Flops, Winners, and Outliers
When is a product a flop? What does a winner look like in consumer technology? How can outliers complicate our thought process? The Apple Watch is getting us to ask all of these questions while failing to provide the instantaneous answers that we crave. Not only has Apple's recent success led market observers to put value in short-term thinking and cynicism, but we have lost all context for how to properly measure product success and failure. It is clear that instead of thinking of flops, winners, and outliers as meaning the same thing across products and companies, context and discernment are needed to properly assess reality.
Flops
Apple has single-handedly morphed the definition of a flop. What once referred to products that were never able to make a lasting impression in consumers' minds (e.g. HP TouchPad, Blackberry Playbook) has now expanded to include product sales that are less than the best selling Apple products of all-time. Some of this aggressiveness to slap the flop label on new products so quickly comes from the proliferation of products not ready for prime time. It remains a mystery why the Amazon Fire Phone ever saw the light of day. Similarly, tech companies positioning their R&D efforts into the public sphere with products like Google Glass have gotten us trained to look for and expect instant flops: products that are never able to find a niche due to a plethora of reasons. Flops aren't just kept for hardware products as a number of Facebook apps, such as Poke and Camera, never were able to find an audience before being thrown aside.
Set in this somewhat confusing environment is Apple, a company that has relied on a strategy of placing very few hardware bets in order to focus attention and resources on a handful of products. In some ways, this rare and unique strategy, which other companies look down upon as being too risky for their own taste, would seem to necessitate a different kind of analysis when it comes to flops. Consensus opinion has landed on the stance that if Apple gave the green light to a new product, that must mean Apple expects it sell in numbers like an iPhone and iPad; anything short of this threshold should earn the flop label.
The primary problem with that thinking, and flops in general, are that they require context, both in terms of setting and timing. There is simply too much diversion in company resources and strategy to use the same flop brush across products, not to mention companies. Even though Apple releases very few products, not everything that comes out Apple HQ is positioned to reach tens of millions of users. Going further, certain models or SKUs may be geared toward a very specific niche that doesn't add up to more than 100,000 customers (think: Mac Pro). This introduces confusion and complexity into what is a flop.
Winners
There is still much disagreement over how to quantify winners in consumer technology. Is market share leader the title one should strive for? In the phone industry, the feature phone master, Symbian, was cast aside in a few short years. Blackberry's early smartphone power was decimated within roughly the same time span. While some may point to profit market share as the more suitable choice for determining success, Apple's monopoly on profits in markets that it plays in doesn't sit well with some people. How about year-over-year growth being used as a litmus test for success? There was a time when Microsoft being able to grow its smartphone market share from one to two percent was classified as a resounding success.
Similar to how flops require context for proper judgement, a product's success is also relative. For a smaller company like GoPro or Fitbit, if the latest camera or fitness wearable registered one million unit sales in a quarter, Wall Street may reward the company with accolades and rating upgrades. For Apple, the same sales rate for a more mature product would be a disappointment, and surely earn a flop badge. There is nothing inherently wrong with this differing rating system and one could argue that is exactly how it should work. The problem with that line of thinking is that success for a company like Apple begins to take on mythical proportions. Everything to come out of the design labs would inevitably be compared to iPhone, a product that Apple is on track to sell 250 million units per year.
How should a winner be defined? Ultimately, the easiest and most universal definition may involve measuring a product's trajectory and looking for signs of momentum.
Outliers
If it wasn't already difficult to figure out how to define a flop or winner, outliers may lead us to continue to struggle trying to find answers to these questions. The iPad is a great example of an outlier, a product that had impeccable market timing and an environment ripe for early sales success. The end result is 280 million units being sold in five years. Today, the product is facing questions as to its long-term trajectories with much of its functionality now being met with other products. When the iPad was launched, the running joke was that it was just a big iPod touch. In retrospect, it was that label that likely indicated why it sold so well, so quickly. It was a product that shared most of the allure of iPhone, only with no contract and a much larger and attractive screen. Once the iPhone screen got larger (and the Mac got thinner and lighter), the iPad was squeezed. The much longer life cycle for the product hasn't helped sales either as consumers hold on to their iPads for much longer than their iPhones.
In our attempt to quantify Apple Watch success, comparisons to the iPad may lead to faulty conclusions, both from a positive and negative angle. It may be too optimistic to assume that a new Apple product can see the same adoption rate as iPad. Just as the iPad is now facing a sales plateau, such a barrier may represent an incorrect conclusion as to how well a new product could do over time.
Another outlier question that undoubtedly needs to be asked involves the iPhone. Is Apple's juggernaut truly a one-of-a-kind product? With such a short upgrade cycle, aided by Apple's relationship with mobile carriers across the world, will it be extremely difficult for another product to meet similar annual sales rates?
What to do?
Taking into account the complications and difficulty in defining flops and winners, set within a sea that contains a few outliers, how should one go about measuring a product's performance?
1) Establish Context. What kind of product is being measured? A $99 fitness wearable that requires no other device to do its job or a $3,500 Mac Pro designed for movie makers? Does the product require a monthly contract or other recurring cost? Will a decaying battery over time require the product to be replaced in a few years, or is the product designed to last many years?
2) Establish Parameters. How should success be defined? Obviously there are major differences when discussing hardware and software initiatives. On one hand, quarterly unit sales may suffice while on the other hand, reaching scale in the form hundreds of millions of users may be the only way to reach success. Even within the same product category, different parameters may exist. For a phone, should we measure success in terms of sales share, profit share, or mind share?
3) Look for Momentum. Rather that merely thinking about a product's long-term potential, it is important to find momentum or signs of life. App developer involvement, early success within a specific demographic, or increased word of mouth may all signal that a product has life and potential to grow over time.
4) Measure Results. It is important to find ways of quantifying parameters and momentum. It is not a coincidence that many technology companies have adopted policies that revolve around providing little to no product sales disclosure. While some of this could be related to competitive reasons, the much more likely reason is to hinder Step #3 from above, making it difficult to know if a product is failing in the marketplace. While Amazon is known for its lack of disclosure, the company has not been shy when disclosing the number of Prime memberships. Along similar lines, Samsung was quick to reveal smartphone sales as the company was consolidating power within the Android OEM space, but when facing struggles at both the low-end and high-end of the smartphone market, the company has now adopted a policy of not disclosing smartphone sales. Even Apple is known to partake in the "tell the world good numbers" party while keeping mediocre results private.
These four steps indicate that measuring flops, winners, and outliers is not easy and likely involves much effort and time: attributes that are seemingly in decreasing supply. The iPhone and iPad may have spoiled us when it comes to thinking about what failure and success mean in consumer technology. In order to get a better grasp of what is happening close to the ground, more effort will be required to bypass the rhetoric and rely on logic and processes to guide the thought process. It won't be easy, but we need to start somewhere.
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