Leaders' Blog

How to Waste Money on Customer Intimacy

This is Chris Halliwell, Executive Director of the Technology Marketing Center, (finally) back with the second of 3 posts discussing implications for strategic marketing at the intersection of market research and advanced technology. 

Let me start with an apology.  The cranky titles of these blog posts are meant to get your attention.  If you are ready this, it may have worked.  On the other hand, I fess up to years of frustration over management and marketing team disconnection with genuine insight about customer value, therefore:  weak value propositions, no value pricing, anemic competitive value advantage in the definition of new products and services.

In the first post I lamented high tech's lack of motivation to invest in market research as a core activity of the strategic marketing function.  We debunked technologists' views that market research related to innovation is of limited value. Furthermore, many tech sectors especially B2B, are now mature, relying on incremental innovation and slim points of differentiation to protect price. The incremental improvement world that most of us live in lends itself very well to both traditional and novel web-based market research tools -- if applied correctly. 

Real World Customer Insight

All too frequently important decisions on segment targets, products, price, and positioning made by marketing departments, and the cross-functional teams they influence, based on serious navel-gazing augmented by a review of emails from the sales department.  If we put that point on one end of a market research quality continuum, the next point in the line is some fairly informal effort to gather qualitative or quantitative customer input without respect for the minimum research skillset required to assure novel, measurable, and unbiased insight. 

It is common for untrained teams to embark on a mission to prove a particular point of view rather than to learn.  As part of the TMC launch about 4 years ago we did a survey of Caltech Industrial Relations Center executive education participants, asking these high tech managers how many of them had ever invested in voice of the customer research training.  Although the majority of respondents felt they did this type of research in their company, less than 10% had invested in any formal training.  And sure enough, the biggest arguments against customer research visits are that a) we already know that stuff, and b) we always get biased results.  To review the logic:  we don’t train ourselves on rigor (listening to different customer buying influencers, asking about different topics, in different ways) and then we stop doing structured customer research because it is not effective.  Hmmmm.

Leave it to the Professionals

Moving along the customer research quality continuum may involve throwing up our hands and tossing the whole issue over the wall to a newly formed internal market research department or to a third party consultant.  Outside firms doing custom market research can be quite helpful.  Internal teams can learn a lot about research tools, and a lot about customers, but these engagements need scrutiny, oversight, and quality assurance that your team can only provide if they have at least some bare bones understanding of market research.  For instance, is the right tool being used for the right job, E.g. surveys, visits, experiments, or conjoint?  If it’s a survey, has the market research firm overcome the dirty little sample size bias secret that drives confidence in numerical results?  And if qualitative research is the right tool, why in the world would we ask a non-technical stranger to engage our customers on our behalf if we were adequately trained to do so directly?

Internal market research departments have recently fallen out of favor because they can further distance product strategists from customer insight, as development teams delegate and devalue the task.  Research departments do offer the potential for more informed purchase of outside research services, but they are a very expensive way to solve the problem.

Where Should We Go From Here?

The point is that technically trained professionals should at minimum have a basic understanding of research fundamentals so that can assure quality and properly integrate research results into team discussions and decisions about product/market strategy.  Many of our best technologists and product strategists don’t have an MBA.  Those that have some business education are unlikely to have taken a “specialist” course in market research, and if they did, they very probably learned about consumer market research tools – how to explore a purchase event rather than a B2B purchase process.

In the interests of full disclosure, the Technology Marketing Center advocates Professor Ed McQuarrie’s seminal guidebook to high tech customer research, Customer Visits, and we offer a course for product/market strategy teams based on his new book, The Market Research Toolbox:  A Guide for Beginners.  You are urged to check out Ed’s books and dive in – with a little effort you can potentially make a huge contribution to your team’s understanding of value, and realize the prize of profitable growth.

Moving to a Service Business Model - Pricing Considerations

Geoff Anderson back for another installment for the Technology Marketing Center.  Today I will be talking about the internal struggle and strife in a transition from a point sale of a product to a pure or hybrid service offering.   As a Product Manager, pricing is critical.  For a new product offering, getting it right is the difference between success, and failure.  But with a product that has a long history, a deep set of competitors (and historical deal data to refer to) thus the error bars are much lower.

But what happens when you move from a point sale of a physical product, to a service, either a subscription, or pay as you go model? Things get tricker, and beyond identifying a price and business model, there is momentum within your organization that is wrapped up in the revenue that the outright sale generated. Getting the message across about the difference in value, and how that relates to the business can be an uphill slog.

Let's take a classic B2B application, traditionally esconced within the IT organization. In the past, this meant server software, licensed, with an annual maintenance charge. Here, you get people upgrading when hardware needs refreshing (4-5 years), and that is a good opportunity to sell them more product. But it also is a window of opportunity for a "forklift" replacement, and the competitors' all know this.

When you can move to a service, the business model changes. Instead of a big dollop of revenue every 4-5 years, and a drought between then (not really many reasons to keep in touch until next upgrade window), you forego the up front revenue (or charge a small-ish startup fee). You then collect a periodic payment based on usage/users connected/or number of transactions. This revenue stream is typically designed to replace the up front revenue in 9-15 months of service charges. Then, all the revenue is incremental. As a bonus, you get two intangibles. First, you are interacting with your customers frequently. You are billing them, and can provide opportunities to add services/capacity/users. Second, you make it much more difficult for a competitor to poach your customer. All good, right?

But, the transition can be fraught with landmines. Sales typically likes to close a deal, get their commission, then move on to the next deal. This is great in a classical business model, but breaks down in a service model. Furthermore, senior management also can take some convincing. Regardless of how often they claim to "get" the new business model, you can be expected to have multiple sessions explaining the revenue model, the crossover point, and this new concept, "Lifetime Customer Value". Still, it is worth all this effort. If you fail to adapt, someone else will swoop in, and you will see your revenue plummet.

Summary:

It is hard enough to make the transition to a service model from a traditional point sale model. Many groups will be lobbying to maintain the status quo, or at least to protect their dollars. But, armed with pricing analyses, business models, and strong definition of "Lifetime Customer Value", the marketeer can overcome these objections.

Innovations impact on affordable healthcare, Part 2.

Hello there, this is Dr. Eugenia Jones looking at biotechnology and medical device marketing for the Technology Marketing Center. This post is a continuation of my last post about lowering healthcare costs through diagnostic tests. Diagnostic tests comprise ~5% of hospital costs, yet results from these tests are used to determine treatment plans that account for 70% of hospital costs. 

Every 33 seconds an American dies from a cardiovascular disease (CVD). In 2010, $1 of every $6 spent on healthcare was for treatment for a CVD. Develop a test that detects CVD before a life-threatening cardiac event occurs, and you could significantly reduce treatment costs. Reducing what we spend on treating CVD would significantly reduce our nations healthcare costs overall.

New molecular tests for CVD are available but healthcare providers haven’t been quick to adopt them. Not because they are callous or too set in their ways, but because they question the credibility of new tests and because the cost for these tests may not be reimbursed. Without demonstrated clinical utility, reimbursement is unlikely, and without reimbursement, healthcare providers don’t order the tests.

That may be changing. Recently groups have been advocating for reimbursement “coverage with evidence development (CED).”  CED provides provisional reimbursement coverage while data are collected for a clinical utility determination and a definitive coverage decision. In addition, there is a movement to require the collection of clinical utility data and pharmacoeconomic analyses as part of regulatory approval submission. Thus, upon FDA approval, new tests also would be reimbursed by Medicare, and other insurers would follow suit. Today FDA approval and Medicare reimbursement coverage are not linked.

In the past, after expending vast resources in developing and acquiring regulatory (FDA) approval for a new diagnostics test, few companies have had the resources, both in time and money, to fund the collection and publication of data proving clinical utility. Marketing efforts focused on endorsements by “key opinion leaders” who touted the benefits to their colleagues. Market penetration occurred first at research institutes that could defray unreimbursed tests costs with research funding. Wider adoption occurring after reimbursement had been secured. Overcoming the adoption/reimbursement hurdle is a common marketing issue in molecular diagnostics. Rather than wait for change in regulations, or adoption of a CED program, some startups have taken a pro-active approach and developed low-cost processes for acquiring clinical utility data.

Singulex, a small south San Francisco Biotechnology company, recently developed and patented a technology that is 1000x more sensitive at detecting the biomarker, cardiac troponin I (cTn I). Elevated blood levels of cTn I are a diagnostic marker for heart damage, and are run for differential diagnosis of symptoms. That is, these tests are run to determine if your symptoms are from a heart attack, or another source. This improved detection sensitivity, will allow physicians to detect cTn I, in patients before a heart attack or other physical symptoms of congestive heart failure appear. In other words it could be used to screen patients to determine the likelihood of having a heart attack. In addition, this ultra-sensitive test, can be used after a cardiac event to monitor treatment. To support these claims, scientist used the new test to screened archived samples from patients with known outcomes. The cTn I level data were correlated with disease progression, treatment efficacy, and recurrence. Thus working cooperatively with clinicians, the test manufacturer was able to generate compelling evidence indicating clinical utility, utilizing archived samples, which is both less costly and more timely than instituting a de novo clinical study. I expect Medicare to review the evidence and provide reimbursement for the Singulex test.

The adoption of test like the, Singulex cTn I test, that allow physicians to screen, detect and treat CVD before the advent of congestive heart failure, will likely reduce healthcare costs significantly and will save lives.

 

 

Does it matter when tech companies are weak on market research know-how?

Over the coming months the Technology Marketing Center will provide a point of view, launch services, and encourage a discussion on the intersection of market research and technology innovation.   I’m Chris Halliwell, TMC’s Executive Director, and this is the first in a series of Leaders’ Blog posts that will cover these topics:  

1. Why many high tech companies don’t consistently  invest in market research,  and how high quality research could be saving untold waste in product and market programs;

2. Why high tech companies are generally weak in market research know-how and why, even when they do invest in market research, it can be phenomenally wrong minded;

3. Why modern research paradigms and the web make this the time to rethink market research  contributions to strategic market advantage, and what you can do to address the issue.

In-ies and Out-ies

Like belly buttons, B2B companies take one of two stances when searching for opportunities to add value through innovation.  Outside-in exploration of value sources (customer problems) and drivers is an orientation that requires technically trained managers to master an understanding of market research.  The more popular approach to value is the reverse, inside-out, relying heavily on analytics and derivation of value opportunities in the art of the possible.  On the one hand we know that analytics, for instance the Blue Ocean value curve, are useful and certainly can be followed by market research to validate hypotheses.  On the other hand, high tech managers also know that, over and over again, development resources are squandered on ideas lacking in competitive customer value which have been championed by technologist executives waving copies of the Innovator’s Dilemma.

Ed McQuarrie, admired in tech sectors for his seminal work on anthropological approaches to B2B customer research, explains why there is inherent distrust of market research among high tech managers in his new book, The Market Research Toolbox: A Concise Guide for Beginners.  Ed writes that in technology circles the suspicion is that market research is a “conservative activity with a built-in bias against anything really new.”  He elaborates by repeating well-worn anecdotes, from Apple to Intel, that illustrate the absurdity of asking potential customers to weigh in on the uses and value of something they have never imagined.  I believe Ed gets it exactly right on this point and his observations explain why inward looking analytics are so attractive to managers who need some compass to guide the search for opportunities to innovate.

The misfortune is that these anti-market research anecdotes  imagine a world of really awful execution because, as Ed says, it is “somewhat hilarious” that managers trained in market research basics would go out and ask people about products they cannot conceive of using.  Value research is about finding problems to solve and understanding priorities among segments of buyers.  Problems, unlike technologies, do not change quickly and are not overly complicated.  Since the dawn of time people have been searching for convenient, safe, efficient dinners at sunset while businesses have been procuring, designing, making, selling, and supporting products and services since the agricultural and industrial revolutions.  Innovations drive value when they improve the outcomes of these jobs in a meaningful way and/or reduce the cost of getting the job done relative to alternative solutions.  Of course there is nothing wrong with inward focused analytical models; they may be necessary, just not sufficient to pinpoint value.

McQuarrie cites the facts about the benefits of market research from a mountain of academic inquiry into profitable investment in product development, concluding that:  “on average successful new product development efforts include more market research efforts, conducted more effectively, and earlier in the development process.”   So, suspicions about market research are half right:  bad market research is dangerous, good market research is priceless, and if technically educated managers cannot discern the difference then new product sales, profit through pricing, and competitive positioning will suffer.  It’s probably better that teams who lack proper skills do NO market research, rather than poor research; they’ll still waste money on the tone-deaf strategy, but at least they’ll save money on the consultants and surveys.

A wonderful example of rigorous and creative outside-in market research done right...

I’ll close out this post by referring interested readers to the story of savvy marketing leadership championing the design of Magellan, a sophisticated process for outside customer input to ideation for new market/new technology innovation in advanced materials research; see the Stanford University case study on Corning’s Early Stage Markets’ market research process (CASE:  SM-167B from June 2008.)

I hope I've been outrageous enough that you will comment, and stay tuned in for the next posts in this series.  Thanks for reading this, Chris

Innovations impact on affordable healthcare

Hi, this is Dr. Eugenia Jones signing in to post on the Technology Marketing Center Leaders' Blog.

Affordable healthcare is a pressing concern for all, particularly as employers pass more benefit costs onto employees, and more people are under-insured or carrying high deductible plans. Both insurers and the insured are looking to healthcare providers for a quality service at lower prices. If you’re a healthcare provider what can you do to respond to the demands of your market for more affordable services?

An ounce of prevention may be worth a pound of cure, and cost a good deal less than a pound of cure. One of the most effective means of lowering healthcare costs is to increase utilization of preventive care services, such as regular check-up and regular screening. Insurers embrace the economics of early detection and treatment, and  provide a variety of offerings and incentives to encourage and reward the use of  preventive care. How do healthcare providers remain profitable while embracing the “preventative maintenance” insurer promote?

One method frequently employed is to use lower cost personnel to provide check-ups and screenings and to take as little time possible to provide such services so that more patients can be seen in a day. We could debate the relative merits of such approaches, yet there implementation has not done enough to drive down costs. So what else might help. Not surprisingly, staying innovative, I.e. using the best and most recent tests available, can significantly reduce immediate costs, and improve long term outcomes. 

Healthcare providers invest significant funds in capital equipment, and are often hesitant to adopt innovative screening technologies that significantly reduce the use of the equipment they own. Healthcare providers often get stuck in the mentality that they must recoup equipment and training cost if they are to remain solvent. . New technologies, approved by the FDA, can significantly out perform current detection procedures. The changes in performance can result from lower equipment cost, increases in ease of use for “non-specialty” healthcare personnel, lower per test price, greater test accuracy, and test detection sensitivity, and earlier detection.

So with all the benefits to healthcare providers, and the patients, why is there a barrier to adoption. The problem lies at the feet of those of us who market the tests. We need to do a better job of understanding and addresses the barriers to adoption. We need to not simply sale our wares, we need to work with healthcare providers to develop a plan that will allow them to transition from current procedures to our tests. Change is never easy, but is always necessary, and change is easier to embrace when a trusted advisor makes the recommendation and will be there to see you through.

 In my next post I review novel medical technologies that can lower our healthcare cost, yet are likely face difficulties in adoption by healthcare providers.

Five Things About Living in the Gray.

Hello all, Rob DeRobertis for the Technology Marketing Center... and here are Five things about living in the gray.

When I was younger, I saw things very much in Black and White. Two things happened in my life that changed that perspective. One was the birth of my son; the other was learning Japanese culture. For anyone who has become a parent, I think you can emphasize that bringing a child in the world really changes your worldly perspective. I remember prior to parenthood, how I lived a very structured world, then after the introduction of our son, well, our world turned upside down. I would like to say that after 21 years, the world righted itself, but that is not how it is.

Later, as I prepared to do business in Japan, I immersed myself in understanding the Japanese culture. There was on item I learnt that amazed me at the time. In Japan it considered a normal opinion that an answer can be yes and no to a question. Getting your head around this idea is difficult for a Westerner but once you do, it helps you live even better in the gray. I think living in the gray helps one balance decision making and also helps understand organizational dynamics.

So here are five things to consider when living in the gray.

1) Who is right when the engineering team wants to deliver a flawless product and marketing wants to get to market ASAP?

2) What do you do when the CEO wants to increase profits and the sales team wants to increase revenue and take market share?

3) What happens when the marketing team wants to launch a new innovation while the financial team is managing down spending?

4) What do you do when the customer wants a product with all the features in half the time anyone can deliver?

5) How do you bring on the best talent while managing fixed spending?

The answers are almost never one or the other, but a blending of both. These are all rational problems where negotiation and time are variables. Negotiation is a difficult, slowly achieved, meeting in the middle but the more the team is willing to accept “gray” as the answer the faster the team will move. Time is best deployed when one aspect can be deployed at a different time as the other. For example, deciding to strategically take market share then to maximize profits later. The answer isn’t “if” but “when”. Both answers may be right, it is simply a timing problem.

Thinking in the gray is a critical leadership quality. Being able to see both the “Yes” perspective and the “No” perspective is a level of maturity that enables driving organizations forward.

So when you look in the mirror, do you see Black and White or Shades of gray? I guess the answer is “That Depends…”.

Is the social media craze being overdone in B2b technology marketing?

Geoff Anderson back for another post for the Technology Marketing Center.  This time I will explore the phenomenon of social media.  You can’t be associated with marketing these days and not be inundated with social media, and how the world has changed.  However, I suspect, particularly in the B2B space that it is crowding out what works, replacing it with a vehicle that is hard to measure.  While I wouldn’t advocate ignoring social media (Twitter and Facebook), I would caution against spending too much time and money.

For the B2C space, and doubly true in technology, there is no doubt that the early adopters and your best advocates are highly active (and visible) in the social realm.  From companies like Chrysler monitoring Twitter for grumbles and complaints, to Best Buy using it to track customer “hot spots”, it would seem that direct customer interaction is moving inexorably to the online realm.  But I fear that this is going too far, too fast, as you run the risk of tailoring your message to the most vocal group online (a very small group) ignoring the “watchers”, the vast majority, and completely missing potential customers who are not using social media (older people, or those who don’t use it for product research).  One often heard comment is that social media can accelerate the conversation between a company and a prospect.  Really?  It is already hard enough to get many companies on the phone.  Unless you have a bank of people monitoring a social media feed, it is difficult to imagine it being a conversation accelerator.

But what about the Business to Business market?  Here, the best leverage of social media is to work through your influencers.  The concept of market influencers is not new.  I have long exploited industry opinion leaders to get a multiplier effect.  Often they are offered early access to technology and products (they are invariably early adopters), and extra access to internal technical resources to ensure a positive experience.  With the advent and meteoric rise of Social Media, the opportunity to amplify these messages abounds.  And this is a very good use of social media.

All this is a boon to marketing in the Social age.  However, there is a risk of going too far, too fast.  I have seen a marketing team that had extensive domain knowledge, market segment savvy, and deep marketing skills gutted to bring in a new generation of social media marketing staff.  Wizards of Twitter, blogging and maintaining a Facebook presence, their lack of detailed product knowledge (indeed, disdain for product knowledge) has lead to poor lead generation (both numbers and quality).   Now they are scrambling to rebuild the core product marketing skills from zero.  When you see companies looking for “Directors of Social Marketing”, you see the risk of going too far.

Without doubt, leaders in Marketing need to adapt to the changing world.  But they should not be discouraged, as their skills and expertise remain crucial to an organization.  The key is to ensure that a social and traditional marketing team work together to cover all the vehicles. 

In summary, Marketing in the Social age has changed.  But the more it changes, the more it remains the same.  YOu are still driving brand and product awareness.  You are still tasked with generating leads.  You are still tasked with defining products that delight customers.  Trade publications, and the past masters of influence (industry analysts, media, trade shows) are in decline, being replaced by the new world.  However, the shift runs the risk of damaging your domain knowledge, and if overdone, alienating large swaths of your potential customers. 

Planning for an innovative 2012

Dr. Eugenia Jones signing in for the first technology marketing center post of 2012. Since I have the honor of starting the New Year, I’ll share with you what I would like to accomplish this year; an innovation in the biotechnology and medical device industry. I will focus on innovation in its broader context in anticipation of the TMC interview with Jay Paap, on January 31, where he will address the question, “Does gated product development kill innovation?”

 

Very few, if any, innovations are created de novo. As a scientist my new discoveries were fashioned from insights gain from a wide range of sources, their validity tested in the lab. When hard work and a little luck coalesced, occasionally a patent was generated. In business I gain insights come from watching the success and failures of those who share my passion for molecular diagnostics, as well as from an indiscriminate and voracious appetite for reading business books, magazines, journals, and attending webinars, seminars, and courses. 

 

Some of the best solutions to problems I have seen come from co-opting clever solutions from others, bundling them, and applying the bundle fearlessly to the problem I want to solve. As the saying goes “imitation is the sincerest form of flattery.” A bundled, or multi-pronged, approach does not dilute your efforts; rather it is necessary to produce the best whole product offering for your customers. Bundling innovative finance, process, and delivery practices with product offerings is on of the surest way to grow your business. (To read more about the types of innovation search- Larry Keeley, 10 types of Innovation.)

 

In the past two years on of the most innovative approaches in my arena has come from Meridian Biosciences, who compete in the infectious disease diagnostics space with giants like Roche, Abbott, and BD just to name a few. Meridian a mid-sized company, introduced a great enabling solution that allows clinical laboratories to adopt their new technology without purchasing capital equipment. Meridian developed a molecular diagnostic assays using a patent protected technology that can be run on equipment that is inexpensive to build and easy to maintain. By giving the equipment to customers, Meridian lowered the adoption hurdle significantly, and by designing the equipment with a small footprint and for a small test number the customer can try it out without feeling that they will have to commit to a large change. Change can be painful, and enabling a customer to bring in the equipment and order a few tests to see if how it fits in their work-flow was brilliant.

 

Of course it would have fallen flat without tests that are FDA approved, easy to use, fast and reliable. If a customer want to run more tests, you give them more machines, and if a machine break downs you ship them a new one. Meridian is currently expanding the product line of assays that run on their platform, adding a Group B Streptococcus assay, approved by the FDA at the end of 2011, to their C. difficile assay. Leveraging their platform, which you can think of as the razor, and expanding the product line, the equivalent of the razor blades, Meridian is poised to do well in 2012 in part because they lowered the adoption barrier by forgoing revenue from equipment sales, and enabled customers to purchase tests, which are just as good, if not better than, their competitors’.

 

One of my goals for 2012 is to apply the knowledge gained in 2011 to help one of my customers launch a customer solution that bundles several types of innovation, along with an innovative product offering, into the biotechnology and medical device space. Add a comment below; I love to hear what you think about how to best innovate solutions, and the most innovative solutions of 2011 were in your industry.  

 

5 directions to look as you plan for 2012

5 directions to look as you plan for 2012.

Hello everyone, Rob DeRobertis for the Technology Marketing Center

When Chris Halliwell sent me a note reminding me that it was my time to post a new blog entry, I was (and still am) in the mist of annual planning for 2012. I have another week before I can actually start thinking about the holidays and year end reflections. So here are 5 directions to look as you plan for 2012.

1) Look Backward

First assess where you are. What worked this year? Where were the successes? Where did things go astray? What safe guards have you put in place to make sure you don't repeat mistakes and what steps have you taken to continue on with those successes?

2) Look Left

Take a deep look at the competition. What are they saying about themselves? How are they positioning themselves and their products? What were their attack vectors? Are the competitors defining the market or are you?

http://www.technologymarketingcenter.com/resourcearchive/how-to-attack-with-competitive-positioning.php

3) Look Right

Look at your team. How have they grown? What strengths do you build upon and what skills do you build into the team? Make sure every member from the best to the weakest are growing, learning and enjoying their roles. Have forward discussions and define plans to help your team achieve not only the company's goals but their own personal goals.

4) Look Forward

One year from now, where do you want to be? What do you want customers thinking when they consider your company, your products and your team? Put yourself in the position of the "future you" and look back, how did you get there? Define a plan to get there.

5) Look Up

Look up at your customers. Where are they going? What challenges are they facing? What elements of the whole product that you deliver make their jobs easier and differentiate them in the market? Where are you falling short?

6) Never Look Down, especially if you suffer from vertigo in high places.

Whole Product vs. Razor Blades

Geoff Anderson back for his regularly scheduled installment of technology marketing observations at TMC. 

Today we will be focusing on the concepts around the whole product, and how important a complete ecosystem is in modern product marketing.  No, I am not going to talk about the razor blade model per se, but merely invoke it as a reference point.  For the record, Gillette pioneered the razor blade model.  Give away the shaver, and keep control of the IP around the blades.  Continuously improve the blades, providing consumers with motivation to repeatedly purchase the pricy blades.  The same model is being used in the inkjet printer world (where HP sells ink for more than $1400 an ounce). But does this translate as well to consumer technology goods?

Moving to the topic of the day:  Amazon launched and recently started shipping a product called the Kindle Fire.  It is a 7” color, Android OS based tablet designed to spar with the heavyweight in the market, the Apple iPad. The technical details: $199 price tag (estimated to be $10 to $50 less than the cost to produce, hence sold as a “loss leader”), 7” touchscreen, customized Android OS, two ports (one USB and one headphone jack), 8G of flash storage, and WiFi network connectivity.  There are a lot of concessions to meet the price point over a $500 iPad2, twin cameras, microphone, option for a cellular connection, a minimum of 16GB storage, and of course, the Apple ecosystem of applications and media.

Amazon is betting that the Kindle Fire will drive an expansion of sales and use of their media offerings.  If you are an Amazon Prime customer, you get access to streaming video, similar to what Netflix offers.  If you buy your music from Amazon's MP3 store, you will be able to access that wirelessly on your Kindle.  You will be able to buy applications from the Amazon Android market (but curiously, not Google’s Android market).  You will be able to buy and read books just like you can on the current Kindle.  All this sounds great, but, there is a dark cloud on the horizon.  Amazon has architected the device to make it difficult if not impossible to venture outside their walled garden of media options.  There is no memory card expansion, so it is difficult to get non-Amazon purchased media on the device.  Additionally, one of the strengths of the Android operating system is the ability to use the Google App store, and that will be stifled (naturally, the the technically minded users will figure out how to break the handcuffs to the Amazon media markets) leaving users with a limited horizon of use.  In short, Amazon is subsidizing the sale of the devices to drive their core competency, media consumption, and the attendant revenues that generates.

Compare this with Apple.  The iPad is wildly popular, highly profitable, and by any measures a huge success.  Apple indeed runs the Itunes music store, and has sold many billions of songs, movies, TV shows, books, applications.  It is THE platform to develop for, as many success stories have painted in past writings.  However, if you read Apple’s annual report, the ITMS is profitable, but it is barely a blip on the radar screen with their revenues.  Apple has always been, and continues to be a hardware company that gets the whole product concept.  Build great products, with a set of features that entice consumers.  Wrap it in services and value added offerings.  Grow an independent ecosystem of interested entrepreneurs, and people will flock to your products.  Apple is the anti-razor blade model.  Make your money on the hardware, add value to lock users to your world, but make it as non-obtrusive as possible.

Time will tell whether Amazon can drive enough content revenue with the Fire to justify the offsetting subsidization that they are doing on the hardware.  There is no doubt that the Fire is going to be a hot seller for this holiday season, but will the initial surge last, and will Amazon be able to continuously improve the package and platform to match the pace of Apple?  Will they engender the same loyalty and passion of the Apple iPad users? Will they prove that the consumption of media can subsidize hardware? Or will the restrictions and limitations around media and apps hamper customer satisfaction?

As a product manager, the concept of the whole product, and the trappings that go with it are core to my belief system and, as is proven over and over again, ultimately the success of a product offering.  Do it well, and you will easily navigate the minefield of the competitive landscape.  I will be certainly be watching the introduction, and the initial trajectory of the Kindle Fire to see if Amazon can wrap the whole product into an ecosystem where their success is on how much adoption of the ancillary product offerings (the media).  Exciting times indeed.