I thrive on challenges…the opportunity to solve the unsolvable. My client wanted 5-year and 10-year projections of global demand for a key component (similar to a small electric motor) used in many kinds of consumer electronics and industrial devices. Although it was clear that 100s of millions of units were being shipped annually, my client was not satisfied with the methodologies that produced top-down market sizing and growth estimates. Content services and analyst houses sell reports and forecasts for each device type, but my client sought an original methodology with more credibility than a top-down prognostication. So, buying canned analyst reports and fee-based database content was not an option.
The approach I used was to develop a bottom-up market forecast for each of the twenty major device types aggregated into a data-driven forecast for the component’s total addressable market.
Besides working liking a demon, how did I do it? Over the years, I’ve developed a flexible analytical framework for bottom-up market studies. I have used it to size the total addressable market for software, consumer electronics, petrochemicals and medical devices, among others. So, adapting this for the component market was straightforward. I created 20 instances of the model — one for each device type market. Using only publicly available information and interviews with key industry players, I created a data mosaic reaching back ten years in each segment. This gave me a trend line that I extrapolated to generate forecasts, segment by segment. Additional analyses of industry trends and drivers were used to tweak the model. Any growth assumption that was not substantiated with data was documented and parameterized so the client could review the results and conduct their own what-ifs.
The result? The report was delivered on time and in budget. The client was thrilled with the findings. I saved them at least $200,000 in market research costs (20 devices, 5 data points for each device, average $3,000 – $5,000 per report written by market research houses like Forrester, Gartner, In-Stat, iSuppli, IDC, IMS Research, plus costs for synthesis and analysis of same).
After the smoke cleared, I decided to compare notes with some peers. They said this project couldn’t be done and told me to turn down the assignment. They said I was crazy to take it on. Crazy? I responded: Right Answers, Right Time.®
Northwestern University Athletics is using Facebook to poll fans on its basketball court redesign. Most of the responding fans are voting for an all-purple court (NU’s colors are purple and white.) It is hard to imagine traditionalists and players seeing this as an advantage. Viewed on ESPN it would probably seem to many as the visual equivalent of the vuvuzela. Is this a smart way to use social media to engage fans, to generate interest and obtain feedback? On Facebook, the crowd is self-selective. With just 200 “likes” on the Facebook page (out of hundreds of thousands of actual fans and paying spectators), outliers with the largest megaphones can drive buzz and appear to sway opinion, just like one spooked cow can start a stampede.
The advantages of a representative sample are well-known. So how can we crowd-sample? Here are a few firms that find the “right crowd.”
- Trada builds specialized crowds that help companies create and improve ad campaigns on search engines like Google, Yahoo, and Bing.
- The University of Oxford hired Chaordix to create a custom-made crowd to help them brainstorm ways to reduce maternal mortality in developing countries.
- To tap expertise outside the company, Medtronic relies on Innocentive, which offers “challenge driven innovation”. Companies anonymously describe technical challenges to which members of a “global community” submit bids. A company then decides whether to option the proffered solution.
- Big Idea Group’s Insight Clubs are private, online consumer communities of 50 to 300 members focused on uncovering innovation opportunities in products, services and marketing for its clients.
Experiments show the “social influence effect” causes us to adjust our thinking to the feedback of the crowd by mindlessly imitating each other. As we become increasingly networked, the vocal crowd seems to speak for the group, yet may mean less. It is important to know how the “crowd” fits in with the rest of a population or community, or you could end up with a purple people eater.
Tapping into the wisdom of the crowd is appealing: instead of hiring one person to perform a task, a business can pay little or nothing to divide it up among thousands, perhaps getting the work done faster to boot. However, getting useful input from a faceless mob in an unstructured online environment is tougher than it seems.
The ubiquitous Web 2.0 technology – after all, everyone is “socially networked” – doesn’t this lead to crowdsourcing?
- CrowdSpirit was an ambitious project to crowdsource the production of a consumer electronics product from R&D and design through production and marketing. Ultimately, the short-lived platform highlights how community-based value creation strategies are difficult to implement.
- The awarded $1 million Netflix prize to improve the accuracy of film recommendations gives the illusion that there is a crowd that solves problems better than individuals. In fact, a small team of researchers at AT&T Labs spent 36 months hammering out the winning algorithm.
- Unilever, the world’s second-largest advertiser, aims to become “less corporate” by providing more co-creation opportunities. A crowdsourcing drive to generate short commercial films for 13 Unilever brands was reported to have garnered 10,000 downloaded briefs by “up-and-coming filmmaking talent.” When Kraft launched a spin-off of their Australian Vegemite spread, they turned to consumers for a name. Over 48,000 entries later, the resulting “iSnack2.0” was so controversial that it was discontinued just four days after its launch.
I’d argue that crowdsourcing is a great tool to get inspired, but it is not innovation.
“It turns out that when you have tasks that require creativity and planning at a higher level, the overhead involved and the need for consistency across the whole task makes (crowdsourcing) very difficult.” (Judd Antin, Yahoo!)
“There is no crowd in crowdsourcing. There are only virtuosos, usually uniquely talented, highly trained people who have worked for decades in a field. Frequently, these innovators have been funded through failure after failure. From their fervent brains spring new ideas. The crowd has nothing to do with it. The crowd solves nothing, creates nothing.” (Dan Woods, CTIO Research)
The most important part of innovation are the managing, mobilizing and aligning the ideas to strategic intent.
Recently an industrial design firm asked me to develop a market research plan. The approach included qualitative interviews of IP phone industry key players and typical users. Later a focus group would comment on a product prototype. So, I wondered, could crowdsourcing be a viable alternative to the focus group?
CE companies use crowdsourcing in product development. Dell’s IdeaStorm allows consumers to vote on features they want to see in Dell products. Intel and Asus created WePC, which doubles as an Asus sales site and a serious attempt to gain community input into the PC design process. Having access to a loyal fan base can be an ongoing source of free ideas and labor. The practice builds interest in the brand and creates communities of users. It’s often cheap and fast research. And, given all of the online and social media tools available today, it’s easy to implement. Why create a product and offer it to consumers when you can optimize two-way communication on the Internet and learn, before putting in too much time and effort, exactly what it is they want in the first place?
Focus groups come at quite a cost – both time and money. They are only one means to an end. Like other data-collection methods, focus groups research is an excellent methodology for many kinds of consumer research but not for all. Times to use it are when:
- Relatively little is known about a given product (service, etc.)
- Dynamics of a group best elicit respondent opinion
- You want to personally observe reactions to the product
- You need to probe to understand
- Results are needed quickly
- Actual dialog can be used to develop surveys for subsequent quantitative research
Crowdsourcing is not smart when attracting and registering a crowd is not feasible nor when proprietary or competitive considerations do not allow public airing.
When major development or budgetary decisions hinge on the results, I’d argue that crowdsourcing could add a valuable data point to a comprehensive research plan. It could provide input for product developers, designers and creative directors but certainly cannot replace them. And it is not a replacement for focus groups.
Although the practice of crowdsourcing isn’t new – interviews, focus groups, customer feedback, and surveys have been around for decades – Jeff Howe first used the term in a 2006 Wired magazine article. Since then it has become a buzzword that describes an invitation to imagine, interact, and inspire. It is used by companies that want to be perceived as modern, tech-savvy and networked.
Crowdsourcing is defined as the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a “crowd”), through an open call. With the Internet and social networking popularity, such “calls to action” can attract thousands of individuals, especially when they are motivated by obsession, competition, money, or all three.
Some say crowdsourcing drives better innovation, deeper insight and competitive advantage. The notion of crowds creating solutions is appealing. After all, we want to believe that working together we can do anything.
In a short four part blog we will discuss how crowdsourcing can be a part of an overall plan to foster technological advancement, design products, research markets and sell to consumers.
Marketplace pressures are driving the consumer electronics industry (CE) to deliver more innovative products and services.*
- Average sales prices are trending downward. To offset this, many CE players are looking to find new revenue streams.
- Product innovation is not enough. Service add-ons are increasingly important.
- Customer expectations continue to rise, demanding more for less.
- Digital convergence blurs the lines among traditional industries, increasing market competition.
CE is undergoing a paradigm shift from producing devices to supporting differentiated customer experiences. Innovation for its own sake is not enough: Getting closer to customers is the key to success. As products become smarter and customer interactions evolve, the amount of customer data is growing exponentially. CE companies can leverage technology to analyze data, generate insights and cultivate deeper, more intimate customer relationships.
For example, the proliferation of eBook readers and digital content can be characterized as smart consumer electronics innovation. US sales of eBooks was nearly $70 million in January 2011 – a 115 per cent jump compared to the same period last year. Total adult hardcover sales during the period dropped 11.3 percent to $49.1 million, while adult mass market paperback sales slumped 30.9 percent to $39 million. Adult paperback sales were down 19.7 percent to $83.6 million, making it conceivable that eBook sales will quickly surpass that category as well.**
At the end of 2010, Amazon’s third generation Kindle 3 eBook reader was its bestselling product ever. Its development reflects a laser-like focus on its most important customer, the average book reader. By doing just one thing well, the Kindle is elevated away from tablet wars. Today the Kindle weighs less than or equal to a typical paperback, is attractively priced at $139, features no glare, and has a battery life of one month.
Amazon’s consumer electronics service delivery platform orchestrates and manages the reader experience. Responding to one of the biggest complaints about Kindle, Amazon now offers the page numbers on more than 10,000 books for those who upgrade their Kindle software. In a blog on its website, Amazon wrote, “We wanted to be able to display real page numbers that have value and are useful for those who need to cite a specific passage in a book for class, follow along with their friend in a book club, or simply point a friend to a favorite part of the book.”
Amazon generates significant economic value from each of four focus areas that maximize ROI. *
- Capture the data – generate new insights by collecting and standardizing information
- Optimize insights – apply intelligence to collected customer and business information using proactive analytics
- Revamp development – increase appeal through more intuitive and relevant products
- Enhance the experience – extend the value of the product through the introduction of new value-added services
CE companies are uniquely positioned to take advantage of technological advances. In a connected world, companies can work on getting it right even after the product is shipped. Customer intimacy can be realized by developing smarter product and service innovation capabilities. Ultimately, companies can change fundamental processes and lower the cost of doing business.
*”A Smart Approach to Maximizing ROI in Consumer Electronics Innovation”. IEEE-sponsored webinar, featuring presenters Bruce Anderson and Scott Burnett, IBM Global Electronics Industry. ** Association of American Publishers’ (AAP) monthly sales report.
Mercedes Benz SLS AMG - CAS 2011
The 2011 Chicago Auto Show (CAS) boasted a 10 percent year-over-year increase in attendance. Local dealerships hope a heightened interest in a recovering auto industry will translate into a continuation of increases in monthly sales. Of course, lots of people are trying to figure out what will drive the market.
- Alan Mulally, President and CEO of Ford Motor Co. keynoted at the 2011 Consumer Electronics Show (CES) in Las Vegas. Deciding to show the new Focus Electric there, Mulally said, “The automobile has moved into the mainstream of our integrated digital world. To be able to share the next step in the evolution of our technology at CES… Not only is it the electric car, but an electric future. All the applications that allow us to operate in our electric world will be using consumer electronics technology integrated with the car platform.”
- By next year, Generation Y (the millennial generation born between 1982 and 2001) will make up 40% of the car-buying market in the US. In-car technology is one of the most important attributes for them, according to a recent Deloitte & Touche report. Built-in Bluetooth and Internet connectivity in their vehicles, more human-machine interfaces (HMIs), and devices like haptic controllers… in essence, the group wants an iPhone on wheels.
- Steve Foley, owner and president of Steve Foley Auto Group, Northbrook, Illinois, told me that car buyers may be impressed by quarter-mile speeds and electric batteries, but, in the end, they are often swayed by four-way lumbar supports and 20-gigabyte navigation and entertainment systems. Gadgets are now very user-friendly and appeal to a wide audience. Andrew Poliak, director of automotive business development at QNX Software Systems Co. in Ottawa says, “Today it seems cars are just one big bundle of consumer electronics.”
As I walked through McCormick Place, I saw huge GM, Chevrolet, Ford, Jeep and Toyota displays. Indeed, a connected world. Exhibits were highly interactive… and social. Interactive displays – four test tracks; BMW’s Build Your Own Car station; Chevrolet’s Motion sensor Volt info station; Ford Mustang Dino Experience; Mercedes Benz 3-D video screens. Toyota’s Prius “Spell the plural” contest and record your own YouTube ad; CAS on Facebook & Twitter. The Jeep exhibit was fabulous - a test track experience that featured a 20-foot drop and man-made snow. Hmmm, no exotics this year. Perhaps Ferrari is watching its marketing dollars.
So, what is driving the market? What do consumers want and how much are they willing to spend for it? I decided to informally talk with some product specialists and salespeople from area dealerships. The concensus: car buyers want it all – looks, power, fuel efficiency, safety features, navigation & entertainment systems, connectivity AND a reasonable price.
What turned on the attendees? Eight thousand consumers voted for their favorite vehicles (selected categories):
- Best All-New Production Vehicle: 2012 Chevrolet Camaro ZL1 Fastest Camaro ever offered by Chevrolet, the car is packed with performance technologies, highlighted by Magnetic Ride Control, chassis and suspension systems. Scheduled for delivery to dealerships in early 2012.
- Best Concept Vehicle: Infiniti Essence A “Wow” looking car, Essence features environmentally sound design. The technology and performance statement is a 592-horsepower gasoline/electric hybrid coupe. A key difference over some other hybrid systems is that both the 3.7-liter V6 and the electric motor feed their power only to the rear wheels. Essence previews a new type of electric motor, called 3D Motor, which operates in both propulsion and power regeneration modes so the battery pack is kept charged up.
- Best Green Vehicle: Chevrolet Volt Aha, here we have a remote-charging and vehicle-control program that owners can download and run from Blackberry and Apple iPhone cell phones. Among other things, it allows the owner to pre-heat or pre-cool the vehicle before getting in. The navigation system is standard, as is a hard drive for storing digital-music files.
- Vehicle I’d most like to have in my driveway: Chevrolet Camaro Just 11 votes ahead of the Ford Mustang, the Camaro’s safety features include ABS, traction control, antiskid system, front-side airbags, and curtain-side airbags. Rear-obstacle detection is standard on two models. Other available features - a wireless cell-phone link, USB port, satellite radio, and remote engine start.
OEMs face a big challenge: designing for the FUTURE. Integrating the product development cycle for both the car and consumer electronics is an option. More market research? Absolutely!
With the introduction of 3D TVs in early 2010, TV manufacturers hyped the new technology with the hope of stimulating consumer demand. Yet annual sales of 3D-capable TV sets were lukewarm at best. It is estimated that 3.4 million 3D sets were sold worldwide in 2010, accounting for just 1.2% of the total worldwide flat-panel TV shipments.(1) Samsung Electronics estimates 1 million 3D sets were sold in the US in 2010, abysmally short of the 3 million to 4 million the company initially forecast. Fewer than 1% of US households have a 3D-capable HDTV, while 61% have at least one high def TV set.(2) Mass-market consumers were put off by the heavy glasses, big price tag, and lack of decent content.
But the major players still see depth. At this year’s Consumer Electronics Show, practically every HDTV manufacturer announced that 3D is a big deal for them in 2011. A slew of new product offerings is aimed at shutting down the skeptics and naysayers.
- New technology glasses. TV manufacturers like LG Electronics and Vizio, among others, introduced light polarized 3D glasses, called passive glasses. But they only work with LCD TVs that have an extra layer to the screen. Panasonic is sticking to active glasses, which are bulky, pricey ($150 a pop) glasses that produce a 3D image by using LCD lenses to rapidly dim one lens, then the other, so your eyes see slightly different images. Further out, Toshiba has developed an “autostereoscopic” consumer 3D TV, which requires no headgear. But the sets are considerably more expensive compared to glasses-based 3D TV and require that viewers sit fairly still – tough in a home environment.
- Aggressive pricing. For most of 2010, you couldn’t buy a 3D TV for less than $1300 for a 40-inch set. Between the set and the glasses, consumers were looking at spending $600 more for a 3D set than a comparable 2D-only set. In 2011, Panasonic, Vizio, Sony, LG, and Samsung all are releasing 3D TVs at many price points. Even a bargain-basement consumer will have no problem buying a new 3D TV.
- More content. TV manufacturers and broadcasters are ramping up their 3D content. The 3D network joint venture of Discovery Communications, Sony and IMAX announced “3net”, a 24-hour 3D channel set to debut in early 2011. HBO is launching its 3D video-on-demand service with Comcast and Verizon’s FiOS TV among its takers. Sony and two TV broadcasters are introducing Japan’s first 3D drama series.
The 3D TV market penetration rate is forecast to grow from 5% of total flat panel TVs in 2010 to 37% in 2014.(3) Buying a 3D HDTV set-up today is an expensive and potentially risky proposition. Gary Shapiro, president and CEO of the Consumer Electronics Association, said there was still much consumer confusion surrounding 3D TV. What will it take to sell the next wave on 3D?
(1,3) DisplaySearch; (2)Leichtman Research Group
Recent claims about 4G networks have been criticized as confusing and misleading. Faced with slowing subscriber growth, wireless operators are enticing consumers to upgrade to smarter phones and more expensive data services by hyping 4G as a faster, next-gen network service.
- The UN’s International Telecommunications Union (ITU), responsible for setting global standards for communications technology, announced October 21 that only two technologies – LTE-Advanced and WiMax 2 – truly qualify as 4G, defined as IP-based, using orthogonal frequency-division- multiplexing (OFDM) and clearing download speeds of 100 megabits per second. Maggie Reardon’s analysis shows the earlier-stage technologies of Verizon Wireless’ LTE network, and Sprint’s and Clearwire’s WiMax don’t come close to ITU specifications. Neither does T-Mobile’s HSPA+ network.
- That said, the upgrades all four major wireless carriers have implemented have made their networks faster.
This 4G marketing reminds me of other content-free buzzwords. Consumers increasingly seek out and are often willing to pay a premium for “All natural” and “organic” products. Yet, these terms are often not precisely defined. When it comes to “organic” and “natural”, it’s all about the label.
- The US Department of Agriculture (USDA) oversees the National Organic Program (NOP). NOP defines “organic” and provides certification that agricultural ingredients have been produced under conditions that would meet the definition. They also include labeling standards based on the percentage of organic ingredients in a product.
- The US Food and Drug Administration (FDA) regulates cosmetics under the authority of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA). The term “organic” is not defined in either of these laws or the regulations that FDA enforces under their authority. Cosmetic products labeled with organic claims must comply with both USDA regulations for the organic claim and FDA regulations for labeling and safety requirements for cosmetics.
- “Green” is not a label or a certification. Some call it a “state of mind”. For example:
- Drastic lifestyle change to become completely independent from fossil fuels and other pollutants that harm the environment.
- Returning to natural, healthy methods of living… breathing fresh air, eating healthy foods, conserving forests and wild life.
- A term that is widely used to describe a building and site that is designed with minimal impact on the environment.
- A product created with sustainability in mind…it meets the needs of the present without undermining future generations to meet their needs.
Is consumer confusion a legitimate concern? Is there backlash when the public feels duped? Or does a sale of the “latest and greatest” cellphone, produce, or skin care product win in the end? Sounds to me like another great opportunity for market research.
As promised, the trick to sizing the Deepwater Horizon oil spill with previous catastrophes is working with different units.
Self-interest plays a role in how previous spills and the BP gusher are reported. Amounts in gallons look MUCH BIGGER than amounts in barrels…and weight in tonnes look MUCH SMALLER than weight in pounds. What about those liquid measures and weights? How to compare the two? Many don’t bother to do the math.
How to compare: “In June 1979 the exploratory oil well Ixtoc 1 suffered a blowout and wasn’t capped until it had released 461,000 tonnes of oil in total” with “current projections [as of June 15] estimate Deepwater Horizon’s discharge at 35,000 to 60,000 barrels [of oil] per day.”
- Convert weights and liquid measures into a common unit. (average of Mexican, California and Texan crude weight = 315 pounds/barrel; 6.98 barrels/tonne)
- Review high and low estimates of Deepwater Horizon spill/day from multiple sources – BP, US Dept of Interior, National Incident Command, Woods Hole (Low: BP 20,000 barrels/day to High: National Incident command 60,000 barrels/day). Remove outliers.
- Ixtoc 1 released 3,217,783 barrels of oil in 1979.
- Final Deepwate Horizon tallies are not yet in.
A couple of other things of interest along those lines. Scott Brown, thank you for the suggestion (scott@ socialinformationgroup.com).
