ThinkFlood Blog

This is a basic question that we all ask ourselves at one time or another. Am I ready to drive a car? Leave home (for school, a job)? Enter into this relationship? Hold this responsibility?

Lately at ThinkFlood, we’ve been asking ourselves the same question — about our product. It seems that there are two opposing forces here. On the one hand, we are eager to get going, to do new things, and to test ourselves. On the other hand, we are apprehensive. We wonder whether our preparations are enough, and whether we are up for the task.

Some will say that the latter is just fear of the unknown. I’m not so sure. Certainly there is an element of unfamiliarity. But there are also good reasons that we may pause. For example, as a young company preparing to launch our first product, we want to make the right first impression. We believe that marketing — not technology — is our biggest challenge, and we need to make sure that when we “go live” the general perception is positive, or we will be digging ourselves out of a deep hole for some time.

Of course this being a business, there are some additional factors in the equation. For example, where are our competitors? For the moment, we seem to be in the lead, but there may be another company out there that is keeping as quiet as we are who sneaks up and surprises us. Another question many companies face is short term cash flow. Thankfully our non-development expenses are basically zero. (This is not true of our personal finances, and I know that my family is dying for this thing to hit the market.)

I think a lot of these factors — on both sides of the issue — are basically irrelevant. Let’s consider a few:

1. Competitors. Let’s face it — we have just about as much clue as to what our competitors are cooking up as we do about how the stock markets are going to move. In fact, that’s a pretty good analogy — timing the market is impossible. Instead, we have to focus on fundamentals (as a product company, that is creating something valuable for other people), make it as good as it can be, and settle in for the long haul.
2. Preparations. There is always more that we can do, and there will always be hiccups along the way. The fact of the matter is that it is impossible to be prepared for everything, and incredibly hard to know how to prepare until you start.
3. Cash position. A lot of people will argue that this is an absolute — no cash, no company. I won’t argue with the last statement, but limited cash on hand is not the same thing as saying there is no cash available. The other day, Jason Calacanis made a pretty compelling argument that entrepreneurs can survive if they want to.
4. Excitement. It’s generally easier to find reasons not to do something than to do something, but let me at least address one reason why people rush into things: excitement. It’s thrilling to do new stuff, particularly if you have identified something at the heart of the latest fad. But enthusiasm alone cannot create real value.

Now, I’m sure that you can come up with a bunch of other reasons to take the plunge or to hold back — I can’t possibly address all of those concerns in this post. Even so, I believe that there are only two questions to consider when planning to start something new:

1. Is it valuable enough?
2. Can I afford to fix it?

The order of these questions matters. First, whatever you are going to do, it has to be valuable to someone. In fact, it needs to be valuable enough that the cost of doing it is less than the value it delivers. As long as this is true, it is worth doing. The second question is related: when it breaks, can I afford to fix it. In other words, is the fully-loaded cost still less than the value you can deliver? You have to assume that whatever you do will fail sometimes — this is particularly true since you are about to start something new. So the question is not whether it will break, but whether you can afford to fix it if it does. If so — if the cost of producing it and fixing the failures is still less than the value you get from it — then there is no reason to wait.

What do you do if you cannot answer yes to both these questions? The answer is simple: 1) either increase the value of the thing by adding more features or (my favorite) streamlining to make it more useful, or 2) reduce the costs to produce and to repair until the answers change.

Yesterday a silent cheer echoed around the world when a consortium of cell phone makers and service providers proposed a new standard that would make possible, of all things, a universal cell phone charger. But it did not take long for critics to point out that the plan will not work because of the conspicuous absence of some major players: Apple, Palm, and RIM.

Personally, I think the fact that these companies did not agree to have this plan “mostly” implemented until January 2012 calls its feasibility into question more than anything else, but that’s another story. What I find most interesting is speculation as to whether Apple will participate.

The answer to that is a resounding no, but not for the reasons that most give. Contrary to popular belief, Apple is not going to snub this effort just because they can. Rather, I see the announcement as an effort on the part of some of the weaker players (“Hello, Moto”) to put in place a program that they can use as leverage against the companies (Apple, RIM) that are looking the strongest at the moment.

Let’s consider the history here. Apple’s iPhone connector is really just an iPod connector — the same one they introduced way back in 2001. In other words, for the past eight years, Apple has had a “universal” charger for all of its models of iPod and iPhone. By contrast, it seems that virtually every phone from the other manufacturers has a proprietary charger that differs from every other model supplied by the same manufacturer. Now, that does seem ridiculous. Unless your goal is to sell the public a lot of cheap car chargers at $35 a pop with an 80% gross profit margin, in which case it makes a lot of sense. [sigh]

The fact is, there have been several Windows Mobile smartphones which have offered a “universal charger based on the mini-USB connector interface” for some time. Which makes it all the more ludicrous that it will take until 2012 for the rest of these guys to catch up.

The real issue here is that while most of these phone companies are talking about chargers – dumb electrical connections that provide only power to the device – the smartphone connectors tend to carry data, as well. For example, those Windows Mobile mini-USB connectors allow syncing of data (calendars, contacts, music, applications, etc) between the phone and a PC.

Among these “smart connectors,” Apple’s 30-pin dock is much more sophisticated than anything else on the market. In addition to syncing data to a PC, it also allows robust access to the music library on your iPod or iPhone, which is the primary reason why there is such a thriving market of iPod accessories today. What would the world of the iPod be without speaker docks, clock radios, DJ mixing tables, video projectors, and a host of other accessories that all communicate using the 30-pin connector?

Personally, I think the success of the iPod (and by extension, the iPhone) is largely a result of the accessory market. Think about it: if you buy an iPod today for a couple hundred dollars, and then you spend a couple hundred more on an good speaker dock, what is your next MP3 player going to be? A Zune? A Walkman? Every time someone buys an accessory for her iPod or iPhone, the switching cost of moving to another platform increases – it’s a built-in customer loyalty program.

It seems that Apple has successfully done with iPod accessory makers what Microsoft did with Windows developers two decades ago. They have built up an ecosystem of supporting players. The iPod/iPhone market is strong today because of these companies. Many of the products they sell address niches too small for Apple to serve. But rather than forgo those opportunities altogether, Apple has licensed their connector technology to these companies and then sat back and watched while a thousand flowers bloomed. They are doing the same thing today with iPhone apps.

Finally, Apple’s competitors seem to be realizing that there is a solid business strategy here. Rather than stiffing their customers in order to sell a few extra car chargers, they could have built cohesive product lines and attracted a cottage industry of accessory manufacturers and application developers. Everyone from Microsoft to Nokia is trying to get on board with the program now. But it may be too late – Apple is way ahead of them.