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steve carroll
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- 6 Feb 2011
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@Steve Carroll:
Isn't it the same situation today concerning DJ Controllers. Don't you want to create an all-integrated stand-alone Controller which works without the need of a laptop. So far there is nothing on the market that could be called well-thought and well-built.
Believe me we're a long way off from the junk which was around in the early days!
But to answer the question, for me, not to continue in this sector, the reasons are the same which finally stopped me. To innovate in an industry where there is little understanding by users, none whatsoever by retailers and a backyard full of wolves who will eat their own mothers dead meat (after they have slashed them) is not the sort of environment which I wish to play in for my whole life.
In short, innovating is much much harder than copying already successful concepts - by orders of magnitude. If you look at companies who are renowned for this behavior http://bit.ly/fUVJ5a you will see it is an accepted part of this business and rampant. The legal system sucks when it comes to IP protection, so it's a race to the bottom (who can produce it cheapest gets the prize) and sure while you do have a few years head start on the clones (if there is no industrial espionage http://bit.ly/ehCgNh ), in the end it takes 2-3 years of development time to innovate really well, whereas it only takes a few months to knock out a clone.
If I wanted to just make cash (and be a business man), I would 'do a behringer', 'or a reloop', 'or even a pioneer' et cetera, in the end no one really gives a shit and the market is quick to forget + criticize the original innovators and then sing the praises of the cheaper or expensive clones as 'better value', etc.
But 1-2 years head start in the market place - (time it takes others to catch up) is nothing when spending 2-3 years on innovating and R&D.
If the smart companies like Roland, Makie et al had made me a sensible offer at the time then maybe I may have continued with them. They had their chance and blew it, but TBH I don't blame them, because even they are not immune to the pond life which feeds from the top where the market innovates and they face their own issues being fat / slow organizations to react.
In truth such companies (or business men) generally have little respect for innovation or 'rocket science' as they might refer to it, or for that matter 'techies' as some like to refer to them, since all the 'rocket science' in the world, wont make up for their business know-how, which these guys claim to have in abundance by basically 'eating people' or cutting people out of the chain - R&D etc.
To them the key is in the cloning (and it works in practice) reinforcing their own believes, then optimizing for efficiency (outsourcing to China) and lastly offering better margins for retailers who are like estate agents, only interested in their commission, pushing for the easiest sale with the same / similar margin etc. like for like.. you choose. + They are proud of their models http://bit.ly/eS3Yi2
'Rocket science for such companies' means costs, time delays, errors, problems, why do it when you can open up the competitions latest products which have proven successful, and this is the important part, look at the technology with your clever engineers, who proudly proclaim they could do that (meaning copy it, or the best features) in a no time at all. Pat on the back for that genius. Change a few details (re package it) and avoid any litigation issues. For such reverse-engineers and business men it is hard to not look down their noses at all them 'rocket scientists' which the other company employed who spent years developing and incurred huge costs with 3 - 4 times the staff as the pond life.
I recently read Lord Sugars biography - "What you see is what you get", here is a little article/review I wrote on it for my clients, it's not that well written as only spent a short time on it, but you may find it interesting :
"Pile them high and sell them cheap"
This was the motto of Lord Sugar's Amstrad. I have just finished reading his autobiography "What you see is what you get", and very much enjoyed reading about the history of Amstrad. This was particularly interesting for me as I also built a small electronics company (in the 1990s) and having grown up in London, I knew many of the companies, exhibitions and the industry he talks about very well.
Amstrad did extremely well, by basically slashing prices of expensive consumer electronics equipment and making products for the "truck driver and his wife" as he admirably refers to his customers. He did this by essentially outsourcing manufacture to the far east and using every trick in the book to cut costs. One of the most successful concepts being, developing the 'all in one' Hi Fi unit and basically cutting out the mess and cost of multiple power supplies and interconnections of separate Hi Fi pieces.
This was innovation at a time when the Hi Fi market was very elitist with most of the waffle being spouted by those who purported to be the 'bees knees' who used to prattle on about the quality of their gold plated plugs etc. trying to pull the wool over the eyes of joe public who hadn't a clue about half of the mumbo jumbo they were going on about, while trying it on with extraordinary prices for kit which looked pretty, but half the time was just average sounding.
So it was a market ripe for the picking and getting in there with a product which every truck driver and his wife in the country could afford was a winning formula. However, Sugar generally lacked respect for 'techies' (as would refer to them) and as far as he was concerned all the 'rocket science' in the world wouldn't impress him, since what these 'techies' lacked was business knowhow, which he tells us he had in abundance.
Sugar is now popular for being the Ogar in the UK's version of The Apprentice where these wannabe 'business hopefuls' get fired until he is left with one who gets hired to work in what's left of his business 'empire' : http://amshold.com/
Sugar made a few hundred million during his business career, mostly from selling shares in Amstrad while it was on the way up, with another few million from court battles with Seagate the hard drive manufacture who conspired to knowingly sell him junk which would fail and ultimately kill his cheap IBM clones business, also by flipping a failing telecoms company he bought for 6 million USD, ploughed in another 10 million, then sold it for 150 Million USD (small 'tit bit' I attended the Hannover exhibition that same year where he set up that deal.) Then another few million from ultimately selling what was left of Amstrad to Murdocs BskyB.
While no one can argue with success I would argue with a few things. There are many companies especially in the electronics sector who are infamous for blatantly copying other manufacture's products and designs, knocking up cheap clones and selling them side by side the real thing only half the price. The retailers love this shit as it makes them good margins and they have no brand loyalty (unless it's their own brand or they stock it). And while there are laws against copyright & patent infringement, the antiquated legal system is guilty of providing inadequate legal protection in practicality.
I remember reading in Dysons manifesto and advice for all the wannabe inventors who badgered him for help, his top advice in the pamphlet he put out was to patent everything! Some good that did him. I went down to buy a 'hoover' (verb not the noun) the other day, and side by side this 499 Dyson hoover was a Philips with all the same features etc. and which retailed for 139 all in... So much for patent protection and his advice!
So arguably while it would seem ethically repugnant to have no R&D costs for launching new concepts and products, spend **** all on marketing, instead just rely on a strong dealer network and do no more than clone the markets leading features and products but repackage them at prices that the 'truck drivers' could afford, it is arguably a great business and one which companies with no shame get away mostly without any legal hassle, in fact it is pretty much industry standard practice, though not so great for reputation management: http://bit.ly/gfLgXO
In one interview Sugar did recently, the interviewer put it to him in a candid way, "is the secret to [your] success, 'putting one over' on the customers" : http://bit.ly/dLEeoK
All in all there are a few interesting business models which can be considered to be successful when we look at Sugars career:
1) copy existing concepts which are new and over priced and offer them at low costs.
2) buying / selling shares in a company when its on the way up.
3) buy companies which have gone bust, reviving them and flipping them when they are profitable or are about to launch a new and innovative product.
4) suing large companies who are guilty of fraud (high risk).
5) selling companies which have ongoing profits to the companies who are buying them products (if you only have a few suppliers)...
And a few things to put on the things to avoid list:
1) football
2) not respecting 'techies' as without these geniuses you won't know
what's wrong with your little clones when the hard drives fail! Nor
will you have any new ideas other than "pile them high and sell them
cheap" once all the other "me too's" have caught up!
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