Why Every Business Has the Apple iPhone Problem
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The most important strategic question facing executives today is how open to be.
- "How open should I be with customers?"
- "Should I allow my employees to access their social network sites at work?"
- "Should I open my product so that people can augment it or should I hold control close?"
A recent Financial Times article criticized the new iPhone for being too closed, and I agree that their lead is being squandered – with very poor uptake in Europe – because of this. Imagine an iPhone that had easy, cheap, standard, memory upgrades. The easier it is to upgrade, change, and improve the product – the more likely it is that people will adopt it, make it better, and an entire ecosystem of products and services can grow up around it. But since its founding, Apple does a great job of launching the first product and then refusing to open up to achieve market dominance.
On June 19, the Obama campaign said that they will not take public financing. Why? Because the openness of their interaction with their supporters is so great, and their social networking so successful that they can afford to refuse the $84,000,000 in public support. The Clinton campaign knew that the world was changing but refused to create an interactive web presence that engaged their audience – and suffered the consequences.
The same thing is happening at your organization. Is your firm open with customers? Are you embracing the dialog that is happening about your products and services in the Groundswell that Josh Bernoff and Charlene Li have so eloquently written about? Inside your firm, do you allow or even encourage your employees to be part of the social network and blogosphere? Is Facebook allowed during work hours or does your firm limit access?
I was just consulting with the top management of a Fortune 100 company that dropped their policy this month of barring Facebook at work it because they were losing promising young employees who refused to go to work for a company that would not allow them access to their lifeline. As my friend John Perry Barlow noted, the internet reroutes around censorship. Likewise, traditional notions of control are obsolete, and executives need to get comfortable that all products, services must open up faster, and customers and employees expect openness at all levels.
We need a new management paradigm that embraces the fact that we are not in control, but in a dialog with all our constituencies including customers, employees, shareholders, and suppliers. Nokia’s Mosh site allows clients to create and upload new wallpapers and ring tones and Staples has a entire process for allowing customers to propose new innovative products for the company to sell – just to name two. But, letting go of control is never easy, and there are risks. If you don’t think carefully about the few things that you keep closed, you can lose your strategic advantage.
In this new setting managers must consider carefully where they can continue to extract value – even as things become more open. The most extreme example is Craig’s list, which only charges for job ads and gives all else away for free -- and yet they are very profitable.
How is your organization dealing with this new challenge?
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John Sviokla is vice chairman of Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI). He is also an Adjunct Professor at the Kellogg School of Management and prior to joining Diamond, Dr. Sviokla researched and taught at the Harvard Business School for twelve years in Marketing, MIS, and Decision Sciences. His extensive writings have appeared in books and journals including the Harvard Business Review, Sloan Management Review, Fast Company, and the Wall Street Journal. He is a frequent speaker at executive forums worldwide and earned his BA from Harvard College, and his MBA and DBA with a major in management information systems from Harvard University. He can be found at 
Comments
John,
Total crap! Jesus... and coming from Harvard!
Listen, a dollar is a f-ing control instrument. If you abandon the notion of control, no one eats! More clearly, if you abandon the notion of control, why the hell would I hire Diamond?!
Sincerely,
- Amanda Chapel
- Posted by Amanda Chapel
June 25, 2008 10:00 AM
@ Amanda-
I don't think anyone's recommending totally relinquishing control-- merely redefining our perception of it. Recognizing the social trend that is happening (whether we want it to or not) where consumers/users with ubiquitous access to knowledge and each other have more control than at any other time in recent history.
how about an analogy: when my kids were little, they did/ate/went what/where/when/how I told them to; as they got older and had more access to knowledge and life experiences, that dictator-style control was no longer possible. Instead, it became much more give and take, negotiation-style (with caveats as needed to maintain health and safety).
So, applied to business, our customers are growing up and dictator-style control of products/services is no longer a competitive advantage. Listening, conversation, negotiation are now competitive advantages because if we don't do those things our customers can quite easily "run away" to the competitor or even (shock! horror!) meet the need themselves. The caveats to this more democratic approach, of course, are where we maintain our strategic advantage.
my 2 cents.
- Posted by Seth Gray
June 25, 2008 12:38 PM
John,
I think that you are spot on. What you did not mention that further aggravated loyal MAC Users who ran out to purchase the product, was the price drop less than a year after the introduction, along with the 2 year contract. As a rule, Apple Users are active brand evangelists. They are equally active in social media ranting about being punished for being brand loyal. The rest is history, just read customer reviews on the product.
My daily battle at work is helping senior managers understand that command and control strategy is like the proverbial boy with his finger in the dike, before you know it, you lose your opportunity for a conversation because more holes materialize than you can plug, so eventually, you have to shift to full crisis communications mode. Just like Apple. Nonetheless, they agree with Amanda.
- Posted by Beth Ryan
June 25, 2008 1:42 PM
Your insight into the Fortune 100 allowing Facebook is quite interesting. I believe they are doing the right thing. The world is changing and your absolutely correct that it is a moment for all companies to embrace to their advantage.
Social networking for example will be something that will not go away. When the best and brightest students in 4-year colleges have a 90% usage rate of Facebook, the Fortune 100 will need to closely examine the ramifications of a ban if it seeks to entice those students. In countries like Korea, social networking has a 95%+ penetration rate amongst all 20-29 year olds, being controlling and standoffish would be incredibly backward.
Also, I disagree with Amanda completely, the notion of control (especially through $) is an illusion. As John has noted, the traditional notion of control is dead. Information mobility is transforming control, we need leaders who will not dictate the limitations of our businesses or market but visionaries who can guide firms with an agenda of openness.
Some secrets should always remain secret and using openness will not be easy but the upside is always immense. The raw potential of Android and the difficulty of bringing it to market is a great case study of the challenge.
- Posted by Johnny Won
June 27, 2008 12:43 PM