Wednesday, September 5, 2007

Palm dumps its hyped-up Foleo

I'm sure everyone will be blogging today about what Palm did wrong, that they saw it coming, etc. etc. etc.

What I found interesting about this news is that it highlighted how much it costs to build a flop. Palm is taking a $10M hit. Obviously, they believe that's only a fraction of the cost of actually releasing the product, which is why they are canning, or at least delaying the launch. The information they have, their gut, or both, is telling them the product won't be a success as-is.

We've been talking a lot about this lately at Macadamian, and our CEO Fred has written about it in his blog (so as usual, I'm taking his idea, rewording it, and passing it off as my own; what is it they say about imitation and flattery?).

Actually, it's more than talk- we're gearing our business model to help companies improve their batting average at product innovation. That's why we acquired Maskery, and why we're working hard at integrating the two teams and building an end-to-end method for creating software products. Macadamian has always been good at building products - helping people get good quality products to market faster and more reliably. What the Maskery team is bringing to the table is experience in helping a client make that product more successful commercially. How? In a nutshell, they know how to talk to users, and what questions to ask. And not "would you buy this product" questions; their strength is in things like user research and rapid prototyping - finding out early what aspects of the design will be an impedement to adoption and what will stop people from trading their hard earned cash for the product, before you spend $10M on development.

Think about it. In the past few years R&D teams have been outsourcing what they can to places like India. Most of the data says that, over time, you will acheive a 20% cost savings. Significant? Yes. Do you need to do it to be competitive? Absolutely. Macadamian has labs all over the world, and we'll continue to keep opening new ones in new locations as we scale. But lets suppose that, as an R&D manager, you are seeing a 20% cost savings through your outsourcing. How much more effort will it be to save 21%? It's more likely that next year, you will save only 19%, because of attrition and rising labor costs overseas. After a while, trying to squeeze out another 1% is diminishing returns.

At Macadamian we decided to change the game. What if you could cut another 20% to 30% of your product R&D budget? Think about it - if you are really really good, a few of your products exceed market expectations, most meet them, and some are total flops. What if you could cut your loss on your Edsels sooner - at the idea phase, rather than just before release when you've spent 10M greenbacks? Or what if you could improve your success rate, so that a greater percentage of your products met or exceeded their market expectations?

My favorite example is our collaboration with Imasight, who engaged Macadamian to build the software and design the interface of their medical imaging product. By visiting target end-users, and by going through our user-centered design process, we uncovered things like the fact the early prototype was difficult to use in a lab environment, because the buttons were to small and tightly spaced to be used with medical gloves. We went through a few iterations and redesigns early on, and now the product is out to market, and getting rave reviews from early customers. What if we had skipped that step, dove headlong into engineering, and released a design like the early prototype? Would anyone have bought it? Perhaps, but I can guarantee they wouldn't be bragging to their colleagues about it.

So did Palm do something wrong? Beats me. I wasn't in their boardroom, nor do I know anyone on the design team. I can tell you that you can avoid the same fate.

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