Roomba as High Margin Product

Do you Roomba? Probably not yet. Roombas are robot vacuum cleaners, and the company iRobot has been selling them for around 10 years. It has also been upgrading them. The latest model, the 880, is starting to look like a nice high margin product. Why?

Well,  nearly all of us have to worry about cleaning the floors in our house on a regular basis. And it is not a job that we enjoy doing. What if we didn’t have to worry about it at all? What if it could be done by a machine while we sleep? The machine wakes itself up, does its job and goes back to its re-charger without the need of any human intervention. And it does not make an enormous racket while it works. As NYT reports, this is pretty much what the 880 does now.

This is what it looks like

Would you like one? Now, would you pay $700 for it?  My guess is that the $700 price tag would scare off quite a few buyers – but not all. And as the Roomba keeps getting better, it will look better and better.


High Margins – the Identification Problem

Steve Jobs used the phrase “insanely great” to describe the goal he aspired to in product design. He wanted to make stuff that was “insanely great”.  And in his famous speech at Stanford, he said that he was able to do this because he did what he loved.

Well, a clarification is in order. In fact, Jobs did not know how to code. And indications are that as a young man, he had no huge love for technology. What he loved to do, and did very well was to get other people engaged in stuff.

In other words, it was in his DNA that the stuff he sold had to be great for the user (not for Steve Jobs alone). And he was relentless in improving designs so that they “just worked”. So that they were stripped of all confusing and non-functional components. This was his formula for producing things that sell for “high margins”. And it has worked out pretty damn well.

In this thread, we are on an adventure to better understand this thought process so that we can do the same thing. Not by making gadgets the way Jobs did, but in everything that we do in our lives. We want our lives to offer us lots of “high margin” opportunities. And we know already that it is not as easy as just “following our bliss”. To produce things that have high value to others, we need tools to get into their heads and hearts. We need the DNA that Jobs had in spades.

Before getting into this, we should be sure we understand a necessary skill set – that relates to our ability to “focus”. Focus is one of those words that in the old days, meant a technical thing. Sight was in focus or out of focus. Peter Drucker was instrumental in giving the word a different usage. He wrote back in the 1960’s that mastering focus was essential to becoming an effective executive. And he introduced the idea that focus is the ability to say “no” to lots of good stuff because it distracts you from important stuff. He makes the point rather well here (from an interview with Forbes)

I’ve seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters.

These days, you see lots of people using this idea. For example, productivity experts exhort us to avoid getting overwhelmed by “urgent” stuff to the point that we lose focus of “important” stuff. In other words, we should strive to reduce the amount of urgency (say no to it when possible) so that we can focus on what is important.

Steve Jobs made this point as well in his famous talk to Apple stuff. When he came back to Apple, he killed lots of perfectly good projects for the sole reason that they were not “insanely great” projects.  So far so good. We know that in order to develop “insanely great” stuff, we need focus.

And we know from the Heath Brothers (book – Decisive) we have to be really careful in choosing focus points. Why? Because once we focus, everything else falls outside of the spotlight. We narrow our options. So (1) it is a great idea to reduce the risk of getting the focus decision wrong and (2) it is another great idea to have “tripwires” that we can set off when data starts to show us that our focus is not working.

Great stuff! But … what are we looking for to make that focus decision? Dan Pink, in his book on how to persuade (“To Sell is Human”) starts with the notion that we should be “in tune” with out clients. If we are in tune with them, we will “feel their pain”.  And when we feel their pain, we might start thinking about how to convert that pain into pleasure.

There are some things we can say about this. The first thing is that the “pain” people feel comes out of what they do, not out of what they might like to do. The fact that I am not a billionaire does not give me daily pain. The fact that I have to take out the trash might. In other words, insanely great stuff – stuff that sells at high margins – relates to activities people can fit into their lives.  If it doesn’t fit in, they won’t see the value. So it was for the very clever new device called the “Segway“. It is a cool thing. But exactly what is it for? Who is it for? Ever since its invention, the Segway has been a device looking for a scalable use. This offers us a nice lesson. To find “high margins” we are better off moving from activity to innovation rather than technology to use.

And this was the genius of Andrew Carnegie. In each work area that he got involved in, he became a student of where the pain was. And he found ways to fix that.  Jeff Bezos offered a very interesting talk about this for TED where he calls what is wrong “kluge”. Jeff makes the point that most of the time we just accept kluge – we don’t actually see it as a problem. And this suggests that we can get a lot better at finding high margin products and services by getting more sensitive to kluge.

Fun idea! But how do we convert “pain” to “pleasure”? That is next! Stay tuned!


Finding Out Who is Who

The old idea was that “all men are created equal”. Well, this is still true. But not in every sense. We are not all equal in our capacity to add value. Some folks are very good at this. Others actually destroy value. So, in our “job markets” we constantly look for folks who we think will add lots of value and say “so long” to folks who we think will not.

This way of thinking is starting to extend a bit further. And this “further” relates to whether folks are “in tune” with value propositions as they evolve. Some folks are very good at creating value within a given system. But they have zero interest in change. Think of highly skills buggy whip makers at the dawn of the automobile age. See the problem? These folks were great to work with. But they are less likely to be great to talk with about what is coming next. Perhaps this is why kids have been so successful in tech, while older fuddy duddies (like me) have been less so. These kids are interested in change. They see next steps that the rest of us do not.

This observation is morphing into a networking principle. Most of the value that will emerge from a network will come from a very small percentage of people in the network. Some put it like this – 80% of the value added will come from 20% of the people involved. An adaption of the old Pareto Principle.

This is pretty important if you are on the lookout for what is next. First, it means that most of the people who are in your networks will not help you. Second, it means you need pretty powerful tools to identify and connect with those who will. As we rely more on digital networks, we are likely to see more platforms that help us sort out “who is who”. That will be interesting.

Love is all You Need?

A while ago, I started thinking about a thread on creating “high margin” work. I posted on this at Quickthink, and started to think it over.

There is no doubt that we all would love to be able to do this. We all would like to work less and earn a lot more (high margin work) instead of working more and earning less (low margin work). But no one is just going to hand this type of opportunity to us on a silver platter. And just working harder at what we do now is not likely to convert what we do from low margin work to high margin work. So how do we create high margins? At least where do we get started?

Thank the Lord! It is pretty easy to find the starting point. If no one is going to hand high margin opportunities to you on a platter, you will need to create them yourself. The starting point is within you. We are talking about an individual skill set that we will use to change the way we relate to the outside world. And if it is a skill set, it is something we can get better at as we practice. So the key then is to see what to practice. If we get that right, we can apply the Tim Ferriss approach to learning — identify the 20% of the stuff that we need to do that will give us 80% of the results we want. Then, we do what Shawn White did when he mastered his amazing acrobatics — practice with mindful attention to those parts.

That, dear reader, is the topic for this post. Here we go!

A long time ago, a guy by the name of Joseph Campbell argued that the secret to finding the good life is “to follow your bliss”. Campbell thought that following your bliss would bring out the inner hero in you, and that a heroic life is voila, the same thing as the good life. Since then, lots and lots of people have been influenced by Campbell. The phrase “follow your bliss” has morphed into the more concrete idea that we should “do what we love”. This “do what you love” idea was forcefully asserted by Steve Jobs in his famous commencement address at Stanford University. Jobs argued that this is what made him a success and that it would work for everyone. It is provocative stuff because it challenges the conventional wisdom of an earlier era — that success came from hard work. And it validated something that a lot of people wanted to hear — that inside each of us resides an inner genius. All we need is the freedom to “let it all hang out”. Right. But back to our adventure.  Does this lead to “high margin” work?

It is a critical question because these days, we accept as obvious the idea that enhanced creativity can solve all problems. And we believe that we find this creativity within ourselves, by nurturing out individuality and core loves. Thus, the key to adding value around us lies with unleashing our inner creativity. And many see life as a journey inward to find out how to do this. It is also argued that this is a profoundly humanizing process. That if we were all engaged in this process, the world would be a better place. But is it true?

Before shouting out “yes!” we might take into account that there is an opposing view. Miya Tokumitsu lays this out in an interesting piece in BI. Miya argues that as we focus more and more on realizing our inward passions, we lose touch with what is going on outside of us. Our inner loves do not necessarily match social needs. In other words, whatever we might gain in individual spirit by questing inward is offset by a lowered capacity to work hard at stuff that is not so lovable – but needed by others. Ouch!

Is Miya onto something? Well, I think that she is onto at least one thing that is critical to creating high margins. High margins are offered to folks who can meet urgent needs. In other words, how much you love or hate what you do has nothing to do with whether someone is willing to pay you to do it at any given moment in time. It could be that loving what you do now could lead you to work hard and learn how to do it better. And it is possible that when you get really, really, really good at it, that the value of what you produce goes up. But even in this rather attractive scenario, how much will it go up in the eyes of others? That depends on what others are willing to pay, not on what you would like them to pay. And this is a story that we know well – the starving artist who cannot persuade people that his or her painting, sculpture, or even collection of trash bags is a work genius. So if we are focused on creating high margins, we cannot simply pursue a “love what we do” strategy. It is totally ok to love what we do, and perhaps it is even great to love what we do, but it is not a great strategic idea to select what we love on the assumption that others will love it too.  We need a better selection tool that opens our eyes to what others need and want to pay for.

So how do we start thinking about that? Good question. The first step is to start seeing what others want, instead of what we want. That takes us to Dan Pink and his book, “To Sell is Human”. He calls this skill “attunement” and I will be discussing it next.


FOLLOW  –  Steve Blank uses Joe Campbell in an interesting way – to bring out the common aspects of the start up adventure.