Apple Versus Nokia: The Primacy Of Design

If you're a typical CEO, you probably find design to be somewhat of a mystery. In a thoughtful moment, you may have pondered whether there is a quantifiable return on the design of your products.

Here's one case where design has massively inverted the economics of a business.

Nokia and Apple reported Q2 earnings two weeks ago.

Apple offers two phone models. In the second quarter, the company sold 8.75 million iPhones for $5.3 billion in revenue. Forrester conservatively estimates that Apple's net profit in the phone business was $1.1 billion, for a net margin of approximately 21%.

Nokia offers over 86 different models of cell phones globally. The company sold 111 million phones in Q2 for revenue of $8.8 billion. We estimate its net profit in the phone business to be $286 million, for a net margin of 3%.

How can this be? You can point to Apple's stranglehold of AT&T, or its retail stores, or its formidable brand. But all of those advantages are muted without one essential element:  design. Of hardware, of experience, of software, of subtlety. 

Why iPad Wins

Back in April I voiced doubts about the iPad because I couldn't figure out where it was going to live. This led me to agree with Forrester's assessment that Apple would only sell three million iPads in calendar 2010. 

Obviously, we got the shipment forecast wrong -- it looks like Apple is on track to deliver between seven to ten million iPads this year. People may have come to the same conclusion I did -- the iPad is an important executive tool, differentiated from the PC and the smartphone.

The iPad is my meeting aid. Board sessions, client visits, or internal operational reviews invariably turn to digital -- the iPad gives me access to that world. Someone refers to a client -- I can quickly look at their Web site. There's a guy sitting next to me from Goldman Sachs -- I quietly look him up on Wikipedia and remember that we met 10 years ago (and that he's running Carly Fiorina's campaign in California).  A client brags about his company's iPhone app -- I can quickly scan it.

Phones and PCs don't perform well in this role. The phone's screen is too small -- and its presence signals that you aren't paying attention, you are rudely checking email. PCs don't work in meetings because the screen acts as a barrier between you and other participants. Using a PC in a meeting subtly lowers your status -- you devolve from thinker to clerk typist when you swing that screen open.

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The Social CEO Q&A

I presented on The Social CEO at Forrester's Marketing Forum. During Q&A I got a number of good questions from the audience that I didn't have time to answer -- here are my (late) responses.

Q: "Are customers really interested in what the CEO thinks? Aren't they more interested in the message from the company?"

A: They're interested in both, as long as the CEO has something enlightening and valuable to say. Hey, why buy products from a company run by a schmuck?

Question:  "Is there any data that shows the ROI of having a social CEO -- or do they not want to be measured?"

Answer:  The CEOs that I hang out with are measurement-crazed, and that's part of the problem. They may use the squishy measurement of social return as an excuse not to do it -- and that keeps them from gaining the "soft" returns -- fortifying the brand, attracting new customers, retaining customers, and winning new employees. 

Q: "How much do you need to monitor your CEO's blog? And how is that done? It can't be easy."

A: The Social CEO should have a strong support team -- that monitors and reviews Twitter and blog traffic at least every 24 hours.

Q: "What are the ways to build followers, especially for B2B companies?"

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The Social CEO Part Four: CEOs Should Be "Social Light"

CEOs are not social, for good reasons. But I believe that some should be -- as a means of talking and listening to customers, attracting new employees, and strengthening their company’s brand. So how should CEOs do it?

Start with the POST methodology:

1) People. Target the CEO's audience.

2) Objectives. Create a clear reason for the CEO to be social.

3) Strategy. Establish how many times the CEO will be social per month; who will support the CEO; who will teach and coach the CEO.

4) Technology. Decide what technology platform is appropriate for the CEO.

Here are my recommendations on POST for the CEO:

For people, have the CEO focus on talking to and listening to customers. He or she is already doing this (if not, you've got bigger problems) -- so no leap is required. Bill Marriott from Marriott International and Tony Hsieh from Zappos lead this charge.

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