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Lessons Learned

8/04/2008 02:00:00 AM Eastern

TWICE: What lessons has the CE industry learned over the years, and what lessons hasn't it learned?

The one thing that clearly has not changed in half a century is a combination of opportunity that is rare, and in some respects unique, to the consumer electronics industry, a combination of opportunity and the reward that comes to genuine innovation. The opportunity arises out of the fact that much of the industry is devoted to the reproduction of either the visual or the audible signal, in voice or picture, and certainly with respect to music. There has been no exception through history — every culture has been distinguished by its love of music. The music has varied from century to century, from culture and country to culture and country, but music has been unfailing. Music is the equivalent of cultural oxygen. So the opportunity for visual and audio reproduction in an ever-improving fashion is the essence of the industry, and that is a wonderful essence. People in the perfume industry wish they could have it the same way.

The reward for innovation has been demonstrated over and over again going back to my earliest days when we, among other pioneers, determined that the three-tube AC/DC radio was inadequate to the opportunity. And clearly, people were utterly astonished when they listened to the music with which they were familiar — not Strauss and Zarathustra but Frankie singing. When they listened to that, as they typically did on their little radios or on their large cabinet phonographs — which were really nothing more than disguised three-tube AC/DC devices — then when they listened to it on our elaborate equipment, they were utterly astonished. "Where is he [Sinatra]?" was the not-infrequent question as people would walk into these little rooms of ours [at early electronics shows] and listen to their first Harman Kardon experience.

That's little different from the response to the iPod. The opportunity is always there. The responsiveness to innovation, which is responsive itself to the way people live their lives, is always there, and there is no doubt in my mind that it will continue to be always there.

Now I made a comment just now that I think is central to the industry, certainly central to my thinking. What you need in marketing is anthropologists, people who interpret the way consumers live, not people who decide how they ought to live, but people who understand the changing habits and lifestyles of consumers and respond with products and services to that changing lifestyle and that changing need. Those are the companies that are invariably successful. The companies that determine unilaterally, the companies that act out of a kind of engineering triumphalism — that we know how to do it and therefore this is what the consumer ought to have — are the companies that turn out monstrous duds.

So it seems to me that I've said several things. One is that the industry is blessed with a historic and unvarying opportunity, that the industry history makes clear innovation is rewarded and the opportunities for innovation are always there, and it's critically important to any company in that industry to put aside its vanity, to put aside its ego, to put aside its own egocentricity and to look backwards from the view of the consumer into the company rather than from the company out to the consumer. Those companies that approach this world and product need in anthropological terms are the ones more and more likely to win. Certainly they're the ones who clearly improve the odds.

TWICE: Do you think Apple with its iPod was a company that looked at things in anthropological terms?

Oh yes. Look at the product. Look at the timing. See the consumer response. And I think it's pretty evident they know how to do that more than once.

TWICE: In your book, "Mind Your Own Business," you mentioned that the makers of consoles, which integrated a turntable, radio and speaker, reacted with disdain to the emerging hi-fi industry, were oblivious to a changing industry and became dinosaurs. Has this mindset continued in the CE industry? Are there any specific examples you can site?

I don't think I should do that. The history is pretty clear. I grew up in a period, and it was hardly a brief one, where the great names in the electronics industry [were] names like Capehart, Admiral, Stromberg-Carlson, RCA. They're gone. In the high-fidelity industry, names like Fisher, Scott, they're gone, virtually gone. Part of that has simply been economics. Companies are acquired, folded in. Part of it has been management's failure to do what I think is central.

TWICE: You mentioned in your book that it is difficult to create and maintain a successful brand. Why is it so difficult?

That's an interesting but extraordinarily complicated question. One reason is that success can often breed failure. Success can lead to complacency so easily. And success can persuade you that you've got it knocked. You know how to do it. If the world stood still, the probability is that if you were successful in a particular approach, you had it knocked. The world doesn't change. You keep it knocked.

But if you stay with what you've got while the world is changing, and peoples' lives are changing, and you are unresponsive to those changes, you don't have it knocked. You're knocked. It's not difficult to imagine, it's not difficult to recognize by now, that companies and people can get comfortable while it's going nicely. They persuade themselves there is only one answer, and I've got it. And that, of course, is the road to ruin.

Then it is fair to say success can breed failure in another way. A company grows. It develops a set of obligations to deliver, to produce, to be effective. If it's a public company, it's to perform financially. And those pressures tend to lock in the model. Think about it in terms of technology or engineering. You build a company. It's doing well. You spend a significant percentage of revenue in engineering, but in a curious way, the better the company is doing, the higher the percentage of the engineering monies you spend in sustaining technology, and in effect, it can detract. In doing well, you've got to keep this thing moving, but the stuff that is driving this thing is the current state-of-the-art technology. Where does the new disruptive leapfrog technology come from?

Now it's not impossible to imagine an existing successful company doing it. Your Apple example is a very good one, but you can see why, in effect, it's more a challenge to an existing successful company than it may be to a start-up company, one without both positive and negative baggage of history and success.

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