Sunday, March 18, 2012

Best Case Study competition for students (Participate win and Excel)


  Case competitions can play a role in highlighting the many skills involved in case writing, teaching and learning. They can benefit faculty, researchers and students and offer the opportunity to showcase expertise at business schools and universities.

ACRC McKinsey/HSBC Business Case Competition

 
Through the ACRC HSBC/McKinsey Business Case Competition, the organisers hope to give students an opportunity to stretch and apply their quantitative, qualitative, presentation and communication skills beyond classroom learning. It also allows these future leaders to network with over 40 members of Hong Kong's most elite business community. The two day competition is open to full-time undergraduate students from invited universities across the region. All cases used at the competition are unpublished business cases developed by the ACRC, The University of Hong Kong.
Members of the winning team receive internships at HSBC or McKinsey as well as a cash prize of HK$15,000. The runners-up receive a cash prize of HK$10,000.

Further information

Results

View results from: 2011201020092008
Videos of the presentations can be found on the ACRC youtube channel at www.youtube.com/user/acrchk

APICS West Coast Student Case Competition

2012 winners announced
Next competition February 2013 in Phoenix, USA

Hosted by the Southwest District of APICS teams of students compete in two divisions: graduate and undergraduate. The teams spend a day working on an operations management case and turn in a case study paper and an eight minute powerpoint presentation before presenting the case to a team of six judges. The top two teams from each division compete in a final round the following morning.

Further information

Results


The Aspen Institute's 2012 Business & Society International MBA Case Competition

First round - 23-26 March 2012
Second round - 31 March - 5 April 2012
Third round - 13 April 2012

In 2012 more than 1,000 students from 25 business schools will tackle a brand new case study, authored by the Yale School of Management, requiring innovative thinking at the intersection of corporate profitability and positive social and environmental impacts. These students will step into a real-life, time-sensitive scenario demanding integrative decision-making -- not unlike the challenges they will face as the next generation of business leaders.

Further information

Results


Baylor Entrepreneurship Student Case Writing Competition 

2012 winners announced

The Baylor Entrepreneurship Case Writing Competition is an innovative international event that supports and encourages undergraduate and graduate students from across the globe who wish to engage in case research and case writing. Submitted cases are suitable if they advance the field of entrepreneurship, broadly defined, and contribute to our understanding of entrepreneurial phenomena. 

Further information

Results


Fisher Invitational MBA Case Competition

12-14 April 2012

Each spring, MBA students in the Fisher Invitational (formerly the Big Ten Case Competition) meet in Columbus, Ohio for a friendly competition among peers. One team from each school analyzes a complex business case; teams must identify the company's challenge and present their recommendations to an often unforgiving panel of industry and academic experts.

Further information


CBS Case Competition 2012

27 February - 2 March 2012

CBS Case Competition is the most prestigious undergraduate case competition worldwide; attracting the most esteemed business schools from around the globe and positioning itself as a value creating asset for the Danish business community.

Further information


The George Washington University 2013 International MBA Case Competition

2013 competition submission date: TBC

Held at George Washington University in Washington, DC the GWU International MBA Case Competition brings together MBA student teams from local, national, and international business schools to analyze a current situation facing a nonprofit organization and to present solutions that draw on the assets of the organization.

Further information


Hult Global Case Challenge 2012

Regional finals: 24-25 February 2012
Global final: 25-26 April 2012
The 2012 Hult Global Case Challenge will be themed around Global Poverty. Under the Global Poverty umbrella, three subject social challenge areas will be tackled through respective individual tracks of competition across five cities.
The aim of the 2012 Hult Global Case Challenge is to drive solutions around those key social areas, which we believe have the greatest net impact on global poverty. Through collectively overcoming social challenges in education, energy and housing, it is our belief that we are undertaking global poverty on a grass-roots level. Through what has become the world's largest crowd-sourcing initiative dedicated to solving global social challenges, the Hult Global Case Challenge seeks ideas and solutions from the world's best and brightest future business leaders that will cause a step-change in the vicious global poverty cycle.

Further information


John Molson MBA International Case Competition

2012 results

The John Molson MBA International Case Competition is a not-for-profit event organized by a team of four MBA students from the John Molson School of Business. The competition is open to top business schools worldwide, and is recognized as the largest competition of its kind. Its main purpose is to bridge the gap between corporate and academic worlds, which ultimately enriches both students and executives alike. 

Further information

Results


KeyBank Foundation Minority MBA Case Competition

Competition commences: 24-26 February 2012

The annual event, now considered one of the nation's premier minority MBA student case competitions, invites 16 universities from around the United States to compete in its Minority MBA Student Case Competition held in Cleveland at KeyBank Headquarters.

Further information

Phillip Alexander
e Alexander.631@osu.edu
Angel Fernandez
e Fernandez.107@osu.edu

NextBillion 2011 Case Writing Competition

 
This competition seeks to find and publish the best business cases on social enterprise and the base of the pyramid, in order to engage students and faculty on campuses all over the world in the emerging field of social enterprise.

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PPM Regional Business Case Competition

Final: 29 September 2011
 
This case competition challenges graduate students in management from all over Southeast Asia, which are younger than 35 years and in teams of 3 people, to develop and present a solution to a case study. The report is graded on analysis quality, ideas, originality and theory relevancy. 12 teams are selected as finalists and the winner is selected through a debate.

Further information


Reaching Out MBA Case Writing Competition

Submission deadline: 30 March 2012

There exists a limited pool of MBA-level business school cases which adequately address contemporary Gay, Lesbian, Bisexual, and Transgendered issues with sensitivity and sensibility, the Reaching Out MBA Case Writing Competition seeks to ameliorate this situation. Students, alumni, and faculty from MBA and PhD programs throughout the world are invited to research and write an original business case for the competition. Research stipends of US$1,500 will be awarded to selected case writers who complete and submit a case according to the following milestones:
  • abstract of case and outline of issues to explore due by 30 November 2011 - the strongest abstracts will be funded and invited to complete the entire case
  • first draft of completed case due by 31 January 2012
  • final draft of completed case submitted by 30 March 2012.
Additionally one case will be selected for its overall excellence and that author, or team of authors, will be awarded an additional US$3,500.

Further information

Results


Tournament in Management and Engineering Skills

10-12 April 2012

The Tournament In Management and Engineering Skills (TIMES), held in Stockholm is the largest pan-European case study competition for Industrial Engineering and Management students. This prestigious, highly acclaimed event has successfully been organised since 1994 and attracts around 250 top teams each year.

Further information

How to write a case study "Writing Guide: Case Studies Conducting Case Studies"

To obtain as complete a picture of the participant as possible, case study researchers can employ a variety of approaches and methods. These approaches, methods, and related issues are discussed in depth in this section.


Method: Single or Multi-modal?

To obtain as complete a picture of the participant as possible, case study researchers can employ a variety of methods. Some common methods include interviews, protocol analyses, field studies, and participant-observations. Emig (1971) chose to use several methods of data collection. Her sources included conversations with the students, protocol analysis, discrete observations of actual composition, writing samples from each student, and school records (Lauer and Asher 1988).
Berkenkotter, Huckin, and Ackerman (1988) collected data by observing classrooms, conducting faculty and student interviews, collecting self reports from the subject, and by looking at the subject's written work.
A study that was criticized for using a single method model was done by Flower and Hayes (1984). In this study that explores the ways in which writers use different forms of knowing to create space, the authors used only protocol analysis to gather data. The study came under heavy fire because of their decision to use only one method, and it was, at least according to some researchers, an unreliable method at that.


Participant Selection

Case studies can use one participant, or a small group of participants. However, it is important that the participant pool remain relatively small. The participants can represent a diverse cross section of society, but this isn't necessary.
For example, the Berkenkotter, Huckin, and Ackerman (1988) study looked at just one participant, Nate. By contrast, in Janet Emig's (1971) study of the composition process of twelfth graders, eight participants were selected representing a diverse cross section of the community, with volunteers from an all-white upper-middle-class suburban school, an all-black inner-city school, a racially mixed lower-middle-class school, an economically and racially mixed school, and a university school.
Often, a brief "case history" is done on the participants of the study in order to provide researchers with a clearer understanding of their participants, as well as some insight as to how their own personal histories might affect the outcome of the study. For instance, in Emig's study, the investigator had access to the school records of five of the participants, and to standardized test scores for the remaining three. Also made available to the researcher was the information that three of the eight students were selected as NCTE Achievement Award winners. These personal histories can be useful in later stages of the study when data are being analyzed and conclusions drawn.

Data Collection

There are six types of data collected in case studies:
  1. Documents.
  2. Archival records.
  3. Interviews.
  4. Direct observation.
  5. Participant observation.
  6. Artifacts.
In the field of composition research, these six sources might be:
  1. A writer's drafts.
  2. School records of student writers.
  3. Transcripts of interviews with a writer.
  4. Transcripts of conversations between writers (and protocols).
  5. Videotapes and notes from direct field observations.
  6. Hard copies of a writer's work on computer.
Depending on whether researchers have chosen to use a single or multi-modal approach for the case study, they may choose to collect data from one or any combination of these sources.
Protocols, that is, transcriptions of participants talking aloud about what they are doing as they do it, have been particularly common in composition case studies. For example, in Emig's (1971) study, the students were asked, in four different sessions, to give oral autobiographies of their writing experiences and to compose aloud three themes in the presence of a tape recorder and the investigator.
In some studies, only one method of data collection is conducted. For example, the Flower and Hayes (1981) report on the cognitive process theory of writing depends on protocol analysis alone. However, using multiple sources of evidence to increase the reliability and validity of the data can be advantageous.
Case studies are likely to be much more convincing and accurate if they are based on several different sources of information, following a corroborating mode. This conclusion is echoed among many composition researchers. For example, in her study of predrafting processes of high and low-apprehensive writers, Cynthia Selfe (1985) argues that because "methods of indirect observation provide only an incomplete reflection of the complex set of processes involved in composing, a combination of several such methods should be used to gather data in any one study." Thus, in this study, Selfe collected her data from protocols, observations of students role playing their writing processes, audio taped interviews with the students, and videotaped observations of the students in the process of composing.
It can be said then, that cross checking data from multiple sources can help provide a multidimensional profile of composing activities in a particular setting. Sharan Merriam (1985) suggests "checking, verifying, testing, probing, and confirming collected data as you go, arguing that this process will follow in a funnel-like design resulting in less data gathering in later phases of the study along with a congruent increase in analysis checking, verifying, and confirming."
It is important to note that in case studies, as in any qualitative descriptive research, while researchers begin their studies with one or several questions driving the inquiry (which influence the key factors the researcher will be looking for during data collection), a researcher may find new key factors emerging during data collection. These might be unexpected patterns or linguistic features which become evident only during the course of the research. While not bearing directly on the researcher's guiding questions, these variables may become the basis for new questions asked at the end of the report, thus linking to the possibility of further research.

Data Analysis

As the information is collected, researchers strive to make sense of their data. Generally, researchers interpret their data in one of two ways: holistically or through coding. Holistic analysis does not attempt to break the evidence into parts, but rather to draw conclusions based on the text as a whole. Flower and Hayes (1981), for example, make inferences from entire sections of their students' protocols, rather than searching through the transcripts to look for isolatable characteristics.
However, composition researchers commonly interpret their data by coding, that is by systematically searching data to identify and/or categorize specific observable actions or characteristics. These observable actions then become the key variables in the study. Sharan Merriam (1988) suggests seven analytic frameworks for the organization and presentation of data:
  1. The role of participants.
  2. The network analysis of formal and informal exchanges among groups.
  3. Historical.
  4. Thematical.
  5. Resources.
  6. Ritual and symbolism.
  7. Critical incidents that challenge or reinforce fundamental beliefs, practices, and values.
There are two purposes of these frameworks: to look for patterns among the data and to look for patterns that give meaning to the case study. As stated above, while most researchers begin their case studies expecting to look for particular observable characteristics, it is not unusual for key variables to emerge during data collection. Typical variables coded in case studies of writers include pauses writers make in the production of a text, the use of specific linguistic units (such as nouns or verbs), and writing processes (planning, drafting, revising, and editing). In the Berkenkotter, Huckin, and Ackerman (1988) study, for example, researchers coded the participant's texts for use of connectives, discourse demonstratives, average sentence length, off-register words, use of the first person pronoun, and the ratio of definite articles to indefinite articles.
Since coding is inherently subjective, more than one coder is usually employed. In the Berkenkotter, Huckin, and Ackerman (1988) study, for example, three rhetoricians were employed to code the participant's texts for off-register phrases. The researchers established the agreement among the coders before concluding that the participant used fewer off-register words as the graduate program progressed.

Composing the Case Study Report

In the many forms it can take, "a case study is generically a story; it presents the concrete narrative detail of actual, or at least realistic events, it has a plot, exposition, characters, and sometimes even dialogue" (Boehrer 1990). Generally, case study reports are extensively descriptive, with "the most problematic issue often referred to as being the determination of the right combination of description and analysis" (1990). Typically, authors address each step of the research process, and attempt to give the reader as much context as possible for the decisions made in the research design and for the conclusions drawn.
This contextualization usually includes a detailed explanation of the researchers' theoretical positions, of how those theories drove the inquiry or led to the guiding research questions, of the participants' backgrounds, of the processes of data collection, of the training and limitations of the coders, along with a strong attempt to make connections between the data and the conclusions evident.
Although the Berkenkotter, Huckin, and Ackerman (1988) study does not, case study reports often include the reactions of the participants to the study or to the researchers' conclusions. Because case studies tend to be exploratory, most end with implications for further study. Here researchers may identify significant variables that emerged during the research and suggest studies related to these, or the authors may suggest further general questions that their case study generated.
For example, Emig's (1971) study concludes with a section dedicated solely to the topic of implications for further research, in which she suggests several means by which this particular study could have been improved, as well as questions and ideas raised by this study which other researchers might like to address, such as: is there a correlation between a certain personality and a certain composing process profile (e.g. is there a positive correlation between ego strength and persistence in revising)?
Also included in Emig's study is a section dedicated to implications for teaching, which outlines the pedagogical ramifications of the study's findings for teachers currently involved in high school writing programs.
Sharan Merriam (1985) also offers several suggestions for alternative presentations of data:
  1. Prepare specialized condensations for appropriate groups.
  2. Replace narrative sections with a series of answers to open-ended questions.
  3. Present "skimmer's" summaries at beginning of each section.
  4. Incorporate headlines that encapsulate information from text.
  5. Prepare analytic summaries with supporting data appendixes.
  6. Present data in colorful and/or unique graphic representations.  
  

Writing Guide: Case Studies (A New Approach)

This guide examines case studies, a form of qualitative descriptive research that is used to look at individuals, a small group of participants, or a group as a whole. Researchers collect data about participants using participant and direct observations, interviews, protocols, tests, examinations of records, and collections of writing samples. Starting with a definition of the case study, the guide moves to a brief history of this research method. Using several well documented case studies, the guide then looks at applications and methods including data collection and analysis. A discussion of ways to handle validity, reliability, and generalizability follows, with special attention to case studies as they are applied to composition studies. Finally, this guide examines the strengths and weaknesses of case studies.


Case Study: Introduction and Definition

Case study refers to the collection and presentation of detailed information about a particular participant or small group, frequently including the accounts of subjects themselves. A form of qualitative descriptive research, the case study looks intensely at an individual or small participant pool, drawing conclusions only about that participant or group and only in that specific context. Researchers do not focus on the discovery of a universal, generalizable truth, nor do they typically look for cause-effect relationships; instead, emphasis is placed on exploration and description.
To read more about case study, click on the items below, or select from the table of contents to the left:


Case Studies: Types and Design Concerns

Researchers use multiple methods and approaches to conduct case studies. To read about types of case studies and the design concerns associated with them, click on the items below:

Lego Is for Girls case study


BusinessWeek Logo

Features December 14, 2011
Lego Is for Girls
Focusing on boys saved the toymaker in 2005. Now the company is launching Lego Friends for “the other 50 percent of the world’s children.” Will girls buy in?
Walk into one of Lego’s 74 red-and-yellow retail stores around the world, or even down the toy aisles of your local Target (TGT), and two things are immediately clear: Lego, the Danish maker of plastic toy bricks, is everywhere, and it’s not for everybody. Rows of classic building kits for police helicopters, rockets, and trains soon give way to contemporary releases such as Lego Alien Conquest, a daffy War of the Worlds scenario with spaceships and laser cannons, and Lego Ninjago, a “spinjitzu” warrior-themed product line heavy on martial arts and supernatural powers. Humbled before the Lego Star Wars sets there’s invariably a baffled parent on a cell phone: Am I meant to get the one with clone troopers or the Mandalorians? Is it General Grievous who has the double light-saber?
Linger for a few more minutes and you’ll notice not just the staggering array of Lego offerings—545 in the last year—but an absence. “They might as well have a No Girls Allowed sign,” says Peggy Orenstein, author of Cinderella Ate My Daughter, a fierce, funny investigation of the toy industry’s multibillion-dollar exploitation of the “princess phase,” which consumes girls at age 3 or 4. Orenstein is right. After overreaching and cratering in the early Aughts, the Lego Group deliberately focused on boys, and the short-term effectiveness of this strategy is undeniable. Revenue has increased 105 percent since 2006, according to the privately held company’s 2010 annual report, and Lego topped $1 billion in U.S. sales for the first time last year. It’s on track to do that again in 2011. “They’re killing it now,” says Gerrick Johnson, equities analyst at BMO Capital Markets, who has followed the company’s impact on listed toymakers such as Mattel (MAT) and Hasbro (HAS) for a decade. Lego, he says, “is the hottest toy company in the boy segment, and maybe the hottest in toys overall.”
There’s now arguably a “Lego phase” for school-age boys that’s as consuming as the princess phase. But unlike tiaras and pink chiffon, Lego play develops spatial, mathematical, and fine motor skills, and lets kids build almost anything they can imagine, often leading to hours of quiet, independent play. Which is why Lego’s focus on boys has left many parents—especially moms like Orenstein—frustrated that their daughters are missing out. “The last time I was in a Lego store, there was this little pink ghetto over in one corner,” Orenstein says. “And I thought, really? This is the best you can do?”
Over the years, Lego has had five strategic initiatives aimed at girls. Some failed because they misapprehended gender differences in how kids play. Others, while modestly profitable, didn’t integrate properly with Lego’s core products. Now, after four years of research, design, and exhaustive testing, Lego believes it has a breakthrough. On Dec. 26 in the U.K. and Jan. 1 in the U.S., Lego will roll out Lego Friends, aimed at girls 5 and up. (French Lego retailers are going rogue and plan to bring out Lego Friends on Dec. 15.) In Lego’s larger markets, like the U.S., Lego determined it was better to introduce the new line after the holidays, when Wal-Mart Stores (WMT), for example, would give the line dedicated shelf space it wouldn’t during the holiday sales rush. The company’s confidence is evident in the launch—a full line of 23 different products backed by a $40 million global marketing push. “This is the most significant strategic launch we’ve done in a decade,” says Lego Group Chief Executive Officer Jørgen Vig Knudstorp. “We want to reach the other 50 percent of the world’s children.”

Legos come from a small town called Billund, the closest thing Denmark has to the middle of nowhere. It’s a pleasant enough destination (albeit one abashed Danes hasten to point out isn’t master-planned, as most of their towns are). If not for Lego, it would be just a couple of intersections, or rather rotaries, without stoplights. Because of Lego, Billund boasts the country’s second-busiest airport, a well-appointed bakery, and a few boutiques. The population roughly doubles to about 6,500 each day during Lego business hours.
In Billund’s center, the 1924 home of Lego founder Ole Kirk Christiansen has been renovated into a museum. The Idea House, as it’s known, highlights Lego’s quaint beginnings (wooden yo-yos and a pull-string wooden duck were among its first toys in the 1930s), as well as its values. Christiansen’s motto—det bedste er ikke for godt, “only the best is good enough”—is why Lego still uses more expensive plastic than rivals such as Montreal-based Mega Bloks, which sells bricks, on average, at 40 percent of the price. It also explains why, according to a 2010 survey by the Reputation Institute, Lego is the No. 1 admired brand in Europe, No. 2 in the U.S. and Canada, and No. 5 globally.
The Idea House nods to Lego’s success in video games (Lego Star Wars), programmable robots (Mindstorms), board games (Creationary), iPhone apps (Lego Photo, which renders snapshots in Lego), and even board games that work with an iPhone app (the Life of George, which is shaping up as a hot holiday gift). Yet Lego’s core technology hasn’t changed since 1958: snug stud-and-tube bricks that snap together and hold fast—and somehow come apart easily. Lego’s competitive edge is precision; the tolerance, in engineering terms, of its Lego-branded studs is 1/50th of a millimeter, 10 times finer than a hair. Lego has its own term for its click-fit: clutch power. How clutch power is achieved is as closely guarded as the Coke (KO) recipe.
Among the “10 characteristics for Lego” set forth in 1963 by the founder’s son, Godtfred, is: “For girls and for boys.” Today, girls and boys play equally with Duplo, Lego’s bigger bricks for toddlers. But starting at the princess phase, Lego’s smaller, more intricate kits skew “boy.”
To develop Lego Friends, Knudstorp relaunched the same extensive field research—more cultural anthropology than focus groups—that the company conducted in 2005 and 2006 to restore its brand. It recruited top product designers and sales strategists from within the company, had them join forces with outside consultants, and dispatched them in small teams to shadow girls and interview their families over a period of months in Germany, Korea, the U.K., and the U.S.
The research techniques and findings have been controversial at Lego from the moment it became clear that if the company were serious about appealing to girls, it would have to do something about its boxy minifigure, its 4-centimeter plastic man with swiveling legs, a yellow jug-head, and a painted-on face. “Let’s be honest: Girls hate him,” says Mads Nipper, the executive vice-president for products and markets, Lego’s equivalent of a chief marketing officer. In terms of Lego iconography, the minifigure is second only to the original studded brick. It’s as hallowed as a 1 5/8th-inch piece of plastic can ever be.

The ultimate decision about how much tweaking might be done to the beloved minifigure rested with Knudstorp. Just 36 when he was promoted in 2004, Knudstorp is only the fourth CEO of Lego Group, and the first from outside the founding family. Six-foot-three but not imposing, Knudstorp wears small circular specs and blue Lego cuff links, and has rushes of enthusiasm more typical of an American than a Danish executive. His passion for Lego Friends comes partly, he says, “from casual observation: I have two wonderful daughters next to my two sons, and they are in a very narrow age range, 4 to 10, so I have a little home study. They all love to build, but certainly they play in very different ways.”
Knudstorp completed two master’s degrees (in economics and business administration, with coursework at MIT’s Sloan School of Management and Harvard) and a doctorate (economics) back in Copenhagen before going to work for McKinsey, the global consulting firm. At 30 he was one of the oldest associates at McKinsey’s Paris office; three years later he ran its recruiting for all of Europe. Three years after that, following a six-month stint as interim chief financial officer, he took charge of a Lego Group in crisis; according to its own financial records the company was losing nearly $1 million per day. During his first months in charge, Knudstorp says, “Hundreds of consumers were writing to us saying, ‘please don’t die.’ ”
To get Lego back on track, he outsourced the Legoland theme parks, selling the resorts, with Blackstone Group (BX), a Lego partner, to Merlin Entertainments Group for $800 million in 2005. That same year, Knudstorp supervised the restructuring of the company’s financial governance so it would be less vulnerable to credit crunches. The Lego Group has a corporate parent, Kirkbi, an investment firm that owns 75 percent of the company (and 28 percent of Merlin); the other 25 percent is held by the Lego Foundation, administered by the Christiansen family. And Knudstorp reduced the number of elements Lego designers could draw upon to create new kits from 12,900 to 7,000. Each new element introduced requires new, expensive molds, plus changes in the global supply chain. He pushed Lego designers to be more creative with the existing parts.
Arguably nothing he’s done has meant more to Lego than sponsoring the research teams that embedded with families to understand how Lego kids live and play. “If I’m honest, I didn’t know what the strategy was,” Knudstorp confesses of his first couple years as CEO. “Lego had done what so many companies had done, which is to stretch the brand, and I wasn’t sure if [the crisis] was because Lego had stretched too far, or if it was just a very hard strategy to execute. At first I actually said, let’s not talk about strategy, let’s talk about an action plan, to address the debt, to get the cash flow. But after that we did spend a lot of time on strategy, finding out what is Lego’s true identity. Things like, why do you exist? What makes you unique?”
During ’05 and ’06, the Lego “anthros,” as the research teams have been called, discovered some underappreciated cultural gaps. The idea of creative play as conducive to learning, or even formal education, is an article of faith at Lego that goes back to its founder, who defended his decision to become a toymaker during the Great Depression by pointing out that all animals use play to develop their brains. In Japan, however, Lego found that study and play were more clearly delineated. Few Japanese parents bought Lego, as they do in Germany or the U.S., because they were “toys with vitamins in them,” as Lego senior director Søren Holm only half-jokingly puts it.
American boys, meanwhile, turned out to be the least free of any group Lego tracked. British and German boys are far more likely to play unsupervised in yards and wooded areas and even have greater latitude in decorating their bedroom walls. Among slightly older American boys, 9 to 12, building with Lego represented a rare chance to be left alone. (On one subject, boys of all ages and nationalities agreed: A castle without a dragon is worse than no castle at all.)
Lego won’t say how much it spent on its anthropology, but research went on for months and shattered many of the assumptions that had led the company astray. You could say a worn-out sneaker saved Lego. “We asked an 11-year-old German boy, ‘what is your favorite possession?’ And he pointed to his shoes. But it wasn’t the brand of shoe that made them special,” says Holm, who heads up the Lego Concept Lab, its internal skunkworks. “When we asked him why these were so important to him, he showed us how they were worn on the side and bottom, and explained that his friends could tell from how they were worn down that he had mastered a certain style of riding, even a specific trick.”
The skate maneuvers had taken hours and hours to perfect, defying the consensus that modern kids don’t have the attention span to stick with painstaking challenges, especially during playtime. To compete with the plug-and-play quality of computer games, Lego had been dumbing down its building sets, aiming for faster “builds” and instant gratification. From the German skateboarder onward, Lego saw it had drawn the wrong lessons from computer games. Instead of focusing on their immediacy, the company now noticed how kids responded to the scoring, ranking, and levels of play—opportunities to demonstrate mastery. So while it didn’t take a genius or months of research to realize it might be a good idea to bring back the police station or fire engine that are at the heart of Lego’s most popular product line (Lego City), the “anthros” informed how the hook-and-ladder or motorcycle cop should be designed, packaged, and rolled out.
Encouraged by what it had learned about boys, Lego sent its team back out to scrutinize girls, starting in 2007. The company was surprised to learn that in their eyes, Lego suffered from an aesthetic deficit. “The greatest concern for girls really was beauty,” says Hanne Groth, Lego’s market research manager. Beauty, on the face of it, is an unsurprising virtue for a girl-friendly toy, but based on the ways girls played, Groth says, it came, as “mastery” had for boys, to stand for fairly specific needs: harmony (a pleasing, everything-in-its-right-place sense of order); friendlier colors; and a high level of detail.
“It was an education,” recalls Fenella Blaize Holden, an under-30 British designer, on the process of getting Lego Friends made. “No one could understand, why do we need more than one handbag? So I’d have to say, well, is one sword enough for the knights, or is it better to have a dagger, too? And then they’d come around.”
Lego confirmed that girls favor role-play, but they also love to build—just not the same way as boys. Whereas boys tend to be “linear”—building rapidly, even against the clock, to finish a kit so it looks just like what’s on the box—girls prefer “stops along the way,” and to begin storytelling and rearranging. Lego has bagged the pieces in Lego Friends boxes so that girls can begin playing various scenarios without finishing the whole model. Lego Friends also introduces six new Lego colors—including Easter-egg-like shades of azure and lavender. (Bright pink was already in the Lego palette.)
Then there are the lady figures. Twenty-nine mini-doll figures will be introduced in 2012, all 5 millimeters taller and curvier than the standard dwarf minifig. There are five main characters. Like American Girl Dolls, which are sold with their own book-length biographies, these five come with names and backstories. Their adventures have a backdrop: Heartlake City, which has a salon, a horse academy, a veterinary clinic, and a café. “We had nine nationalities on the team to make certain the underlying experience would work in many cultures,” says Nanna Ulrich Gudum, senior creative director.
The key difference between girls and the ladyfig and boys and the minifig was that many more girls projected themselves onto the ladyfig—she became an avatar. Boys tend to play with minifigs in the third person. “The girls needed a figure they could identify with, that looks like them,” says Rosario Costa, a Lego design director. The Lego team knew they were on to something when girls told them, “I want to shrink down and be there.”
The Lego Friends team is aware of the paradox at the heart of its work: To break down old stereotypes about how girls play, it risks reinforcing others. “If it takes color-coding or ponies and hairdressers to get girls playing with Lego, I’ll put up with it, at least for now, because it’s just so good for little girls’ brains,” says Lise Eliot. A neuroscientist at the Rosalind Franklin University of Medicine and Science in Chicago, Eliot is the author of Pink Brain Blue Brain, a 2009 survey of hundreds of scientific papers on gender differences in children. “Especially on television, the advertising explicitly shows who should be playing with a toy, and kids pick up on those cues,” Eliot says. “There is no reason to think Lego is more intrinsically appealing to boys.”
Maybe not, but even Knudstorp acknowledges that Lego’s girl problem will be hard to conquer. Lego sponsors a series of clubs called First Lego League to get kids interested in science. Recently, Knudstorp attended a Lego robotics contest and spoke to a Berkeley (Calif.) professor whose daughter excelled. “We’re seeing lots of girls perform extremely well, but her mother said to me, she won’t say that she’s a ‘Lego kid’ because that’s a boy thing,” Knudstorp says. “I don’t have any illusions that the girls business will be bigger than the boys business, but at least for those who are looking for it, we have something to offer.”
In the U.S., Wal-Mart, Toys “R” Us, and Target all plan to carry Lego Friends. Target’s Stephanie Lucy, vice-president and merchandise manager for toys and sports goods, says the Minneapolis-based department store will introduce Lego Friends on an end-cap (at the end of an aisle), then shelve it with other girl-oriented toys, not with the rest of the Lego—all currently in the boy section. As long as girls find it, Lucy says, “I believe it will do very well.”
Grown-up Lego hobbyists, who gather frequently for weekend conferences, have their own acronym, AFOL, for Adult Fans of Lego. AFOLs will also factor in Lego Friends’ performance. “Oh, we’re going to buy Lego Friends,” says Joe Meno, “but we’re going to buy it for all the wrong reasons.” Meno is co-author of the new book The Cult of Lego and editor of the BrickJournal, a glossy fanzine. “We want the sets for the new colors. One of the colors is ideal for a Perry the Platypus I want to build.” The lady minifig, he predicts, “I’ll probably toss aside.” Stupid boys.
Wieners is an executive editor for Bloomberg Businessweek.
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Home Depot's Fix-It Lady Case Study


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Features January 13, 2011,

Home Depot's Fix-It Lady
Chief Financial Officer Carol Tomé has a shot at CEO, if she can solve the retailer's technology problems
Carol B. Tomé, the chief financial officer at Home Depot (HD) and a leading contender to be the retailer's next chief executive, has caught the technology bug. "I can't wait until the day when I have my credit card loaded up on my smartphone, and I don't even have to carry my wallet—just walk around with my phone," she says, gesturing toward the orange-and-beige Store No. 121, visible from her 22nd-floor conference room in Atlanta. "It's tap and go. It's going to happen. It's all ages, all generations."
It is September, and Home Depot is weeks away from unveiling a mobile app allowing consumers to order merchandise via their iPhone or iPad. "We're already there," Tomé says, visibly pleased that the home-improvement chain would beat its smaller but faster-growing rival, Lowe's, in the race to introduce such a feature.
Lowe's still hasn't introduced its iPhone app, yet Home Depot's small victory is misleading. The world's largest retailer of potting soil and two-by-fours has actually lagged in technology. Until last year, employees stocked shelves as they had for 15 years, using computers powered by motorboat batteries and rolled around stores on bulky carts. The retailer still doesn't offer customers the option to order online and pick up merchandise in stores, as Lowe's (LOW) does.
Technology was an afterthought as Home Depot for years emphasized opening new stores. When Frank Blake replaced Robert Nardelli as CEO in 2007, he shifted focus to increasing profits from existing outlets. "Inventory turns"—a measure of how well a retailer turns goods into sales—have risen for three straight quarters. Now, Tomé, 54, has the challenging assignment of leading a belated tech catch-up.
Above all, the company must attract younger consumers accustomed to shopping online, often with devices they carry in a pocket or handbag. During the company's fiscal 2010, which ends Jan. 30, Tomé oversaw tech spending of $350 million, or a third of all capital expenditures. Several former top Home Depot executives say Tomé would be the logical internal choice to succeed Blake, 61, when he retires. Her chances of becoming the fifth CEO in Home Depot's 33-year existence may depend on whether she succeeds at improving the chain's in-store technology as well as boosting online transactions, which amounted to less than $1 billion, or 1.5 percent of its estimated 2010 sales of $68 billion. "The way people shop in the future—Carol is going to craft that for Home Depot," says Carl Liebert III, who left as executive vice-president for stores in 2006 to become CEO of 24 Hour Fitness Worldwide. "It certainly puts her in the driver's seat for replacing Frank when that time comes."
Home Depot's tech troubles provide some sobering lessons for other brick-and-mortar retailers as they try to capture mobile-device sales. When processing special orders for customers, Home Depot employees are now forced to use "prehistoric" technology, hurting both service and sales, Marvin Ellison, the company's executive vice-president for U.S. stores, said at a Goldman Sachs (GS) conference in New York in September. Home Depot also needs to improve its website to lure the 7 in 10 customers who first browse online, Blake said at the conference.
For more than a decade, the company neglected the tech revolution, preferring to open stores—more than 100 a year through 2005. Today there are 2,244 in all. Tomé was in the thick of the real estate binge. She still heads the corporate committee that oversaw that expansion, though in 2008 it became clear that demand for big-box home-improvement stores had reached the saturation point. Now it is up to her to approve the big-ticket tech spending needed to move Home Depot online.
In 15 years at the company, Tomé is the only senior executive to work for all four of its CEOs. She has advanced, colleagues say, by combining sharp intelligence with a zeal to learn the business from the hammers and nails on up. Stepping off the elevator at Atlanta headquarters one morning, she is dressed in black with a pearl bracelet on her right wrist and fashionable glasses with black-and-burgundy frames, one of more than a dozen pairs she owns. She carries an ostrich-skin tote bag. A coat rack in her office bears more than 90 orange aprons decorated by employees of stores she has visited. Tomé tours at least one outlet a week, talking to customers and quizzing workers. "Carol can mix paint," says Cara Kinzey, a senior vice-president for information technology, recalling a particularly detailed grilling by the CFO over the 2009 purchase of new paint-blending equipment and other improvements. "We always have to pay for these projects with results."
The oldest of four children, Tomé first learned about finance in Jackson, Wyo., where her father ran the family-owned Jackson State Bank. She assumed that one day she would become Jackson State's first female CEO. When she was studying for an MBA at the University of Denver, however, her father called with news that upset her plans: He was divorcing her mother after 27 years of marriage and selling Jackson State.
"When I calmed down, I said to myself, 'Carol, you are going to be a banker. So be a banker,' " Tomé recalls. "As I sit here today, the best thing that ever happened to me, personally and professionally, was the fact that he sold the bank." Setting off on her own, she joined United Bank of Denver, and that led to a series of corporate finance jobs that landed her at Home Depot in 1995.
In 2000, Home Depot hired a new CEO: Nardelli, a cost-cutter who had been a runner-up in the contest to succeed Jack Welch as General Electric's (GE) CEO. Nardelli had a rocky time in the home-improvement business. During his tenure, customer satisfaction slipped and sales growth trailed that of Lowe's. His compensation of $225 million over six years also provoked grumbling. For Tomé, though, the Nardelli era proved fruitful. He promoted her from treasurer to CFO in 2001; when other executives left, her responsibilities expanded to include store operations and customer service. The board ousted Nardelli in 2007, but Tomé's status did not suffer. She was paid $5.2 million last year. Nardelli, now head of the operations and advisory unit of New York-based buyout firm Cerberus Capital Management, declined to comment.
"I've never run into [a CFO] who knew the business as well as Carol does," says Virginia A. Hepner, Wachovia's senior banker for Home Depot during Tomé's first seven years at the retailer. (Wachovia is now part of Wells Fargo (WFC).) "At work, she is all business, always focused, calm, and professional," says Hepner. She and Tomé and their husbands share interests in the arts, gardening, and cooking. "Carol makes a wicked chocolate mousse," Hepner says. They socialize at the Tomés' Italian Renaissance-style home in the Atlanta suburb of Buckhead. Tomé's husband, Ramon, is a chemist with the Georgia Natural Resources Dept.
The Home Depot executive, who has rounded out her résumé by serving as a director of United Parcel Service (UPS) and chairman of the Federal Reserve Bank of Atlanta, won't comment on whether she wants to run the retailer. She notes, though, that she demurred when a headhunter called last year about a possible lateral move to Bank of America (BAC). "I've got the best CFO job in the country, so why would I want to entertain another CFO position?" she says. Her boss, Blake, who doesn't face mandatory retirement as CEO, won't talk about succession, saying, "I want to avoid horse race discussions."
Getting Home Depot up to speed on technology became a key test for Tomé last March, when she and Blake attended an off-site on the company's mobility future. Executives heard presentations from vendors of video cameras tied to computers that guess shoppers' ages and suggest purchases on their smartphones, mobile devices for contractors to order work-site deliveries, and other gadgets. With so many possibilities, Blake asked Tomé to come up with a plan. The result was Home Depot's mobility committee. "The assignment for Carol was very logical," Blake says. "She has the breadth of view to coordinate that. She's a very bright woman with a good sense of the business."
Under her leadership in 2010 the company laid out $60 million to buy 40,000 handheld devices to replace the in-store computers from the early 1990s. In October it launched a blogging site at homedepot.com where employees answer customer questions on such matters as repairing a door damaged by direct sunlight. "Clean tools are happy tools," wrote a store expert who uses the handle TheHammer. He recommended glass cleaner to remove grease from pliers. As part of a broader upgrade of checkout systems, the company's U.S. stores have lately installed contact-less scanners for reading credit-card information on smartphones. They're not in use yet, says Dwaine Kimmet, treasurer and vice-president for financial services. "We did it for the future, to keep our options open."
Tomé's tech challenge will be complicated by the preference of most older contractors and do-it-yourselfers to buy in person at a store. "You have to serve customers the way they want to be served," Blake says. Tomé reinforces this point, stressing that the company's largest category of capital spending remains maintenance of stores, including bathrooms. "It's very much defensive spending," she says.
Colin McGranahan, an analyst at Sanford C. Bernstein (AB), says Tomé is headed in the right direction. "Over the long run, consumers are going to be a lot more comfortable using their smartphones on a real-time basis researching outside or inside the store." He rates Home Depot as "market perform," a prediction that its results will be similar to that of the overall market.
In 2009 the square footage of Home Depot stores declined by 1.3 percent, the retailer's first annual drop ever, and it was essentially unchanged in 2010. "We were very much like that Kevin Costner movie: Build a store, and they will come," Tomé explains. "That's no longer the case. We need to look at what we're doing inside the company to grow. Our economic engine will be driven by productivity and efficiency."

Amazon, the Company That Ate the World case study



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Technology September 28, 2011
Amazon, the Company That Ate the World
Jeff Bezos’ new tablet, the Kindle Fire, is cheap, pretty, and puts Amazon in perfect position to take a bite out of Apple—and every online transaction you make
Jeff Bezos is channeling Steve Jobs. It’s mid-September and the wiry billionaire founder of (AMZN)Amazon.com is at his brand-new corporate headquarters in Seattle, in a building named Day One South after his conviction that 17-year-old Amazon is still in its infancy. Almost giddy with excitement, Bezos retrieves one by one the new crop of dirt-cheap Kindle e-readers—they start at $79—from a hidden perch on a chair tucked into a conference room table. When he’s done showing them off, he stands up, and, for an audience of a single journalist, announces, “Now, I’ve got one more thing to show you.” He waits a half-beat to make sure the reference to Jobs’s famous line from (AAPL)Apple presentations hasn’t been missed, then gives his notorious barking laugh. With that, Bezos pulls out the Kindle Fire, Amazon’s long-anticipated tablet computer—and the first credible response to the Apple iPad.
Unlike a wave of other tablets that have emerged hopefully only to flop, such as the HP TouchPad, the Motorola Xoom, and the RIM PlayBook, the Kindle Fire has a good shot at turning the newest theater of war in high-tech into a two-tablet battle. With a 7-inch display, the Fire is about half the size of the iPad. At $199, it’s also less than half the price of the cheapest Apple model. Amazon has painted over the rough surfaces of (GOOG)Google’s Android operating system with a fresh and easy-to-use interface and tied the device closely to its own large and growing content library. Kindle Fire owners can watch the film Rio, scroll through magazines such as The New Yorker or Esquire, and access their music collection on Amazon’s servers.
“What we are doing is offering premium products at non-premium prices,” Bezos says. Other tablet contenders “have not been competitive on price” and “have just sold a piece of hardware. We don’t think of the Kindle Fire as a tablet. We think of it as a service.”
To demonstrate the Kindle Fire, Bezos pulls up a chair. He proudly shows off a lightning-fast Web browser that runs on Amazon’s EC2 cloud computing engine and Amazon’s version of the Android app store, with over 10,000 games, e-mail programs, shopping guides, and the like. Bezos pauses briefly to exhibit his dexterity at a game called Fruit Ninja, zapping watermelons and kiwis that fly across the screen, and appears to momentarily lose himself in the effort. “I do find it strangely therapeutic, uncomfortably therapeutic,” he says.
There are some limitations to the Kindle Fire. Unlike the iPad 2, it doesn’t have embedded cameras or a microphone, and there’s no 3G cellular connection, only Wi-Fi. Its diminutive size, which makes it so handy for stashing in a coat pocket, also makes it unlikely to satisfy more than one antsy kid on a long car ride. The versatile iPad 2, with its video chatting capabilities and exquisite screen resolution, is a lifestyle-defining objet d’art. The stripped-down Fire is more of a sit-back-on-the-sofa-and-shop device. It crystallizes the difference between Apple, which tends to keep prices (and profit margins) high, and Amazon, which likes to start low and drive lower in an effort to knee-cap the competition. The tablet is symbolic of Amazon’s remarkable ability to adapt and reluctance to cede the future to anyone. If the Fire and its inevitable sequels are successful, they will add even more might to one of the fastest-growing retail operations the world has ever seen.

Amazon’s 1990s slogan—”Earth’s largest bookstore”—stood for an ambition that now seems cute. Amazon boasted of its unlimited selection of books, even though in most cases it was simply having them shipped directly from distributors. Today, Amazon sells millions of goods and services, from toys and high-definition televisions to server space for other Internet companies and digital reading devices for book lovers. Borders found it impossible to match Amazon’s selection and went out of business earlier this year. (BBY)Best Buy has watched Amazon undercut it and commoditize whole product categories, and is now trying to shrink the square footage of its superstores. (WMT)Wal-Mart Stores has struggled to match the ease and reliability of Amazon’s shipping network, and posted nine straight quarters of declining same-store sales. Websites that have matched Amazon in selection, price, and customer service—Zappos, Diapers.com—Bezos has quickly acquired.
“Amazon is not a fight-on-their-knees kind of company,” says Rob Glaser, the Seattle entrepreneur behind (RNWKD)RealNetworks and now also a venture capitalist at Accel Partners. “Jeff’s a hyper-competitor.”
As its rivals steadily asphyxiate, Amazon is ringing up 50 percent growth in quarterly revenues, and could reach $50 billion in sales this year. Walmart needed almost twice the time—33 years—to cross that threshold. “Amazon is such a smart learning organization,” says Nancy F. Koehn, a professor of business administration at Harvard Business School. “It’s like a biological organism that through natural selection and adaptation just keeps learning and growing.”
Amazon is also facing a new kind of challenge that competitors like Walmart are intimately familiar with—cultural backlash, or at least the early signs of it. The company has been criticized for waging an expensive state-by-state battle to avoid collecting sales taxes, and more recently for skimping on air conditioning in its East Coast distribution centers during a brutally hot summer.
If the Kindle Fire is half as good as it looked in Bezos’ conference room, it will fan the fears about Amazon’s growing dominance. The tablet funnels users into Amazon’s meticulously constructed world of content, commerce, and cloud computing. Just like owners of Kindle e-reading devices tend to start buying all their books from Amazon, Kindle Fire owners are likely to hand over an increasing chunk of their entertainment budget to Jeff Bezos.
Tablets represent a huge opportunity for Bezos, not only to sell a new kind of device but also to entice people to buy more stuff. Even with only 28.7 million iPads sold, e-commerce sites say they see an increasing amount of traffic coming from tablets. (FORR)Forrester Research reported this summer that online purchases made on tablets now account for 20 percent of all mobile e-commerce sales, and that nearly 60 percent of tablet owners have used them to shop. Bezos says tablets “are a huge tailwind for our business.” Amazon once saw spikes in traffic during the workday lunch hours. Now traffic is more evenly distributed as people pick up their tablets anytime of the week, buying the books and albums they see on television and making impulsive decisions about replacing their dishwashers.
The Kindle Fire (internal code name: Otter) is designed to ensure that even more of those purchases go to Amazon. The company has built a tablet-optimized shopping application, with simplified and streamlined pages but none of the clutter of the main website. The app is pre-installed and sits at the bottom of the Fire’s main screen (users can get rid of it if they want). The device also comes with the enticement of a 30-day free trial of Amazon Prime, the company’s $79-a-year two-day delivery program that tends to convert members into Amazon addicts who triple or even quadruple the amount they spend on the site. Since March, Amazon has also administered its own app store for Android devices, culling Google’s more comprehensive selection and removing everything that’s offensive and unreliable. Kindle Fire owners will have access to apps from (P)Pandora, Twitter, Facebook, and (NFLX)Netflix. Other competitors such as (BKS)Barnes & Noble can submit their apps, but it will be much easier for Kindle Fire owners to find Amazon’s own content.
That’s one reason Amazon is in the best position to turn the tablet battle into a two-combatant war. The other is price. Analysts speculating on the new device widely pegged the Kindle Fire at $250 to $300. (Samsung, (RIMM)RIM, and others have entered the tablet race with similar devices at those prices and above.) Bezos is able to go lower because he can make his profit on media content and with additional subscriptions to Amazon Prime—which then will drive additional purchases of toys, toasters, diapers, etc. He’s also exploiting his company’s popular cloud computing initiative, called Amazon Web Services. Amazon saves money on the Kindle Fire by packing it with only 8 gigabytes of memory (the costliest version of the iPad has 64 gigs), but owners of the device get to store as many books, songs, movies, and personal documents on Amazon’s cloud servers as they like for free.
Bezos won’t say whether he thinks he’ll lose money on the device itself, only that he’s at ease flirting with red ink. “Certainly this is a for-profit business,” he says. “Let’s put it this way. We are and always have been very comfortable at operating at extremely low margins.”

Although the decision to design and build its own hardware is a high-stakes bet, it’s equally true that Bezos had no choice but to enter the tablet business. About 40 percent of Amazon’s revenues comes from media—books, music, and movies—and those formats are rapidly going digital. Amazon was late to understand the speed of that transition; Apple, which launched the iPod in 2001 and iTunes two years later, wasn’t. The iPad has only strengthened Apple’s hold over digital media. There’s a Kindle app for the iPad, but Apple takes a 30 percent slice of all content that app makers sell on the tablet and has restricted Amazon from directing iPad users to its website in order to avoid giving Apple its cut. Doing business on the iPad threatens Amazon’s already thin profit margins.
Bezos claims he doesn’t think defensively. “Everything we do is driven by seeing opportunity rather than being worried about defending,” he says. Given Apple’s inroads into the media business, that’s hard to believe. Bezos is magnanimous toward Jobs. “On a personal level we have a tremendous amount of respect for Apple and Steve. I think that’s returned,” he says. “Our cultures start in the same place. Both companies like to invent, both companies like to pioneer, both companies start with the customer and work backwards. There’s a like-mindedness.” Pause. “Are two companies like Amazon and Apple occasionally going to step on each others toes? Yes.”
Amazon has recovered more quickly than other tech companies in the race to catch up with Apple in digital media. Amazon introduced an online TV and movie store in 2006, the Kindle e-book store in 2007, and the MP3 digital music store in 2008. Earlier this year, Amazon also aimed its sights on Netflix with an Instant Video streaming service that’s free for members of Amazon Prime, and it’s now spending hundreds of millions to increase its catalog with TV shows and movies from studios like (NWS)Fox and NBCUniversal. The music and video stores haven’t been huge hits. That may change on the Kindle Fire. On a tablet those apps will give users the impression that most songs, TV shows, and movies are just a click away. “We are leaning into this,” Bezos says. “It’s not a small initiative for us.” Amazon is also among the companies in the final round of bidding for the online video site Hulu, according to people with knowledge of that process who were not allowed to speak on the record.
Apple’s success with the iPod taught the entire tech industry another valuable lesson. There were other digital music players on the market back in the 1990s, but Apple’s device, which seamlessly blended hardware, software, and eventually an online service in iTunes, made the experience simple and unintimidating for non-techies.
There is a sense, as one easily holds the Kindle Fire in one hand (try doing that with an iPad), that Bezos is working from the same set of principles as Jobs: Content matters. Simplicity is key. How do companies allow users to easily buy songs, movies, and other digital goodies? They persuade customers to entrust them with their credit cards—as both Amazon and Apple have done. How do they ensure that the device is easy to use? They design and build it themselves.

“What should Amazon be doing in 20 years?”
That was the first question Bezos asked Jateen Parekh, a Silicon Valley systems engineer who had worked for the digital video recorder pioneer Replay-TV, an early (TIVO)TiVo rival, and Philips Research, a division of the Dutch consumer electronics maker. It was August 2004, and Bezos and his new senior vice-president in charge of worldwide digital media, Steven Kessel, were exploring what seemed like a radical idea for an online retailer: making their own hardware. “The question impressed me,” recalls Parekh, who is now the founder and chief technology officer of digital radio startup Jelli. “The fact that the CEO was thinking that far out was huge.”
Parekh joined Amazon that September, becoming the first employee of Lab126, a secret Silicon Valley skunkworks. At first, Parekh didn’t have an office to report to: He and the few industrial designers and engineers hired soon after, including Gregg Zehr, a former vice-president of hardware engineering at Palm Computing, set up shop in an empty room in the offices of A9, Amazon’s Palo Alto (Calif.)-based search subsidiary. Parekh recalls spending his first few weeks investigating the possibility of building Internet-connected set-top boxes and even an MP3 player.
Bezos loved reading far more than listening to music, and Amazon had deep expertise in the book market, so the next decision was a natural one. Amazon’s new hardware geeks would build an e-reader. Parekh and Zehr, who became president of the new division, researched existing e-readers of the time, such as the Sony Librie, which required AAA batteries, sold poorly, and never made it out of Japan. They concluded the market was wide open. “It was the one thing that wasn’t being done well by anyone else out there,” Parekh says.
First, though, Amazon’s engineers needed a better name for the original “A2Z Development Corp.” Parekh and his colleagues hated it, and thought it ill-suited to luring the best and brightest engineers from places like Apple and Palm. They eventually settled on the more mysterious “Lab126.” The 1 stands for a, the 26 for z, a geeky naming convention inside Amazon where groups like the personalization team are referred to by the abbreviation P13N. (If you’re confused by that, count the letters in the word “personalization.”)
Other people who worked for Lab126 in those early years recall it as a loosely managed startup. The group piggybacked on A9′s infrastructure for most of the next year. When the search division moved to the former offices of a Palo Alto law firm, Lab126 moved with them and took up residence in the old law library.
Lab126 was eventually given nearly unlimited resources. It also had to contend with the unfettered imagination of Bezos. Amazon’s founder wanted his new e-reading device to be drop-dead simple to use and argued that configuring devices to Wi-Fi networks was too complicated for non-tech-savvy users. He also didn’t want to force customers to connect the device to a PC, so the only alternative was to build cellular access into the device, the equivalent of embedding a wireless phone in the hardware. Nothing like that had been tried before. Bezos insisted that customers should never have to know the wireless connection was there or even pay for access. “I thought it was insane, I really did,” Parekh recalls.
The effort to develop the first Kindle ended up taking more than three years. Nearly everything went wrong. The black-and-white displays from E Ink, an offshoot of the Massachusetts Institute of Technology Media Lab that makes screens resembling the printed page and requiring very little power, would look good for one month and then degrade alarmingly. (QCOM)Qualcomm, which was set to provide the wireless chips, was sued by a competitor, (BRCM)Broadcom, and for months was enjoined by a judge from selling its wares in the U.S. The Lab126 team repeatedly urged Bezos to make their project easier by considering a Wi-Fi-only connection for the Kindle. He rejected the idea, constantly suggesting new ones for complicated features, like the notion that customers’ annotations of books should be backed up on Amazon’s servers.
That original Kindle, code-named “Fiona” after a character in Neal Stephenson’s futuristic novel The Diamond Age, was finally ready to go in the fall of 2007. Still, Amazon nearly blew it. Modeling demand after the first-year sales of the original iPod, Amazon dramatically underestimated what a hit the Kindle would turn out to be. The first batch sold out in just a few hours. Amazon then discovered that one of its Taiwanese suppliers had discontinued a key part and spent months getting a replacement. “You look at the history of the Kindle, they developed some real skills around the creation of that product. They’ve cut their teeth so to speak,” says Brian Blair, a New York-based analyst at Wedge Partners.
Making four successive versions of the Kindle e-reader also led Amazon down the path toward the Kindle Fire. For years the engineers at Lab126 tried to create a workable and reader-friendly color Kindle, according to three former employees. New color display technologies like Qualcomm’s Mirasol and another MIT IT-offshoot called Pixel Qi proved unreliable and difficult to produce in large quantities. In January 2010, the iPad demonstrated the broad appeal of a new kind of color LCD tablet with better image quality, wider viewing angles, and, near to Amazon’s heart, Apple’s own selection of e-books. People close to Lab126 say that work on tablets, including the Kindle Fire, started soon after.
Amazon’s devices division now employs around 800 hardware and software engineers in Cupertino, Calif., who fill up all but one floor of an entire eight-floor office building and part of a second building in the same office park, less than a mile from Apple’s corporate headquarters. In the unit’s industrial design lab, according to a person who has visited that top-secret floor but was not authorized to speak on the record, naked e-ink displays hang from the walls with images from books imprinted on their screens. They’re used to demonstrate to potential new hires how an e-ink screen can hold an image indefinitely without being connected to a power supply. There’s also another office of Kindle employees at Amazon’s new corporate campus in the South Lake Union district of Seattle, in a building nostalgically named Fiona. The group is cordoned off from other Amazon employees, whose company badges do not grant them access.
Bezos won’t say what kind of devices he’s cooking up next. People with knowledge of the division’s plans say that the Kindle Fire is only the first of a line of Amazon tablets, not an isolated product, and that the group has always considered the possibility of building Amazon cell phones and Internet-connected TVs. “We are a company with a lot of ideas,” Bezos says, when asked directly about his plans. And then, of course, he laughs uproariously.

For those already competing with Amazon.com, the Kindle Fire will not be good news. Kevin Ryan, the co-owner of Green Apple Books, a 44-year-old bookstore in San Francisco, says that Amazon has lowered the prices in the book business beyond his ability to match them. Amazon has also locked up several big authors to publishing contracts, and though it says it will produce their books in print as well as digital formats, that has competing retailers nervous. “They’re bullies. They really are. I think they really want to be a monopoly,” Ryan says from the 8,000-square-foot store that features tribal masks over the bookshelves, and which has watched sales drop for much of the past decade. Of the growing group of authors like George R.R. Martin, whose books have sold over a million digital copies through Amazon, he says, “You have to assume that people joining the million book Kindle club is taking business away from you.”
In the past year major chains like Toys “R” Us, Sports Authority, and (RSH)Radio Shack have teamed up to combat Amazon’s might, forming a free shipping program called ShopRunner that, like Amazon Prime, also offers free two-day shipping for $79 a year. It’s not clear yet how ShopRunner is doing; the group won’t release subscriber numbers. Fiona Dias, ShopRunner’s chief strategy officer, says that by locking in a new wave of customers with the Kindle Fire, Amazon will make their jobs even harder. “It’s a phenomenal concentration of power,” she says. “If we were scared of Amazon in the Web world, we should be absolutely terrified of them in the tablet world.”
It’s not just competitors that are assessing Amazon’s dominance. Over the past year, lawmakers, the media, and even some customers have begun weighing Amazon’s growing sales and size against the impact for communities, commerce, and the local job market.
Amazon has brought some of this scrutiny on itself. It touts its hiring of workers for its growing network of shipping centers, yet those jobs aren’t exactly plumb: They start at around $11 an hour (with health benefits), and conditions can be tough. The recent newspaper account in the Allentown (Pa.) Morning Call not only revealed that temperatures over the summer in a local Amazon facility reached 120F, but that workers who were slowed by the heat felt penalized by their bosses. (Amazon has promised to put in air conditioners.)
The report is consistent with a company that’s notoriously frugal with employees, who get few perks aside from 10 percent off $1,000 in annual purchases. Unlike Google and Apple, Amazon does not subsidize meals or provide free sodas. Even the pet dogs of Amazon employees get a better deal: There’s a bucket of free milk bones at the front desk of every company building in Seattle.
The vicious, multi-state battle over state sales tax has created perhaps the most controversy around Amazon. Legislators in more than a dozen states, pressed by such politically connected competitors as Walmart, have been pushing Amazon to collect the sales tax that their customers technically already owe on online purchases, to better repair widening budget deficits and pay firemen and school teachers. Bezos has tenaciously fought that effort, arguing that only federal legislation can overrule a U.S. Supreme Court ruling from 1992 that retailers with no physical presence in a state should not have to pay sales tax there. Critics have charged he’s just stringing out his price advantage as long as possible.
On Sept. 7, Amazon finally compromised in California, agreeing to start collecting sales tax in the state by November 2012. Bezos thinks that by then the federal government will uniformly set nationwide standards for the collection of online sales tax. “You have to do what you think is correct,” he says. “Obviously we care about perception, but we also value substance and the right place to fix this is in federal legislation.”
Losing the tax advantage may not be such a bad thing. If and when Amazon starts collecting sales tax, it will be free to set up distribution centers right outside major cities, which would enable even faster deliveries than it offers now. As part of Amazon’s deal with California, for example, the company has pledged to spend $500 million on new warehouses and hire 10,000 full-time workers and 25,000 seasonal employees. Customers in California could soon end up getting same-day deliveries of products and even produce. Amazon’s experimental “Fresh” grocery program is now active in Seattle, where the company already collects sales tax.
Nancy Koehn of Harvard Business School thinks Amazon may be getting big enough for people to finally start considering the ramifications—for towns, shopping centers, and jobs—of a world dominated by online buying. She recently discussed Amazon on Wisconsin Public Radio—not the most neutral forum—but was surprised when almost all of the phone calls from listeners were critical of the company. “Americans get very nervous about centralized power that affects their communities,” she says. “We get a little bit nervous about bigness, yet we want the convenience and the pricing and the material plenty that bigness allows.”
Amazon’s new Seattle campus testifies to that growing size. The company has leased 11 brand-new buildings in the burgeoning South Lake Union neighborhood from real estate developer and (MSFT)Microsoft co-founder Paul Allen. It’s classic Amazon: unostentatious, and no company signs on any of the buildings. The entire campus is due to be completed by 2013 and will host several thousand employees, but the company is growing so fast, it’s already looking for even more space.
In Day One South, Bezos would clearly rather discuss the Kindle Fire than real estate, sales taxes, or air conditioning. Former employees of Lab126 say the chief executive officer spends an unusual amount of his time delving into the gritty details of his fledgling hardware business, and can happily talk for hours about the location of this or that button on a device. “I spent a huge amount of time working on Kindle Fire,” he says.
He’s right to sweat the details, especially now that his competition has gone from slow-moving big-box retailers to tech giants like Apple, which has even deeper deep pockets and is as comfortable with long-term investments as Amazon. “I believe these industries are so big, there are going to be multiple winners,” Bezos says. He’s been saying that for 10 years, during which time he’s helped consign Circuit City, Borders, and others to oblivion. “When I look at something like the Kindle Fire, what I want is to be one of the winners.”
With Danielle Kucera and Andrew Fixmer
Stone is a senior writer for Bloomberg Businessweek.
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