Ford

The Old New Business Model of Uber and Ola

uber

Cars were a luxury in the early twentieth century. Their production was a slow and an expensive process. And this basically meant that the prices at which they were sold were also very high.

At the same time the car makers employed skilled craftsmen to produce cars. As Ryan Avent writes in The Wealth of Humans—Work and its Absence in the Twenty-First Century: “The automakers employed skilled craftsmen, who often had to shape these individual components to fit the peculiarities of the car’s handmade frame. In 1908 Ford Motor Company sold only about 10,000 vehicles. Most of its 450 employees at the time were highly skilled mechanics and craftsmen.”

This changed when Henry Ford came up with the assembly-line system of producing a car. This system was inspired from the meat processing industry in the United States. In this system, known as the ‘disassembly line’, the animal’s carcass hanging from a hook attached to a powered belt moved from one butchery station to another.

At each station, workers hacked off specific cuts of meat. As the animal moved through the disassembly line, its carcass grew smaller as the meat kept getting hacked from it. Ford thought that a system in reverse could be used to produce cars.

In Ford’s system, the chassis (i.e. the base frame) of the car was moved by power lines through various production stages. Various parts of the car kept moving towards the chassis at the same time. The workers were arranged at specific positions and they attached these parts on to the car. Hence, as the chassis moved through various stages of the production process, it became bigger and bigger.

In that sense, it was the opposite of the disassembly line and came to be referred as the assembly line. The assembly line was a major innovation and rapidly reduced the number of hours needed to produce a car from more than 400 working hours to less than 52 hours decades later.

At the same time, the cost of producing a car fell as well. This led to car prices falling and a boom in demand for cars. In the process, the production of cars went up as well. This led to an explosion in employment in car production even though the labour needed to produce each car had come down.

Also, the employees needed to produce cars on the assembly line did not need to be exceptionally skilled, as was the case earlier. As Avent writes: “The people working on the line were not especially skilled, for the most part. But Ford’s clever system meant that they were nonetheless fantastically productive.”

Cut to the 21st century. App based taxi services like Uber and Ola, are working around similar lines. Take the case of the traditional cab driver (or an auto-rickshaw driver in India). He was protected by laws and regulations. Most cities do not issue permits to drive a cab or an auto-rickshaw, on tap. Hence, there are a limited number of permits going around.

Also, more importantly, the drivers need to know their way around the city. If they don’t, they won’t be able to do their jobs. Uber and other app-based cabs have simply taken these things out of the equation.

As Avent writes: “Uber entered markets with a new business structure that took advantage of technology – smartphones equipped with GPS – that made the prior knowledge much less important… In doing so it allowed relatively unskilled drivers to enter the business in vast numbers.”

The point being that many more people could operate the smartphone than know the way around big cities like Mumbai, Bengaluru, New Delhi, New York or London, for that matter. Like in case of the assembly line, the cleverness of GPS technology, has essentially ensured that many more people can now become taxi drivers than was the case in the past. This has put the traditional taxi-drivers in trouble.

The question is how long will this last? As Avent writes: “New business models that open opportunities for unskilled workers by simplifying the tasks done in an industry arguably pave the way for the eventual automation of those tasks.”

The column originally appeared in the Bangalore Mirror on November 2, 2016.

 

What Team Anna can learn from Nirma, Sony, Apple and Ford


Vivek Kaul

The decision by Team Anna to form a political party has become the butt of jokes on the internet. A Facebook friend suggested that they name their party, the Char Anna Party and someone else suggested the name Kejriwal Liberal Party for Democracy (KLPD).
The jokes are clearly in a bad taste and reflect the level of cynicism that has seeped into us. Let me paraphrase lines written by my favourite economist John Kenneth Galbraith (borrowed from his book The Affluent Society) to capture this cynicism. “When Indians see someone agitating for change they enquire almost automatically: “What is there for him?” They suspect that the moral crusades of reformers, do-gooders, liberal politicians, and public servants, all their noble protestations notwithstanding are based ultimately on self interest. “What,” they enquire, “is their gimmick?””
The cynicism comes largely from the way things have evolved in the sixty five years of independence where the political parties have taken us for a royal ride. Given this the skepticism that prevails at the decision of Team Anna to form a political party isn’t surprising. Take the case of Justice Markandey Katju, who asked CNN-IBN “Which caste will this political party represent? Because unless you represent one caste, you won’t get votes…Whether you are honest or meritorious nobody bothers. People see your caste or religion. You may thump your chest and say you are very honest but you will get no votes.”
Former Supreme Court justice N. Santosh Hegde said “Personally, am not in favour of Annaji floating a political party and contesting elections, which is an expensive affair and requires huge resources in terms of funds and cadres.”
Some other experts and observers have expressed their pessimism at the chances of success of the political party being launched by Team Anna. Questions are being raised. Where will they get the money to fight elections from? How will they choose their candidates? What if Team Anna candidates win elections and start behaving like other politicians?
All valid questions. But I remain optimistic despite the fact that things look bleak at this moment for Team Anna’s political party.
I look at Team Anna’s political party as a disruptive innovation. Clayton Christensen, a professor of strategy at the Harvard Business School is the man who coined this phrase. He defines it as “These are innovations that transform an existing market or create a new one by introducing simplicity, convenience, accessibility and affordability. It is initially formed in a narrow foothold market that appears unattractive or inconsequential to industry incumbents.”
An excellent example of a home grown disruptive innovation is Nirma detergent. Karsanbhai Patel, who used to work as a chemist in the Geology & Mining Department of the Gujarat government, introduced Nirma detergent in 1969.
He first started selling it at Rs 3.50 per kg. At that point of time Hindustan Lever Ltd’s (now Hindustan Unilever) Surf retailed for Rs 15 per kg. The lowest-priced detergent used to sell at Rs 13.50 per kg. The price point at which Nirma sold made it accessible to consumers, who till then really couldn’t afford the luxury of washing their clothes using a detergent and had to use soap instead.
If Karsanbhai Patel had thought at the very beginning that Hindustan Lever would crush his small detergent, he would have never gotten around launching it. The same applies to Team Anna’s political party as well. They will never know what lies in store for them unless they get around launching the party and running it for the next few years.
Getting back to Nirma, the logical question to ask is who should have introduced a product like Nirma? The answer is Hindustan Lever, the company which through the launch of Surf detergent, pioneered the concept of bucket wash in India. But they did not. Even after the launch of Nirma, for a very long time they continued to ignore Nirma, primarily because the price point at which Nirma sold was too low for Hindustan Lever to even think about. And by the time the MBAs at Hindustan Lever woke up, Nirma had already established itself as a pan-India brand. But, to their credit they were able to launch the ‘Wheel’ brand, which competed with Nirma directly.
At times the biggest players in the market are immune to the opportunity that is waiting to be exploited. A great example is that of Kodak which invented the digital camera but did not commercialize it for a very long time thinking that the digital camera would eat into its photo film business. The company recently filed for bankruptcy.
Ted Turner’s CNN was the first 24-hour news channel. Who should have really seen the opportunity? The BBC. But they remained blind to the opportunity and handed over a big market to CNN on a platter.
Along similar lines, maybe there is an opportunity for a political party in India which fields honest candidates who work towards eradicating corruption and does not work along narrow caste or regional lines. Maybe the Indian voter now wants to go beyond voting along the lines of caste or region. Maybe he did not have an option until now. And now that he has an option he might just want to exercise it.
While there is a huge maybe but the thing is we will never know the answers unless Team Anna’s political party gets around to fighting a few elections.
The other thing that works to the advantage of disruptive innovators is the fact that the major players in the market ignore them initially and do not take them as a big enough force that deserves attention.
A great example is the Apple personal computer. As Clayton Christensen told me in an interview I carried out for the Daily News and Analysis (DNA) a few years back “Apple made a wise decision and first sold the personal computer as a toy for children. Children had been non-consumers of computers and did not care that the product was not as good as the existing mainframe and minicomputers. Over time Apple and the other PC companies improved the PC so it could handle more complicated tasks. And ultimately the PC has transformed the market by allowing many people to benefit from its simplicity, affordability, and convenience relative to the minicomputer.”
Before the personal computer was introduced, the biggest computer available was called the minicomputer. “But minicomputers cost well over $200,000, and required an engineering degree to operate. The leading minicomputer company was Digital Equipment Corporation (DEC), which during the 1970s and 1980s, was one of the most admired companies in the world economy,” write Clayton Christensen, Michael B Horn and Curtis W Johnson in Disrupting Class —How Disruptive Innovation Will Change the Way the World Learns.
But even then DEC did not realise the importance of the personal computer. “None of DEC’s customers could even use a personal computer for the first 10 years it was on the market because it wasn’t good enough for the problems they needed to solve. That meant that more carefully DEC listened to its best customers, the less signal they got that the personal computer mattered — because in fact it didn’t — to those customers,” the authors explain.
That DEC could generate a gross profit of $112,500 when selling a minicomputer and $300,000 while selling the much bigger ‘mainframe’ also didn’t help. In comparison, the $800 margin on the personal computer looked quite pale.
Another example is Sony. “In 1955, Sony introduced the first battery-powered, pocket transistor radio. In comparison with the big RCA tabletop radios, the Sony pocket radio was tiny and static laced. But Sony chose to sell to its transistor radio to non-consumers – teenagers who could not afford big tabletop radio. It allowed teenagers to listen to music out of earshot of their parents because it was portable. And although the reception and fidelity weren’t great, it was far better than their alternative, which was no radio at all,” write Christensen, Horn and Johnson. Sony went onto to come up with other great disruptive innovations like the Walkman and the CDMan. But did not see the rise of MP3 players.
The point is that incumbents are so clued in to their business that it is very difficult for them to see the rise of a new category.
So what is the learning here for Team Anna? The learning is that their political party may not take the nation by storm all at once. They might appeal only to a section of the voters initially, probably the urban middle class, like Apple PCs had appealed to children and Sony radios to teenagers. So the Team Anna political party is likely to start off with a limited appeal and if that is the case the bigger political parties will not give them much weight initially. Chances are if they stay true to their cause their popularity might gradually go up over the years, as has been the case with disruptive innovators in business. The fact that political parties might ignore them might turn out to be their biggest strength in the years to come.
Any disruption does not come as an immediate shift. As the authors write, “Disruption rarely arrives as an abrupt shift in reality; for a decade, the personal computer did not affect DEC’s growth or profits.” Similarly, the Team Anna political party isn’t going to take India by storm overnight. It will need time.
Business is littered with examples of companies that did not spot a new opportunity that they should have and allowed smaller entrepreneurial starts up to grow big. The only minicomputer company that successfully made the transition to being a personal computer company was IBM. “They set up a separate organisation in Florida, the mission of which was to create and sell a personal computer as successfully as possible. This organisation had to figure out its own sales channel, it had its own engineers, and it was unencumbered by the existing organization,” said Christensen.
But even IBM wasn’t convinced about the personal computer and that is why it handed over the rights of the operating system to Microsoft on a platter. Even disruptive innovators get disrupted. Microsoft did not see the rise of email and it’s still trying to correct that mistake through the launch of Outlook.com. It didn’t see the rise of search engines either. Nokia did not see the rise of smart phones. Google did not see the rise of social media. And Facebook will not see the rise of something else.
Team Anna is a disruptive innovation which can disrupt the model of the existing political parties in India. There are three things that can happen with this disruptive innovation. The Team Anna political party tries for a few years and doesn’t go anywhere. That doesn’t harm us in anyway. The Team Anna political party fights elections and is able to build a major presence in the country and stays true to its cause. That benefits all of us. The Team Anna political party fights elections and its candidates win. But these candidates and the party turn out to be as corrupt as the other political parties that are already there. While this will be disappointing but then one more corrupt political party is not going to make things more difficult for the citizens of this country in anyway. We are used to it by now.
Given these reasons the Team Anna political party deserves a chance and should not be viewed with the cynicism and skepticism which seems to be cropping up.
(The article originally appeared on www.firstpost.com on August 4,2012. http://www.firstpost.com/politics/what-team-anna-can-learn-from-nirma-sony-apple-and-ford-404843.html)
(Vivek Kaul is a writer and can be reached at [email protected])

“Marlboro is probably the best example of the power of a visual hammer”


Laura Ries is a globally respected marketing consultant. Ries has run Ries & Ries, a consulting firm with her partner and father, Al, since 1994. Together they consult with Fortune 500 companies on brand strategy. Her new book Visual Hammer is just out. “The critical missing piece in most marketing programs is a powerful visual that can drive a brand into the mind,” says Laura. This book outlines the steps a brand needs to take to develop a visual hammer.
In this interview she speaks to Vivek Kaul.
Excerpts:
You talk about marketing messages from companies ignoring half of the prospect’s brain. What do you mean by that?
Everyone has two brains, a left brain and a right brain, plus the corpus callosum connecting the two brains. The left brain is associated with verbal messages; the right brain with visual messages and is also the site of your emotions. If a marketing message is totally verbal, it ignores the right brain and especially the right brain involvement with “emotion.” What things do people remember the best? Those things that have an emotional connection. The day you got married. The day you had an automobile accident. The day you graduated from college. Etc. A totally verbal message is usually flat and unemotional. That greatly hinders the memorability of the message.
Could you explain this through an example?
The old-fashioned Coca-Cola bottle (which the company calls a “contour” bottle) communicates the fact that Coke is the original cola, the authentic cola, the real thing. Coca-Cola has also used the verbal (“the real thing”) but it just doesn’t have the same emotional impact of the bottle itself. Of course, the best strategy to use would be both. The Coke bottle (the visual hammer) and the verbal nail (“the real thing.”) They reinforce each other.
You say that most marketing messages are abstract ideas built around concepts like good consumer service, superior reliability, dependable performance etc. Why is that?
In general, a major corporation would first develop a verbal strategy for a brand. Then the company would “sell” the verbal idea to top management before they bring in an advertising agency to develop the idea. And since most corporate executives are left brainers, they readily accept verbal ideas. There is a lot of evidence that top management is dominated by left brainers. Right brainers are usually introverts and not very talkative. Left brainers usually are extroverts and very talkative. Now which type is likely to make it to the top of any organization? A quiet, introverted left brainer. Or a talkative, extroverted right brainer. When a CEO makes a speech, he or she usually stands behind a podium and reads from a Teleprompter or from a script. Totally word-oriented and a sure sign of a left brainer.
But exceptions are always there…
There are exceptions. Steve Jobs of Apple was a right brainer, but of course, he was once fired from Apple. After he returned to Apple, his “speeches” involved a screen 40-feet wide and enormous visuals, not exactly the type of speech a left brainer would make.
Could you share some of the most abstract marketing messages with us?
Here are some recent slogans from major global corporations. starting with the letters A and B.
ABB: “Power and productivity for a better world.”
Accenture: “High performance. Delivered.”
Acura: “Advance.”
Air France: “Making the sky the best place on earth.”
Audi: “Truth in engineering.”
BlackBerry: “Be bold.”
Bridgestone tires: “Your journey, our passion.”
British Airways: “To fly. To serve.”
None of these slogans can serve as verbal nails because they are not specific enough. They are typical abstract ideas that need to be brought down to earth before they can be visualized. I could go through the rest of the alphabet and give you dozens of similar slogans. All abstractions.
You write “Words are what they use the most and are most familiar with. Yet there is a lot of evidence that visuals play a far more important role in marketing than do words”. Why do you say that?
The reason Visual Hammer is such a helpful concept is that very few companies are actually using visual hammers. That’s why successful examples are few. The lime in the top of a Corona beer bottle. There were dozens of Mexican beers imported into America, but until the arrival of Corona none used a visual hammer. The lime help to communicate the fact that Corona is an authentic Mexican beer. Thanks to its visual hammer, Corona went on to become the best-selling imported beer in America and the best-selling Mexican beer on the global market. It also was ranked by Interbrand, a branding consultancy, as the 86th most valuable brand in the world (and the only Mexican brand on the list) worth $3.9 billion. The last time I was in Mumbai, a diner at the table next to us ordered a Corona beer. And sure enough, the waiter served the beer with a lime on top of the bottle.
Any other example?
The red soles of, a French designer who regularly tops The Luxury Institute’s index of “most prestigious women’s shoes.” In 1992, he applied red nail polish to the sole of a shoe because he felt the shoes lacked energy. “This was such a success,” reported Mr. Louboutin, “that it became a permanent fixture.” The red sole was the hammer, but what was the nail? It was the stiletto (heel heights of 120mm or more) which Louboutin helped bring back into fashion in the last two decades. To build a brand you need both: The red sole and the stiletto. Let me give you another example. BMW, for example, owns the word “driving,” an achievement that lifted the brand from nowhere into the world’s largest-selling luxury-car brand. But what put the “driving” idea into the minds of consumers? What’s was BMW’s visual hammer? It was a long-running, consistent series of television commercials showing happy owners driving their BMW vehicles over winding roads. “The ultimate driving machine” was the nail. But it was the visual hammer was put that idea into the mind.
You write in your new book “Unless there is an instant connection with a verbal idea, a visual becomes nothing but wasted ammunition in a marketing war.” Can you elaborate on that through an example?
There is a lot more to say about how visuals are received by the brain and how verbal messages are received. For example, you are driving down a street and a stoplight in front of you changes to “red.” Your foot hits the brake . . . without conscious thought on your part. That’s the right brain at work. If a stoplight used words (Stop, Caution, Go) instead of visuals, your left brain would have to first translate those type-set words into “aural” sounds that your mind could understand. That takes time and effort. You might be reading an article and you get to the end of a paragraph and suddenly think to yourself, What was that all about? In other words, it takes effort for your left brain to understand printed words. With a visual, however, your right brain can almost instantly understand a visual and react to it.
How is that linked to building a brand?
In building a brand, however, visuals are only effective if they “say something” about the brand. Advertising is filled with visuals, but very few visual hammers. It’s only things like the Coke bottle (authentic cola), the lime on top of a Corona (authentic Mexican beer), the TV commercials showing happy BMW owners (the ultimate driving machine), which hammer the nail in.
You have repeatedly talked about the visual hammer hammering the verbal nail. What do you mean by that?
The Marlboro story is probably the best example of the power of a visual hammer. We don’t like to feature it, however, since smoking is such a health hazard. Before Marlboro was launched, there were four exceptionally strong cigarette brands in America: Lucky Strike, Camel, Chesterfield, Winston. All of these brands were “unisex,” in the sense that they appealed to both men and women. In general, they pictured both men and women smoking.
Marlboro narrowed the focus to men only. (Another strategic concept that we strongly recommend for an also-ran brand.) In other words, Marlboro wanted to become a masculine cigarette. And the cowboy is perhaps the best visual to use to communicate the masculinity idea.) In America today, Marlboro outsells the next 13 cigarette brands combined. Marlboro is also the largest–selling global cigarette brand.
Why is it very difficult today to put a verbal idea into a consumer’s mind without a visual hammer?
The world is awash in words. This is especially true because of the Internet. Consumers are drowning in Emails, Tweets, Facebook pages and other web-oriented media. To cut through the clutter with a verbal message only is extremely difficult unless you have a revolutionary development. And if you have a revolutionary development, you probably don’t need much marketing help. In 2010, the five largest advertisers in America were AT&T, Verizon, Chevrolet, Ford and Toyota. Together these five brands spent $6.9 billion on advertising. What was the verbal idea, or slogan, used by each of these brands? I’ll guarantee that few consumers would remember. Here they are.
AT&T . . . “Rethink possible.”
Verizon . . “Rule the air.”
Chevrolet . . . “Chevrolet runs deep.”
Ford . . . . “Drive on.”
Toyota . . . “Moving forward.”
None of these slogans can be effectively visualized into a hammer. That’s why, in spite of the $6.9 billion, most consumers don’t remember them.
Could you share some marketing messages from companies which have good visual hammers and why do you think they are good?
In general, it is difficult to create a memorable visual hammer. One exception is for leader brands. Any simple visual used consistently with a powerful leader brand can become a visual hammer.
The “Golden Arches” of McDonald’s.
The “Swoosh” of Nike.
The “Tri-Star” of Mercedes-Benz.
What these visual hammers are communicating is “leadership,” and leadership is probably the most important verbal idea for a brand. If consumers perceive your brand to be the leader in a category, your brand can maintain that leadership for decades. Hertz in rent-a-cars. Kleenex in pocket tissue. Heinz in ketchup.
You say that unlike a verbal idea, a visual hammer can cross International borders with no translations necessary. Could you explain that through an example?
The Coke bottle, the Marlboro cowboy, KFC’s Colonel Sanders, Mercedes-Benz’s Tri-Star, Corona’s lime are all global visual hammers that say something about the brands. Coca-Cola is sold in 206 countries and 74 percent of the company’s revenues come from outside the United States. Coca-Cola can use the same contour bottle visual in every country, but trying to translate a single slogan into dozens of different languages would be very difficult. And sometimes a verbal slogan just cannot be translated into another language. For example, my dad (marketing guru Al Ries) wrote a book called “Bottom-Up Marketing,” a verbal idea that works well in English. But the Spanish translators of the book couldn’t find any Spanish words that could capture that idea. (They were all vulgar expressions not suitable for a book title.)
Coca-Cola’s exceptionally-strong visual hammer puts its major competitor in a difficult position. What should Pepsi-Cola do?
Narrow its focus. In general, you cannot find a visual hammer with a broad conceptual idea. You have to narrow that idea. For example, BMW could have used “performance” as its verbal strategy, but how would you visualize that verbal idea? Instead, they narrowed the focus to “driving,” an aspect of performance. That allowed them to run “driving” TV commercials to drive in the idea to prospects.
So what is Pepsi-Cola’s new verbal strategy, just announced last week. “Live for now.” How can you visualize a conceptual idea like that? You can’t. Years ago, Pepsi-Cola had a verbal idea that could be visualized. “The Pepsi Generation.” In other words, Pepsi was appealing to the youth market, the Pepsi generation, a narrow-the-focus concept. That idea could have been easily visualized. As a matter of fact, even today, most consumers remember The Pepsi Generation, but none of the dozens of other slogans the brand has used.
You write “Today, “The real thing” lives on in newspapers, magazines, books and television shows in spite of the fact that Coca-Cola used the slogan only once, for just two years, more than 40 years ago.” The real thing was a slogan that Coke used just once for two years, 40 years ago. But it lives on. So why does the company keep coming up with all these different slogans which no one can remember?
The dominate concept in the advertising field is “creativity.” Ideas are evaluated based on how creative they are. But what is creativity? An idea is usually considered “creative,” if it’s “new and different.” An old idea used before can never be considered “creative.” That’s why Coca-Cola refuses to use it. There’s also the influence of the advertising agencies that handle big accounts like Coca-Cola. Advertising agencies live or die based on their abilities to win awards in the annual creative contests. And you can’t win an advertising award if your advertising is not creative. Take Marlboro which has used cowboy visuals ever since its launch in 1953. I don’t believe Marlboro has ever won an advertising award because its advertising is not “creative” in the usual sense of the word.
(The interview was originally published on May 14,2012, in the Daily News and Analysis (DNA). http://www.dnaindia.com/money/interview_marlboro-is-probably-the-best-example-of-the-power-of-a-visual-hammer_1688368).
(Vivek Kaul is a writer and can be reached at [email protected])