — on top of the ride fare — provides extra margin and room for the robot taxi service provider to lower ride fare prices and still be profitable.

Waymo, Apple, Amazon and Uber possess the best ride-monetization opportunities.

Google’s Waymo is the AV team arguably best positioned to create in-car ride-monetization experiences. Nest, Google Express, Youtube, and of course the digital ad business provide a multitude of opportunities for Waymo and its parent. Perhaps the next best-positioned providers of ride-monetization experiences are Apple and Amazon.

Apple needs to move fast in the autonomous vehicle space.

The smartphone will continue being a key tool in our lives, but Apple must play a role in this future mobile platform otherwise it risks massive declines in its enterprise value. Apple may be late to AV game, but there is hope for Apple to win. With its suite of entertainment, content, and home-system products, Apple is one of the best positioned to create ride-monetization solutions. Seamless cross-product integrations and experiences are what Apple does best. The autonomous vehicle will be just another one of the products with which Apple products will need to integrate. If Apple doesn’t win a major stake in the AV future, Google’s Android — through its integrations into the autonomous vehicle ride experience — could create a better-integrated mobile OS and capture not only Apple’s share of that market but also share of adjacent markets in hardware and content.

As it stands now, Apple has made its AV strategy clear, and it will partner with car manufacturers to provide the autonomous hardware/software technology needed to make a car drive from point A to point B. The challenge will be for it to get the technology working fast enough and to set up the manufacturing partnerships before other teams beat them to it, and there aren’t many car manufacturers left who haven’t already partnered with an autonomous vehicle technology team.

Very strong network effects will be at the core of the autonomous vehicle revolution, which will hinge largely on robot taxi platforms instead of direct-to-consumer vehicle sales. The first teams to get a working product to market will have significant advantage over late bloomers, who will struggle to profitably create a product that offers value in excess of the significant switching costs that the would-be customers would incur to leave its existing AV tech provider.

 

The future of Whole Foods: Why Amazon’s acquisition makes so much sense

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Amazon’s acquisition of Whole Foods makes sense. I enjoyed deconstructing why below.

1. Amazon will leverage their expertise in warehouse automation and delivery to eliminate the need for the ever popular “Task Rabbiter” shoppers who assemble pickup and delivery orders in the store. Visit a Whole Foods today, and you will see many contractor

In-store shoppers are extremely common and have been asked to stop wearing Instacart t-shirts so as to not change the feel of the shopping experience for other customers.

workers shopping for delivery-platform customers such as Instacart and Whole Foods own delivery service. These shoppers are extremely common in Whole Foods, and they have been ever since Instacart started doing deliveries from their stores. While they no longer wear t-shirts that indicate the platform for whom they are working (this isn’t an accident), these shoppers are pretty easy to pick out from amongst the crowd. They wear headphones, stare intensely at their phones as if reading a off a list, fill grocery carts with large orders, talk with store clerks as if they are colleagues, and move briskly from one item to the next. They become efficient shoppers, knowing where everything in the store is located and they have their own checkout lines in the store so that they can complete as many orders as fast as possible. But watching these shoppers go around and pick items to assemble orders, you can’t help but see this labor force as very replaceable by warehouse robots and machinery that Amazon already uses to assemble orders from large warehouses with thousands of SKUs.  Now that Whole Foods offers its own delivery service (delivery.wholefoodsmarket.com), expect Amazon to put its mighty marketing and operations competencies behind the delivery service to not only make them less dependent on Instacart going forward but to also move all assembly of delivery orders to a warehouse environment so as to improve the in-store shopping experience for  customers.

 

2. Overlapping customer bases enables better customer experiences for the Amazon and Whole Foods customer of the future.

Whole Foods stores are located in affluent neighborhoods of metropolitan areas.

Like Whole Foods stores, Amazon customers are located in more affluent neighborhoods in metropolitan areas. Walmart’s core customer lives in rural areas. Whole Foods and Amazon customers value convenience and a higher-quality experience over rock bottom prices; and they are willing to pay a higher price for it. Both Amazon and Whole Foods customers value pleasant and efficient shopping experiences that save them time. Amazon’s entrance into various product categories means that customers can efficiently procure many services and goods from a  single entity. Like Amazon customers, Whole Foods customers are accustomed to the convenience of high-quality, curated stores and SKU availability. As a result, many Amazon customers are already Whole Foods customers, so this acquisition will mean that Amazon can gain greater share of these existing customer’s wallet. With greater data collection and insight into each individual customer and their shopping history, Amazon will leverage this data to make better recommendations and inventory management decisions, both of which will also potentially lead to increasing total expenditures by each customer.

 

 

3. Massive cross-marketing opportunity to create new Amazon customers. Within the Whole Foods customer base, there a few segments who may not be Amazon customers yet. Imagine the older, not-so-tech-savvy segment of Whole Foods customers who shop there purely for the higher quality food and shopping experience. These customers are the type of people who don’t do a lot of e-commerce but regularly procure their food from Whole Foods because they have grown to trust the Whole Foods brand. Amazon will be able to leverage this brand equity, and cross market to these segments to attract new Amazon.com and Prime customers. And once the customer is brought into the fly wheel, there is a high likelihood that the customer will become a consumer of Amazon’s other stores and products, such as Amazon Video, Audible.com, etc.

 

 

 

One urban mobility market that Uber and Lyft might ignore

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As we look to the future of urban mobility, one of the questions I am constantly pondering is “Is there an urban mobility product that can effectively compete against an autonomous vehicle fleet powered platform?” From our experience, we know that the bulk of the ride-hailing market cares primarily about the average cost and time he/she spends on the ride. An autonomous vehicle fleet is expected to decrease the cost of rides and hailing times, so the question then is “What product could compete along these two critical dimensions with an Uber or Lyft autonomous vehicle product?”

In my experience, the only product that comes close is a commuting shuttle or van, which usually features a larger 15-passenger vehicle and a driver, and benefits from pickup, dropoff and time densities of the riders during commuting hours. There are two primary variations of the model: fixed vs dynamic routes. My challenge with dynamic routes is that it is essentially Lyft Line and Uber Pool, but with a bigger and more expensive vehicle. Since the Uber Pool and Lyft Line products are operating at significant scale and the experience is generally pretty poor because of the uncertainty surrounding when the rider will arrive to her destination, I think it will be very hard to build a dynamic shuttle product that creates a better consumer experience at a lower cost structure.

So the question really then becomes “Can the consumer’s per-ride total cost and commute time for a shuttle product be more competitive than an autonomous vehicle solution?”* NOTE: Since consumers can use pre-tax dollars to pay for dynamic shuttle trips, we need to consider the post-tax cost to the consumer.

Below is a first attempt to model out the cost structure of both products, and which product is advantaged.

 

Cost Advantage
Driver Cost Autonomous Fleet
Vehicle Amortization Commuter Shuttle
Vehicle Maintenance and Repairs Uncertain or Neither advantaged
AV Hardware Maintenance Commuter Shuttle
AV Software Acquisition and Maintenance Commuter Shuttle
Vehicle Storage Neither advantaged
Vehicle Refueling Autonomous Fleet (assuming electric AVs)
Demand Planning Commuter Shuttle
Demand Matching (Dispatch) Neither advantaged
Marketing Spend Autonomous Fleet
Insurance Uncertain or Neither advantaged

 

Cost Count of Advantages
Commuter Shuttle 4
Autonomous Fleet 3
Uncertain or Neither advantaged 4

This is of course a rough attempt to map out competitive advantage between these two products. I not only don’t know if this is accurate but I also don’t know the magnitude of each of these advantages.

Much remains to be learned about how low these costs will decline over time or whether they will approach some kind of asymptote, but I think this is the right way to structure this problem, and that this is the right kind of question to be asking when we look to predict what the long-term future of urban mobility landscape will look like.

 

*Of course, there are some qualitative aspects of the experience that differ, but there is a price at which some market segments find these qualitative aspects worth the trade-off. I will ignore these and focus on the primary value drivers of total cost and time of the trip.

Three cool lessons we can learn from jazz and apply to business

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I just watched a talk given by Google Ventures partner Ken Norton about what we can learn from jazz music and how it is created. Below are the three ideas.

1  Get uncomfortable but not too uncomfortable

“Miles Davis nudged his musicians into a place where they were uncomfortable, the zone of optimal anxiety. What Larry Page calls “uncomfortably exciting.” When Duke Ellington challenged Clark Terry to play like Buddy Bolden. When Ella Fitzgerald thought, “uh-oh!” What Frank Barrett calls provocative competence: triggering people away from habit and repetition. Where there are no such things as mistakes, only missed opportunities. Embracing uncertainty when we make software, which is inherently unpredictable. We don’t know how our users, or our audience, will react, and that goes with it.”

While it is important that we push ourselves outside our comfort zone, it is also important that we don’t overstress ourselves to a point where we are unproductively worrying about being unproductive. Norton also mentioned the importance of making sure the team is not too stressed. As leaders and teammates, we sometimes need to make sure we pull team members back up the stress curve, making them feel less anxious, by making them feel more confident, competent, and part of the solution.

2 Listen carefully.

“Jazz is a continual conversation where listening is more important than talking. Big Ears encourage empathy, knowing where others are going, and helping them get there. Looking for mistakes that can become new opportunities. You can help by listening more than talking, by being willing to ask questions when you don’t know the answers, even when you think you do. Celebrate following and listening in addition to leading and talking.”

On this note, check out this Marc Abraham post on Socratic questioning.

3 Let everyone solo.

“In jazz, everyone takes turns both leading and following. Psychological safety means everyone knows their voice is valued, and that they’re not afraid to try something risky. You can create this for your teams by demonstrating engagement, making sure each person speaks and is heard, picking up on unspoken emotions, and showing your understanding.”

I think this idea is important and speaks to everyone’s individual need to feel like our work and contributions matter in the world. We all need to feel like we can offer something to the world and that we are thus valuable for these contributions. As leaders and managers, I think it’s important that we help make our team members and colleagues feel this way. It’s what good humans do. 🙂

 

How we know Trump doesn’t believe what he says

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Tonight I listened to Trump address congress.

It was incredibly disheartening and–if I’m honest–infuriatingly scary. Scary because he not only isn’t saying anything new, but he doesn’t even believe the cliche statements that we all believe to be importantly true. It is easy to tell he doesn’t believe what he says because he is inconsistent and he gets caught up in the web of lies he is spinning. 
Tonight, this became clear when he found himself in an impromptu moment, wherein he had to add lib. His improvisation was contradictory. He’s so bad at lying that his contradictory statement contradicts his immediately previous statement. Not six or statements prior, but the previous statement. For example, his acknowledging of a fallen soldier who should never be forgotten, presumably because every human life is valuable; not just a brave one who fights for a good cause. Then, in the next statement, he paints a picture wherein the fallen soldier is smiling from heaven because congress just “se a record” for the longest applause ever recorded in congress. Surely, he isn’t claiming that the soldier wouldn’t trade a hundred years of applause to have even a fraction of that time back alive on earth. Surely he isn’t suggesting that applause even comes close to bringing back the father’s son. Life is about much more than being recognized. It is there to be protected so that it can be enjoyed. To me it is clear that he doesn’t genuinely appreciate the lives hat have been lost. For him, these lost lives are simply tools to be used as propaganda to support his anti-immigration policy.
Another example is when he cited how we value NATO for having fought fascism and communism. I almost fell out my chair when I heard this. His behavior to date is more dictator like than any president this country has had. Telling the EPA what it can report on and what it cannot! Stepping outside the bounds of our judiciary system. The list goes on and on. 
My only hope is that the people who voted for him, start to see the light; and regret their decision. 

Does it make sense for OEMs to be investing in AVs and urban mobility products?

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TLDR: AVs and robot taxi services are not a near-term (3-7 year) threat to existing OEM business lines, but they are a longer-term (7+ year) threat to OEMs; and this is why they are investing so heavily in AV technology.

Investments being made by large car manufacturer (OEMs) in self-driving autonomous vehicles (AVs) and urban mobility solutions are receiving a lot of attention these days, and for good reason. AVs promise significant societal benefits and economic opportunity, but I want to contemplate and deconstruct why OEMs are making these investments.  What is the business rationalle.

The going sentiment or explanation seems to be A) that AVs and these urban mobility solutions threaten the OEMs existing business and/or B) that the OEMs’ ability to design, manufacture, and distribute vehicles makes them a natural necessity in the future value chain of AVs. While I agree with the latter explanation, I think there is room to elaborate  on the former.

 

Vehicle sales will not decline significantly over near-term (3-7 years) because of robot taxi services.

First, the majority of cars and trucks are sold to consumers and businesses located outside dense urban city centers. Second, as I’ve explained in a previous post, robot taxi fleets will be economically constrained–over the near-term–to being deployed within dense urban city centers. As a result, over the near-term, if anywhere, robot taxi services will reduce car ownership rates within dense urban centers, but car ownership rates in urban centers are already low, therefore little impact will be made on the number of vehicles sold by OEMs. Simply put, car ownership is already low in the areas/populations wherein AV-based robot taxi services will be launched over the next 3-7 years. It won’t be until robot taxi services slowly make their way out to lower density suburban areas that car ownership there starts to be impacted.

I would suggest that vehicle sales by volume are declining not because of ride-hailing services, but rather vehicle build quality is improving. Cars are being built better and are lasting longer, and hence need to be replaced less frequently. Again, for most people living in the suburban US, ride-hailing is not a substitute for car ownership. And for most people living in urban environment, car-sharing (eg. GetAround) and short-term rental (eg. ZipCar) services are more likely to be a substitute* for car ownership than ride-hailing service is. Sure, hailing a ride is better than renting a car for two hours in most situations (that’s why ZipCar’s business is declining significantly), so ride-hailing services might be substitute for some urban market segments but I would argue that most car owners in urban areas own their car because they have consistent weekly inter-city transportation needs. Most people decide to buy/lease a vehicle because they have consistent transportation needs that cannot be solved with a better alternative. Getting to/from work or shuttling the kids to/from five days a week, for example.

The same holds true for suburban car owners. If you live outside dense urban areas and decide to buy/lease a vehicle, it is because you have consistent transportation needs that cannot be solved with a better alternative. Getting to/from work or shuttling the kids to/from five days a week, for example. For most people, car ownership is a better alternative for these consistent trips than Uber and Lyft.

As a result, I would argue that car ownership has not been impacted significantly by ride-hailing services–in neither urban nor suburban population.

Ride-hailing platforms have become a complementary transportation solution; not a substitute. They have become a substitute only for traditional taxi services. For urban dwellers, it complements mass-transit utilization. For suburban dwellers, it complements car ownership, as a solution for infrequent trip needs such as getting to/from the airport or nights on the town to avoid drinking and driving.

Although I don’t think robot taxi fares will come down to the level of mass-transit fares, the already low car ownership rates in urban populations means that I see robot taxi trips being used by consumers as a substitute for an occasional mass-transit trip; not permanent car ownership.

It’s a long-term play for OEMs.

Robot taxi services are not a near-term threat to OEMs, but I do think they are a long-term threat (7+ years). For the reasons stated above and in this post, robot taxi ride fares over the near-term will remain prohibitively high for suburban populations, where car ownership is highest. Eventually, in the longer-term (7+ years), the technology and economic constraints will change such that serving more sparsely populated areas can be done profitably, and robot taxi platforms will start serving these areas.

This is why I think hundred-year-old OEMs are investing in urban mobility and AV tech. OEMs don’t and shouldn’t care about being relevant over the next decade; they’re aiming to be relevant over the next 100 years.

 

*According to Jeffrey Rifkin, “Some 800,000 individuals in the U.S. are now using car-sharing services. Each car-share vehicle eliminates 15 personally owned cars.”   

The firm as a great listener… Do businesses underutilize reverse channels?

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In marketing, we frequently discuss distribution channels (how a manufacturer gets something to a customer to buy) but I rarely hear conversations about  reverse channels, which we can think of as the way a customer gets something to the manufacturer.

As marketers and business leaders, I think we are missing out on a large opportunity to: engage with customers, build brand equity, hear the customer voice, get ahead of trends, and create more sales opportunities through greater number of customer touch points.

One straightforward way of using a reverse channel is to recycle products when the customer decides they want to replace it.  DELL does this with their computer/electronics recycling program, and I think it is great.  Not only does it encourage environmentally conscious customers to buy new DELL products, but it creates brand equity with these customers who are rightly led to believe that DELL cares about the environment.  But this isn’t the only way in which a reverse channel be used.

Reverse Channels Facilitate Dialogue

In this information age that we are living in, channels also serve as the means for information gathering and sharing.  In the same way a manufacturer’s forward channels serve as a means for educating customers about product information, a reverse channel can serve as the means for customers sharing feedback about the products with the manufacturers, for example.  Customer service/support is an example of a reverse channel that almost every company has, but I still think marketers are under utilizing reverse channels.

Consumers use Twitter, Facebook, and other social media tools to have a dialogue with each other, and brands use these these tools to talk to consumers, but I feel like the digital-marketing conversations I hear these days are focused on how brands can effectively communicate a message to their target audience.   I propose that marketers would be wise to also focus on the reverse channel, both physical and digital, so as to facilitate a two-way conversation.

Reverse Channels Add Value Pre and Post -sale

Reverse channels can serve as the means for sharing product feedback with the manufacturer after they have purchased and used the product, but couldn’t customers use a reverse channel to share ideas for new products that they want but that are not currently offered for sale?   In a sense, a reverse channel could be used to augment product development functions.

The Firm As a Great Listener; Not Just Great Speaker

To me, what this all suggests that smart firms will try to be great listeners as well as great story tellers; and we should think about how we can create reverse channels that provide the means for us to efficiently hear the customer voice.

Facilitating Customer-to-Customer Dialogue

Lastly, eBay goes a step further by enabling its customers to speak with one another.  eBay does not serve as an intermediary between these conversations, which act as free advertising and promotion.  To extract further value from this kind of customer-to-customer communication channel, I think it makes sense for the brand to strategically design the communication channel so that it can efficiently harness and mine this information.  The brand could perhaps monitor customer sentiment and get ahead of market trends.

Why do we believe what we believe?

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I was watching a story about a guy who pretended to be a guru, and successfully attracted numerous followers. The reporters interviewed one of the followers, who admitted something very interesting.  She said “I wanted to believe he was a great guru”. This struck me because I have been thinking about the power of our own states of mind and how this shapes our thoughts.  We all agree that for many things, perception is reality. We believe 2+2 =4 because it can be proven, but so much of what we encounter and choose to believe is a function of what we perceive. We can’t know everything for a fact, so we must choose what to believe is truth. As a result, I am extremely interested people’s perceptions and how they are manipulated. An actor for example could pretend to be a doctor, and I might believe him to be a real doctor.

But, going back to what that woman said, I find it very interesting that what we perceive, is a function of both what we want to see or what we want to be reality, as much as it is a function of how well the actor plays a convincing doctor.  In the case of the guru and this follower, she wanted to believe that a guru and wise master existed, and that she was fortunate to know him, and that following him would lead to her happiness; but the guy was also a good actor.   The question in my mind is what which force was more influential…her desire to believe or the actors ability to portray, convince, persuade, etc.

In another example, I think about how a person might think that it makes sense for a doctor to be confident and borderline arrogant, and as a result would not believe an actor portraying a doctor who behaves or speaks insecurely.

So, what is the takeaway?  I think there is two.  The first is that–to avoid being swindled by a fake–we should be aware of our desires to believe in something, and how this clouds our judgment.   The second takeaway is that if we want to be convincing, we should consider what our audience wants to believe in and portray this.

Nike’s “Find Your Greatness” campaign and “Jogger” commercial

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Nike’s Find Your Greatness. — Jogger commercial  is a great ad.  It is one ad in a series for the “Find Your Greatness” campaign, which tells us that greatness is about the spirit within and pushing ourselves to our own individual limits.  Greatness in athletic pursuits is not about being faster or better than someone else; it is about being better than you were yesterday.   Endurance athletes generally know this well.  When we practice and compete, we are battling ourselves, our own will, and our own endurance more than we are that of someone else.  We must conquer what is happening in our own bodies and minds if we wish to compete against someone else.

Nike is a great brand, and there is nothing wrong with their supporting the Olympic gold medalists; but with this ad campaign, Nike wonderfully reminds us that sport and exercise is for everyone; and that we all compete against ourselves; and that we are our most important competitor.

Why I am short Walmart

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As someone who feels strongly about a good retail experience and that retailers can offer a lot of value to consumers, I realized that I really can’t stand Walmart.  I find the business uninteresting and lacking in providing a value-add retail experience for consumers.

From an industry perspective, I worry and hate the idea that Walmart is putting other, perhaps smaller, retailers who add value by educating consumers and curating product inventory, out of business.  In my mind, the retailer serves a wonderful primary function of being a trusted solution provider.  This involves curating product inventory, educating the consumer on how to use products to derive desired solutions, and lastly, providing customer service when the product maybe doesn’t solve the problem.    Does Walmart do this?  Overall, I would argue, no.   Walmart’s business model and strategy is instead focused on everyday low prices and being a one-stop shop for almost everything.  Eye glasses, auto-repair, groceries, televisions, etc.   How can a retailer specialize in all these different product categories?  Answer: They can’t.  And service suffers as a result.  Essentially Walmart is the brick-and-mortar version of Amazon.com, but Amazon.com probably adds more value because they can at least recommend things you might be interested in buying.

customer service is terrible   Don’t blame Walmart employees for this either.  It isn’t their fault.  The Walmart business model doesn’t focus on the potential value that its employees could add to the consumer’s shopping experience.  Walmart doesn’t care that non of its employees are not experts in any product category, and they don’t care about employee turnover, as a result.   How can we expect this employees to be excited and informed about the products being sold in the store?

penny wise, dollar stupid    When people go to Walmart, they go there expecting to save money.  Instead, they end up buying more than they had originally planned and spending more money than they would have likely spent had they gone to a specialty retailer for the specific item that they needed originally.

no curation value-add    Walmart’s idea of curating its product inventory is looking at suppliers who can supply the large enough volume at low-enough prices.  Where does fit of product features and consumer preferences of different market segments get factored into store buying/merchandising decisions?    Am I finding anything unique in the Walmart store located in my hometown versus another Walmart store location?  Am I finding anything unique at all in the Walmart?  I would argue no.  The shopping experience is void of any taste and style…it is a colorless experience, from my point of view.   I prefer spending my money with retailers who are passionate about their products and business, and who help tell me what I should want.   Walmart presumes its customers already know what it wants, and it just provides it a low price.  Boring.

boring business model    Congratulations Walmart, you’ve become an expert at supply chain and economies of scale.   This business model existed and was well utilized in the 1900s.  How exciting it must be to be all about size and volume, and that’s it.