Monday, January 05, 2009

Constraint based innovation

As an iPhone application provider Endeavour Software Technologies has been developing applications for Appstore since its launch and we’re starting to see a trend that is evolving.  People want large number of small apps. That the iPhone dev market is getting highly commoditized and as a result the word going around in the US is that you can get an iPhone app developed in around 10 K $.

The developers are lowering prices to the lowest possible level in order to get favorable placement in iTunes.

Many of the responses to Craig’s post focus on the need for marketing vs. depending on the App Store for sales. I do agree with the need for marketing, but if we are talking of low cost apps then marketing activity which involves additional cost is adding to the cost. There are methods which are cost effective such as working with press or getting featured by Apple but they are incredibly hard to guarantee.

What will it take to succeed?

I see that in order to make profits and sustain in this market companies need emphasize on a flawless, streamlined process where there are GUERILLA teams which churn our code quickly. By Guerilla I mean the ability to move in and move out of customers and their applications quickly, be able to get a very robust configuration, build and release mechanism to handle large volumes and a robust project and cost management oversight, which is led by a senior level executive.

The profits have to come out of the efficiencies by the way we build those apps. In the "app store" world we have seen that smaller players want to build an app quickly and inexpensively because for them the profit comes from launching many apps with small time to live, not with a single, large time to market application. Companies must therefore understand this trend and adapt.

Similarly, we know that BlackBerry app store is getting launched shortly. This will give rise to the need for the publishers to make their iPhone offerings available for the BB store as well. Here again the, short time to launch, high volume, low price app laws will hold. And here again we must tailor our offerings accordingly.

As of day there are over 10,000 applications on the iPhone Appstore and growing. In order to get a significant chunk of this one has to get the right price to drive volumes. This however is a million dollar question and begs some research. It is important t know the price point in which we get a customer to say YES? Is it $10,000, $8000 or $15000?

At the same time one has to think of innovative ways to bring down the cost such as Annuity based pricing? Are we willing to do development for a one-time cost of say $7000 and the rest in revenue per seat sold by our customer. For example, customer pays $7000 per application and then promises 25 cents per download on the Appstore.

Companies need to focus on agile development which has elements of

  • REUSE
  • Process steps are well defined, streamlined and efficient
  • Rework is a minimum
  • Self Motivated and Independent teams

This concept though is not new and similar concept is also developed by Mobile Distillery for other java enabled devices. They proclaim reducing 30% of development time. This tells me that that software development for the mobility world has to change dramatically over standard s/w development where speed and portability becomes key.

Companies need to come up with automated development and test frameworks for rapid application development. The efficiency will be the key. I have seen Barclays using such frameworks for building complex trading tickets by designing widgets (GUI controls embedded with behaviour) and then by just putting these together for building the application. This worked very well. These widgets were individually tested to save time and finally the overall picture needed to be tested.

In all this one must keep in mind the three main issues with mobile applications

Porting:- Not a tough job as such, we just have only one SDK to develop the application for

Distribution:- Appstore is all about distribution and as easy as downloading music via iTunes

Discovery:- This is something that isn't sorted out yet & needs further elaboration

Approach to beat the market

  1. Focus on Agile development and be able to change concept of software development for changing face of software that is needed for the mobile platform.
  2. Need for a dedicated testing team connected to each application. We can offer it as a service for Appstore developers and publishers
  3. Need to practice for each horizontal platform such as iPhone, Blackberry, Windows Mobile, Android Market, etc. This can also be extended to vertical elements as we go on.

Conclusion

Well, its true that in crowded market prices is driven down but is only true of products and services where the barrier to entry is low. Indeed in a globalized and open playing field only those who provide a differentiated offering and able to educate their target audience will be able to command a better price.

Such barriers though are the very seeding point for creativity that will be born out of very constraints that are now seen as barriers. Constraint based innovation as C.K. Prahlad would say.

If one market place, say Appstore, does not offer what the customers want over a period of time then again market will shift in a direction to create quality. The move from the red ocean to blue ocean.

Never in human history have we been held back because the space for selling is crowded. Markets always find a way and mobility is still at its infancy...

1 comment:

JT Klepp said...

Hi Rahul,

very interesting thoughts. I think there are two tracks here:

1) The quick hit apps that you talk about. I have seen this work back in the early days of Java, when a Norwegian developer sold 20k copies in a few days (with only a few available java handsets) by developing a game overnight based on a funny political event in the country. I.e. develop something relevant, and it can be simple but probably has a short shelf life.

2) Some apps will by the vary nature of it be complex because they service they offer is complex. In our case with www.storyz.com, it is not about re-use as much as further development of the app as the service grows. I.e. you start with a major app and re-work it to improve it.

In the latter case, using porting platforms such as Mobile-Distillery or Javaground is certainly valid when you want to take it to other platforms (which you typically need to do as a mobile service provider).

I do see a "garbage" danger at the AppStore, but typically what you see is that only the top 25 generate the bulk of the traffic. It has always been the case in mobile that page 1 and 2 of any mobile portal generates 90%+ of the downloads. The AppStore is not any different.

The real danger I see then is that it becomes a publishers game. For now, the AppStore is agnostic to content providers, but surely the temptation may be to lean towards making deals with the big publishers for favorable placement. Or they can go the other way and tie up with google and others to create and ad centric model where you pay for the placement. Google has already taken step 1 by allowing you to only show your ads within the iPhone browser - but surely the ad eco system is very rudimentary at this stage.

Of course the problem may be that the big publishers will outspend everyone here as well, but the internet has shown that cool content can rise to the top through word of mouth. It just has to be really good (and I am not talking about iFarts or the Woo button here... :).