Case Studies: “The Flip” and Palm

Today, Pure Digital Technologies, the maker of the "Flip" video camera announced that it was being sold to Cisco Systems for $590 million.  Since its introduction in 2007, Pure Digital has sold over two million Flips for between $150 and $230.  Also today, Palm, the maker of the Palm Pilot and other similar devices, announced that it lost $95 million for the quarter, its seventh consecutive quarterly loss.  Sales at Palm for the quarter ending February 28th were $90.6 million vs. $312 million for the same period in 2008.

Oh the lessons to be learned.  When it was introduced a decade ago, the Palm Pilot was revolutionary.  Having so much information at your fingertips was unheard of.  Palm dominated the market for a long time.  Then Blackberry and Apple built a better mousetrap by making the focus connectivity.  Palm didn't get it and became the dinosaur it is today.  The internet made information a commodity that supports connectivity, not the other way around. 

Then look at the Flip.  Nothing new about it.  How many camcorders and even cellphones do what it does better?  And the software – there are a host of other video editing applications on the market.  Yet in 2 years, Pure Digital was able to sell over $300 million worth of the little guys.  Why? Because Pure Digital realized that most of us don't want to be Steven Spielberg, we just want to make sure we get quick video of the family that we can send along to the rest of the family right away.  Flip customers get only what they want for a reasonable price.  Sold.

What Flip understands and Palm missed is that it's all about what the customer really values and providing it to them.  Palm teaches us that there is no such thing a perpetually successful business model.  Certainly, the Flip will (and already does) have competition.  How they will be able to innovate and expand with Cisco's help will determine its ultimate success in the marketplace.

Just don't make the mistake of thinking you have to find out what your clients want.  They don't know.  What you have to do is figure out is what they value.  Once you know what your clients value, you can build your business around providing that value.  Blue Ocean Strategy for sure.

The beauty of creative business is its intimacy with the customer.  For the most part, no one needs your services, you get hired just to make someone's life richer, even if only for a day.  And it's all subjective, what lifts one client may do nothing to another.  But most of you are so close to your customer that you know what makes most of them happy just by their expression.  That is your value proposition.  Strip the rest of your business away from your value proposition.  You can still do it all if you want to, but only if the value proposition is front and center.  For the most part, clients will pay for what they value, enough for you to earn a proper return.

Just don't forget about Palm — what is valued today may not be tomorrow.  If you put your ego aside, you will be able to adapt and shape your business accordingly for a very long time.