In the Future, Will Software Be More Important than Hardware?

From  talent wars going on in Silicon Valley for software engineers, to the hundreds of thousands of new smartphone applications coming online, it’s not far-fetched to believe that software rules the world today and will continue to rule in the future. However, some hardware makers strongly disagree- that it’s the physical design, construction and production of the device, machine or infrastructure that will take precedence. Who holds the future – hardware makers, software makers—or both?

Flickr for android, courtesy of Flickr.

A Financial Times article by Andrew Keen highlights a brewing battle between hardware and software makers for investor dollars. Both sides believe that they are the smarter investment for the long run. And both have a point.

First, it’s tempting to see hardware manufacturing as nothing more than something that should be outsourced. After all, companies such as Amazon source the production of the Kindle to offshore manufacturers, and it’s commonly understood that most large computer companies leave production of machines to Chinese/Taiwanese contract manufacturers such as Flextronics, FoxConn and others.

However, increasingly companies such as CPU manufacturers and tablet makers are taking some of these manufacturing capabilities in-house, especially as product complexity increases and integration between software and hardware becomes more commonplace.

In addition, taking manufacturing capabilities in-house means less bureaucracy in terms of working with an outsourced vendor, arguably higher accountability (no one to blame for failures), and more control over manufacturing processes. Net, net in many cases the higher a product moves up the value chain in terms of complexity and integration, the more it makes sense for companies to assert authority, control and accountability for manufacturing operations—sometimes all the way to the point of assuming full responsibility for hardware production.

The counter argument however is hardware will always be a commodity. Designs and specs can be written so that just about any respectable contract manufacturer can produce a product. The real value, say software makers is the design of user interfaces all the way to behind the scenes algorithms responsible for executing complex processes.

Proof points for the “software will rule” camp include software companies gaining a bigger slice of VC funding, and the number of applications developed for iPhone (650k) and Android (400k). For further reading on this perspective, review VC and market maker Marc Andreessen’s comments.

Ultimately, the most likely answer of who will win the future (hardware vs. software) is that there’s a place for both camps. For example, it’s the integration of commodity hardware with advanced software that seems to be the best fit for many companies looking to acquire analytics capabilities.

This is evidenced by the data warehouse appliance trend of an engineered and integrated solution stack of hardware and software coupled with services for implementation, maintenance and operations. These solution stacks are architected, performance tested, certified and supported. And they usually come from a single vendor responsible for the entire end-to-end package.

In the meantime, we have a strong debate. VC’s like Marc Andreessen say software companies are primed to “take over large swathes of the economy”. Hardware makers claim the user experience in terms of design, touch and feel is more relevant than ever. What say you?

Digital Design: Instagram and the Pursuit of Beautiful New Things

For some Silicon Valley companies, the mantra is: “Slap code together, design a quick user interface, and get it to market.” And above all, as Mark Zuckerberg would remind us, “Keep shipping.”

In the very near future, such talk will probably give Instagram founder Kevin Systrom heartburn. That’s because Systrom thinks designing software code should be an inspired effort, just like the delectable creations of top chefs around the world.

When it comes to digital products, the idea that form follows function is being tossed out the window. As a New York Timearticle describes, it’s no longer necessary to simply examine a digital device or application to discern what it does. But that doesn’t mean there’s not a sense of beauty and simplicity necessary for digital products. In fact, the goal for software engineers designing best-in-class digital products is to build instinctive and intuitive applications and devices.

Perhaps that’s why Kevin Systrom’s Instagram was worth one billion dollars to Facebook. As noted in a Financial Times article titled, “The Aesthete of Silicon Valley Who Makes Photos Beautiful,” Systrom is obsessed with building things that are inherently beautiful.  Systrom says great chefs who painstakingly labor over their creations and add high-quality ingredients despite potentially higher costs inspire him. “The things we’re creating solve a need,” he says, “but in the meantime, they should be visually stimulating and fun to interact with.”

An obsessive personality, Systrom would likely have been a better disciple of Steve Jobs rather than of his new boss, Mark Zuckerberg. “Kevin notices the details that most of us don’t notice,” says Clara Shih, a friend of Systrom. “He’s a slow walker and lets himself get distracted. He takes time not just to smell the roses but to analyze the roses and think about the detail.”

Technological advances are coming so fast that it takes us a long time to assimilate all the benefits of each product and service. For example, software companies are notorious for rolling out hundreds of new features in each release, only to have customers use very few.

As our digital lives get inevitably more complicated, there will be an insatiable customer requirement for simplicity and aesthetic beauty. And as user interfaces get more cluttered, clarity in purpose and design will drive market share (as Google can attest). Indeed, the elegance of a single search box—unencumbered by advertising—is one reason Google has the lion’s share of search requests.

Instead of focusing on additional features that users will probably never use, digital companies of all stripes perhaps should aim for a crisper design and greater ease of use.

Ultimately, making digital products easier to use takes a long time in discerning and studying user behaviors, capturing those learnings, and using them to design better and more intuitive devices and interfaces. However, much like how top culinary chefs take the time to use better ingredients and obsess over the tiniest details in presenting their creations, digital creators will need to endeavor to stress the small stuff.

For digital consumers, naturalness, comfort, and fit will matter more in the near future. And thoughtfulness in terms of design and ease of use will be the next generation of differentiation for digital companies.

Finally, there’s been a bit of stress for Instagram users now that Facebook has purchased the company. Despite Facebook saying it will run the company independently, plenty of users fret that Instagram will lose its touch. However, wouldn’t it be something if Systrom didn’t end up leaving Facebook after all and instead became the company’s Jonathan Ive? It could end up being a “magical” pairing.

Transparency: Do Customers Want to Peer Inside the “Black Box”?

From politician salaries to calorie counts on restaurant items, “transparency” is a key buzzword in government and business circles. However, high interest in cloud computing, data warehousing “to go,” and other analogous concepts beg the question of whether customers really want to peer inside the black box or whether an opaque approach works best.

Increases in the call for transparency are legion. Health inspectors post food safety grades for eating establishments. Websites track lists of political campaign donors. And restaurants redesign bars, kitchens, and more to show patrons how drinks and meals are prepared. All this, in order to give customers a window into processes for product and service creation.

And to be sure, there’s definitely even more opportunity for transparency in product creation, especially in financial services. As an example, Michael Lewis’ Big Short cites how via the securitization process, hundreds of subprime mortgages were packaged up and divvied into “tranches” of investment quality. Through securitization, it was tough to estimate the contents of a particular asset-backed security. One hedge fund manager exclaimed; “I didn’t know what the (expletive) was in the things. You couldn’t do the analysis. You couldn’t say, ‘Give me all the ones with all California in them.’ No one knew what was in them.”

Creating a product with so much complexity that teams of MBAs are necessary to decipher its contents surely is a recipe for confusion. And on the ugly side of things, perhaps that was the intention. Regardless, in an age of social media where a company’s reputation can be destroyed in five minutes or less, this avenue will not ensure long term success.

However, a key question is whether customers really want to peer inside the black box. After all, investment banks had very little difficulty offloading these impenetrable structured products. Plenty of hedge, pension and even sovereign wealth funds lined up to buy these complicated products—and most with no questions asked.

In the analytics market, there’s an adage that business users really don’t care how a particular solution works, just so long as it meets their needs. And while this may be true in some instances, there’s also ample opportunity to enlighten consumers (or in this case application users) as to the “value” received through peeling back the curtain on how a product or service is designed and delivered.

What say you? Do your customers really want transparency? Do they really need to know what’s in the black box?

How BMW is Designing a Better Customer Experience

Design isn’t just for products—it should be a careful consideration in the overall customer experience. Case in point, with its “Dream it. Build it. Drive it” program, BMW is taking the concept of a personalized customer experience to a whole new level.

It’s common knowledge that when it comes to shopping for an automobile, most people dread setting foot on a car lot. That’s because the customer experience often includes pushy salespeople and plenty of exasperating negotiation with the dealer on a final price.

That’s why a Financial Times article titled “Benefits of a Showroom Bypass” is so interesting. It mentions that BMW is offering buyers a way to circumvent the dealer showroom and custom build a car of their very own.

According to the article, BMW has long offered buyers in Germany the ability to customize their own automobile, from paint and interior colors to installation of custom features, such as grills and moonroofs. However, as the company has shifted production of some models to the United States, this option is also now available for U.S. buyers.

In designing the customer experience, BMW had to revisit many of its processes in order to offer customers a personalized encounter. First, there was website design on the front end and database design on the back end. (There are more than 70 million possible combinations of models, interiors, exteriors, and accessories.) Second, engagement with buyers throughout the process was a consideration. The company ships each customer a video of their particular car as it’s built—it’s the actual car in the video—so the process needed redesign consideration when “custom built” became an option offered to consumers.

Why would BMW go through all this trouble—especially when it doesn’t charge extra for a custom-built car? A few things come to mind, including better customer engagement and the creation of a unique and special “one of a kind” automobile that arguably enhances an image of status in the mind of the buyer. In addition, it doesn’t hurt that most buyers of a custom BMW end up spending more money to accessorize a car of their own.

There has been plenty of research in the field of customer choice—and how too much “choice” can ultimately lead to customer confusion. However, this appears to be one instance where a highly customized and personalized customer experience is leading to extremely satisfied customers and ultimately higher profits.

Questions:
• Does the concept of a customized automobile purchase appeal to you?
• Is “build to order” a concept applicable to premium products only?

Customer Experience: Healthcare by Design

Image credit: Jim Roof Design

As health care insurance premiums rise year over year and out-of-pocket expenses rise in tandem, patients are beginning to realize that they no longer must accept 1960s-style doctor offices and plastic plants in the hospital lobby. In fact, in response to consumer-driven trends, some health providers are feverishly updating their office decor. Yet, these improvements cost extra dollars that some hospitals and doctors say they cannot afford. Are improvements to the overall patient experience worth the investment?

A hulking magnetic resonance imaging (MRI) machine sits in front of a painted backdrop of a country hillside, a bubbling brook, birds alive with song, and willow branches gently hovering above the water. Looking at the image behind the MRI machine, do you feel more or less anxious regarding your exam?

That’s a question that hospital administrators are asking themselves as they look to design principles to help re-engineer the customer (patient) experience.

Though shabby carpets, medical charts, and plain stark white walls remain the mainstay of hospital and doctor office waiting rooms, some medical practitioners are starting to realize that better design can reduce anxiety, increase patient satisfaction, and even lead to better health outcomes.

An article from Atlantic MagazineThe Art of Healing” cites how hospitals, doctor offices and clinics are taking cues from cutting edge retailers like Starbucks and Best Buy to redesign the patient experience. Author Virginia Postrel writes that since MRI and CT scans usually frighten patients, research shows that “simple elements like nature photos can ease their stress.” In support of this point, Ms. Postrel mentions, “Other studies with subjects ranging from the severely burned to cancer patients … have found that looking at nature images significantly reduces anxiety and increases pain tolerance.”

And it’s not just the sprinkling of nature images throughout the health care provider that’s working. Architectural configuration is also coming into play where designers are ensuring that patient recovery rooms get a good dose of sunlight and hospital rooms have access to windows with a clear view of blue skies and trees. One study cited by  Postrel found that patients with a view of nature had shorter hospital stays and required less “high-powered medication.”

The renewed focus on patient experience by some healthcare providers is long overdue, but not completely altruistic.

While the Atlantic article notes that it is certainly more costly to incorporate good design principles into the healthcare setting (sometimes an additional 10-15% expenditure), doctors and hospital administrators are realizing that patients have much more choice on where to spend their health care dollars. Indeed, such trends as more private pay patients, adoption of consumer-driven health plans, and websites ranking hospital care are pushing health care providers to up the ante in providing a better patient experience.

Ultimately, despite a renewed emphasis on designing a better health care experience, most patients would choose the best doctor in a substandard environment over a competent doctor in aesthetically pleasing surroundings. However, as consumers arm themselves with newly available information on satisfaction ratings of doctors and hospitals, error rates, and even outcomes, consumers will drive the health care system to improve not only the quality of care, but also the overall customer experience.

Questions:

1) Should your health care provider look more like a day spa?
2) Suppose you had an elective surgery where a significant portion was private pay, would you be willing to spend 10-15% more for a better patient experience?
3) Has your hospital or health care provider taken into account better design principles? Have these improvements made a difference in your perception of the provider?
4) Will the passage of the Health Care and Education Reconciliation Act of 2010 accelerate or impede health care aesthetics re-design?