Becoming Design-Infused: 2 Necessary Mutations to Organizational DNA
Simpler and easier was the idea behind LetterPerfect, WordPerfect Corporation’s newest release back in 1990. They wanted to take word processing beyond the complicated world that WordPerfect’s eight year-old flagship product inhabited. This was going to be a faster to learn, easier to use, and superior product to anything they’d produced before. The team had worked for years on it, tested it against the competitors, and knew they’d build something better. They were proud.
LetterPerfect was a failure from the day it released. Even though the price was only $100 (WordPerfect 5 was selling for $799), nobody was buying the product. It defied all logic: How could a cheaper product with a substantially better user experience from an established market leader fail?
LetterPerfect’s failure signaled the start of the end for WordPerfect Corporation. By the end of the decade, they would just be a shell of their former self, despite the substantial growth in the word processing market.
Everything Worked, Except the Business Model
LetterPerfect was a superior product to everything on the market, and that was what caused their failure. In 1982, the original WordPerfect product came out for the PC. In the eight years that followed, WordPerfect had built an empire, completely dominating the word processing market for that decade.
Their empire was built from a network of resellers. The company didn’t have much direct contact with it’s users. Instead, the resellers installed the software, trained the users, and provided front-line support. The price of the software (and the margin the resellers made from it) were just a small portion of the income the reseller network was bringing in. By the time LetterPerfect was released, the worldwide reseller network was bringing in what today would be billions of dollars.
The easier-to-use LetterPerfect didn’t give those resellers much to do. It required no training or support. Installation was straightforward. And the $100 price tag didn’t leave much for a margin. There was no incentive for the resellers to sell the product.
The original WordPerfect program was complicated and hard to use. That’s why the resellers made their money. A lot of money. Making it simpler and easier worked against their business model.
The company had no backup business model. They had no way to promote and sell a product that wasn’t through their reseller network.It was how WordPerfect was built that led to their demise. Their DNA couldn’t handle the easier product. Yet the market was moving in that direction. That eventually killed them.
A New Business Model Battle
Fast forward to 2015. We’re witnessing the same business model failure happening right in front of us.
This time, it’s not about word processing. Instead, it’s about taxis.
The rise of Uber’s car sharing service has put pressure on the independent taxi companies to up their game. Before Uber, taxi companies were sitting pretty and successful, having a practical monopoly on the cities they serviced. Their dispatching was clumsy, payments (especially with credit or debit cards) were inconvenient, the cabs were often messy, and the drivers were often difficult.
Uber has changed the experience. The cars are neat. The drivers are usually polite. The dispatching and the payments were built into a simple application making them easy.
Suddenly, the hard-to-use taxi services had an easy-to-use competitor. They weren’t prepared for it. Initially they spent all their efforts to retain their monopolies, but those efforts have, for the most part, failed. Uber was here to stay.
To compete with Uber the taxi companies had to improve their customer experience.
So far, this has been difficult. The DNA of a taxi company isn’t about great customer service. Moving to computer-based dispatching puts the most powerful people in their network out of work. Building a payment infrastructure is technically difficult for folks who have never embraced technology. Refurbishing their fleets and training their drivers to deliver a nicer experience is an expensive proposition.
The taxi companies are marching to the same fate as the WordPerfect Corporation. Like WordPerfect, their previous business model is fighting their ability to deliver a better customer experience. If they don’t do something soon, they’ll lose their competitive edge. The taxi companies’ DNA need to change.
It may already be too late.
Changing an Organization’s DNA is Hard
A year after Steve Jobs’ return to Apple Computer, they released the iMac G3 and Powerbook G3 products. At that time, Apple primarily moved its product through third-party retailers, mostly big box stores like Best Buy, Sears, Circuit City, Computer City, and CompUSA.
Like WordPerfect Corporation, Apple was dependent on those retailers to provide sales and support. Yet those retailers were also selling Apple’s competitors. Apple only had a small amount of the shelf space in the stores. Customers had to deal with untrained salespeople and poorly maintained displays. This did not foster loyalty among the customers, who often chose less expensive Windows PCs.
In 1998, Jobs and his newly hired SVP of Worldwide Operations, Tim Cook, announced they were not happy with these retailers. They started on the path to changing Apple’s DNA, by creating a new retail outlet: The Apple Store. Three years later, they opened the first store in the Tysons Corner Center mall. The rest is history.
It wasn’t an easy transition for Apple, but they pulled it off. Now they run the most valuable retail operations in the world. They control the entire customer experience, starting from the moment a customer walks into the store. They changed the DNA from being dependent on a retail network to having their own retail network.
Apple isn’t the only one who has made this journey. In recent years, the New York Times has shifted it’s DNA from being substantially dependent on advertisers to now getting the majority of revenue from their subscribers. This means readers pay for the Times’ high editorial quality directly, instead of having to fight advertisers who demand larger ad space.
Established decades-old companies in every sector, like GE, Fidelity Investments, and Marriott International, are all working hard to mutate their DNA to make their organizations design-infused. While each faces different challenges, there are some common patterns that are emerging in how they’re pulling it off.
DNA Mutation Pattern #1: Growing New Business Models
WordPerfect was born in an era when everyone expected to get training to use their computer. The customers expected it to be hard and foreign, so they were happy for the assistance.
WordPerfect had the smarts to hire a team of some of the world’s best UX professionals and play a leadership role in design. (For example, they hosted the very first Usability Professionals Conference in 1992).
However, they didn’t have a plan for how they’d sell a product that didn’t require reseller support. They understood the value of good UX and design, but not how it interacted with the business. (Honestly, it’s hard to fault them. None of us did back then.)
Both the New York Times and Apple Computer actively developed alternative business models. It was hard. Really hard.
Though Apple opened their first store in 2001, you can trace the origins of the idea back to 1999, when Steve Jobs recruited Millard Drexler, CEO of Gap, Inc., to Apple’s board. For two years, they worked on the store concept, prototyping ideas with a full-size mockup in a warehouse near the company’s headquarters in Cupertino.
Even after the Tysons Corner store opened, Apple had to maintain relationships with their existing retailer network. Tim Cook and Steve Jobs renegotiated contracts, enforcing higher standards for product presentation and sales training. They experimented with concepts, such as opening a store-within-a-store at chains like CompUSA. Today, there are still several thousand independently operated Apple resellers still supporting the regions where Apple hasn’t opened their own retail operation.
Apple’s business model change took years to materialize. They experimented. And they supported (and still do) multiple business models simultaneously, taking an approach of augmentation over replacement.
The same is true for the New York Times. It took them years to discover their current metered paywall implementation. They experimented and spectacularly failed with other revenue-generating approaches, including several previous attempts at building a paywall.
And all along, they needed to support (and still do) their old revenue channel of advertising support. Like Apple, they put in higher standards for the types of ads and how they’d be displayed. The old business model was upgraded while the new model was put into play.
Factors such as time, experimentation, and raising standards all played into this organizational DNA mutation. It’s not something an organization can do by accident. It must be intentional. It must be designed.
How do the independent taxi company operators mutate their organizations’ DNA to meet the competitive world they’re in today? They’ll need time to figure out a solution that works. They’ll need to experiment. They’ll need to support their existing customers, while they augment with a new system.
They’ll need to be intentional and this will be very hard. There are lots of unsolved problems. For example, how will they continue to serve customers who don’t have access to technology? How will they serve those who live in a cash economy? How will they support high-demand environments like an airport taxi line? Uber and it’s ilk currently ignore these needs that taxis currently serve.
There’s a lot of thoughtful design that needs to be done around these questions. Do the taxi operators have the skills to do it? Will hiring an agency to think about this solve the problem, or does it have to come from within their own business?
DNA Mutation Pattern #2: Finding Intrinsic Motivation
WordPerfect initiated the LetterPerfect project in response to the release of Microsoft’s Word for DOS product. Word was capturing customers who struggled with the WordPerfect program’s complexity. Word delivered a what-you-see-is-what-you-get approach that made it easy to do simple things fast.
LetterPerfect matched Word’s capability and took it further. When compared side-by-side, it was easier to learn and faster to operate. It was a great product, but it was still a reaction.
Apple’s stores weren’t a reaction to other manufacturers’ retail operations. In fact, the industry consensus was that retail stores were a mistake for computer makers. Both Gateway and Dell were closing their retail outlets when Apple opened their own.
Instead, Steve Jobs and Tim Cook created stores because they didn’t like the experience offered by Apple’s current resellers. They saw an underserved opportunity to do something better and they took it.
The New York Times also wasn’t reacting to a competitor eating their marketshare. Instead, they were reacting to a declining advertising market. They also saw an underserved opportunity and decided to explore it.
Is the business reacting to a threat or discovering an underserved opportunity? Are they motivated to change by extrinsic forces or by intrinsic motivations? It seems the organizations most likely to succeed in making this DNA mutation are intrinsically motivated.
Extrinsic motivation leads to more imitation. That’s what we saw with LetterPerfect, which emulated Word. And with the independent taxi operators who are trying to copy Uber’s approach.
Intrinsically motivated organizations are more innovative. Apple innovated an entire new store concept, with commission-less retail staff, a massive investment in in-store customer training, and a cashier-less purchasing system. The New York Times applied innovative thinking to smarter ad placements, integrated interactive designers into the editorial team, and clever ways to leak high-profile articles through the paywall to increase exposure from social media.
Finding intrinsic motivation and using that to drive the massive change within the organization seems to be the successful pattern. It’s a more difficult path, because it requires looking beyond today’s competitive pressures and researching opportunities that nobody else has spotted yet. However, the payoff is big when you pull it off.
Becoming Design-Infused to Gain Market Leadership
It’s one thing to say design is important and to put phrases like “delivering best-of-class customer experiences” into the corporate mission statement. It’s another thing to change a corporation to truly make design a competitive advantage.
Infusing design into the corporate culture means making hard changes. Cutting out traditional ways of doing business. Building the capability to seek out radical opportunities that will change decades-old thinking about how business gets done.
These are intentional activities. They are designed. Design isn’t just about manipulating pixels on the screen. It’s about rendering our intent.
For organizations to become truly design-infused, where everything that happens is to bring a great experience to their customers, their employees, and even their resellers and vendors, change must happen.
That change happens at the organization’s DNA level and it’s as difficult and painful as anything the business will ever tackle. If done successfully, the outcome will be a better organization that, in today’s market, is destined to become a leader.