tag:theconversation.com,2011:/uk/topics/new-products-11011/articlesNew products – The Conversation2023-06-09T03:20:29Ztag:theconversation.com,2011:article/2073072023-06-09T03:20:29Z2023-06-09T03:20:29ZThe Apple Vision Pro hasn’t really impressed consumers, but that isn’t the goal – for now<figure><img src="https://images.theconversation.com/files/531060/original/file-20230609-28-hnfwyk.jpeg?ixlib=rb-1.1.0&rect=43%2C54%2C7186%2C4758&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Jeff Chiu/AP</span></span></figcaption></figure><p>Apple’s new Vision Pro mixed reality headset has generated a significant amount of buzz. Announcing it at this year’s <a href="https://developer.apple.com/wwdc23/">Worldwide Developers Conference</a>, chief executive <a href="https://www.bbc.com/news/technology-65809408">Tim Cook said</a> the virtual and augmented reality headset will <a href="https://www.youtube.com/watch?v=TX9qSaGXFyg">allow users to</a> “see, hear and interact with digital content just like it’s in your physical space […] seamlessly blending the real and virtual worlds”.</p>
<p>The Vision Pro is the first new product category Apple has introduced since the Apple Watch in 2014. It marks the company’s foray into <a href="https://www.apple.com/au/newsroom/2023/06/introducing-apple-vision-pro/">spatial computing</a>. <a href="https://www.wsj.com/articles/apple-is-breaking-its-own-rules-with-a-new-headset-80c9b36c">Analysts</a>, <a href="https://www.google.com/finance/quote/AAPL:NASDAQ?sa=X&ved=2ahUKEwj8ztzBybL_AhWFd94KHUKbCv0Q3ecFegQIKhAh">markets</a> and <a href="https://www.gizmodo.com.au/2023/06/early-testers-vision-pro-apple/">consumers</a> have been quick to react – and not all positively. </p>
<p>On one hand, the headset has been <a href="https://techcrunch.com/2023/06/05/first-impressions-yes-apple-vision-pro-works-and-yes-its-good/">lauded for</a> its <a href="https://www.theverge.com/2023/6/5/23750003/apple-vision-pro-hands-on-the-best-headset-demo-ever">technical features</a>. It’s less clunky than competitors’ offerings and has a range of advanced capabilities, including hand and eye tracking, and the seamless combination of <a href="https://www.wsj.com/video/series/joanna-stern-personal-technology/apple-vision-pro-headset-first-look-impressive-immersive-and-heavy/776FE781-C5F2-4048-9161-08563DA7364E">virtual and augmented reality</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531062/original/file-20230609-22-b9kivr.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The mixed reality headset has had a mixed reception, although it has generally impressed on the technical front.</span>
<span class="attribution"><span class="source">Jeff Chiu/AP</span></span>
</figcaption>
</figure>
<p>However, others can’t help but point out the hefty price tag of US$3,500 – and the fact that the general public has <a href="https://www.wired.com/story/do-people-actually-want-to-wear-vr-headsets/">simply not</a> <a href="https://www.wired.com/story/apple-vision-pro-doomed/">embraced</a> mixed reality headsets.</p>
<p>Globally, the demand for these headsets has been slowing. Fewer than <a href="https://www.idc.com/promo/arvr">nine million units</a> were shipped in 2022 (mostly by <a href="https://forwork.meta.com/quest/quest-pro/?ref=AVsRL14V5xl7CziavTtRzDrQ8O5yjImi3boLHA-qhBivxUIybXgQgnTdAcluip9cjZjrA7c67zPnPs5o6hzHTzHhbEBZ9MYq98Y7CrFJcfq2-vlUkmOQWpH81Ve59PH6QRUSjSXFlwQ1ejW5iuueSbY7DHyjlTvaROakHgFhkimSBnVniKx8eBZ_zYlTzI3Cktg9jAlUj3RfA2exKTP5Ps3WH1IndddONEOFiKsrIUPfQFsYk_qPBBw8VOTATf6p_jfNrHzpnFSqu8I4nHc02nw0BgZr3aaQzBvbaxkMnK5SutEvjTUiGtqbUB3VJjeUA-EF4BSkodpCwrtrBJa0zDGpk3yzgc6KwY16h9SP5Fr4en9VGIAt6jPTQSfpYa3Kb9UqVG">Meta</a>, Apple’s biggest competitor in this category).</p>
<p>Meta sees spatial computing as a big part of the tech future, despite <a href="https://www.theguardian.com/technology/2022/oct/27/metas-shares-dip-is-proof-metaverse-plan-never-really-had-legs-facebook">market analysts and critics</a> calling for the <a href="https://www.wired.com/story/what-is-the-metaverse/">metaverse</a> to be abandoned. Last week it released the Quest 3 at a relatively low cost of US$499. With continued heavy spending on the metaverse, developers of Quest 3 Reality Labs recorded an operating loss of <a href="https://www.cnbc.com/2023/06/01/meta-quest-3-unveiled-ahead-of-apples-planned-vr-headset-debut.html">US$3.99 billion</a> in the first quarter of 2023. </p>
<h2>So if there is no demand, who is Apple targeting?</h2>
<p>While Meta’s recent history might seem like a cautionary tale, timing and strategy are critical when it comes to technological innovation. And compared to Meta, Apple’s strategy seems prudent.</p>
<p>Apple is likely betting the app developer community will provide it with the <a href="https://appleinsider.com/articles/23/06/06/even-with-so-many-demonstrated-use-cases-apple-vision-pro-might-not-yet-have-a-purpose">use cases</a> it needs to turn the Vision Pro (and subsequent iterations) into its next big income generator – and perhaps change how we interact with this technology forever.</p>
<p>Getting developers to build exciting complementary offerings, such as apps and device add-ons, would give Apple a springboard to convince users of the Vision Pro’s <a href="https://www.smartinsights.com/manage-digital-transformation/digital-transformation-strategy/digital-marketing-models-technology-acceptance-model/">value</a>. But this won’t work without developers’ buy-in, which leads us to believe the Vision Pro is (at least for now) aimed at Apple’s <a href="https://appleinsider.com/articles/22/06/06/apple-now-has-over-34-million-registered-developers">34 million</a> registered <a href="https://developer.apple.com/wwdc23/">app developers</a>, rather than the broader user market. </p>
<p>It’s expected many of the apps on the App Store will work on <a href="https://kanebridgenews.com/apple-releases-vision-pro-headset-first-major-new-product-in-a-decade/">Vision OS</a>, the Vision Pro’s operating system, by the time the product is launched. Apple is already <a href="https://arstechnica.com/gadgets/2023/06/vision-pro-developer-kits-will-help-devs-get-their-apps-ready-before-launch/">supporting developers</a> with programs and tools to redesign apps for compatibility with the Vision Pro, and create new ones. </p>
<p>Users are attracted to a product that provides more app variety, and their migration to it further piques developers’ interest. Typically, this becomes a self-reinforcing cycle. Such a multiplication of value for consumers, coupled with Apple’s manufacturing capabilities, could allow the Vision Pro to rise to dominance. </p>
<p>And this isn’t just speculation; Apple has used this approach before.</p>
<h2>Leveraging an app-driven ecosystem</h2>
<p>Apple has a history of leveraging its app-driven <a href="https://www.investopedia.com/articles/personal-finance/042815/story-behind-apples-success.asp">ecosystem business model</a> to give its products the upper hand. One early example of this was the iPod and iTunes, wherein the Apple Music store, cloud connectivity and massive storage capacity (at the time) created an environment that locked users in. </p>
<p>More importantly, with the sophistication of the hardware and software, the ease of use and the novelty of the experience, users were happy to be locked in. </p>
<p>This approach has been repeated time and again with other Apple products, such as the <a href="https://theconversation.com/latest-updates-apple-is-trying-to-reclaim-its-major-innovator-status-by-making-you-wash-your-hands-141293">Apple Watch</a>. Once more, Apple drove innovation by linking the hardware to other devices and systems, introducing unique features and providing high-quality apps to generate interest. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-iphone-turns-15-a-look-at-the-past-and-future-of-one-of-the-21st-centurys-most-influential-devices-183137">The iPhone turns 15: a look at the past (and future) of one of the 21st century's most influential devices</a>
</strong>
</em>
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<hr>
<h2>Competition heats up</h2>
<p>Ultimately, users will judge the value of the Vision Pro through a combination of objective and subjective information. According to initial reviews, the Vision Pro operates well, and Apple is using branding and marketing tactics to further create a perception of value.</p>
<p>All things considered, Apple’s entry into the mixed reality market represents a big threat to competitors. It has a track record of building hardware at scale and with progressively affordable prices. And let’s not forget its base of some two billion active devices to which the Vision Pro can link. </p>
<p>Apple’s massive ecosystem – built on devices, apps, developers and manufacturing partners – won’t be running dry anytime soon. And by the very fact of its existence, the Vision Pro has a shot at success.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-new-iphone-se-is-the-cheapest-yet-smart-move-or-a-premium-tech-brand-losing-its-way-136507">The new iPhone SE is the cheapest yet: smart move, or a premium tech brand losing its way?</a>
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</em>
</p>
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<img src="https://counter.theconversation.com/content/207307/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martie-Louise Verreynne receives funding from the ARC and NHMRC. </span></em></p><p class="fine-print"><em><span>Margarietha de Villiers Scheepers has received funding from State and Local Governments for specific research projects.</span></em></p>Many point to Meta’s failings to make a case for mixed reality headsets having no future. But Apple’s approach is arguably much more strategic.Martie-Louise Verreynne, Professor in Innovation and Associate Dean (Research), The University of QueenslandMargarietha de Villiers Scheepers, Associate professor, University of the Sunshine CoastLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/946402018-04-09T22:40:05Z2018-04-09T22:40:05ZMade by humans: A recipe for innovation<figure><img src="https://images.theconversation.com/files/213925/original/file-20180409-114112-33r0ge.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Justin Trudeau participates in an armchair discussion highlighting the federal budget's investments in Canadian innovation at the University of Ottawa in March 2018.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span></figcaption></figure><p>Innovation doesn’t just happen — it is designed by humans for humans. </p>
<p>While economists discuss new theories, scientists develop new technologies and industrialists exploit new markets, the process of innovation is first and foremost socially constructed. To navigate its complex and risky path requires courage and knowledge — courage to learn the recipe, and knowledge of the techniques. </p>
<p>The innovation conversation is happening everywhere. Inside boardrooms, at cafés and in government offices, many people talk about it. But few are doing it and for those who are doing it, even fewer are doing it well. Like high-school sex, some education is required. </p>
<p>So where and how do we learn to innovate? Our parents can’t teach us. Our bosses are trying to learn alongside us. Even post-secondary courses only provide us with rudimentary frameworks and passive business cases. If innovation is a dynamic process, how can we learn to “do it” safely and empathetically?</p>
<p>There’s no question the innovation process is complicated. Its complexity stems from the many interactions between humans with diverse backgrounds, mental models, systems and ranks. It involves organizational cultures, economic climates and egos. </p>
<p>So how might we learn a process that fundamentally signals uncertainty, ambiguity and risk inside our companies? By admitting it is something that can and must be learned. </p>
<h2>Innovate or die</h2>
<p>Organizations that don’t keep up with their customers’ needs will die. This provocative and incentivizing statement has led many firms to dive into the innovation process. </p>
<p>Unfortunately, most jump in without first asking why, how or what they are seeking to change. Asking the right question at the right time is critical to succeed at innovation adoption.</p>
<p>Consider the following: Are you seeking to change what you offer to your customers (e.g. product/service innovation)? Are you wanting to change how you operate or organize yourself to design and deliver a new offering (e.g. process innovation)? Are you eager to change where and who consumes your innovation (e.g. positioning innovation)? Or are you feeling forced or intuitively seeking to change the <em>why</em> in your current practice or business model (e.g. paradigm or cultural innovation)?</p>
<p>By first asking these questions, organizations begin with a clear context from which to adjust the recipe as needed. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=498&fit=crop&dpr=1 754w, https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=498&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/213932/original/file-20180409-114112-1w90amx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=498&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A man walks past a company sign at a Nortel Networks office tower in Toronto in February 2009. THE CANADIAN PRESS/Nathan Denette.</span>
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</figure>
<p><a href="https://www.theglobeandmail.com/report-on-business/a-tale-of-toxicity-the-real-culprit-in-nortels-collapse/article7379114/">Nortel is one infamous Canadian company</a> that suffered an untimely death. </p>
<p>Findings from University of Ottawa researchers on the dramatic rise and fall of Nortel point to its failure to foster a resilient culture. <a href="http://www.cbc.ca/news/business/nortel-failed-amid-culture-of-arrogance-1.2582136">Their study</a> highlights the company’s neglect of its customers and the inflexibility of management to adapt to a new environment. </p>
<p><a href="https://ca.blackberry.com/">Canada’s technology darling, Blackberry</a>, initially showed innovative promise by launching a mobile device and system that would be used across boardrooms and college dorms. Then, without an internal process and prioritization on understanding changing consumer needs, <a href="https://www.theglobeandmail.com/report-on-business/the-decline-and-fall-of-canadas-global-corporate-superstars/article13822902/">it faced a new competitor</a> called Apple’s iPhone. Enough said. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=319&fit=crop&dpr=1 600w, https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=319&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=319&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=401&fit=crop&dpr=1 754w, https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=401&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/213934/original/file-20180409-114116-16clpxb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=401&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Canadian flag flies at BlackBerry’s headquarters in Waterloo, Ont., in July 2013.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Geoff Robins</span></span>
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<p>Governments, like corporations, must respond to customer or voter needs. Vancouver’s municipal government is currently engaging in service innovation through a collaborative <a href="http://www.citystudiovancouver.com/">initiative called City Studio</a>. Through co-creative city planning projects with municipal staff, students and the greater Vancouver community, user needs are identified and embedded into proposed solutions. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/213938/original/file-20180409-114098-10c7ycp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Canada Goose jackets are seen in this 2013 photo. THE CANADIAN PRESS/Aaron Vincent Elkaim.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Aaron Vincent Elkaim</span></span>
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</figure>
<p><a href="https://www.canadagoose.com/ca/en/home-page">Canada Goose</a> is flexing its innovative prowess by leveraging its positioning of Canadian-made coats and <a href="https://www.entrepreneur.com/article/241286">growing demand</a> from a global marketplace. Moving forward, however, the company will have to consider how to maintain production costs and profits through supply-chain process innovation. </p>
<h2>The basic recipe for innovation</h2>
<p>From extensive field and desk research on innovation process models, we can reduce the process into key components or ingredients.</p>
<p>The process typically begins with a perceived need or problem, then involves researching the need or problem, moves to testing and developing the framing of the need or problem, and finally into making decisions on how best to solve that need or problem and bringing that problem-solving idea to market.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=80&fit=crop&dpr=1 600w, https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=80&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=80&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=101&fit=crop&dpr=1 754w, https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=101&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/213947/original/file-20180409-114121-1pur38s.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=101&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Innovation Process Recipe.</span>
<span class="attribution"><a class="source" href="https://www.freepik.com/free-icons/food">Freepik</a></span>
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</figure>
<p><strong>Directions:</strong> </p>
<ol>
<li><p>Ask yourself what you need to change. (Product, service, position?)</p></li>
<li><p>Gather a team that represents all key stakeholders for that change across functions, systems and markets (your key ingredients)</p></li>
<li><p>Prepare an innovation intent framework that is part <em>need-finding</em>, part <em>problem-framing</em> and part <em>problem-solving</em>.</p></li>
<li><p>Collect and combine need-finding data, then form insights. </p></li>
<li><p>Wrap your insights into problem-framing ideas (prototypes) and let stand until all stakeholders have had a chance to reflect.</p></li>
<li><p>Whisk customer feedback into prototype mixture.</p></li>
<li><p>Prepare final prototype for implementation.</p></li>
<li><p>Bake innovation and test for rejection or adoption.</p></li>
<li><p>Save your recipe and continue to experiment with new ingredients. </p></li>
</ol>
<h2>The innovation techniques</h2>
<p>To learn the recipe for innovation, you must be ready and willing to engage and practise with diverse techniques, based on your “innovation” output (e.g. product, process, culture, etc.). </p>
<p>Innovation techniques range from <a href="http://designresearchtechniques.com/#/">agile qualitative and quantitative research methods</a> to popular <a href="http://dstudio.ubc.ca/">design thinking tools and strategic frameworks</a>. </p>
<p>If Canada wants to improve its innovative capacity and develop <a href="https://www.budget.gc.ca/2017/docs/themes/Innovation_en.pdf">“innovation-ready citizens,”</a> it needs to acknowledge the lack of innovation literacy and actively support the best practices in teaching and learning of the innovation process.</p>
<p>Developing a corporate and individual creative confidence will ensure Canadians survive new economic cycles. It begins with a basic recipe, crafted by humans and with repeated practice.</p><img src="https://counter.theconversation.com/content/94640/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Angele Beausoleil does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Where and how do we learn to innovate? Our parents can’t teach us. Our bosses are trying to learn alongside us. Even post-secondary courses only provide us with the basics. Follow this recipe.Angele Beausoleil, Assistant Professor Teaching Stream, Business Design and Innovation, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/877622017-11-29T02:31:26Z2017-11-29T02:31:26ZHow ‘brand you’ came to be<figure><img src="https://images.theconversation.com/files/196456/original/file-20171127-2055-hl7o54.jpg?ixlib=rb-1.1.0&rect=0%2C85%2C2044%2C1440&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Mike Mozart/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><blockquote>
<p>…a person’s name is, to that person, the sweetest and most important sound in any language.</p>
</blockquote>
<p>Dale Carnegie’s line from his bestseller book ‘How to Win Friends and Influence People’ rings especially true in the retail sector.</p>
<p>From packets of <a href="http://mumsgrapevine.com.au/2017/11/personalised-food-labels/">Tim Tams and jars of Vegemite</a> to luxury hand bags, today’s marketing is stamping our names on the things we buy, setting us out as unique individuals. </p>
<p>To get to this point, marketing has moved from a focus on the product itself to the consumer, who they are and finally, how they think. </p>
<p>The power of personalisation can been seen in Coke’s successful, ‘Share a Coke’ campaign. Soft drink manufacturers have been experiencing declining <a href="http://fortune.com/2016/03/29/soda-sales-drop-11th-year">sales</a>, but Coca-Cola was able to break the downward trend. By printing individual names on cans, the company saw a 2.5% increase in total sales and soft-drink volume went up by <a href="http://incitrio.com/cokes-share-a-coke-campaign-an-integrated-marketing-success">0.4%</a>.</p>
<p>Even luxury brands like <a href="http://au.louisvuitton.com/eng-au/stories/personalisation-mon-monogram#the-films">Louis Vuitton</a> and <a href="http://www.montblanc.com/en/customer-service/additional-services.html">Mont Blanc</a> have begun to personalise their products.</p>
<h2>How we got to personalisation in marketing</h2>
<p>The journey from mass production to personalisation has taken more than 100 years. Mass production was popularised between 1910 and 1920 by Henry Ford’s Ford Motor Company. He <a href="https://www.biographyonline.net/business/henry-ford.html">famously said</a>: </p>
<blockquote>
<p>Any customer can have a car painted any colour that he wants so long as it is black.</p>
</blockquote>
<p>Mass production was tied to the <a href="https://managementmania.com/en/production-concept">production concept philosophy</a>. This stated that consumers preferred products that were widely available and inexpensive. To achieve this, the focus was on uniformity, efficiency and mass distribution. </p>
<p>Today, even the most basic of household consumables (for example salt, bottled water, flour) would fail to succeed by employing this simple concept, as even these products have sought to <a href="https://www.forbes.com/sites/larrymyler/2016/11/23/how-differentiation-strategies-can-get-you-to-pay-4400-times-more-for-a-commodity/#4f1b00294413">differentiate</a> in a crowded market. The production concept is now only ever used within the <a href="http://smallbusiness.chron.com/difference-between-product-orientation-production-orientation-16004.html">manufacturing sector</a>. </p>
<p>From the 1930s, as new products flooded the marketplace, marketers turned their attention to communicating, not the low price and availability of their wares, but instead the quality and features. This is called the <a href="http://www.blackwellreference.com/public/tocnode?id=g9780631233176_chunk_g978140510254419_ss1-39">product concept</a>. This held that consumers favoured products that offered different levels of quality, performance or features. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=361&fit=crop&dpr=1 600w, https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=361&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=361&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/196457/original/file-20171127-2016-1xysyjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Vehicle manufacturer Ford has changed its marketing strategy from just making its products available and cheap.</span>
<span class="attribution"><span class="source">JOHN LLOYD/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>However, the risk of positioning your product based purely on its perceived quality and features, is that your competitor will simply replicate. Take any smartphone manufacturer, such as <a href="http://www.versiondaily.com/the-marketing-strategy-of-apple-a-concise-analysis/">Apple</a>, every 18 month or so, they need to release a new product, with higher quality and more features, to stay ahead of their competitors. </p>
<p>By the 1960s, marketing shifted to the <a href="https://www.thebalance.com/what-is-selling-orientation-2295562">selling concept</a>, where the most successful marketing involved aggressive selling and promotions. This assumed that consumers will either not buy, or not buy enough, of the business’ products unless the business made a substantial effort to stimulate consumers’ interest. It focused on “creating a need”, rather than “<a href="https://insight.kellogg.northwestern.edu/article/walking_the_walk">fulfilling a need</a>” for consumers. </p>
<p>Switch on to any <a href="http://www.broadcastingcable.com/news/news-articles/shopping-channels-less-hard-sell/72660">home shopping television</a> channel to see a good example of this in practice. See, you really didn’t realise you needed that piece of gym equipment with a free set of steak knives. </p>
<p>The simply named <a href="http://marketbusinessnews.com/financial-glossary/market-orientation-definition-meaning">marketing concept</a> challenged these earlier philosophies, holding that brands need to understand their target market in order to create and deliver value.</p>
<h2>Customisation and personalisation</h2>
<p>What’s emerging today is a move away from market segments with many consumers to markets of <a href="http://www.startupdaily.net/2015/08/in-the-future-all-products-will-be-designed-for-a-market-of-one/">one</a>. In other words, moving away from understanding the needs of a group of consumers (and creating standardised value) to creating unique value propositions for one customer through customisation and personalisation.</p>
<p>There is often confusion around these two terms, customisation and personalisation. In simple terms, customisation allows a consumer to make small changes to a product or service, from a discreet set of alternatives. This often happens in automotive manufacturing or consumer electronics, where a customer can customise <a href="http://www.mytoshiba.com.au/products/computers/portege#">their car, PC or notebook</a>. </p>
<p>While customisation deals with small groups of consumers making choices from a set of alternatives, personalisation deals with just one, with unlimited alternatives. </p>
<p><a href="http://www.acrwebsite.org/web/acr-content/640/emotional-attachment-to-brands-the-implications-for-marketers.aspx">Attachment theory</a> explains why consumers desire personalised products. Like human relationships, sometimes consumers form an emotional bond with a brand. Once a strong bond is formed, consumers will become loyal and engage in positive “word-of-mouth” promotion of it. So, how do brands form bonds?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/196459/original/file-20171127-2025-8w399p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Louis Vuitton handbag cake.</span>
<span class="attribution"><span class="source">Dawn/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>To increase this bond, brands need to get personal, and that personalisation needs to be relevant. Within a consumers’ brain lays their <a href="https://medium.com/desk-of-van-schneider/if-you-want-it-you-might-get-it-the-reticular-activating-system-explained-761b6ac14e53">reticular activating system</a>. This filters out irrelevant information, enabling consumers to attend to only important information. </p>
<p>Imagine being at a noisy party, with many conversations. It’s all white noise, until someone mentions a topic that is of particular interest to you. You then tune in, thanks to this part of your brain.</p>
<p>So brands use your name. Whether you see it or hear it, your <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1647299/">name</a>, is one of the easiest sounds for your reticular activating system to hone in on. A product with your name on it creates attachment, and then brands have you for life.</p><img src="https://counter.theconversation.com/content/87762/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gary Mortimer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Marketing has moved from a focus on the product itself to the consumer, who they are and finally, how they think.Gary Mortimer, Associate Professor, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/849672017-10-17T22:02:17Z2017-10-17T22:02:17ZEnabling innovation: Lessons from Crystal Pepsi<figure><img src="https://images.theconversation.com/files/190044/original/file-20171012-31422-smf49y.jpg?ixlib=rb-1.1.0&rect=0%2C9%2C1022%2C706&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Crystal Pepsi, seen here on sale recently as part of a nostalgia campaign, was considered one of Pepsi's epic fails. </span> <span class="attribution"><span class="source">(Creative Commons)</span></span></figcaption></figure><p>We tend to think that innovation is driven by new discoveries or advances in technology. Yet the problem with new products is often not an engineering challenge, but a psychological one. </p>
<p>In fact, it seems to be much easier to develop a new product than it is to find people who are willing to buy it. In the consumer packaged-goods business alone, approximately 33,000 new products are introduced every month (<a href="http://www.mintel.com/global-new-products-database">Mintel Global New Products Database</a>). Too many of them fail.</p>
<p>Crystal Pepsi is a classic example. </p>
<p>Almost 25 years ago, Pepsi introduced a new clear cola, believing it would quickly <a href="https://www.wsj.com/articles/crystal-pepsi-is-returning-to-store-shelves-1467226242">grow to be a billion-dollar brand</a>. They named it Crystal Pepsi because it was bottled without the dye that gives standard Pepsi its caramel hue. </p>
<p>The new product was launched in 1993 with a Super Bowl commercial claiming: “You’ve never seen a taste like this,” accompanied by Van Halen’s hit song <em>Right Now.</em></p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/KPvyq_KmXhc?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>Unfortunately for Pepsi, consumers weren’t buying it — not “right now,” not weeks or months later. By 1995, the product was discontinued. </p>
<p>In hindsight, pundits have argued that Crystal Pepsi failed, in large part, because <a href="https://www.fastcompany.com/1805208/what-were-they-thinking-when-fizz-went-flat-crystal-pepsi">no explanation was given</a> for its atypical colour. The company didn’t help consumers make sense of the new product and, in turn, consumers rejected it.</p>
<h2>Too weird?</h2>
<p>Stories like this are surprisingly common. </p>
<p>Although innovation is critical to economic growth and societal progress, novel products too rarely succeed. Even a single atypical feature is often enough for consumers to reject something as too weird. </p>
<p>There have been countless examples of such failures, ranging from Orbitz soda to Ford’s Edsel. </p>
<p>Orbitz soda didn’t catch on because consumers felt uncomfortable drinking a beverage with colourful edible candy balls inside the bottle —it looked like a lava lamp. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=354&fit=crop&dpr=1 600w, https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=354&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=354&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=445&fit=crop&dpr=1 754w, https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=445&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/190043/original/file-20171012-31418-13hop2l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=445&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mmmm. Globules in a soft drink!</span>
<span class="attribution"><span class="source">(Handout)</span></span>
</figcaption>
</figure>
<p>The Edsel was rejected by consumers because of its odd body styling and unusual push button start (sometimes what seems strange is just ahead of its time).</p>
<p>We tend to resist products that fall too far outside the familiar. As a result, even though companies are constantly innovating, people struggle to keep up with the many changes that innovation can bring. This is a challenge for innovators and entrepreneurs — one that can be met with a better understanding of the psychology that underlies our natural response to radical novelty.</p>
<h2>Why the resistance?</h2>
<p>In a series of recent studies, my co-authors — <a href="http://schulich.yorku.ca/faculty/theodore-j-noseworthy/">Theodore Noseworthy</a> and <a href="https://www.uwinnipeg.ca/business/faculty/fabrizio-di-muro.html">Fabrizio Di Muro</a> — and I investigated why this happens.</p>
<p>At the risk of oversimplification, we found that consumers tend to be curious when products are different from what they expect. However, when the new product is extremely incongruent with what consumers think is typical of the category, it creates anxiety. </p>
<p>Consider, for example, replacing your current coffee with one that has vitamins added. That idea makes most people a little uncomfortable. In our research, we didn’t just ask people how they felt, we evaluated their reactions by measuring their pulse rate and skin conductance response (small changes in the amount of secretion from sweat glands).</p>
<p>The bottom line? They weren’t happy. <a href="http://www.kylemurray.com/papers/NDM-JCR14.pdf">People get anxious</a> when products are too radically atypical.</p>
<p>That led us to test an idea we had about how to improve consumer response to extremely incongruent new products. In a series of laboratory and field studies, we demonstrated that companies <a href="http://kylemurray.com/assets/noseworthy-murray-dimuro-jcr-2018.pdf">could use “enablers”</a> to make new product designs seem less radical.</p>
<p>In our research, an enabler was a product feature that helped consumers make sense of another, otherwise extreme, feature. For example, we found that people were more willing to accept vitamin-enriched coffee that was coloured green. </p>
<h2>Making products seem less radical</h2>
<p>That might be surprising, because neither vitamin-enriched nor green coffee sound particularly appealing. But when they are combined, the colour green helps people make sense of the vitamins. </p>
<p>Basically, people tell themselves that this is a different coffee subtype. It doesn’t replace or maybe even directly compare to regular coffee; it is a category of its own, related to regular coffee but also quite distinct. As a result, people felt less anxious about the new product.</p>
<p>We looked at other incongruent products, but my favourite study revisited the classic case of Crystal Pepsi. </p>
<p>To do so, we set up a taste-test booth at the entrance to a busy mall just after a very limited re-release of Crystal Pepsi (which, it turns out, almost no one knew about). </p>
<p>We told our taste testers that this was a new cola; we didn’t want any bias to be introduced by the Pepsi brand. And we examined what people thought about the regular cola (caramel-coloured Pepsi) versus the clear cola (Crystal Pepsi).</p>
<p>Consistent with Crystal Pepsi’s original market failure, people didn’t like the clear cola. But when we added an “enabler,” things changed. Specifically, when we enabled understanding of the clear colour by telling people this cola was made with natural spring water, they liked it a whole lot more. </p>
<h2>Spring water a game-changer</h2>
<p>In fact, in that experimental situation, they liked the clear cola as much as the regular one. Telling people that regular cola was made with natural spring water had no effect, but for the clear cola, adding that natural spring water detail made it easier for them to make sense of the colour.</p>
<p>Many new products have features that change the look and feel of a beloved product in ways that may appear extremely odd. As a result, these offerings often fail to find a foothold with consumers. </p>
<p>For example, Renova <a href="https://www.myrenova.com/c/1/colors">sells toilet paper in colours</a> like black, brown and purple, which people tend to find unappealing. One of the largest milk producers in the United Kingdom recently announced that it is going to start making <a href="http://www.telegraph.co.uk/news/2017/09/23/fizzy-milk-could-hit-supermarket-shelves-boost-milk-sales/">sparkling milk</a>. Prior attempts at similar beverages have failed, as consumers tend to dislike carbonated milk.</p>
<p>Our findings reveal how minor design or promotional changes can significantly improve evaluations when it helps consumers make sense of otherwise unappealing innovations. </p>
<p>That’s not to say that we could turn Crystal Pepsi into a billion-dollar brand, but we have certainly found a way to make what seems like an extremely weird product much more attractive to consumers.</p><img src="https://counter.theconversation.com/content/84967/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kyle Murray receives funding from SSHRC insight grant #435-2015-0100. </span></em></p>It can be much easier to develop a new product than to actually get people to try it, even for big established brands. Where did launches for products like Crystal Pepsi go wrong?Kyle Murray, Professor of Marketing, University of AlbertaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/700562016-12-09T04:15:13Z2016-12-09T04:15:13ZThe latest Productivity Commission report isn’t strong enough on improving consumer protection<p>The <a href="http://www.pc.gov.au/#consumer-law-enforcement-and-administration-draft-report">Productivity Commission’s latest report</a> on how consumer law is being enforced assumes the law is working well when, in a number of areas, it’s failing abysmally. It’s time to recognise that better coordination and enforcement are needed.</p>
<p>The report from the Commission joins a few more, such as <a href="https://cdn.tspace.gov.au/uploads/sites/86/2016/10/ACL_Review_Interim_Report_v2.pdf">the review of Australian Consumer Law</a> and the <a href="http://treasury.gov.au/PublicationsAndMedia/Newsroom/MediaReleases/2016/Release-of-the-external-dispute-resolution-review-Interim-Report">Financial Services External Dispute Resolution Review</a>, which have pointed to needed reform. <a href="http://consumerlaw.gov.au/the-australian-consumer-law/">Consumer law</a>, as it works today, has 10 different agencies responsible for enforcing it.</p>
<p>The Productivity Commission has had ideas about reforming consumer law before like reviewing the adequacy of penalties, consumer complaints handling and redress systems and better forms of co-operation between regulators and the court and tribunal system. Sadly, not much has happened on many of those recommendations and this review doesn’t come to grips with them either. </p>
<h2>Learning from international experience</h2>
<p>The overall objectives of Australian consumer law are to:</p>
<ul>
<li>improve consumer well being through consumer empowerment and protection;</li>
<li>foster effective competition;</li>
<li>enable the confident participation of consumers in markets in which <a href="http://consumerlaw.gov.au/files/2015/06/acl_iga.pdf">both consumers and suppliers trade fairly</a>. </li>
</ul>
<p>The United Kingdom and other European Union member states are radically improving <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377522/bis-14-1122-alternative-dispute-resolution-for-consumers.pdf">complaint processes for consumers</a> through the creation of economy-wide ombudsmen in sectors that don’t have industry specific regulators. It’s bringing remedies to millions of consumers. With virtually no analysis from the Productivity Commission on consumer complaints processes, it’s unlikely any change will occur here.</p>
<p>In relation to penalties there is more welcome news. The commission is endorsing the need to increase penalties under consumer law from A$1 million to A$10 million, to be consistent with competition law. </p>
<p>Equally important is the need for a much wider range of behavioural remedies, including compliance and restitution orders, which already exist in many other countries. The Productivity Commission does not appear to have looked across the rapidly fading borders to update its thinking on best practice consumer protection.</p>
<p>The Productivity Commission laments the absence of sufficient hard data to make a clear assessment of how the law is being administered. This is not the first time this issue has been raised by the Commission. In 2008 it recommended the establishment and public funding of a serious consumer research agency, but this is yet to happen.</p>
<h2>Areas that are in need of consumer protection</h2>
<p>Each year there are thousands of claims made by marketers of over-the-counter, or herbal or complementary medicines, with scant evidence of their efficacy and a <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/Expert-Review-of-Medicines-and-Medical-Devices-Regulationmedia">huge regulatory gap</a> when it comes to taking effective action against them. Campaigners like Dr Ken Harvey, an Associate Professor in the Department of Epidemiology and Preventive Medicine at Monash University, and a long time critic of poor regulation, have made this point many times. It’s disappointing the latest Productivity Commission report has not come to grips with the hard evidence presented by researchers in this area.</p>
<p>It is widely accepted that the Australian Competition & Consumer Commission <a href="https://www.accc.gov.au/">ACCC</a> has the necessary tools, experience and culture for taking on serious breaches of the Australian consumer law in this area, and yet the government is preparing to establish a new enforcement body. This goes against the very policy goal of regulation reduction espoused elsewhere.</p>
<p>Protecting consumers of financial services is another blind spot in this latest review. Although the commission notes the exclusion of financial services from Australian consumer law jurisdiction, as they are regulated by the Australian Investment and Securities Commission (<a href="http://asic.gov.au/">ASIC</a>), there is inadequate recognition of the gaps between these two standards of regulation. This occurs where Australian consumer law provisions are not carried over to apply to financial products and services. </p>
<p>These include the absence of consumer guarantees, prohibitions against unsolicited consumer agreements and single pricing, in which consumers must be given a total price for goods or servivces. Finally, the Australian consumer law protection in relation to proof of transaction, doesn’t apply to financial services. </p>
<p>Throughout this report the Productivity Commission acknowledges that multiple regulators can work well together enforcing the same law, but not when it comes to the financial services sector. </p>
<p>Genuine consumer empowerment should provide avenues for some of these problems to be heard by regulators. In 2008 the commission accepted <a href="https://cdn.tspace.gov.au/uploads/sites/86/2016/10/ACL_Review_Interim_Report_v2.pdf">that UK style complaints procedures</a>, through which market failures can be brought to the attention of regulators, might be useful for Australia. Sadly, the Commission review concludes without evidence that regulators are in the best position to determine where markets aren’t working. </p>
<p>There is still a chance for the Productivity Commission to revise its thinking. In the interests of consumers, I hope it does.</p><img src="https://counter.theconversation.com/content/70056/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Allan Asher received funding from the Australian Treasury in connection with research conducted for the ACL Review. He chairs the Disputes Resolution Panel for Therapeutic Goods and is a former Deputy Chair of the ACCC. Mr Asher and the the co-author, Mr Bill Dee are Directors of the Foundation for Effective Markets and Governance (FEMAG)</span></em></p>The latest Productivity Commission report on how consumer law is being used shows that the same issues still haven’t been addressed for years.Allan Asher, Visitor, Regulatory Institutions Network (RegNet) & Chair of Foundation for Effective Markets and Governance, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/677742016-10-27T06:16:30Z2016-10-27T06:16:30ZPhantom brands haunting our supermarket shelves as home brand in disguise<p>There was a time when shoppers could easily differentiate between supermarket private labels and proprietary branded products, however <a href="http://foodstrategy.co.uk/brands-aldi-crossroads/">new “phantom brands”</a> appearing on supermarket shelves are clouding the waters. These are private supermarket label products without any reference to the supermarket’s brand or logo.</p>
<p>Despite significant improvements in the quality of private label ranges, supermarkets still face the challenge convincing customers of value perceptions. While supermarket private label ranges generally offer low price; low price is <a href="http://www.marketing91.com/price-quality/">frequently associated with lower quality</a>, and therefore less value.</p>
<p><a href="https://www.marketingweek.com/2014/08/21/where-next-for-tescos-venture-brands/">Phantom brands</a> are a way for supermarkets to overcome this challenge. While this strategy provides significant benefits to supermarkets, it comes with the inherent risk that shoppers may feel duped into buying a brand, which is not really a brand.</p>
<p>How supermarkets communicate the introduction of these new brands will be vitally important to their success.</p>
<h2>Woolworths the latest to try this</h2>
<p>The introduction of phantom brands <a href="https://www.retail-week.com/sectors/grocery/analysis-woolworths-australia-launches-phantom-brand-in-battle-with-aldi/7009930.article">by Australia’s largest food retailer, Woolworths</a>, is a strategic move away from the deepening price wars and offers many commercial benefits. Firstly, such brands will attract a new shopper who is seeking value and willing to pay a little more for a better quality product, while <a href="http://www.woolworthsholdings.co.za/media/news_display.asp?Id2=377">existing Woolworths Essentials products</a> will continue to satisfy the budget shopper. </p>
<p>Secondly, new brand names like Your Majesty Cat Food, Apollo Dog Food, Bell Farms and Baxter’s will give the impression there is a greater choice within the store. Supermarkets expect shoppers will welcome more choice and these new brands. </p>
<p>Thirdly, as these new phantom brands are essentially supermarket-owned brands, higher profits should be achieved. It also allows Woolworths to capture a larger slice of category sales where private labels have <a href="https://hbr.org/1996/01/brands-versus-private-labels-fighting-to-win">traditionally had little penetration</a>, like health and beauty, haircare, pet food and baby needs. </p>
<p>The risk Woolworths will face is in communicating the launch of such brands. While shoppers understand the Aldi offer, brands that aren’t really brands, they may feel with Woolworths they’ve been dudded into buying a brand. </p>
<h2>Why phantom brands work</h2>
<p>As grocery shopping remains a mostly low involvement, routine shopping task, consumers will employ simple strategies to reduce time and cognitive effort. This involves often referring to only brand or price, to <a href="http://www.acrwebsite.org/volumes/7967/volumes/v23/NA-23">determine quality and value and aid in selection</a>.</p>
<p>Supermarket shoppers presented with proprietary brands think higher priced means excellent quality and good value. At the other end of the spectrum, shoppers also encounter supermarket private label products and reason that lower price means acceptable quality and better value.</p>
<p>Phantom brands combine these two different sets of logic. Priced a little higher than supermarket private labels, but under national branded products, shoppers will perceive this new brand as moderately priced, quality comparable to the leading brand and therefore, excellent value.</p>
<p>Aldi provides an excellent example of this strategy at work. Aldi’s private label ranges do not carry the Aldi moniker, instead a wide <a href="https://www.aldi.us/en/grocery-home/aldi-brands/">range of “exclusive” brand names</a> like, Lacura Skincare, Choceur Finest European Chocolate, Belmont Biscuits and Mamia Baby. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=425&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=425&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=425&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=534&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=534&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143409/original/image-20161027-11260-bbzaam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=534&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Two brands of cereal, one phantom brand, one name brand.</span>
<span class="attribution"><span class="source">Choice/Allprices.com.au</span></span>
</figcaption>
</figure>
<p>Aldi’s private label ranges mimic the packaging of nationally branded products – take a look at Aldi’s copy of Kellogg’s Nutri-Grain called Power-Grain or its Sunny Crumpets, that look remarkably like Tip Tops’ Golden Crumpets. Such phantom brands infer perceptions of quality as packaging is comparable to the proprietary brands. Aldi’s low prices then create the perception of value. </p>
<h2>Private label growth and its challenges</h2>
<p>Australian shoppers have warmed to the supermarkets’ private label products. <a href="http://www.canstarblue.com.au/food-drink/stores/supermarkets/private-labels-vs-brand-names/">Research by market research company Canstar Blue</a> earlier this year found the number of Australians who purchased private label groceries rose from 44% to 65% in the space of just six months.</p>
<p>Market <a href="http://www.nielsen.com/au/en/insights/news/2016/up-for-grabs-grocery-retailing-growth-opportunities.html">research firm Nielsen estimates</a> supermarket revenue growth will come mostly from private label products. In comparable markets like the UK, the <a href="http://www.mcbride.co.uk/leadership-in-private-label/growth-markets">proportion of private label sales is almost at parity</a> with national branded products and across Europe. </p>
<p>Despite shoppers’ apparent <a href="http://www.nielsen.com/au/en/insights/news/2014/our-penchant-for-private-label.html">appetite for private label products</a>, there is still a stigma attached to buying private label. Much of this <a href="https://www.scribd.com/document/23369430/perceptions-of-generic-products">stigma stems from history</a>, as supermarket private labels evolved from no name generic products.</p>
<p>Ultimately, there <a href="https://hbr.org/1996/01/brands-versus-private-labels-fighting-to-win">are supermarket categories where private label simply doesn’t work</a>, like confectionery, baby food, health and hygiene, haircare. Such categories are dominated by market leaders, Coke <a href="http://clients1.ibisworld.com.au/reports/au/industry/majorcompanies.aspx?entid=1859#MP25">(with 53% market share)</a> and Cadbury <a href="http://www.roymorgan.com/findings/5615-chocolate-block-consumption-cadbury-and-lindt-december-2013-201406012329">(with 30% market share)</a>. Phantom brands will fill this space between private and proprietary brands. </p>
<p>Aldi’s entry into the Australian market in 2001 changed the way shoppers looked at private label products. While Woolworths Homebrand and Coles Smart Buys were generally seen as cheap, if not cheaper than similar Aldi products, consumers considered the quality of these <a href="https://www.scribd.com/document/23369430/perceptions-of-generic-products">no-name generics to be substandard</a>. </p>
<p>As a result, <a href="https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/choice-supermarket-special">supermarkets implemented a “good, better, best”</a> strategy for private labels. This is all despite the recent efforts of the big two supermarkets to <a href="http://www.smh.com.au/business/retail/woolworths-makes-homebrand-homeless-in-private-label-shift-20160327-gns0p2.html">re-launch their private label ranges</a> by essentially removing this bottom rung of no-name generics. </p>
<p>Even the supermarkets’ very best offers, Select and Finest, are still adorned with the supermarket brand and logo. Where these current private label ranges fall short of convincing skeptical shoppers of quality and value, phantom brands will succeed.</p><img src="https://counter.theconversation.com/content/67774/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gary Mortimer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More supermarkets are starting to stock “phantom brands”- private label products without any reference to the business’ brand or logo.Gary Mortimer, Associate Professor, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/385612015-03-09T18:10:36Z2015-03-09T18:10:36ZApple Watch: phantom menace of smartwatches could make us even more self-obsessed<figure><img src="https://images.theconversation.com/files/74190/original/image-20150309-13550-lrm2k3.jpg?ixlib=rb-1.1.0&rect=55%2C0%2C1992%2C1404&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wrist reward. Apple arms itself against rivals.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/hetstyle/15222624538/in/photolist-xBaE4-j1EjW3-81wyYZ-j1CuxE-97LJ3K-81zJk3-mYoJSM-mYqyoN-mYoKaR-81wz7H-81wz4D-81zJiJ-99Vnvt-99VnwX-8qiWNk-bLHrwi-eawgCF-oGkZXC-mYqyjE-81wz6g-oGkobZ-8GSHFq-oRKnKf-pcaVVL-oGm1pj-n8HKB1-zNutn-d2yvbj-d2yutd-d2ytP1-d2yt6S-d2yso9-d2yrGE-d2yqU9-d2yq93-d2ypqb-d2yoF1-d2ynRE-d2ymZj-d2ymbm-d2ykH1-d2yhYJ-pafBcu-kh6XMi-d2yxdY-d2ywqu-d2yvyb-d2yjZj-d2yjnf-d2yiEq">Houang Stephane</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Apple CEO Tim Cook has <a href="http://www.telegraph.co.uk/technology/apple/watch/11458389/Apple-Watch-event-live.html">released the much anticipated Apple watch</a> – his company’s first new product since the iPad. Cook said the new watch, in addition to telling the time, was a “comprehensive health and fitness companion”. But we’re unlikely to hear much about how people will actually use this new product for some time. </p>
<p>Our research has found that smartwatches certainly do have some benefits for users. But they also have a hidden, darker side which the companies selling them are unlikely to talk about. </p>
<p>As part of <a href="http://www.telegraph.co.uk/technology/10949941/Smartwatch-wearers-have-you-experienced-the-phantom-device-effect.html">a research project</a> with Alberto Rizzoli, we have tried to understand what drives people to invest in smartwatches. One participant, a judge, hoped he could keep track of the deluge of emails during long hours in the courtroom when he had to pay attention – and be seen to pay attention.</p>
<p>The dilemma is familiar to many of us. We spend our days engaged in social interaction. Huge proportions of our time are taken up with meetings or impromptu encounters with colleagues. However when we are in these meetings, our smartphone is buzzing away reminding us that our inbox is filling up. We may want to check these incoming messages, but <a href="http://www.cnet.com/uk/news/is-your-smartphone-helping-you-be-rude/">know it would be rude</a> to glace at our phone. When one of the first smartwatches came to market, the judge thought he had found the solution to this problem.</p>
<h2>Compulsive checking</h2>
<p>We found that heavy smartwatch users valued how the devices helped them track information as it arrived while still appearing socially attentive. It also saved users the hassle of having to dig through their pockets or handbags to find a buzzing phone. Surprisingly only about half the people we spoke with actually used all the health tracking technology built in to the watches. They were more interested in keeping abreast of their inbox than their calorie count. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74195/original/image-20150309-13585-189vtpc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ghostly devices, delicious variety.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/cozinhandofantasias/12915868633/in/photolist-5yNeiu-guR3gG-7baL9Y-7chAZ1-3Pm9HV-933Yd1-bsNrfZ-b6fPuK-b6fPCi-giXGrA-5LKHUk-vfZ49-9TPmKs-7ccQQ2-8Ytz5o-3PqjBJ-zucWf-h91QGh-dE4hpy-r2cBS-zucSw-5LFGaC-8KFVgG-aB8Jsa-kFkcLe-4PWEeX-utWqd-oWyMno-uvmZt-6y9Z1L-3KQMTM-2jHeMU-7CjxE9-dppV5S-6vMVD1-edwKHw-edr6EH-4kFQD1-7qbgLF-8PvLX2-qeoz8h-akEUSa-8G7Rvo-7zDEEF-7eMc9b-9wcuwg-9kaZgk-PkFMF-aA4wPo-68tBrd">Cozinhando Fantasias</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>We also noticed a worrying side to these new devices as heavy users of the watches incorporate them into their daily routines – we call it the “phantom device effect”. They would compulsive check their watch not just for the time, but for a wide range of information. In some cases their new gizmo would become such an instinctive part of their life that even when not wearing one they would check their bare wrist. Some would feel a phantom buzz, notifying them of an imaginary incoming email. </p>
<p>The phantom device effect leads us to ask about just how ingrained in our daily habits these devices might become. Recent research has suggested that average smartphone users <a href="http://abcnews.go.com/blogs/technology/2013/05/cellphone-users-check-phones-150xday-and-other-internet-fun-facts/">check their phone 150 times a day</a>, starting just minutes after waking up.</p>
<p>We also know this has the effect of extending work into all areas of our lives – monitoring work emails late into the night or during social or family events. We used to worry that the average American watched television for six hours a day. Now we accept as a matter of course the fact that we tied to our devices for most of the time we’re awake. Indeed many of us go to bed with our smart devices quietly monitoring our rhythms as we sleep. </p>
<h2>Keeping track</h2>
<p>This raises the question of what impact it will have on our lives. In the <a href="http://www.theguardian.com/books/2015/jan/22/the-wellness-syndrome-carl-cederstrom-andre-spicer-persuasive-diagnosis">work</a> Carl Cederström and I have done on the hidden dangers of wearables, a big big concern is privacy. </p>
<p>The Apple Watch, like most wearables, is essentially a tracking device, recording heart rate, sleep patterns, movement, whereabouts, and much more depending on the apps installed. All this is packaged and transmitted to datacentres for analysis. The result? A database of personal information of which <a href="http://www.britannica.com/EBchecked/topic/563751/Stasi">the Stasi</a> could only have dreamed. </p>
<p>As well as sucking up personal information, wearables could fuel an unhealthy obsession with personal wellness. By pumping health and wellbeing information at us non-stop, we start to become a little too focused on our bio-rhythms. Data which would have been generated only in the most unusual situations now becomes commonplace, making people not just health conscious, but also self-obsessed. </p>
<p>Instead of checking in with social networks, we spend more time checking in with our own bodily rhythms. As a result other people start to become more interested in what is going on inside themselves rather than what is happening in the world. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=430&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=430&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=430&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=541&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=541&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74194/original/image-20150309-13543-cizhrf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=541&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Have a heart. Get the data.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/18909153@N08/7194920984/in/photolist-bXMRkN-xHf9W-7NH13K-rm3dUQ-mNyhJ-99JhHa-76rGmU-knMSG-6BxdTP-35CjDr-zVg3F-7wsS22-a6BqJy-eLcUmA-9Ek24V-kiwhvX-sEfXu-oxZwis-tXNTP-9AVSAU-eL1uzD-eL1uNz-kpa49b-kpa1yw-9jj2Lo-6Gzaik-9hYnCu-9hVgvZ-9hYmDQ-9hVfv8-9hVg9B-pksjai-p4eA67-p4fp2D-62nNgQ-6ebygT-7E4sXh-arzymY-47Zxyz-47Zxpg-4J82op-d9Cz7j-5BT3G-kp8qdi-4JsTCi-4Jcf45-7V4mqD-9Lp9rC-6tWRLe-kpaaaE">Cross Duck</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<h2>Information obsession</h2>
<p>As we pay more attention to our feed of personal biodata we’re likely to become more anxious about things that we may never have given a second thought to in the past. Not walking your <a href="http://www.sparkpeople.com/mypage_public_journal_individual.asp?blog_id=2877769">allotted steps in a day</a> or finding you had a poor sleeping pattern at night can become a source of significant personal guilt or worry. As a result, we pour more attention into monitoring and controlling ourselves, giving us less time to do the things which actually make us happy. </p>
<p>If Apple’s projections are indeed correct and <a href="http://www.patentlyapple.com/patently-apple/2015/02/jp-morgan-forecasts-26-million-units-of-apple-watch-will-be-sold-in-2015-vs-720000-android-units-sold-in-2014.html">tens of millions of people</a> purchase smartwatches, it’s likely to create a step change in our lives. We already see people routinely posting on social media information they would have only shared with their doctor a few years ago. </p>
<p>Widespread use of smartwatches could mean that instead of relieving our boredom by answering emails, people will spend their time sifting through their biodata stream, planning ways to maximise their personal wellness ratings. Rather than talking about what was on television last night, people will start comparing charts of their sleeping patterns. When this happens we will know that <a href="https://theconversation.com/youve-heard-of-the-internet-of-things-now-behold-the-internet-of-me-36379">the internet of me has arrived</a>.</p><img src="https://counter.theconversation.com/content/38561/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Smartwatches will bombard us with data about our internal lives. We risk letting sleep patterns, calorie counts and bio-rhythms dominate our days.Andre Spicer, Professor of Organisational Behaviour, Cass Business School, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/280732014-06-18T09:55:43Z2014-06-18T09:55:43ZAmazon’s smartphone launch offers a prudent platform for growth<p>Amazon, the e-commerce internet giant, is launching its first smartphone. Media attention is focusing on whether the phone’s features, such as its rumoured 3D interface, are really as cool as portrayed in its <a href="https://www.youtube.com/watch?v=erUZQ9GK0sE">trailer video which aims to wow early users</a>. But by entering into the fray of an already hyper-competitive mobile phone industry, Amazon is doing a lot more than adding another gee-whizz feature to a smartphone.</p>
<p>This launch tells us a great deal about <a href="http://www.forbes.com/profile/jeff-bezos/">CEO Jeff Bezos’</a> strategy for his company – and what it might mean for the future of competition and innovation in our increasingly digital world. </p>
<p>First, let’s ask the obvious questions. Why is Amazon, known for internet retailing and related software development, entering a hardware market where leading incumbents like Nokia have already failed? After all, what does Amazon know about the telecoms business? Can it succeed where Google has failed? </p>
<p>We have seen Google, which has virtually limitless financial resources, enter the mobile phone handset industry by purchasing Motorola Mobile in 2012, only to <a href="http://www.bbc.co.uk/news/business-25956284">take a heavy loss after selling it on</a> less than two years later. Even incumbent firms who had a very strong set of phone-making capabilities have taken tough hits in this turbulent market – witness Nokia’s dramatic plunge, which led to <a href="http://www.microsoft.com/en-us/news/press/2014/apr14/04-25nokiapr.aspx">a sale of its mobile phone business to Microsoft</a>.</p>
<h2>Platform Number 1</h2>
<p>You cannot understand Amazon’s move without situating it in the broader context of platform competition. Platforms, these fundamental technologies such as Google search, Facebook and the Apple iPhone, are the building blocks of our digital economy. They act as a foundation on top of which thousands of innovators worldwide develop complementary products and services and facilitate transactions between increasingly larger networks of users, buyers and sellers. Platform competition is the name of the game in hi-tech industries today. </p>
<p>The top-valued digital companies in the world (Amazon, Apple, Google, Facebook) are all aggressively pursuing platform strategies. App developers and other producers of complementary services or products provide the armies that sustain the vibrancy and competitiveness of these platforms by adding their products to them. The more users a platform has, the more these innovators will be attracted to developing for them. The more complements available, the more valuable the platform becomes to users. It is these virtuous cycles – positive feedback loops, or “network effects” – that fuel the growth of platforms and transform them into formidable engines of growth for the companies and developers associated with them.</p>
<p>The smartphone is a crucial digital platform. Achieving platform leader status in this space is a competitive position all the hi-tech giants are fighting for. Google has its ubiquitous <a href="http://developer.android.com/about/index.html">Android operating system</a>, Apple has shaped the whole market <a href="http://www.telegraph.co.uk/technology/apple/iphone/5477324/Apple-iPhones-history-in-pictures.html">with the iPhone</a>, Microsoft has purchased Nokia’s phone business, and Facebook has <a href="http://www.bizjournals.com/sanjose/news/2014/06/04/highlights-from-whatsapp-co-founders-first-public.html?page=all">invested $19 billion in WhatsApp</a> among other acquisitions for its growing platform. </p>
<p>In fact, I suppose I should have rephrased my question a little earlier – why hasn’t Amazon already staked its claim to lead this digital space after having launched its Kindle Fire tablet and Fire TV set-top box?</p>
<h2>Opening the door</h2>
<p>Simply put, the smartphone is the main gateway to the internet today, and, in the hand of billions of users throughout the world, is the physical embodiment of a conduit that links those users to each other and to the whole content of the internet. There are almost 7 billion mobile phones in the world (and only 1 billion bank accounts). And the trend is staggering. Mobile payment transaction value <a href="http://www.zdnet.com/global-mobile-payment-transactions-to-surpass-235b-7000016297/">surpassed $235 billion worldwide in 2013</a>, and is growing at 40% a year, with the share of mobile transactions already reaching 20% of all worldwide transactions. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/51658/original/z83ytyxn-1403176272.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Amazon Fire.</span>
<span class="attribution"><a class="source" href="http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-imageproduct33">Amazon</a></span>
</figcaption>
</figure>
<p>So, while risky, Amazon’s entry into the smartphone business is a classic play: a platform leader entering an adjacent platform market that is also complementary to its primary business. All platform leaders aim to stimulate complementary innovation (think how video game console makers aim to stimulate the provision of videogames), and they often attempt not to compete too much with their complementors in order to preserve innovation incentives. But at some point all platform leaders start to enter these complementary markets themselves. Google has done it through Android, Apple has done it with iTunes, Facebook has done it with <a href="http://www.theguardian.com/technology/2014/jun/11/future-facebook-smartphone-apps-whatsapp-instagram">Facebook Home</a>. </p>
<p>It happens when platform leaders feel threatened by competition in their core market, or when they want to steer demand, competition and innovation in a particular direction. The idea is to use their own user base as well as their own content and technologies to create an unassailable bundle, one that is difficult for external competitors to break into. Think of it as creating barriers to entry, while expanding the core market. </p>
<p>The reasoning behind entering a complementary market is well known, and related to the benefits of bundling. In the case of hi-tech platforms, the benefits are even stronger. By optimising and controlling the interface between a platform and complements, a company can have a structuring impact on the evolution of the platform ecosystem – and that means on all the innovators around the world that invest and make efforts to develop complementary products and services.</p>
<h2>In your hands</h2>
<p>So, these are the reasons why Amazon is entering the mobile phone market, despite the difficulties inherent in taking on an über-competitive market. This strategic choice makes a lot of sense.</p>
<p>As to whether Amazon has a fighting chance of succeeding, there are reasons to be optimistic. Beyond its deep financial resources, Amazon has learned something of what it takes in the development and successful commercialisation of <a href="http://electronics.howstuffworks.com/gadgets/travel/amazon-kindle.htm">various versions of the Kindle</a>. That has given it expertise in hardware, on top of its software background, and should prove a useful training ground to allow it to launch other consumer products such as the smartphone. </p>
<p>But the ultimate judge will be you, gentle readers. Will you be willing to swap your favourite mobile phone for a yet another new kid on the block, even if it does let you browse Amazon’s ever-growing catalogue in splendid 3D?</p><img src="https://counter.theconversation.com/content/28073/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annabelle Gawer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Amazon, the e-commerce internet giant, is launching its first smartphone. Media attention is focusing on whether the phone’s features, such as its rumoured 3D interface, are really as cool as portrayed…Annabelle Gawer, Associate Professor in Strategy and Innovation, Imperial College LondonLicensed as Creative Commons – attribution, no derivatives.