Assumptions

I study engineering at university, and I've discovered that engineers are really good at making assumptions. If I was to write down the one key skill of an engineer, then I'd say that was it.

In traditional engineering, we might make assumptions about the type of fluid that we're dealing with, or the composition of a material. Businesses make assumptions too, but they're about their customers, and their competitors, and all sorts of other things. But unfortunately, they're not always as successful as engineers.

The reason is really simple - business assumptions might be valid when they're conceived, but over time they can become very, very wrong.

A good example is Polaroid Corporation. Their entire business was founded on two main assumptions:

1. That selling film was essential for them to be profitable.
   
2. That people valued an instant colour print.

In the 1980s this might have been true, but they carried these assumptions with them into the 1990s, a time when digital cameras exploded in popularity. The net result? Polaroid went bankrupt in 2001.

But where engineering and business diverge further is in the difficulty of changing an assumption. An engineer can pick up a pencil, and make a quick change. A business leader can't. This is because assumptions become embedded in the corporate culture, which makes them very difficult to change.

I think there's a few lessons to be learnt from this:

1. Remember what your assumptions are, and why you made them - are they still true today?
2. Don't let assumptions become too embedded in the corporate culture, otherwise it could compromise the organisation's ability to respond to change.
3. Consider your assumptions when making an investment decision. If the assumption is wrong, will the company we jeopardised?
   

It's not what you know, it's who you know

I've been fascinated by this phrase ever since I first heard it as a teenager.

My initial thought was that ok, that may be true, but if we took it to its logical conclusion and nobody knew anything, then the world would be a pretty crap place.

The phrase came up again in a Paul Arden book I was reading over Christmas, which used the anecdote of a young architect. This architect was at a pub handing out business cards, presenting himself in such a way that anyone who met him would've thought he was the best architect in the world. The flip side of the coin is an ultra talented architect who spends all his time at the office and never goes to the pub.

The 'right person' in the opinions of all the pub goers, is the guy stood there marketing himself. He might not be the best architect, but he's the one they'll go to with any questions about architecture - i.e. he acquires the status of guru.

This is the power, and the weakness, of knowing the 'right person'.

People should do their best to convince the world that they are the right person, because that's where people go when they want a job doing.

But people should think carefully before accepting someone as the 'right person'. Look at most successful entrepreneurs in the last few decades. If people had a business question, do you think they would've gone to Bill Gates? It's unlikely, even though he's one of the most successful entrepreneurs in the world, and by admission by Warren Buffet, one of the greatest business minds. Do you think Steve Jobs was the 'right person' to start a company with all those years ago? Popular opinion would probably have said no.

It's not who you know - it's who you really know. That's where the real power lies.

Digital - physical cross over

I'm a bit late to realise this, but there's a lot of unique opportunities at the moment as digital products cross over in to the physical realm, and vice versa.

People are getting increasingly attached to their data (especially as it exists on the web), and making this accessible through physical products is an obvious opportunity. Products which have managed the cross over exceptionally well are the iPhone, but less obvious examples are:

The BBC Olinda Radio...


Which has social networking features so you can see what your friends are listening to. Big deal you might say, but people like ritualistic things. Listening to the radio is a big part of my life, and being able to segment that away from my usual computer usage is important. And as computing and networking power becomes even more pervasive, there's room for intelligent usage of these kinds of social features (but no intelligent fridges please - I don't feel like sharing my eating habits quite yet....).

The flip side of the coin is bringing physical products into the digital realm. Developers sometimes exist in their own bubble, developing products which are useful to other computer fanatics, but which aren't so useful to the general public. There's a lot of opportunities in solving problems associated with everyday things. Transport for London has done a great job providing real time data about their bus service. Another great example (only a prototype at the moment) is this iPhone app which shows a map of air quality.


Some products straddle the boundaries. For instance, the Wattson electricity meter allows people to see what their electricity usage is at any time via a glowing ornament which sits on the table. A future feature is to allow the owner to upload the data to the web, to compare electricity usage with other users.


It's an exciting time to be designing new products and services. We have to remember that they're being designed for the internet generation, who have grown up in a world where the digital world and the physical world have merged. It makes sense that our products do the same.

Life is a journey

It's amazing how much failure has become a topic of discussion in start up and design communities. Some people preach "fail early and fail often". And other people wouldn't even admit to failure being in their vocabulary.

What's going on here?

The real issue is fear. You can't be scared to start stuff. If it all goes tits up, then it isn't the end of the world. But neither does that mean that the entrepreneur should resign themselves to failure - they have to fight tooth and nail to influence everything they possibly can to give themselves the greatest chance of success.

If something doesn't turn out, don't just focus on what went wrong - look at what went right, and do more of that next time.

When looking at failure, we should think of it as a long term investment. The stock market might go up, and it might go down, but long term it can show considerable gain. The same is true of start ups. Take Paypal as an example. They started out offering payments via mobile phone (short term failure), which evolved in to the Paypal we know today (long term success). Something is only a true failure when it comes to an abrupt end. If the Paypal founders had quit altogether after their initial struggles, and never started another company, then that would've been failure.

As it happens, most people have set backs at one time or another - it's called life. And the beauty of entrepreneurship is it produces all kinds of unexpected by-products. A company could be inadvertently sowing the seeds of future success, even when the company in its current incarnation is about to crash and burn. An example is Acorn computer, whose work on 32 bit RISC architecture led to a spin out company called ARM, which has met with tremendous success in the portable electronics market (approx. 98% of mobile phones use this processor architecture).

But long term success requires lots of determination. Determination and hard work is what drives entrepreneurship. You don't have to be super smart to be an entrepreneur, but you do have to be determined. The current preoccupation with failure has missed the point. It's not good to fail, but it is wrong not to try.

Avatar Review

Opinions seem split on Avatar, so I thought I'd say a few things about it :)

Avatar Review

Adsense can be Nonsense

I went to the Business Start-up event at Olympia on Thursday, and got talking to an SEO guy.

It seems like most people have an interest in SEO these days, and I'm no exception. Even though there's a huge number of books on the subject you can usually pick up a few anecdotes or tips from someone working in the field.

He was telling me about one of his clients, who had purchased a franchise selling health supplements. The client paid to have a website made, but was disappointed when it only ranked number 600 in Google search results. The situation stayed like this for a few weeks, with the site doing little or no business. What are most people trained to do in a situation like this? Pay for Google ads of course!

This is what the guy did. He set his budget at a few hundred pounds, expecting it to last a month. Initially there was very little traction, and the man decided enough was enough - he'd take a break for a few days. When he checked it again over a week later, he realised that he'd gotten 60 hits. But sadly, the conversion rate was zero....

And to make matters worse, all of those hits were generated via Google ads. In the space of a week he'd blown hundreds of pounds, with absolutely no return. Yikes!

I'm sure this happens all the time, but franchises must be more susceptible than other businesses. There could potentially be 100 other franchisees, all playing the same game. Of course he was never going to be high in the rankings!

In terms of the conversion rate problem, the guy should have taken an entirely different approach. He should have identified the relevant communities online, and tried to build a relationship that way. Once he had some traffic (and hopefully a non-zero conversion rate) then he could have made a more informed decision about the effectiveness of ads. If he had a 20% conversion rate, and average profit per transaction of £5, then to pay more than £1 per click would be insane.

Even if the strategy was to build up a customer base, it's still a flawed approach. The aim of a new business must be to protect its cash flow. Otherwise it'll go bust (especially in the health supplement market, where there isn't any VC money sloshing around).

I took away another lesson - engineer your website from day one to perform well in search rankings. This aligns with what I was saying in my post about customer focus. There's no point being a generic company with no USP. In order to optimise for SEO you need to have a very clear idea of who your customer is, and then tailor the content appropriately. It isn't rocket science - but it's something that is often overlooked.

SEO newbies should avoid making the same mistakes, and check out the following:

Google SEO guide
Google analytics
Plug-in SEO

What's ideal?

I get the feeling that a lot of companies in the technology space are scared to strike out and do something innovative. Instead they're watching each other, waiting until they can see where the industry is going, and then dutifully following.

Some companies have based their entire business practice on doing this. In fact it has a name - fast follower innovation. A classic example is Microsoft, where they move in to a market when they see a competitor making some money. But the problem with being a fast follower is that things are getting too fast to follow. This is why some companies are always playing catch up. This is clearly happening in the smart phone market where companies are desperately trying to regain lost ground from Android and the iPhone.

What these other companies need is:
1. More faith in their own judgment
2. A clear vision for the future

The first point depends on a strong corporate culture, and a decent CEO. The second point depends on defining what's ideal, which is something I'll touch on in this article.

When I talk about what's ideal, it doesn't have to be feasible given the current set of technologies available. It's all in the realm of tomorrow's world, which is what makes it so powerful.

My ideal car will never need refueling, will be fast, comfortable, stylish, have plenty of room for luggage, can accommodate my entire family, and will emit no C02. My ideal computer will be thin, sturdy, lightweight, powerful, silent, and efficient. This is from a consumer perspective.

From a company perspective (and in particularly manufacturing) there's already some well known things which make a product more ideal.

Firstly, to have as few components as possible. If one component can economically perform the task of multiple components then it should do. It reduces assembly time, reduces failure rates, reduces inventory, and countless other things. If companies are scared of innovating, then this is something they should try. During the last 100 years of manufacturing, reducing components has been a sure fire way to innovate. Here are some examples: the integrated chip, the macbook unibody, living hinge designs etc. and even object orientated programming in computing.

The next thing is to look at is demographic change. You can download fairly accurate data from the UK National Statistics website which gives you insight in to how the country will change in the next few years. People are getting older, and are retiring later. There'll also be comparably fewer people of working age who'll have to work harder. What products can help these people?

Another sure fire way to innovate is to try and boost service revenue. As our economies become more service orientated, it's a safe bet that services are a way to innovate. A company with innovative services will be more attractive to a consumer. The iPod wasn't necessarily the best hardware, but when incorporated with the iTunes service, it became a compelling proposition.

My final example concerns looking for under developed parts of the system. Every system will have parts which have been neglected. A tremendous amount of effort has gone into developing processors, but not so much effort has been spent on track pads, or mice, or power adapters. Apple got some fairly easy wins by innovating in these areas. These parts of the system don't require huge R and D budgets to make an impact, which means that other companies should have prioritized them as innovative opportunities.

There's countless other ways to innovate, which aren't terribly risky. I'd advise companies to try and exhaust all of these options before they resort to financial engineering, and outsourcing as a way to protect the bottom line. The future might seem uncertain, but some things can always be relied upon. Technology isn't like the weather - it doesn't take sudden U-turns. Have faith in the future, and innovate. It might be easier than you think.

----------------------------------------------------------------------------------------

Anybody interested in the above article is strongly encouraged to read 'Innovation and Entrepreneurship' by Peter Drucker.

Customer Focus

There's a commonly held misconception that a new product should be targeted at as large a group as possible. I used to think this - until my friend made me realise how dumb I was.

I'll take Malcolm Gladwell's example of coffee. I could create a new blend of coffee which I think everyone will like, but when I ask people's opinions the approval rating is only around 50-60%. How could this be?

The answer is pretty damned obvious - not everyone likes the same stuff. We are human beings, with individual tastes and biases. Even Coke isn't liked by everyone. But Coca-Cola are smart, and they realised this a long time ago. You don't like classic Coke? No problem, have Diet. You don't like Diet? Have Coke Zero. In this way Coca-Cola manages to capture more of the market than it could possibly hope for with a single product.

Since an entrepreneur only has limited resources they're unlikely to launch with more than one product, so they have to carefully pick their target consumers. There's no point in targeting everyone, because a product with a 50% approval rating isn't going to set the world alight. But if you can create a product which 10% of people think is fantastic, then you're on to a winner.

This is because the world is full of mediocre, generic crap. If somebody feels like a product has been designed especially for them then they're going to buy it. And they'll tell their buddies who might also buy it.

The challenge is selecting which group to target. It's usually a good idea to target lead users, who're respected for their exceptional taste, or high level of technical understanding. Here are some examples:

Apple Macs are strongly associated with the design community. Everyone expects a designer to have a Mac. This in itself is incredibly powerful, but when you consider that designers are the trend setters of the future, it has a halo effect to other users.

The same is also true of fashion, where designers produce garments for the top end of the market, and then produce diffusion ranges once the desirability of the product has been established.

Another example is Etsy who carved out a profitable niche by providing an alternative to eBay for producers of craft items. They now dominate that area of the market, and could conceivably expand in to new areas. If they'd gone head to head with eBay from day one then they would've been annihilated. Even if they'd reached widespread acceptability, they would've struggled to build a strong, long term business. It takes time to hire good people.

My final example is Facebook, who started out by targeting college kids. They're now the biggest social network in the world. Pick your target market carefully, build a strong team, and then go mainstream. Anything else could spell disaster.

Parametric analysis and the iPod

I came across a great video covering Steve Jobs' introduction of the first iPod. It's an interesting watch because it tackles the assumption that Apple are unique in their abilities to predict new products.

I'm not taking anything away from Apple - they're smart enough to use these tools, so they deserve full credit. In this instance the tool is parametric analysis, which is a way of spotting innovative opportunities.

All you have to do is compile a bunch of data about competing products and technologies, and display them on a chart. An example is hard drive capacity - if I plot storage capacity against price for 50 competing products then I'll quickly get an idea of where the norm lies. This provides the benchmark against which my product will be measured.

As in any chart there'll be seeming anomalies (for instance, a drive with 2 terabytes of storage, or which only costs £20). These indicate market niches, and can represent innovative opportunities. I can then make the assertion that hard drives are likely to get bigger, and start marketing a 3 terabyte drive. Conversely, I could market a drive for £10 if I thought that price was the leading factor. Sometimes a certain segment of the market won't be catered for (perhaps there's no 750 gigabyte drives) which also represents an opportunity.

Obviously price and capacity aren't the only criteria worth comparing - speed, size etc. are also very important, and can be plotted separately. Some of these charts will be useless, but one or two of them should provide real insight.

In the case of the iPod, by plotting the number of songs which can be stored on each kind of storage medium the market opportunity was obvious. Why? Because there was an order of magnitude difference between existing systems and the iPod.

When marketing a product the rule of 10 applies. Consumers don't get excited when something is just a few percent better, but when something is ten times better then that's revolutionary. For instance, Amazon didn't just stock the same number of books as a local book store - it stocked 10 or 100 times more. These opportunities don't come along every day. In fact, they're incredibly rare, and usually represent a step change in technology. But when they do occur they're huge opportunities because the resulting product is markedly better.

So Apple knew that having 1000 songs was significantly better than having 10 songs. What did they do next? They outsourced a lot of the hardware development, got the Apple Design team to make it as attractive as possible, and purchased what was to become iTunes. Apple could have developed all of the hardware and software in house, but they decided not too. Instead they captured the innovative opportunity as quickly as possible, and the rest is history.

I don't propose that entrepreneurs sit around drawing graphs all day, but if you are considering a new venture, then parametric analysis is a useful way of analyzing a market. You never know - it might just lead to the next iPod.

Smart little people and service design

Imagine you have to design a computer from scratch.

Now imagine that computers haven't existed up until that point, so nobody has any idea what a motherboard or a processor is. How would you go about designing such a thing?

People are designing new things all the time - products, services, jobs, laws....so they must experience similar difficulties. Fortunately there's a tool which can help them.

Smart Little People is used predominately by engineers to tackle technical problems, but it's equally applicable to other forms of design. One way to approach the computer design problem (at least at a conceptual level) is to let smart little people take the place of the components. A smart little person is basically a super intelligent human being which can do anything you tell it to. This allows you to escape the trappings of considering 'is this technically feasible?' If we consider the main functions of a computer to be accepting information from a user, sending it to a CPU, accessing memory, outputting information to the screen, and running system maintenance programs, then this can easily be tackled with the smart little people approach. We don't care whether the computer uses a keyboard, or a mouse, or any other form of input device - we just let a smart little person take care of it. Likewise, we don't care whether the CPU is multi-threaded, multi-core, RISC, or whatever - again, a smart little person can take care of it. We follow a similar approach for each component of the system.

The beauty of this approach is that it allows us to pose questions in a non-technical way. A marketing person could say 'well, why don't we have another smart little person who communicates with all the other computers?' In traditional technical language, the marketing person would be disadvantaged, and may feel nervous about offering suggestions. With smart little people this is no longer a problem.

Once all the smart little people have been identified, then the technical people can get to work making them feasible, content that management understands what they're working on.

Smart little people is even more powerful when we're designing services. Let's say we're designing amazon.com. Smart little people can be envisaged in the following roles: taking orders, processing payment, getting the item from stores, sending it out, restocking etc. I can decide which smart little people to replace with technology, and which to keep as real human beings. Over time I'm likely to use more and more technology - but this isn't the overall aim of a business. Businesses exist to make money, and in an increasingly competitive environment, those businesses need to be launched quickly.

A lot of start ups don't have the money to have the best technical systems, but they do have smart people who work hard. I think it's important to identify the elements which must use technology, and those which can be done by people. This is the first step to launching a service as quickly as possible. I've seen a lot of start ups develop massively complex technical systems, and go bust before even launching. Or even if they manage to launch, the technology might not be flexible enough to handle the variety of customer requests, which is so characteristic of service businesses.

My main message is for non-technical people to take heart. Focus on the customer, and don't get too worried about technology - you'll have plenty of time to develop the right systems. Keep smart and launch quickly.

Professional services and start ups

Professional services - the mere thought of it makes my blood run cold.

If you're running a start up then you'll probably have to deal with accountants, lawyers, designers, engineers, and who knows what else. It's not that they aren't nice people (I'm sure they're lovely) - it's the cost which is worrying.

If you're funding a company out of your own back pocket then you need to make sure you've got a broad set of skills, or at least some good friends who can help you out. Otherwise professional services will bleed you dry.

Things are bad enough when you have to pay for ancillary stuff, like the accounts and legal documents. But things are even worse when consultants are responsible for building or maintaining the core technology which a business relies on. In this situation the consultant owns you, not the other way round.

So how can you avoid this dire situation? I'm a firm believer in starting a company with one or two other people. Ideally those people will be as unlike you as possible. This might seem strange - but who wants to be surrounded by people who think in exactly the same way, and have exactly the same skills?

Since technology is such an important part of doing business nowadays, you need someone who at least understands the basics. Even if you have to outsource some development work, that person is still critical - otherwise some guy could tell you a 5 minute job will take 2 weeks, and cost thousands of pounds.

You also need someone with some marketing skills. Even if you have the best product in the world, it won't sell itself. But don't have too many marketing people. The reason for this is simple - you have to be able to create a product before you can market it.

I think that design skills are becoming increasingly important. And I mean design in the broadest possible sense - not just creating a pretty logo. A product which isn't well designed has little chance of standing out in the market place.

I've touched on team sizes before - but I'll reiterate my main point that big groups are bad (especially in start ups). If you've got two founders, each has a 50% share. This gives you some equity to offer to angel investors. But when you've got three founders, they'll be unwilling to give away much equity, otherwise their stake seems insignificant. When you reach four or five founders then you may as well not bother.

So if we work on the assumption that 2 or 3 people is optimum, then you need to make sure that you pick the co-founders carefully, so they have the skills which you're missing. Otherwise you'll be in the pocket of the consultants. But how easy is this? Most people socialize with people of a similar background to themselves. I'm an engineer, so I don't find it hard to meet other engineers - but meeting designers and business people can be hard.

To make matters worse, most events are targeted at a particular group of people. It's rare to come across an event for designers, engineers, and business people. Design London is a welcome exception.

I've given the consultants a bit of hard time - their contribution is still important. Hiring people is a costly and lengthy process, so consultants can provide some of the flexibility that a start up needs. But their services also need to be affordable. I'd like to see some more established firms offering their services to start ups at a discounted rate. And since start ups are the big companies of the future, it make sense from a business perspective too. It'd also be nice if start ups did more for each other.

The points I've highlighted are especially important as businesses get more and more sophisticated. A lot of different skills are required to get a product to market. I expect this trend to continue, up to the point where almost all start up costs are associated with skilled labour. That brings increased managerial pressure, as well as financial pressure. In some ways starting a company can seem straight forward - but in some ways it just keeps on getting more difficult.

High Value

What is high value manufacturing, and does it matter? Those were the questions on discussion at the RSA this evening, with Sir John Rose, CEO of Rolls Royce, offering his thoughts.

For those unfamiliar with Rolls Royce, it's helpful to consider the kinds of markets that they are in - primarily civil aviation, defense, power generation and marine. All of these markets involve high value manufacturing. This is primarily because of the complexity involved, not only in conceiving the technical solution, but also in making it a commercial reality.

If we take a civil jet engine as an example, the number of people involved is staggering. Aero-thermal engineers, material scientists, electrical engineers, software engineers, to name but a few. But not all of these will be working directly for Rolls Royce - instead they'll be working for an array of contractors. It is then the task of systems integrators to bring together all of these different subsystems.

This highlights the need for exceptionally skilled people, but it also illustrates the highly networked nature of these industries - and I believe this was the cornerstone of Sir John's speech.

Traditionally these networks would've primarily resided in the UK, but this is simply not the case any more. A company must look beyond its national boundaries for all sorts of resources. An example which came up time and time again was that of Singapore.

Singapore has no natural resources, yet it has made itself an attractive place for foreign investment. The level of education is high, wages are comparatively low, and the city is well governed. As a result of these factors Rolls Royce has positioned a significant proportion of its R&D and production capabilities there. If I was the UK Government then I'd be very concerned.

Education is something which the UK prides itself on, but is it doing enough? Young adults who leave school at 16 stand to benefit from skilled manufacturing jobs, where the wages and availability of training is often superior to comparable service jobs. But young people aren't adequately prepared for these roles.

Another concern is the UK's approach to cities. The world can be envisaged as a group of interconnected cities. Some of them are economically highly important - London, Tokyo, Paris, New York etc. They act as global hubs, which by their very nature attract large amounts of foreign investment. This has benefits for the wider geographical area too, as manufacturers and service providers make use of the access to markets that the city provides.

This view of the city isn't new. Liverpool was a highly important trading hub in the 1800s. This brought a tremendous amount of wealth into the city and surrounding area. But with the exception of London, most UK cities have become less internationally important over time.

In a recent NESTA paper, Charles Leadbeater looked at Manchester, and how it's renewal policies have effected long term competitiveness. You only need to visit Manchester to appreciate the scale of investment, but when you compare it to other similarly sized European cities (Milan is taken as an example), it still lags behind.

Closing the gap will require an innovative approach. Social problems, as well as economic problems, need to be tackled. Firstly, a greater proportion of the population needs to be economically active. The government needs to identify the industries which will help provide meaningful employment, and put the necessary infrastructure and policies in place to attract the best companies. This sort of thing is obvious - or at least it should be.

In the last decade, growth in public sector employment has far outstripped the private sector. There is only so far this can go. What's needed is a more consistent social and economic policy, where government helps to nurture private sector employment. Otherwise, where will the jobs of the future come from?

The government could start by accepting more input from industry. They need to learn that high value industry is what developed economies need in order to survive. Innovative, highly skilled, competitive - it has all the right buzz words, so why isn't the government taking any notice?

------------------------------------------------------------------------
The talk is now available online.

Scrappage scheme - here to stay?

I came across an ad this morning for a company which was offering to take old windows in exchange for a discount off new ones. This company has followed the legions of others offering similar promotions - you can now exchange your car, your computer, your washing machine, your mobile phone, and heaven knows what else.

The interesting thing is that besides from the car scrappage scheme, they are all privately financed. So what does this represent? Is it a temporary marketing ploy? Or does it reflect changing consumer values?

The answer is simple, at least in the short term: companies are trying to shift more products in order the beat off the recession. But does this make economic sense?

Unless the product contains rare metals, and/or significant amounts of aluminum, recycling will result in a net loss (for instance, recycled glass is worth next to nothing). In this instance, the margins on the new product must be good for a scrappage scheme to make any sense. Windows fall squarely in to this category.

Some items are borderline - a mobile phone for instance. It will contain rare metals, but the small quantities are hard to extract. Furthermore, most electronic devices have razor thin margins, so the benefits of a scrappage scheme are dubious.

In the case of cars, it would make no economic sense for a manufacturer to offer a scrappage scheme, unless incentivised by the Government.

So where does this leave us when the recession is over and consumer confidence is restored? Unless the markets for raw materials rebound strongly, it leaves us back at square one. Manufacturers have no responsibility for recycling the products which they produce, so increasing land fill tax has negligible effect. And it seems unlikely that consumers will insist on retailers taking their old products - I don't particularly want to haul my dusty old vacuum cleaner down to John Lewis on a Saturday afternoon.

However, I think that products will increasingly be designed with longevity in mind, and that business models will change. I think there'll be two main driving factors behind this - one is the move towards platform hardware, and the other is service contracts.

In order for a platform to be successful the installer base must be high. As long as an iPod is being used, the owner will be downloading content. If it flunks out then I'll throw it away, and may or may not get a replacement. The same is true of game consoles, set top boxes, and even showers. This last example might seem strange, but it's true. I used to work for a shower company, and they would sell cleaning products especially for their showers. The showers were designed to last for 50 years, during which they'd likely sell a huge amount of cleaning products.

To take a more high tech example, Rolls Royce currently has thousands of engines in operation, and they're all covered by a service contract. If those engines last 50 years instead of 40 years, then that's 10 more years of revenue.

Rolls-Royce do something even more interesting - they monitor each of their engines remotely, and can tell when a component is about to fail. When the airplane arrives at its destination, a Rolls Royce engineer is on hand with a replacement component.

What if all hardware was designed this way? What if my iPod battery was showing signs of failure, and it recommended that I order a replacement? This would mean the product had as little down time as possible - giving me greater customer satisfaction, and allowing me to download more content.

Apple recently applied for a patent covering operating systems which were funded by advertising. This might seem like a strange patent for Apple - but it could lead to a mutually beneficial relationship. What if Apple said to me 'Listen, we'll sell you a cheaper laptop, and guarantee 100% up time, if you have some ads on your computer?' I'm not saying that everyone would go for it, but it's certainly a viable option.

The problem of scrappage misses the point entirely - we need products to last longer, and in order to do that we'll need to innovate our business plans, as well as our products.

Employers: leverage you brand!

It's that time of year again, where companies go out on the graduate recruitment trail, in search of the best and the brightest. The costs involved are large, and the stakes are equally high - graduates are the life blood of most large companies. So what can companies do to make a better impression, and ultimately walk away with their employee rosters brimming with only the best?

The remuneration package will obviously play a role, but I don't think this is the most important factor. Like most things in the 21st Century, the answer is branding. How can a company best market themselves to potential candidates?

I've been involved in a few focus groups on this subject, and there's an increasing move towards greater engagement with students. This can be through college visits, sponsored events, or full page adverts in the student newspapers. But some companies are conspicuously absent - Google, Dyson, Sony, Disney, IDEO, Apple, Nike, Innocent....to name but a few, because these are strong consumer brands.

Most people aren't too smart when picking a company to work for - they like the companies which appeal to them as a consumer. Can you imagine the cachet that most people would feel working for one of these brands? This is a very important deciding factor - and one which companies mustn't ignore.

Some companies have done a better job than others. For instance, Google have done an admirable job of leveraging their consumer brand into their employer brand. It's been widely documented how Google allows their engineers to spend 20% of their time on personal projects. This immediately creates positive sentiment towards Google as an employer.

Another example is IDEO, the global design consultancy. Their methods of design thinking, and their promotion of creativity in the workplace have also been widely documented. This creates awareness amongst potential customers, and amongst potential employees.

The same is true with Dyson, where a section of their website is devoted to explaining the Dyson philosophy, and how products are created. Look at Apple's website and you'll see something similar. The content is highly manicured, and contains a lot of marketing gloss, but it still provides insight, and gives an impression of transparency. And if I leave with the impression that the same amount of attention is lavished on the employees as the products or services, then I'm much more likely to want to work for them in the future.

This is the reality of business in the knowledge economy - the brand values must be aligned with the needs of the customer, the employees, and the environment. Any company which tries to market a shallow brand to a graduate will have to offer a good salary - and even then they're unlikely to attract the best candidates. These issues are deeply felt amongst graduates, and the sooner businesses wake up to it, the better it'll be for everyone.

Long term companies

I've been reading Akio Morita's biography 'Made in Japan'. He co-founded Sony shortly after the end of the Second World War, and is well placed to explain some of the forces behind Japan's 'economic miracle'.

It's widely know that Japanese employees expect a job for life, and I thought this was something deeply embedded in their culture, having its origins hundreds of years ago. But in reality it was something forced upon Japan by the Allies at the end of the war. Laws were introduced which made it almost impossible to fire an employee. This was seen as a major handicap to business at the time, but it came to be one of Japan's greatest strengths.

The first challenge of providing a job for life is ensuring that the company lasts long enough to fulfill such a promise. The vast majority of companies don't last the working life of a human being. Arie de Geus, in his book 'Living Company', studied the life span of businesses, and found that those that did survive exhibited certain qualities:

1. Sensitivity to the environment - an ability to learn and adapt.

2. Cohesion and identity - an ability to build a community and a persona for itself.

3. Awareness of ecology - its ability to build constructive relationships with other entities, within and out-side itself.

4. Conservative financing - the ability to govern its own growth and evolution effectively.

These are fundamentally people centric issues, and this is why Japanese firms had been so successful - they'd made these beliefs permeate throughout the organisation by having a shared sense of purpose with their employees. Arguably this is only possible with the promise of long term employment, which suggests that long term social security and economic prosperity are inextricably linked.

There is more and more short term thinking going on in business which shouldn't be tolerated for the reasons outlined above. Otherwise companies will lead shorter and shorter lives, to the detriment of the business world, and society as a whole.