Clearly they’re working on something in the “wearables” space, but I don’t think it’s merely a “watch” (even with a funky cool display).

One of Apple’s defining corporate characteristics is “watch and wait” (okay, so I made a pun). They have rarely, if ever, been the first to market. Rather they watch the market and competition, cherry pick what works from what doesn’t, and then package it with minimalist flair and high-end construction.

In fact, when the company did try to be a market pioneer with the Newton they failed miserably. Lesson learned.

What I think we are going to witness is Apple’s transformation of the “quantified self” movement from quirky early-adopter status (“Count my footsteps during the day? Why would anyone want to know that?”) and lead by companies such as FitBit and Jawbone, later followed by Nike with their FuelBand, to mainstream.

Essentially Fitbit’s and Jawbone’s products are accelerometers encased in a wrist band, although the Basis Band has a few more sensors tacked on to make it interesting.

There are more than a few hints out there, such as this article on the team of experts Apple has put together to work on this project.

If you read through the specialties of the people on the team and then close your eyes (I recommend reading the list before you close your eyes, otherwise it’s going to be a bit difficult) an image of a small, perhaps wrist-mounted, fashionable device with a clear display appears.

But the real magic is within.

This will be a sensor-studded device which monitors its wearers’ vital signs day and night. I’m imagining a device that autonomously monitors pulse, respiration, perspiration, blood flow, glucose, temperature (ambient and skin), acceleration (and hence, movement), location and motion (via the M7 chip already found in the iPhone5S).

It will have some kind of low-power (and low range) communications protocol, and my guess would be BLE (Bluetooth Low Energy), with which Apple already has experience.

What to do with all this information? The contributions of fitness, health, and sleep experts, point to many possible applications of this technology from the obvious (sleep and fitness monitoring) to the sublime (replacing current medical monitors, gesture-based input device – think of a WII without the WII or a Kinect without the 3D camera).

Apple was just granted a patent for headphones that can detect head gestures and monitor their wearers' activity, temperature, perspiration, and heart rate. There are a ton of applications here, and the one that climbs to the top of my list is training (measure exertion, stress, vitals, head position – and therefore change a displayed image or animation – and give audio feedback).

Personally I would love to go out running with nothing other than lightweight Bluetooth headphones and a wrist-mounted device. No, shoes and shorts are not optional.

Considering the involuntary nature of the device, this may be the largest scale invasion of privacy ever concocted and adopted willingly by millions of people – also paying for the privilege.

Want a hint? Apple is known for camouflaged field-testing their devices. Next time you see Apple CEO Tim Cook, take a glance at his wrist. It’s a fair bet.

Dong Nguyen is the most important mobile games developer on the planet today. Don’t ever expect to hear from him again.

Nguyen, developer of the hysterical hit “Flappy Bird”, did the unbelievable and withdrew his incredibly addictive game from the various app stores after it became too popular.

Nguyen claims to have taken the game down because it was “an addictive product” in his words. His other high-performing games Super Ball Juggling and Shuriken Block both have the same 8-bit retro graphical UX and simple game controls but are “harmless”.

His other games obviously benefit from the success of Flappy Bird, yet he did not build in any kind of cross-promotion between his games.

The best apps do one thing, and they must do it exceptionally well. The same applies to mobile games (which are, of course, apps as well): game play should implement one gaming principle as its main gaming mechanic.

Flappy Bird uses the gaming principle of “deceptive difficulty” (other gaming principles will be covered in future posts). As its name suggests deceptive difficulty works by confusing the player as to the real level of difficulty of the game. Often this is implemented by letting the player work through easy levels as they learn the controls and the rules. It also works as enticement for them to keep on playing through harder levels.

One excellent example of this is Angry Birds (hmm, maybe this is a “bird game” thing after all…). It’s deceptively difficult. It uses the digital equivalent of a slingshot which most people intuitively understand, but it’s not as easy as it looks. Angle and power need to be balanced to get the perfect shot (most levels can be solved with a single, properly placed bird). Looks easy? But it’s not.

“How hard can this be?”
Nguyen’s game skipped the learning and confidence-building stages. The game controls are exceedingly simple – tapping the phone screen is the only user action – which adds to the deceptive difficulty effect.

The seeming ease-of-play coupled with the extreme difficulty of getting anywhere in the game (most players would be sweating profusely if they made it to five points) simply enflamed players’ egos. The relatively short few seconds before players smacked into anything and killed off their birds encouraged players to try again and again since they hadn’t invested a great deal of time in navigating a level. This created a kind of negative-reinforcement loop – perhaps the “addictive” nature of the game that so bothered Nguyen – that drove players to play again, and again, and again.

Although it’s apparent when the viral spike in downloads happened, nobody to this days knows why it happened. The developers did not invest in any kind of marketing, and certainly not any viral campaigns, yet the game’s meteoric rise to the top of the charts came about only by its virality. In short, its success is probably due to the following IM (or DM, however you’d like to call it) sent by tens of thousands of frustrated players: “OMG. Dude, you’ve got to try Flappy Birds. It’s impossible!”

Of course having a YouTube video posted titled “FLAPPY BIRD – DON’T PLAY THIS GAME!”, or a mainstream article “Let Me Tell You The Time That I Played ‘Flappy Bird’ For 8 Hours” screams for this game to be played.

Reportedly at its peak this game took in $50,000 a day, all of it from ads. This incredible number obviously comes from the sheer volume of downloads (45 million or more) and game-plays (45 million times does anyone really know?). The press is wondering how he can turn off this money-making machine by killing off his game, while conveniently forgetting that existing installs still work and will continue to generate revenue until the masses’ attention is directed elsewhere.

On the other hand the idea of scarcity (“I have a game that you can’t have”) may keep people playing it for longer than its viral tail would ordinarily suggest.

The take away for developers from Flappy Birds: clearly “deceptive difficulty” is an ideal gaming principle to implement, although it’s deceptively difficult to do it right (Ahem. Sorry about that.). It’s driven widespread adoption of some of the best mobile games of the last few years, especially among the casual-gamer segment. The key is to figure out how to create a game that is easy to play but very difficult to master.

Every startup needs to focus on one thing, its core competency. When it gets bigger it can expand its horizons both in terms of vertical products or additional competencies, but only once it has firmly planted a stake in the ground.

In Better Place’s case they tried to develop several business segments at once, without actually developing the core competency they needed.

They were lauded for their vision, built a network of battery switching stations and sophisticated software, and created an excellent customer service team. What they didn’t do was focus on the one thing that was core to their business. Instead they tried to control all aspects of their offering.

Very few companies can successfully pull that off, and they are more an anomaly than the rule. Apple is a good example of the exception: they directly control design, software, marketing, sales, branding, and hold the reins very tightly on supply chain management and production. But not even Apple is able to control 100% of the user experience: to wit, the extensive third-party app collections for their handheld products, and, to a lesser extent, their computers.

(Which actually created a competitive barrier for Apple, although the company at first refused to allow third party apps.)

Steve Jobs, upon retaking the helm of the company in 1997, reduced the company’s product line to 10 from 50 (from an all-time high of 350), focusing only on the key products that constituted the company’s core competency and directly addressed the needs of the company’s natural customer base.

In contrast Better Place was all over the place by trying to manage the entire user experience, but in actuality controlling very little of it. So what were they – a car company? A leasing company? A technology company?

Better Place created their own predicament by being a car company that didn’t make cars. They had to find some. Only one manufacturer agreed to build a car for them – Renault – and only once Renault extracted a financial commitment from Better Place to buy 100,000 units from them (I have also seen this reported as 20,000). Tellingly, upon announcement of Better Place’s bankruptcy, Renault announced that "(t)he investment in the partnership hasn't been significant” in the project.

By all (user) accounts the single Renault model is a great car. But Better Place left its entire business dependent on the whims of one supplier. The single supplier also became Better Place’s potential single point of failure (absolute dependency), something that every engineer – and good entrepreneur – tries to avoid.

Oops number 5: building a business on top of someone else’s platform and goodwill (see numerous examples of companies who tried and died at Facebook’s and Twitter’s upside-down thumb). Wanting to control the entire end-to-end chain? That’s just arrogant and greedy.

The car also had another critical performance issue: the battery. The Fluence’s battery was essentially good enough for a few around-town jaunts, a typical suburban-urban commute, but that’s not how the typical customer drives. Even if they had, when they explored the “edge cases”, e.g. a weekend drive out to the countryside, which is not such an extreme edge case, they could reasonably only make a 50km trip, needing the other 50km to get back to their plug-in chargers.

Quite simply this was a technology fail, or more of a management fail, by launching a company on a vision for which the technology wasn’t available. Other companies in this situation merely invent the technology they need, whether it takes them 10 months or 10 years; this is a reasonable gamble since their competition will be in the same situation.

The right play for Better Place would have been either to engineer their own cars, à la Tesla, or focus on building better battery technology with 2x or 5x performance (10x performance is probably a real moonshot). From there they could have controlled the game with car manufacturers and consumers alike. Instead Better Place was forced to operate from a position of weakness and not strength.

Oops number 6: not having the power they needed, in several senses of the word

You Mean You Don’t Have $810 Million?

Ok, so you’re a small startup with maybe only a few million in the bank. Or a few thousand. It doesn’t matter. There are a lot of great lessons to be learned here. In brief:

• Know who the customer is. Give them a reason to buy (maybe I’ll get around to writing about this someday), creating demand
• Secure key customers, not just any customer
• Don’t invent new business models, learn the ones that are out there and that your customers know, and pick the best one
• Make it simple for customers to own your product
• Understand the difference between marketing and PR
• Don't base your entire business on someone else's proprietary platform*
• Negotiate from a position of strength, not weakness**
• Startups are a risky proposition. Mitigate business risks.
• Be able to deliver on your vision

Above all, stay humble. It’s good for business.

*Yes, iP*** apps would be nowhere without iOS, thousands of shrinkwrap programs would have never happened without Windows, a million websites would have never launched without Wordpress. However – how are all those Token Ring networking businesses doing today?

**Easy to say, hard to do

Here’s how it goes when you buy a car: you buy a car. It’s yours. From then on you’re responsible for putting in gasoline (if you want it to move), insuring it, paying licensing fees and parking and/or speeding tickets if you tend to accumulate those. But it’s the car that you want – probably – since you could choose anything in your budget.

Here’s how it goes when you lease a car: depending on whether it’s a personal or corporate lease you pay some money each month and don’t actually own the car at the end of the lease, although there are leases which allow you to buy the car at the end of the lease. For the most part companies prefer to lease and not own cars so that it becomes an operating expense (and not a capital expense). It’s a tax thing. The leasing company pays for all the associated costs with the exception of fuel.

Here’s how it goes when you get a car from Better Place: you pay for the car, but you also pay them every month. You sort of own the car, but don’t own the battery that gives the car its go-go juice. The fee you pay allows you to drive a certain distance each month. Just like with cell phone plans, there are several packages available. You can get any car you like, as long as it’s one of the models that the company sells, of which there is exactly one: the Renault Fluence ZE. And it comes in three colours, so you can’t say there isn’t choice. Oh, and the company knows where you drive, and even instructs you on what route to take so that you can make it on the remaining charge you have or swap batteries on the way.

When enterprise customers factored in the price of the car and the monthly running costs, they came to the conclusion that the net financial benefit to owning Better Place cars was exactly: nothing. In other words, except for the feel-good of producing pollution somewhere else and not out a tailpipe, Better Place was not making any sort of value proposition. No value proposition – no enterprise or fleet sales.

And even those for whom green is a way of life and not just a colour, the Better Place model was just too difficult to understand.

Oops number three: alienating the natural customer base.

For those who did buy into the vision and were willing to set economics to the side, many suffered greatly from range anxiety or FONGT (Fear Of Not Getting There).

An average commute in the US is about 25 miles, and in the countries where Better Place was active, the average commute is a bit less. But average is just a mathematical mid-point. With a real-world range of roughly 110-120 km (or about an hour’s worth of highway driving, less going up hills) and many users commuting at least that distance daily the need for swapping/charging stations is obvious, but their proximity was never a given. Most travelers plan their routes and find filling stations on the way – with Better Place you navigated between swapping stations and hoped that there was some scenery to fill the space in between.

Quite simply battery technology isn’t where it needs to be to pull off the company’s vision. There are countless stories of founders waiting until technology caught up to their visions before launching their companies, Pixar being one example.

Oops number four: putting the electric cart before the battery.

Better Place could have better served everybody by spending lavishly on battery R&D than on lavish visitor centres. Yes, it could have put them at a competitive disadvantage, giving other companies opportunity to build other parts of the system, but a long-range, quick charge battery is exactly the technology that will push the industry mainstream. That could have been significant enough business for Better Place, giving them far more leverage with all the players than the almost-none they had. That’s for the next post.

In the first part of this series on Better Place  I made the rather simplistic assertion that the company failed because quite simply it brought in much less money than it spent, and then ran out of money by trying to be all things to all people.

While the concept of cars was not new and the idea of putting batteries into cars was not all that new, the notion of electric car-as-cellphone was new, with the company itself making that analogy both in terms of its billing practices (fee plus system usage) and its unique battery swapping system.

Better Place put a great deal of effort into marketing by going so far as to build a visitors’ centre so that the general population could learn about the company, the car, and go home with a bumper sticker that read “My next car is going to be electric”, stuck to the behind of many a gas guzzler. It was soft-sell all the way with the hopes of converting the visitor into a customer on the next purchase of a family car.

Oops number one: first-hand family cars typically stay with their owners for between 5 and 7 years. There was no sense of immediacy to switch nor was there incentive to buy, say, being paid book value for trading in your old car.

For all the lobbying the company did, and with all the friends it had in many high, high places , it was surprising that no government program (in Israel) incentivised drivers to switch.

Now it could be that the relaxed sales approach was a cultural choice, or that the company was deliberately selling slowly so that it could build out its support systems and infrastructure (a la Mailbox). But the visitor centre’s real purpose was to draw in early adopters who were far more mesmerised by the car’s allure than its practicality. They would then turn into an evangelical force multiplier, spreading the word to other potential customers.

I can personally attest that this tactic worked very well with early adopters bombarding their friends with messages and photos about their wonderful new shiny thing. Even so, I’m still friends with them.

But Better Place completely misunderstood their market. It’s not mom (or pop), it’s the corporate fleet manager where fuel, maintenance, turnover and worker jealousy all play a part in large purchasing decisions.

Oops number two: the first customers should have been the Israeli government, key corporations (the Israeli Electrical Corporation, for one), and municipalities.

The enterprise sales route was tried and failed. Why? Next post.

Too Important To Fail. That about sums up the investment thesis behind Better Place.

A grandiose scheme to make the world a better place, born at the World Economic Forum in 2005 and launched in 2007, Better Place as a company never fell into a nice, neat niche. It was not a car manufacturer, a battery manufacturer, or a technology provider. Instead it was a sales & marketing organization, a battery-swapping infrastructure management company, and a tracking & billing company rolled up into one uncomfortable mashup.

Even though it raised astronomical sums of capital and had the appearance of a large multinational, it was every bit as much of a startup as say, Tumblr, also founded in 2007. However, while Tumblr had a focused mission that was fulfilled gradually, Better Place tried to be, and perhaps had to be, all things to all people, at least to its customers.

For comparison, imagine a modern automobile company not only needing to engineer and build its own cars, but also to make tires, transmission fluid, and open gasoline refilling stations wherever it thought its customers might drive. Not a very feasible proposition. This is, however, roughly what Better Place took upon itself.

The reason behind Better Place's failure to thrive is actually very simple: the company earned less money than it spent. But the lessons lie in the reasons why that happened. For now I want to deal with just one:

It All Starts At The Top

On the one hand, we expect founders to have vision – not just small, compartmentalized vision but an encompassing vision of their niche – and also to be assertive about pursuing and communicating that vision. On the other, declaring that your company or business model is the only solution to a problem is a sure way to be blindsided by the competition that will inevitably come.

In my opinion Better Place lived and died on arrogance and hubris, greased by greed. This is essentially the underlying theme to the other issues which will be covered in the next posts.

Over the next few posts I will try to dissect why Better Place didn’t succeed from the point of view of it being a startup. There are some good lessons to be learned which can be applied to most startups, no matter what the field.