Selling through Orifices

💡 Selling to a decision maker who isn't the end user leads to terrible user experiences.

In 2005 Steve Jobs was asked about rumours that Apple was working on a phone. He deflected by offering this colourful explanation of why it didn’t make sense for Apple to sell into a mobile phone market controlled by carrier networks:

“Apple’s greatest successes haven’t been in the Fortune 500. We’re not very good at going through orifices to get to the end users.”

Steve Jobs, D3 Conference 2005

As we all know Steve Jobs was lying. Apple had been working on a phone since 2004. Regardless of Jobs’ attempts at secrecy, his comments illustrate a broader point about Apple – it has never been great at selling into markets with gatekeepers or decision makers who weren’t the end users.

Apple’s struggles in selling into the personal computing market of the 1990’s are described here:

In the 1990s, the PC market was mostly a corporate market (roughly 75% of volume). Corporate buyers wanted a commodity. They were buying 500 or 5000 boxes, they wanted them all the same and they wanted to be able to order 500 or 5000 more roughly the same next year. They wanted to compare 4 vendors on price with the same  spec sheet. They didn’t care what they looked like (and they were going under a desk anyway) and they didn’t care how easy it was for non-technical people to set them up because the users would never touch the configuration. Nor did they care much about the user interface, because most of the users were only going to be running 1 or 2 apps anyway.

… 

Hence, in this market all of Microsoft’s advantages were in play, and none of Apple’s. Apple, in Steve Blank’s phrase, did not have product/market fit. The Open model deployed by Microsoft and Intel produced a generic commodity product that was exactly what the market wanted: Apple’s model did not. Fundamentally, Apple’s selling points were irrelevant, invisible or both. 

Apple, open and learning from history — Benedict Evans

Apple was selling into a market that did not value a better user experience. The result? Apple became increasingly irrelevant during the 1990’s and was three months from bankruptcy when Steve Jobs returned in 1997.

There are many examples of market structures where someone designing and producing a product has to sell through some intermediate buyer/stakeholder in order to get to the end user:

  • Corporate IT departments and computers and devices for their staff 
  • Products for kids (toys, books, lunchboxes) need to be okayed by the parents
  • University lecturers assign textbooks to their students who are the end users
  • Mobile carriers dictated the design of phones to handset manufacturers but the end users were consumers
  • Corporate HR choose learning and training programs but the end users are employees

A Shit Bad User Experience

Selling through an orifice produces bad experiences for the end user. Decision makers and the end users have different incentives. e.g. Corporate HR might be incentivised for a learning program that delivers a high survey rating, whilst employees want to learn things that will help them in their day to day job. Corporate IT wants 3000 of the same computers that are easy for them to maintain, whereas end users value other things like a smooth, responsive or a well designed user experience (which might sound vague but affects a user’s day to day experience).

Locks in the current design

Selling through an orifice also stifles innovative approaches by freezing the current design.

The design of handsets was controlled by carriers (who mandated features line by line i.e. physical buttons for functions like email, phone call, music). Mandating features in this way froze the design of handsets into a certain form. This produced some ugly phones. We could only appreciate how ugly they were in hindsight after we were introduced to smartphones with touchscreen displays that could generate different UI’s for different applications.

The genius of Steve Jobs and Apple was to find and negotiate around this artificial constraint and find a carrier that would allow them to do as they pleased in the design of a handset.

There are only so many variations of a phone with a physical keyboard. Pre Smartphone mobiles were locked into this design paradigm.

Bad go to market strategy

The final aspect is that selling into an orifice is a bad go to market strategy, especially if you are a company with a new way of doing things or a new conception of how a market should work. 

Before these companies were started (referring to Uber, Lyft), there were multiple startups that tried to build software that would make the taxi and limo industry more efficient. Then they went out and knocked on the door of taxi companies and pitched them on their software.

For a variety of reasons, it didn’t work. Taxi companies weren’t thinking about software as a competitive advantage. They didn’t have the appropriate cost structures or anyone to even evaluate the software.

So when technology startups tried to inject technology and software into that industry, it didn’t take.

The Full-Stack Startup – Chris Dixon, a16z

It’s a bad strategy for a number of reasons. The orifices already have users and dont have strong incentives to experiment with new business strategies or technology. Any feedback from users is distorted by passing through the orifice (e.g. Does my rideshare app need improvement or do people not like XYZ taxicab company?, did my training program actually help line workers do their jobs? Or did I produce an entertaining but educationally useless workshop that optimised for good survey results?) 

On the other hand, there is a tight feedback loop that comes from selling directly to the end users. If you create something that solves your users’ problems well enough, you get rewarded and people buy your product. If you don’t, the users won’t buy it.

What alternatives do we have?

The most viable alternative to selling through orifices and existing incumbents is to reconfigure the value chain in the industry, and to go direct to consumers. 

Apple has only succeeded in markets where it developed a new revolutionary user experience and sold it directly to consumers – the iPod was 10,000 songs in your pocket, the iPhone was the touch interface done right for a mobile phone. Most importantly they engineered their go to market strategy so that it would have a chance of succeeding.

The old approach startups took was to sell or license their new technology to incumbents. The new, “full stack” approach is to build a complete, end-to-end product or service that bypasses incumbents and other competitors.

The Full-Stack Startup – Chris Dixon, a16z