Billion Dollar Lessons by Paul B. Carroll

Author:Paul B. Carroll
Language: eng
Format: epub
Publisher: Penguin Publishing Group
Published: 2010-03-01T05:00:00+00:00

Bet on the Context, Not the Vision

“Skate to where the puck is going, not to where it is,” advised Wayne Gretzky, the Hall of Fame hockey player, imparting a piece of advice that is crucial in thinking about technology.

At the time Iridium was conceived in 1987, mobile phones were physically unwieldy and provided poor connections. They were usually carried in briefcases rather than pockets. They required special antennae when operated from cars. And users had to find a nearby window when inside buildings. Mobile phone service performed, in essence, much like the Iridium phones would a decade later. If offered in 1987 rather than 1997, Iridium would have provided comparable service while addressing cellular’s coverage and roaming limitations. (Even then, it is doubtful whether it would have been the leapfrog technology that Motorola touted. There were serious questions about whether Iridium’s capacity limitations would have allowed it to scale, and in the process drive down costs, as terrestrial cellular services did. But Iridium would have been much more competitive.)

The rest of the world, of course, did not stand still. Iridium’s engineers, actually, did a very good job of delivering the long-promised function, feature, and cost characteristics. In the decade that it took for Iridium to reach the market, however, cellular technology advanced at an exponential rate—the puck moved. The cellular industry had long since reset customer expectations for price and quality. Cellular had eaten up the most lucrative geographical regions by expanding coverage. It had adopted standards that made roaming from network to network much easier. By 1998, though Iridium’s vision was compelling, its service offering was not.

Federal Express also misread the relevant technology trends related to its Zapmail product, leading to huge losses.

Fred Smith built FedEx’s overnight-delivery business throughout the 1970s. Smith realized early, however, that the growth of digital communications would inevitably cut into his overnight-document business, which by 1984 had grown to account for a third of FedEx’s revenues and half of its shipments. Rather than wait for the onslaught, Smith invested $100 million over four years to launch Zapmail. “We could consider [digital] to be a threat, or we could attack,” one FedEx executive said at the time.18

With Zapmail, FedEx couriers would pick up paper documents and deliver them to a nearby FedEx processing center. FedEx would fax the documents to another processing center near the destination. From there, another courier would deliver the documents to the recipient, all within two hours. The cost was $35 for as many as five pages. If the customer brought the document to the FedEx office, FedEx charged $25 and promised delivery within an hour. High-volume customers, ones that sent more than ten to twenty documents a month, could lease facsimile machines for in-house usage.

Fax machines were not new; ITT Corporation had been offering an in-office fax service for five years. But FedEx thought that it had discovered what Kim and Mauborgne refer to in Blue Ocean Strategy as a “value innovation,” an innovative combination of value, differentiation, and cost.

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