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Attendees of the Mobile World Congress in Barcelona earlier this year might have easily overlooked what could become a huge success. Modu, an ultracompact cell phone launched by the Israeli technology start-up modu mobile, might be the first truly modular phone – a technology with significant disruptive potential in the mobile communication devices category. However, highly relevant questions on consumers’ jobs-to-be-done and the business model need to be thoroughly considered for modu mobile to be successful in the marketplace.

The technology

In essence, the 1.41 oz., 2.8 x 1.4 x 0.3 inch device is a no-frills cell phone with a small screen and just a few buttons that can be wrapped in one of multiple “jackets” to become a more advanced cellphone (e.g. with a full QWERTY keyboard, a bigger screen, or individualized design). When merged with a “mate,” the modu becomes the core of an entirely different compound device with different performance dimensions such as a portable music player, a car radio, a GPS-system, a bike computer, a camera, or an alarm clock with a docking station that displays incoming text messages. The modularity of modu’s hardware and software allows its processor, memory, and wireless technology to run the compounded devices. 

The job

The modu is set for success only if it precisely targets consumers’ jobs-to-be-done and does not get distracted by the technological possibilities. Instead it should focus on specific circumstances consumers face during their day where the modu could be a winning solution: “Help me enjoy my commute” when getting to work and back, “help me access my emails while on the go” during the work day, and “help me become available for communication” when going out at night might be examples. Now, each of these jobs is already addressed separately by illustrious products such as Apple iPod, RIM Blackberry, and small form-factor cell phones by Nokia, Motorola, Samsung and others. 

At the moment, modu mobile’s answer to these competitors seems to be a lower price. The anticipated price of $200 for a modu bundled with two jackets that range in price from $20 to $60 each might differentiate modu from its respective nonmodular competitors. Yet, competitors could simply decide to sell for less, cutting their margins to outcompete modu.

The true power of modu’s technology lies in its modular architecture. Modu mobile can create a competitive edge by translating the device’s customizability into two distinct performance dimensions. First, modu's modularity can facilitate the individualization of consumer electronics -- a trend that predates its most common and unfortunately popular example, the personal ringtone. The second performance dimension follows the broad job “help me make my daily life easier.” This might sound more straightforward than it actually is, but figuring out how precisely to align communication technology with cross-architectural usefulness will be key for modu to challenge the iPods, Blackberrys and Nokias of this world. In this context, swapping the modu between multiple jackets and mates per day needs to be as quick and easy as its teaser suggests.

The business model

Modu mobile plans to launch its device with support from major cellphone carriers in Italy, Israel and Russia this October, followed by the U.S. and other European countries in 2009. Modu's business model focuses on selling the phone while licensing the technology to third-party manufacturers, who will build jackets and mates on their own. Manufacturers could profit from licensing modu’s technology by launching their products without a slow and relatively expensive licensing process with the Federal Communications Commission, because the modu is already a phone.

Modu mobile, in turn, keeps full control over the core component of what they hope will become as standard as flash data storage devices, the last undertaking of modu founder and CEO Dov Moran, who was formerly CEO of msystems inventor of flash data storage devices that was acquired by SanDisk Corp for $1.6 billion in late 2006). The two main advantages of licensing technology to other manufacturers for modu mobile are that with an increasing number of jacket and mate manufacturers the modu would be more and more cemented as a standard, and as other companies also strive for success, modu mobile hedges its risk of failure by potentially not getting the job quite done for consumers.

The future

Modu mobile has the potential to disrupt the mobile communication devices category. It can target overshot and/or nonconsumers (an interesting occurrence of a potential low-end and new market disruptive innovation), if it is able keep the low-price promise along with increased ease of use, or by introducing a new performance dimension around the device’s modularity and striving for increased customizability. The business model appears promising, if the self-reinforcing mechanism of initial success results in a large base of third-party manufacturers.

These are all big ifs, and I am really curious to see what the future will bring for modu. 

With the Eee Surf, ASUS wisely trades power and functionality for simplicity and a low price, a disruptive play that should find its way into many homes as a second computer.

I learned about the ASUS Eee PC 2G Surf laptop on a recent flight. The passenger next to me opened up the airline magazine and pointed out to me a small, really sharp looking laptop that sells for under $300. The computer was designed by ASUS and Intel and is known for its combination of light weight, Linux-based operating system, Wi-Fi capability, solid-state drive (like an iPod Nano) and relatively low cost. He said he wished he had known about the ASUS Surf before because it would have made for a great second home computer for his wife and young children.

We applaud ASUS for developing a product that is targeted at a clear job to be done – provide easy access to the web and prevent household fights over the primary PC (and Internet connection).

This product breaks down two key barriers that currently prevent more people from using laptops – complexity and cost. According to Laptop magazine, the laptop is “ten times simpler to use than any Windows machine, starts up twice as fast and is about one fifth the cost of other systems in its weight class”. The interface offers only six easy-to-understand options: Internet, Work, Learn, Play, Settings and Favorite.  Since the computer runs on Linux (which is free) it keeps the price of the product down (no Microsoft licenses).

Of course, breaking down the barriers of complexity and cost requires trade-offs that won’t satisfy everybody. It is hard to load new applications, skimps on internal memory (only 300 MB of the 2GB solid-state drive is free) and won’t impress tech savvy folks with its specs, but like many disruptive innovations, it meets an important and unsatisfied job to be done. Need a low-cost, easy to use computer to prevent your kids from fighting for Internet time? ASUS has the right PC for you.

Our own Scott Anthony warned on his HBS blog Innovation Insights that Sony's Blu-Ray victory over Toshiba's HD-DVD format "will be meaningless if the real battleground turns out to be the fight for disruptive devices and business models that make it simpler, easier, and cheaper to access content over the Internet."

Surely enough, when asked in a March 3 Wall Street Journal interview if Toshiba intended to play a role in the video-downloading market, Toshiba Chief Executive Atsutoshi Nishida answered, "That's what we're hoping. We've been developing technologies in this area already, but now that we don't have the HD DVD business, I want to put even more energy into that."

When asked if the loss of the format battle was a blow to Toshiba's growth strategy, Nishida replied, "It was just one avenue of growth. It was one of 45 strategic business units that we have. This just means we now have 44." And later on, he said, "If you don't take risks, you make no progress. Situations change constantly, so if we can't change with them, then there's no future for us."

While Nishida never cited Innosight or Clayton Christensen in this interview, clearly he understands how disruptive innovation works. Here, for example, are his five tips for overcoming a crisis:

1. Keep in mind that business without risk is business without growth.
2. Work with the facts. Listen to the market, not your ego.
3. Act quickly and decisively. Delay makes things worse, not better.
4. Be a proactive leader and quickly communicate your decisions.
5. Be resilient and continue to innovate. Success is not forever, nor is failure.

It would not be wise to count Toshiba out, even if they did lose this round to Sony.

Its often said that generals "fight the last war. They use tactics that worked in the last war and struggle when conditions change in ways that render those tactics ineffective. For example, after years of bloody trench warfare in World War I, France built heavy fortifications along its borders (the "Maginot Line) to prevent a full-on assault. The Germans innovative "blitzkrieg model obviated Frances brute force.

Companies oftentimes run into the same trap. They assume tactics that led to success in the past will lead to success in the future. Even worse, companies can choose the right tactics to win a particular battle, only to find out they have lost the innovation war.

This often happens in disruptive circumstances. Market-leading incumbents can do everything absolutely right, achieve dominance in their core market, and stumble in the face of a disruptive attacker that changes the game through simplicity, convenience, or low prices.

Consider Sonys efforts in the battle for next-generation DVD technology...

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More over at HBSP's Innovation Insights

Microsoft's new operating system, Vista, promises much-heralded enhancements in things like parental controls, media features and search capabilities. It also boasts a new graphics-intensive user interface called Aero. If you dont have a fairly new computer with a powerful Graphical Processing Unit (GPU), you will be downgraded to a stripped-down interface without the latest bells and whistles.

This means that in addition to the traditional question of what CPU to buy to run a new operating system, consumers upgrading to Vista Premium with Aero will now have to focus on what GPU they need as well. This has interesting strategic implications for chip makers.

ATI, one of the two major graphic card makers, has designed new technology specifically for Vista; AMD, looking to develop new growth as a CPU-maker, purchased ATI last year.

Widely known as the number two player in PC CPUs, AMD now has a chance to change the game. It is integrating ATIs graphic capabilities with its own CPU onto a single chip, called Fusion. By reducing the number of chips needed in a computer, AMD aims to dramatically cut PC costs while delivering an advanced graphics offering that is likely good enough for mainstream Vista Aero consumers, but unlikely to woo the most demanding gaming users. The WSJ reports that Fusion will be especially popular in emerging markets where eager customers want to upgrade but lack purchasing power.

The major risk in AMDs acquisition is that as an integrated company, ATI is unlikely to continue working closely with Intel, which has moved to improve its own graphics offerings and is bolstering its relationship with ATIs competitor, Nvidia. However, with the opportunities for increased efficiencies and advanced Vista graphics support on a single chip, Fusion is the right move for AMD to remain competitive in the consumer space.

See "AMD Readies For Vista Graphics. Red Herring. January 29, 2007
"Did Vista influence AMD-ATI fusion? Daily News and Analysis. October 28, 2006
"AMD Plans New Class of Multifunction Chips by '09. Wall Street Journal. October 25, 2006

Professor Christensen has stirred up an interesting debate about Apple's ability to maintain its current level of growth in the recent BusinessWeek article, "How Apple Could Mess Up, Again."

In this interview, he speculates that Apple's proprietary architecture will lose its competitive advantage in the future, as it did in the past. Prof. Christensens bases his argument on the theory of modularity which states that early on, when functionality and reliability is not yet good enough, a proprietary solution is right. However, when the technology matures and standardization occurs, the product becomes modular. The industry leader loses its competitive advantage and the ability to make money shifts down the value chain to those who control aspects of performance.

What is your view on this topic? What do you think Apple should do?

For more information about modularity, see Skate to Wear the Money Will Be, HBR, 2001.
See also, Chapter 5 in The Innovator's Solution.

Researchers at MIT's Media Lab, in conjunction with high-tech heavyweights such as Google, AMD, and Nortel, recently unveiled a prototype of a $100 laptop intended to grant access to the World Wide Web to children in developing countries. The computer is the size of a textbook, features built-in wireless capability that can connect to the web via WiFi and create local area networks, and - since electricity in large swaths of the developing world is expensive, inconsistent, or non-existent - can be powered by a hand crank. Costs are kept down by reliance on open-source software, a radical redesign that focuses on simplicity and durability, and economies of scale -- governments in Brazil, Thailand, Massachusetts and elsewhere have signaled interest in purchasing the machines en masse. The $100 laptop has enormous disruptive potential: it will compete primarily against non-consumption in places where traditional laptops cannot penetrate due to excessive cost and insufficient power and will appeal to overshot consumers on the basis of price and accessibility by cutting out the pricey proprietary software and advanced applications featured on, say, $1000 laptops. Essentially, this new kind of laptop will meet the needs of a massive and massively underserved market. Furthermore, government agencies and international aid organizations (led by the UN) are expected to foot the bill, meaning that tens-of-millions of the laptops may be shepherded into the developing world as soon as the final (though not insignificant) technological hurdles are overcome. The target date is late 2006, with full rollout in 2007. Like many disruptive innovations before it, the $100 laptop is being derided by industry incumbents as nothing more than a gadget (specifically, "a $100 gadget," in the words of Intel Chairman Craig Barrett, quoted by Reuters, 12/9/05). Will the well-established and thriving laptop computer industry be swept away by a hand-cranked "gadget?" And of infinitely greater significance, can said "gadget" revolutionize the global computing and communications landscape and facilitate the education of millions, hundreds-of-millions, even billions of the world's poor and underserved? Affordable wireless telephony has already begun to reshape the world; cheap and effective wireless computing, run on wireless power, cranks up the disruptive and transformative potential even higher. See: http://laptop.media.mit.edu/ http://seattletimes.nwsource.com/html/businesstechnology/2002628425_laptop17.html http://www.treehugger.com/files/2005/12/intel_chairman.php http://today.reuters.com/News/CrisesArticle.aspx?storyId=SP263515

As the number of days left for Christmas shopping dwindle, it becomes harder and harder to find one of the most popular gifts this season - the XBox 360. If you can't find one, don't worry - it may turn out that the XBox (and the PS3 for that matter) are missing the boat when it comes to video games.

When you think about the "Jobs to be Done" regarding video games, perhaps the most important job is allowing the game player to escape from reality for a while and become immersed in a new world. Sony and Microsoft have decided that the best way to do this is to make the pictures and graphics on the screen as realistic as possible. Both are moving along the sustaining curve in that the traditional measure of performance for video games has been graphics. Both the XBox 360 and the PS3 have incredibly sophisticated graphics processors and support High-definition outputs. Both produce stunning graphics. And both have hefty price tags.

Nintendo has decided to go a different, and perhaps disruptive, route. No high definition for the new console, the Revolution. And while the graphics processor will be capable, it's not the cell processor that's going into the PS3. The price? Estimated to be half of a fully loaded XBox 360 or PS3. So what's the big deal? The controller.

The wireless controller eschews the typical joystick controllers used by the PS3 and XBox 360 in exchange for motion sensitivity. Imagine your character walking in the forest and encountering a dragon - a quick slash of the controller results in your character making the same slash with his sword. A lunge forward and your character lunges. Don't aim your gun with a joystick, aim it with your hand like a real person would do.

Nintendo is betting that the way to a more immersive experience is not through higher quality graphics. They believe that the graphics capabilities of the new systems are overshoot. Instead, they argue, make the gaming experience more real by having the player get more physically involved.

It's a new approach in an industry that has been focused on graphics for a long time. While it remains to be seen how successful Nintendo will be, they have to be commended on their attempt at disruption.

So if Santa doesn't bring an XBox 360 to your house this Christmas, it may not be the disaster that Microsoft would have you believe.

A few weeks ago, I mentioned the Firefly phone and asked whether it would be considered a sustaining or a disruptive innovation. While it had some characteristics of a disruptive innovation - a simple product that enables a new set of customers to use the product - my analysis suggested it was more of a sustaining innovation. If the innovation is not disruptive to all major incumbents, it is probably not disruptive. More and more evidence seems to be backing my thinking.

The latest entrant into the market is Leapfrog - the manufacturer of the LeapPad, which if you have young kids, you know well. Very similar to the Firefly - and since it's Leapfrog, it will also play educational games. Clearly a number of companies feel the market for cell phones for young kids is attractive. Time will tell if they are right. One thing is for sure - if it turns out to be a good market, it is only a matter of time before the big cell phone manufacturers jump into the fray.

This morning, Disney and Sprint announced plans to develop "family oriented cellular services." Here is the link - Disney/Sprint Collaboration. While the companies have not been forthcoming with details, others have suggested that the service may offer cell phones for young children.

The good news for Firefly is that the service isn't expected to launch until next year. The bad news is that if the Firefly phone is successful, we can expect to see the Disney/Sprint collaboration offering similar scaled down phones that leverage the Disney properties. A Sleeping Beauty cell phone with "Once Upon a Dream" as a ringtone could turn out to be Firefly's nightmare.

There have been a couple recent articles (Washington Post story, RR) about the launch of single-use camcorders. The hope behind companies introducing the products is that they mimic the use of single-use still cameras. Believe it or not, there were more than 200 million single-use still cameras sold in the United States last year " about two per household.

The company that has introduced the camcorder, Pure Digital Technologies, has done its part. Wall Street Journal reviewer Walter S. Mossberg (RR) praised its product as simple and convenient, exactly the words you would want associated with a disposable product. He did note that the quality of the product lacks in some circumstances. Thats not a big deal however, since people who purchase these devices are going to compare them to no recorded video at all. Something with spots of mediocrity is almost always better than nothing.

So will the product be a big success? My hunch is that it will not. The basic reason for this assessment is the sense that the save my memories when Im on the go space has a number of established competitors. Sure, video has some advantages over still images, but there still is vastly more consumption of still cameras than video cameras. Additionally, many digital cameras and cellular phones with cameras have rudimentary video capabilities, which could very well be good enough for target users.

Because Pure Digital Technologies has optimized around the right variables for a compete-against-nonconsumption play it has a fighting chance of success. The big question will be whether it truly does compete against nonconsumption, or if consumers compare it to disposable cameras and their cell phones and think, What Ive got is actually good enough.

Any thoughts about this? Am I offbase?

Weve long held that one of the best ways to drive growth is to provide simple, affordable solutions to the great many nonconsumers in developing countries. This article discusses an interesting example: a computer that costs about $200 targeted at users in India who cant afford higher end solutions. To hit that low price point, the computer lacks features that existing users take for granted, such as a hard disk and Windows software. As the developer states in the article, the computer lacks the "unnecessary fluff of the conventional systems.'' It can adequately do everyday tasks such as surf the Web and word processing. The critical thing always is targeting the right product to the right user. People already consuming good computers would reject this simple computer as not good enough. People who lack the wealth to afford even low-end computers might deem this solution delightful.