Andrew Malcolm, Skype Why do great products make for bad business? Conversely, why do bad products sometimes result in good businesses? Systems for effective decision making are key to ensuring you know your phase 2 and how to get there.

1. Remember Phase 2:
Ensuring great products become great businesses
Andrew Malcolm
VP Mobile Product Marke5ng, HP
Sunday, November 3, 13

2. Defini5on of a Product
What’s the product?
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Sunday, November 3, 13

3. Defini5on of a Product
What’s the product?
As a user, does it maFer?
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4. Defini5on of a Product
What’s the product?
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5. Defini5on of a Product
What’s the product?
This probably maFers … a lot
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Sunday, November 3, 13

6. When great products become bad
businesses
Some of the greatest products in recent memory did not translate to financial value
Nintendo
Sony
Callaway Golf
186M
“Walkmans”
cumula5vely
shipped
Titanium
drivers
penetrate
market
Titanium
drivers
reach 460cc
maximum
size
Wii sells 11M
units in 2008
to surpass
XBox
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7. Some bad products are good businesses
While less inven5ve “products” have created great wealth
Nintendo
Sony
Comcast
Visa
Callaway Golf
eBay buys PayPal
California bans
for $1.5B
smoking within 20`
of entrance to
public place
DirecTV signs NFL
deal
Philip
Morris
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8. Why does one product win?
The story is especially true now that distribu5on is not a barrier to entry and network
effects are less sustainable
First to Market
Dominant Player
VS
VS
VS
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9. Who wins?
All business need to know what Phase 2 is
hFp://www.southparkstudios.com/clips/151040/the-­‐underpants-­‐business
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10. RECAP: Defini5on of a Product
What is Skype’s product?
Is it the plaform Mac,
Win, Droid?
Is it the payment
structure: Premium, Sub,
PAYG?
Is it the Mode of
communica5on: video,
chat, PSTN?
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Sunday, November 3, 13

11. RECAP: Defini5on of a Product
What is Skype’s product?
Is it the plaform Mac,
Win, Droid?
Is it the payment
structure: Premium, Sub,
PAYG?
Is it the Mode of
communica5on: video,
chat, PSTN?
As an organiza5on, does it maFer?
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Sunday, November 3, 13

12. Who wins?
Which of the following VoIP products is beFer?
Features
Unlimited group
communica5on
US Domes5c Free
Calling Price per
Minute
eMail contacts added
Sign-­‐up Experience
Web based
Group Video with premium
subscrip5on
3.0¢
Contacts added individually
Downloadable so`ware
Plaform
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13. So who wins?
Why does the “lesser” product have 4X the monthly users?
Features
Unlimited group
communica5on
US Domes5c Free
Calling Price per
Minute
eMail contacts added
Sign-­‐up Experience
Group Video with premium
subscrip5on
3.0¢
Contacts added individually
Web based
Downloadable so`ware
~100M
~400M
Plaform
Monthly Users
hFp://marke5ngland.com/if-­‐googles-­‐really-­‐proud-­‐of-­‐google-­‐it-­‐should-­‐share-­‐some-­‐real-­‐user-­‐figures-­‐9796
Sunday, November 3, 13
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14. Is Skype a great product?
Skype is the largest Telco in the world
Interna5onal Phone Traffic
• More than 30% of
Interna5onal Minutes are
on Skype
• More than 2B minutes
every day
• More than 1B downloads
and ~30-­‐40% penetra5on
of all broadband devices
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Sunday, November 3, 13

15. Is Skype a great product?
Skype is the largest Telco in the world
Interna5onal Phone Traffic
• More than 30% of
Interna5onal Minutes are
on Skype
• More than 2B minutes
every day
• More than 1B downloads
and ~30-­‐40% penetra5on
of all broadband devices
Undeniably, Skype disrupted the telco market
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Sunday, November 3, 13

16. Is Skype a great business?
Skype destroyed a lot of value for telcos; what amount of value did it capture?
Minute Growth: Skype vs. Telcos
•How does Skype make
money?
• Who is Skype’s largest
compe5tor?
•What happens when
more and more people
are on Skype?
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Sunday, November 3, 13

17. Is Skype a great business?
Skype destroyed a lot of value for telcos; what amount of value did it capture?
Minute Growth: Skype vs. Telcos
•How does Skype make
money?
• Who is Skype’s largest
compe5tor?
•What happens when
more and more people
are on Skype?
It’s easy to cri5cize, what could Skype have done?
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18. Skype could have …
Become an exchange for “e-­‐services,” a plaform for communica5on applica5ons, or a
global wallet for remote services
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19. Ensuring you know Phase 2
Great businesses are a system of decisions, not a product or features
Customer Selection
Customer
Priorities
Stated
Silent
Future
Value Proposition
What high value customer opportunity am I
serving?
What problem will I solve
for them?
Organizational Architecture
What does my organization have
to execute better than anyone
else?
Business Design
Environment
Traditional
Emerging
What will I do
to protect my customer
relationship and profit
stream?
Strategic Control
How will I earn a profit
from serving this
customer?
Profit Model
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Sunday, November 3, 13

20. Geong to Phase 2
As I was leaving, Ballmer said “great technology leaders don’t have to be great
technologists; they have to have insights.” I believe insights start with the customer.
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