Will Twitter Ever Reach Facebook’s Scale?

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At little past 5 PM Eastern Time today, Twitter stocks fell by 14% from its initial IPO opening price of $45.10, apparently on poor market sentiments triggered by its less-than-expected growth in user base. In fact, the markets seem less anxious about the net loss of $132 million than the slow user growth. Timeline views by monthly active users declined 8% year-on-year. Analysts are fervently comparing what they deem as a ‘lackluster’ performance by Twitter with the great results of Facebook a week ago. I guess this was inevitable given that Twitter’s newly launched profile page mimics Facebook’s so closely. However, as there are some fundamental differences between the two social media networks in terms of user engagement and content lifespan, I think the comparisons are less than fair.

Expectations versus Performance

After a great year in 2013, when Twitter beat Wall Street estimates in terms of both earnings and user additions, the 5.8% growth in monthly active users this quarter was not enough to boost sentiments. I think the low user additions, much below Facebook and LinkedIn averages, is triggered by poor user experiences. Though Twitter has been tweaking its UI in order to bring in more visual experience to its audience over the years, it still feels like it has a long way to go. The company also has challenges when it comes to user engagement, partly because of the very nature of Twitter and partly because of the poor user experience.

Twitter’s sub-par user growth is also because of the significant downtimes it has witnessed over the years. How many times have you been turned away by the “Oops, something seems to be wrong” or the fail whale banner when you had rushed in to post a tweet? To be fair, some of these downtimes were because of unforeseen network overload when some big news or event breaks over the Internet. Twitter seems to have learnt from its past mistakes though as it has been investing in infrastructure and network failover mechanisms over the last several months.

The Future

The biggest challenge for Twitter is that its growth is slowing even when it has enough headroom to grow. Unlike Facebook, it is not nearing market saturation even in mature markets such as the US, let alone globally. While Facebook’s slower growth in user base is more or less anticipated, Twitter should be sprinting along at a considerably faster rate, which is not happening right now. The growing popularity of competitors such as Pinterest, Snapchat and Instagram can be attributed to the fact that these are more appealing visually and hence sustain user engagement. Even relative newcomers such as WhatsApp, which has about 55 employees, had a daily active user (DAU) count of 353 million compared to Twitter’s 120 odd million DAU in early 2014. However, WhatsApp’s use case as a messaging application is different from Facebook or Twitter, which are both pure-play social networks.

Twitter CEO Dick Costolo admits that the platform has to become more user-friendly in order to grow and retain registered users. However, I am not entirely convinced that copying a Facebook-style profile page is a step in the right direction. Twitter has to leapfrog competition in terms of both user interface and experience in order to overcome some of its growth challenges. Also, for a company that bets most of its future growth in international business, it has not been consistent in rolling out new products for the non-US markets, contributing to the growth slowdown.

Growth in the most prospective Asian markets has been slowing for sometime now. Especially in Japan and South Korea, where the percentage of mobile users is very high, due to a larger market movement towards private social networks rather than more open platforms such as Twitter. In Korea, only one in seven of Twitter users are said to be even moderately active on the social network. Dick Costolo rejects any claims that the fundamental nature of Twitter could be inhibiting adoption. While this may be true, it should also be acknowledged that despite the fact that a majority of its users are not from the US, international revenues contribute just 27% of total sales.

Will the recent improvements in the interface be enough to overcome what seems to be a mounting number of issues? I am skeptical.

 

 

Apple in Search of the Next Big Innovation

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Today Apple released its Q2 2014 financials (the webcast quality was awful on apple.com. I could hear only every fourth word on my super high-speed Internet connection). Predictably, all the doomsayers are out in full swing. For weeks, why even months, we have analysts coming out with dire predictions on Apple’s declining iPad, iPhone sales and profitability. When the iPhone 5 was launched, critics said it marked the end of Apple’s innovation. Today’s results show that things are not as bad with Apple posting a quarterly revenue of $45.6 billion ($43.6 billion in Q2 2013) and quarterly net profit of $10.2 billion ($9.5 billion). iPhone sales were at 43.7 million, beating market estimates of 37.7 million for the quarter.

The guidance for Q3 does not seem so positive though. I do believe that Apple got away with no new product innovations this quarter and the analyst claims are not entirely unsubstantiated. However, exactly when we would see a visible decline in growth if Apple maintains the same pace of innovation is debatable.

Keeping revenues and profitability aside, the real question here is, can a company continue to sustain being an innovator? Apple was no ordinary innovator, but was very disruptive in each of its new markets, whether it was the phone, the tablet, music player or digital music distribution. The rules of play for each of these industries changed after Apple’s entry. The closest comparison I could think of is what Google did to search, email and to some extent the mobile OS market.

Apple’s Shifting Customer Base

I want to cite an example from a workshop that I attended a long time back, on what kind of customers that innovative companies typically want to go after:

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Picture Courtesy: IDEO
The bell curve is where the extreme users are. However, the classic problem Apple faces today is that this bell curve is not a constant. It is dynamic, it shifts. Customers change and so do their choices. Understanding the pace of shift and addressing it is easier said than done. Jobs was a master of that art.
I have heard arguments that people have had ‘too much of Apple’ products. I don’t think that is true. They have had too much of the ‘same’ Apple products. Innovation on the iPhone slowed down after the 4S. It declined dramatically with the 5C where Apple’s value proposition was the different color themes of the plastic casing. The novelty of the iPad is wearing off as larger-screen smartphones are invading its space. Different form factors and retina display may no longer be enough to save a quarter.
Samsung and the Culture of Commoditization
The Samsung price-value differentiation is resonating among younger customers even in developed countries such as the US where Apple has more than 40% share of the smartphone market. Samsung is seeing a high growth trajectory among the more price-sensitive emerging markets such as India, the second largest for smartphones after China, commanding ~45% market share while Apple gets bundled in the ‘Others’ category. In China, Apple’s iPhone sales have not been too encouraging and its huge subsidies are impacting the carrier, China Mobile, according to Bloomberg. Apple’s answer to Samsung’s commoditization of the market was the 5C, which did not resonate well with people like me who believe that Apple is sacrificing its uniqueness and brand value for market share at the lower end of the value chain.
What Next for Apple?
Where would the company go from here? Is it going to be the thinner, larger-screen iPhones that will bring new growth? Would product extensions be enough to avoid the imminent plateauing of growth in sales and profitability? I don’t think so. 
Will it be the elusive iWatch?   The company needs to come out with something that is disruptively innovative and neither of these two impress me as even innovative. There have been few speculations on what else it could be, Apple entering the health & fitness market and the world of television. I am still skeptical. If people like us could second-guess it, it wouldn’t really be ground-breaking and disruptive, would it?
These are the moments when I, and I bet Apple too, miss Jobs the most.

 

Have UC Vendors Given Up On Innovation?

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When was the last time an iPhone-like innovation happened in the Unified Communications (UC) space? Or for that matter, in the larger, more encompassing enterprise communications? The answer is, probably never. I am not just referring to user experience, but across the entire spectrum of technological innovation in this market. From my tracking of the UC industry over the last 10+ years, new product launches are never radical breakthroughs but rather product extensions camouflaged as innovations.

Have you ever wondered why innovation happens so fast in the consumer world compared to enterprises? Not that consumers are any more discerning than enterprise CIOs. I think it is because they have the freedom to switch. Even if I am tied down to a mobile plan, my window of loyalty is about 14 months. For vendors in the consumer market, innovation has a direct correlation with customer churn and profitability.

I thought it is worthwhile to spend some time on why there is such shortage of innovation in the UC industry.

Reason 1: Innovation is a culture

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Not many UC vendors nurture innovation or out-of-the-box thinking. I have worked with many of them as employee, analyst and consultant. The one common characteristic that I see across all these organizations are that they are large, monolithic and steeped in the old way of doing business. A good percentage of their employees have been with them for an average 15+ years. Some start and end their careers with the company. While this may be a good thing in some aspects, in many ways this stifles new thinking. The general attitude is, “we have done it this way for many years and will continue down the same trodden path in future.”

I see some encouraging signs though. Some UC vendors are hiring new grads in an effort to get the perspective of Gen Y users. Others are taking R&D out of their labs and doing extensive usability testing on ‘real’ users. But these are just instances of best practices, far from becoming a culture.

Reason 2: Vendors can get away with little innovation

If you are a frequent attendee of industry conferences, you would agree with me. Year after year, the themes seldom change. Many of the vendors have their enterprise customers locked down in their environments. The cost of switching is too steep. Managing change is nightmarish. And, the solutions from one vendor to another are not vastly different in order to warrant a switch based on functionality. Under these circumstances, why go overboard innovating? The business still runs, profitability is good though it can be better, and more importantly, there is no reason to believe that innovation can bring dramatic changes to my top-line or bottom-line. It can, if we are radical enough, get it right, and continue to innovate, because what is radical today could be ordinary tomorrow.

Reason 3: The perception of innovation is vastly different

The way customers view innovation is vastly different from how UC vendors see it. In 2011, Cisco and Avaya decided that there was great, untapped potential in ‘enterprise-grade’ tablets. Their argument was that the iPads of the world were more consumer devices and did not offer enterprise-grade features for secure, reliable access to resources, tools and infrastructure. Their enterprise-grade tablets were at least three times as expensive as their consumer counterparts, needed docking stations that were priced between $300 – $1,000 and integration with backend infrastructure that could run to tens of thousands of dollars. The devices flopped as neither were they user-friendly nor did they justify the cost.

There was the belated realization that these enterprise users were happy to carry their personal devices to the workplace and be more productive. All it needed was ensure proper administration and security for these devices. In other words, a BYOD strategy.

Reason 4: Vendors think in terms of sales, market share. They seldom think as users.

The most that companies do to ‘capture’ user feedback is conduct focus groups. How many of us are capable of expressing what exactly we need and how we are going to use it in focus groups without any embellishments or omissions? I have been in focus groups where the moderator, ever so gently, steers the participants towards the answer that his/her client wants to hear. Now, if we are going to rely on such formats to get customer feedback, how will this impact product development?

Reason 5: Vendors seldom walk the talk

I recently read a post by fellow blogger Luis Ramos titled Can Lync Fly? The idea was to see if Lync video would work on a plane. The grand conclusion of the article was that it was very difficult and he could do it partially after several compromises. Now, contrast this with a Facetime call on an airplane using an iPhone 4. Now why didn’t Microsoft think of making Lync work on an airplane? Isn’t the phrase ‘anytime, anywhere access’ flogged to death by UC and mobility vendors?

It is not all gloom and doom for the industry. Smaller startups innovate in order to survive. Unfortunately, only a handful of them survive and sustain. Acquiring small innovative startups has become fashionable in the UC industry. But once acquired, their innovation gets smothered by old-school mismanagement. Like a Zimbra or a DimDim… or a Skype.

A Cat’s Survival Guide to the Corporate World

ImageI have great respect for my cat, Martinique, a Bengal tiger mix. She came to me as a rescue kitten after being tossed around from one animal shelter to another at a tender age of 6 months. I suspect that she had been abandoned by her mother as a baby and must have roamed the wilds of southern Michigan before being spotted by a rescuer. The shelter told me at the time of adoption that she had a lesion near her right ear, probably caused by a bite from another animal.

She has been with me for close to a year and half now (she turns two in June). In this time she has taught me a thing or two about survival, adaptability and building relationships. No, I am not crazy. If you had ever owned a dog or a cat, you will understand what I am saying.

Marty would have had a great career in any corporate environment, in fact I think she is CEO material. Here is why.

She is Smart… and She Hides it Well

Lesson no.1 for survival. In the corporate wild, it is not enough if you are smart, but you should be able to camouflage as average and sometimes even dumb. Or, risk making your peers insecure and turn against you. 

Marty is ultra smart. For hours, she would sit in her usual meditative posture, feet tucked under her fluffy body, eyes half-closed and to all appearances seem to be in a state of stupor, or deep trance. Neither me nor the unsuspecting dog were aware that she knew how to prise open the refrigerator to get at the dog food, mimic bird sounds and trick them into believing she was one of them, wriggle her paws under doors to pull them open, climb to the tallest branch of a tree (and climb down!) and seem to always know which kitchen drawer held the dog’s treats and hers.

Know Your Place in the Food Chain

Lesson no. 2 for survival. It never pays to call your boss stupid, even if you are provoked beyond reason… and even if it is true.

Marty knows that the dog is three times her size and is sometimes just a blundering fool. But she would play along, acknowledge the dog’s territorial rights and stay meek. She reserves her claws and hissing for someone closer to her size.

Several years back when I was tracking the then fledgling Wi-Fi industry, a boss of mine said that the technology would die in a few years and be displaced by 3G. I remember arguing vigorously with him, pointing out that 3G (at that time and even now in many countries) was way too expensive which would restrict adoption. Wi-Fi would become cheaper and pervasive. I was right. But I ended up angering him and paid a heavy price in terms of career progression for a short while.

Learn Cat Composure

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Lesson no. 3 for survival. Don’t lose your cool. 

I call Marty the cool cat. She remains unruffled under the most trying of circumstances. The dog regularly chases her, growls at her and goes ballistic even when she is somewhere near the periphery of the dog’s food. Marty reacts to all this craziness with the utmost calm, finds the most ingenuous hiding places and has learnt to sprint to the tallest rail in the house in under 10 seconds.

I have seen the best minds in business make a fool of themselves by shouting at a colleague in group meetings, swearing and being very vocal with their anger. Despite their skills and position in the hierarchy, these people short circuit their careers and end up making a lot of enemies at work.

Trust is Developed, Not Acquired Overnight

Lesson no. 4 for survival. Be it your boss or your peers, trust is developed over a period of time. If someone says they trust you on your very first meeting, don’t believe them. Neither should you trust on instinct. Many of us forget that trust is a nurtured attribute, and pay a dear price for the lapse.

For Marty, trust does not come instinctively. I had to earn it over a period of 18 months. I had a blemish-free record with her, er.. almost, until I brought in another kitten into the household a few months back. She hated me for a while and showed it in her usual subtle ways. The point is, I had to struggle to win it back. It is not any different in the workplace. I had to work hard at winning trust, and even harder retaining it.

P.S: I apologize to my sweet dog Lily for calling her a blundering fool. I shall soon redeem myself by doing a ‘dog lessons’ post. You and Marty are equally precious and have taught me life lessons that I cherish.

 

 

5 Things Steve Jobs Taught Us About Customers

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I will admit it. I was watching Jobs on Netflix yesterday. While admiring the amazing performance of Ashton Kutcher (did Jobs really walk like that?), I was constantly reminded of the great mind that redefined customer/user experience today. This was a guy who swore by minimalistic design, be it the iPod, the iPad or his presentation slides at a time when gadgets and computers were being designed for engineers and geeks.

I was attending a roundtable a few weeks ago at Enterprise Connect and a design company executive was talking about all the things that were wrong with Apple’s design. It is easy for us, today, to pick holes on something that we could see, hold in our hands and use. But remember that Jobs designed in abstract, was able to visualize something that was non-existent and beyond the comprehension of ordinary people and even designers like the person who was on stage criticizing him. In the bargain, he created a market, destroyed a few companies (Nokia had about 70% share of the mobile handsets market at that time) and amassed a cult-like following. All thanks to his laser-focus on customer experience.

Small Things Matter

Some months back, I read a behind-the-scenes story on how Marissa Mayer‘s decline came about in Google. The article said Google’s lead designer Doug Bowman quit the company because he was tired of “debating minuscule design decisions.” The last straw apparently was that they were wrangling over 41 shades of blue in order to find the right one for Google’s search landing page. I see a similarity between Jobs and Mayer. They both cared about these ‘small’ things because from a user’s perspective these were anything but small.

Customers Need to be Comfortable with It Before they Use It

In a recent customer demo of a collaboration product, I heard a focus group participant say that the product looked similar to a videoconferencing system. My heart sank. Video has for long been a clumsy dinosaur that is too complex to use. I am sure you would agree with me if you had tried to dial-in to a video room some time or the other. Far from plug-n-play. And when it comes to UX, things have not changed much in the last 20 years. That is how quickly change comes to this industry.

Jobs believed that if “people were scared of something, they wouldn’t touch it.” Computers from HP and IBM in the good old days were clunky monsters that scared people away. Jobs wanted something simpler and sleek that ‘ordinary’ people would love to use. He put technology in our back-pockets, literally.

No Market Research Will Tell You What Customers Want

I have seen companies spend tons of money on focus groups, ideation and customer research and still come up with a product that fails to impress customers. Remember New Coke? Market research was one of the biggest factors behind Coca-Cola launching the New Coke.

Jobs was widely believed to be a skeptic of good old market research methodologies.

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” – Steve Jobs

Jobs was not alone. Henry Ford also said “if I had asked people what they wanted, they would have said faster horses.”

While I am not subscribing to this in entirety, I would agree that blindly relying on market research to answer your biggest product design questions can lead you the New Coke way. You need experts, visionaries and innovators as well as customer feedback to nail it.

Customers Know When they are being Ripped Off

Just because people buy from you does not mean that they do not know they are being short-changed. They could be still coming to you because their choices are limited. Remember Motorola Rokr E1, the first phone to run iTunes? The E1 would allow users to store only 100 songs at any given point of time. The product saw lower sales even with a vigorous marketing campaign and died a natural death when the iPhone was released in 2007, delighting users with unlimited storage for songs, videos and photos.

Start from the Customer Experience and Work Backwards

Despite the unfair bashing he has received at the hands of his critics for being patronizing to his customers, Jobs had a lot of respect for them. He knew that no product can survive in this fiercely competitive industry unless the customers endorse it by using it diligently. In order for them to use it, the product needs to be attractive, simple and ‘honest’. If your customers don’t use it, it is dead, be it the Motorola Iridium or Apple’s own Newton.

Despite my recent negative experience with Apple, I do hope the company continues to foster his vision around customer experience. As an ardent Jobs fan, it is the best thing that Apple could give me.

Three Customer Experience Stories from Delta, Apple, Best Buy

As a consultant, I am often asked the question “How do I build a customer base that is fiercely loyal?” I don’t think there is a perfect prescription for developing it simply because companies are fundamentally different from each other, as are their customers. However, as a customer, I can tell what delights me and what doesn’t. Here are three stories that I want to share and what it taught me about how companies approach customer service.

The Good: Best Buy

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Last week I spilt tea on my 3-year-old, very loyal MacBook Pro and it decided it didn’t like it. I am not as diligent in backing up my data as I would like to think I am and I was in complete panic mode. Losing the laptop was one thing (my Apple Store buddy told me that spilling liquid on your Mac is like totaling your car), but the data? Three years of hard work, tons of reports, insights and intelligence. I had to get the data back. I called up Best Buy and was told the service from Geek Squad costs about $200. However, when I landed at the store, the customer service person said “Why do you want to spend all that money when you can buy an external hard drive sleeve for $28 and you could do it yourself?” He showed me how to insert the drive into the sleeve, plugged it in, showed me that all my data was intact and sent me home, charging me only for the sleeve. I was predictably ecstatic. Now, let us move on to the Apple Store story.

The Bad: Apple Store

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The first place I rushed to after my tea disaster was the Apple Store. Even after I told the customer service person at the doorstep what my issue was, my waiting time before actually speaking to a service personnel was about 40 minutes. I think by that time my Mac progressed from being a casualty to DOA. And when I did get hold of the service person, I was told it would cost me about $800 and a few weeks time before Apple could repair it. That was when I made the big mistake of telling them that I might as well get a new one if repair costs are going to be that high.

From that moment on, all service talk became sales talk and within 15 minutes, I had a shiny, new Mac in my hand and was poorer by $1500. Apple didn’t want to take a chance at backing the data because of the liquid surrounding the hard drive which could spoil their “very expensive equipment”. I was recommended a great company that can restore my data, was given a business card and sent home with the very reassuring words, “don’t worry, these guys are great. Apple works with them all the time.” As a die-hard Apple customer, I believed them.

I duly called the data restore company and was quoted a price of between $5,000 – $9,000 to get the data back. These guys must be kidding me, right? I told them I was not Malaysian Airlines trying to get the deleted data from the flight simulator of the MAS370 pilot. I was frustrated and more than slightly angry at Apple for wasting precious time.

The third story is not about my laptop but about Delta.

The Ugly: Delta 

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Flying domestic in the US is painful enough but wedged between two passengers in the last row is stuff that nightmares are made of. And when one of them gets into the plane drunk and takes a fancy to you transports this story into the realms of horror. As the plane took off, the drunk next to me was getting more intrusive, talking to me all the time (OMG, talk about bad breath), asking me what the ‘thing’ I was holding in my hand was (an iPad), peering into my screen, and eventually leaning on me and nudging me with his elbows if I didn’t answer yet another pointless question from him. Refreshments were being served and the Delta flight attendant sold the drunk 2 beers and 2 shots of vodka. Hey, we do want to do more inflight sales, don’t we? I will not bore you with details of what happened subsequently. The drunk became more drunk (though I thought it wasn’t possible) and abusive. I had to summon the flight attendant twice before I could change my seat, which was well over an hour after we took off.

A few days later, Delta sends me a survey asking about my ‘inflight experience’. I filed a complaint with them about the incident and the indifference of the cabin crew. Four days later I get a mail from Delta saying that they were indeed distressed to hear about the unfortunate incident and how wonderful that alternative seating arrangements were made. BTW, we will send you a $50 coupon in 48 hours as token of appreciation for your patience and continued patronage.

Three Guesses Who is Losing a Customer

I was amazed at how different the three approaches to customer service were. Best Buy delighted me because they predicted my need and offered me a cost-effective and workable solution even though I was was ready to spend more. Apple gave me something without really understanding the intensity of my need and ability to pay as they were intent on closing a sale rather than resolving my problem. Delta was not only patronizing but they really diminished my value as a customer by putting a cheap price tag on it.

Best Buy probably didn’t do a big sale with me that day but they have won my loyalty. Any guesses where I would go next time when I need expert tech advice? Apple did a big sale but I lost my confidence in them as a company that cared deeply about the customer. Under the carefully-cultivated veneer of great customer care at the Apple Store was a sales machine keen on making you spend more. So when Ron Johnson says that “the most important component to the Apple experience is that the staff isn’t focused on selling stuff,” I can only raise a skeptical brow.